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December 1, 2005

Ducks more interesting than markets today, Thur., Dec. 1, 2005, 12:38 PM

I noted earlier that I have increased the gold allocation from a very high 8 pct to a 12 pct extreme. What concerns me most is the devotion to debt in America today.

I have started to get into the very small producers and the senior explorer companies because I feel that the large cap and mid-cap goldminers have gotten ahead of the juniors. Gold mining production has declined for a couple years, and, with the high bullion prices in the market recently there has been a lot of capital invested in exploration. Some of these juniors will either find new ore bodies or expand known resources, and move others from possible into probable status and from probable to proven reserves.

If you have any interest in this area, Bob Bishop (a friend) offers an excellent mining report (albeit somewhat costly), and Canaccord Capital's Graeme Currie, a research analyst I worked with 18 years ago, and a person I also respect, offers free research for 60 days to non-Canaccord account holders. Please google to find them if you have any interest.

Traders of junior gold stocks need be extremely wary of misleading stories. In a hot gold market, the hype becomes so extreme, it's often criminal. At times like this, you need a good investment research service and/or advisor. And your knowing the gold stock promoter (if that happens to be the case) is " trust me " the worst possible scenario. You need accurate and objective reporting and commentary, which you are probably not going to get from a stock promoter, even the good ones I consider friends.

Yes, markets are flying. The Naz is up 1.33 pct in three hours, and the Dow is at a triple-digit gain. But I know how markets work; and I know it seldom pays to chase a hot market.

Gold is up $6.50.

I just came in from taking photos of some thousands of ducks plus a few Trumpeter swans off the backyard. It's kind of a gloomy day. But, I'm rather enjoying it.


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Posted by Posted by Bill Cara on December 1, 2005 12:38:18 PM | Category: Cara Today in the Market

Discourse

TRULY INDEPENDENT ANALYSIS
Don't forget to mention John Kaiser. Many consider his Bottom-Fishing report http://www.kaiserbottomfish.com/s/Home.asp to be the best in the business. Best of all, he cannot be greased like most of the other newsletters. In fact, he has a little ditty at his website:

"In so far that independent analysis is targeted at typical investors, the quest for economic viability pushes newsletter writers into the conflict of interest role historically played by brokerage firm analysts, namely generating market interest in specific stocks rather than objectively describing the situation and the associated risk-reward potential. Independent analysts acquire conflicts of interest in three ways: 1) they own the stock personally, and even if they make full disclosure and match their trading with the advice given to subscribers, their analysis will be biased toward optimism, 2) they get compensated by the companies either directly or indirectly, which usually discourages critical followup analysis of negative developments, and 3) the willingness of companies to distribute friendly analysis widely spares the newsletter a significant marketing cost associated with generating new subscribers, many of whom subscribe because they already own the stock and like the independent analyst's reinforcing comments. Thanks to the ease with which cyberspace facilitates copyright violation, the credibility of independent analysts as a source of subscription compensated commentary on speculative companies or plays for general audiences has nowhere to go but down in the long run."

BROKER WITH INDEPENDENT THINKING
Andrew Muir from Canaccord is the one that I would personally speak to if I had a question concerning a junior exploration company. He tells it like it is, unlike anyone with "research department" obligations. Andy has Geology degree from UBC and is has been a Chartered Financial Analyst since 1990. He was a mining analyst for years, specializing in junior exploration plays.

Teresa

Posted by: Teresa Lo [TypeKey Profile Page] at December 1, 2005 1:08 PM [link]

GLD just hit $50 for the first time!

Posted by: MarkM [TypeKey Profile Page] at December 1, 2005 1:10 PM [link]

Hi Teresa,

I agree that for traders who need help steering clear of the minefield that is called "the penny golds", an advisor like Andy Muir at Canaccord would be very helpful. Americans however must be cognizant of the cross-border securities laws. I believe Andy is not registered to trade in securities in the U.S. But Canaccord, his employer, is. They recently made a purchase of Boston-based Adams Harkness, and may have extended their U.S. licensing. Readers would have to check.
http://www.adamsharkness.com/

Of course, exempt clients ("the sophisticated investor rule") could call Andy.

My bigger point has nothing to do with Canaccord, a firm that both you (Teresa) and I worked for many years ago, but only to say to traders who wish to participate in junior capital markets that it is a good idea to obtain the services of an expert and trustworthy advisor.

I may put the knock on the sell-side because of their structure, but I have never advocated eliminating it.

Posted by: Bill Cara [TypeKey Profile Page] at December 1, 2005 1:38 PM [link]

Bill,

I have noted in the past how the large commercial traders have pushed gold prices their way, and the little guy buys into tops and sells into bottoms.

The commercials are very much net short. Could this be the start of a very large short squeeze? They even took off longs from the last report.

If anyone wants to see positions, simply go here: http://www.cftc.gov/cftc/cftccotreports.htm Gold trades at the Comex.

I have often wondered how much these traders make personally through what has always been viewed to me as collusion, silent or not. They are due their comeuppance, hope it's now!

Posted by: g034 [TypeKey Profile Page] at December 1, 2005 2:18 PM [link]