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| Tuesday Oct 03, 2006
"The stampede for the exit doors"Taipan Group's Dynamic Market AlertBy J. Christoph Amberger-- “The stampede for the exit doors” ---------------------------- --------------------------
“The stampede for the exit doors”by J. Christoph Amberger Another day, another big drop for gold. December gold contracts fell over $15 to $587.70 an ounce in afternoon trading, following a low of $585.60. The usual suspects had their boilerplate explanations handy: lower oil prices, the slowdown U.S. GDP growth. Oddly enough, the Twin Deficits (up until May the premier motivation to tout a rosy future for gold) are still standing, solid as rocks. But Jon Nadler, an analyst at Kitco.com, brought up something new... a “stampede for the exit doors by a notable number of hedge funds.” Now, that spells trouble ahead. Because as you will recall, the rise in gold prices above and beyond $300 occurred in the same time frame as fund and institutional buying provided additional demand. The higher gold went and the more unimpeded its process, the more gold those funds were buying. Hitching a speculative ride on an asset that was moving up in price with no major interruptions was a great idea. The returns justified tying up capital. But capital has no loyalty. And neither have fund managers. They are paid on performance, not for being right about economic prophesies. As soon as the returns a particular asset generates decline or as soon as the risk to the principal increases, these guys start looking for other venues to make a quick calendar-tear buck. It appears now that gold’s repeat plunges since May have eroded that certain safety zone that money managers like to see -- so they, like their capital, don’t have to work all that much for their money. The market reacts to this with its own logic: If funds shift money out of gold, supply increases as demand falls. Prices stick with demand. Which prompts the next segment to shift their assets to more productive and less risky assets. Gold bugs are keeping their fingers crossed that the Indian wedding season will see many happy couples riding off into the sunset. There better be plenty of them: It takes a lot of wedding rings to make up for the drop in fund buying. -- DMA reader Eric A. from Oklahoma took the time to put together a response to Steve Lord’s Friday editorial on oil service stocks: “As a 20+ year veteran of the industry I thought I’d pass along something you did not mention -- that is a short discussion as to why these companies are cheap right now. Typically oil service stocks -- drilling companies in particular -- usually go considerably higher the further into the business cycle we go. Their margins expand as well as their revenues. This is because as oil prices rise the energy companies quickly allot increasing capital budgets to increase production through the drill bit. “Bringing their products to market when prices are higher just makes sense. This causes intense competition for rigs and other associated services (supply boats off-shore, etc.). Everyone wants to drill their prospects and get them on stream while prices are high enough to justify the expense. “Unfortunately, there are not enough drilling rigs to work all the projects the oil/gas companies have lined up waiting to go. As a result there is a tendency for rig day rates to rise - companies want to get the most they can for their assets -- which results in the increased earnings you alluded to in your article; this is the normal and expected response as companies all vie for the same drilling rigs and crews. Drilling companies have been having new rigs built at a rapid pace in order to meet demand but the time it takes to build a rig involves a sufficient lag time as does training new crews to run them. “In my last channel check with folks in the industry, they are working like crazy trying to drill all the wells they can and many are taking delivery of new rigs from China. They have a pretty good backlog of projects to work as well. “With limited capacity to get projects drilled some energy companies opt to increase their reserves and production through acquisition rather than through the drill bit -- but that is a discussion for another day.” ---------------------------- Make 14 times your money from America’s “dirty little secret”... For two years I’ve wanted to tell my readers about this company that has the potential to cure diabetes. I couldn’t before because there was one last piece of information waiting to fall into place. Now it has! And now you can make up to 14 times your money on America’s dirty little secret... ---------------------------- Clowns & Harlots: A Bad Wrap We have no relatives hereabouts upon whom we could foist a few rolls of wrapping paper. And I believe it is extremely inappropriate and socially irresponsible to ask a neighbor to buy wrapping paper, raffle tickets or anything else -- unless their kids have hit you up for something in the past decade. (The Geneva Convention has spoken to this.) Coveting thy neighbor’s wife runs a poor second in my estimation to expecting someone to buy your kid’s raffle tickets or wrapping paper. As a result, we have a closet completely full of many seasons of unused wrapping paper. Bows, too. Actually it’s a small room. When I die I want to be wrapped. It will get rid of some of that damn wrapping paper. ---------------------------- Earnings Announcements Wednesday, October 4, 2006 Arrow International, Copart Inc, Immucor Inc, RPM International Inc, Veritas DGC Inc, and Wolverine World Wide Inc are releasing earnings. Brought to you by http://www.AmericanCapitalist.net Unlock Dates for October 2006 Wendy’s will distribute its remaining 82.75% stake in Tim Hortons Inc on September 29, 2006. When these shares flood the market, look for THI to drop. THI has a PE of 19 as compared to a company like McDonald’s, which trades with a PE of 16, is much cheaper, and has more growth. 10/3/06 – Visicu Inc is unlocking 6 million shares. Brought to you by http://www.vixtrader.com
Upgrades and Downgrades Brought to you by http://www.gressor.com ---------------------------- TAIPAN TIDINGSAccording to the Washington Post, “Scientists now say one-third of infant deaths are because of premature births –- a much larger percentage than previously thought.” In fact, previous pre-term statistics were listed in “fewer than 20 percent of newborn fatalities. But that rate should be 34 percent or more, said researchers at the U.S. Centers for Disease Control and Prevention.” Worse yet, even today there’s not a reliable test to assist doctors in determining an accurate induction date, resulting in an increase of pre-term infants. But there is a large and growing demand from the medical community to find a way to predict induction dates… and is precisely why the FDA granted one company priority review for a drug that could save U.S. taxpayers up to $26.2 billion a year and save about 350,000 babies here in the U.S. Quote of the Day: “Starbucks is raising the price of a cup of coffee to $5.00. Don’t worry, you’ll still get the sneer from the girl with a nose ring serving your coffee.” - Jay Leno, September 26, 2806
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