No6

Ladbrokes to repay £351m bond and boost share price

 

Gaming group Ladbrokes is set to confound its critics later this month by repaying a £351m bond which could be a boost to its bombed-out share price.

 

Doom-mongers had suggested the bookmaker was struggling under its near £1bn debt burden,

 

It was not helped last month when credit ratings agency Fitch downgraded the company in the wake of a gloomy trading statement in May, since which time the share price has slumped 26pc.

 

But repaying the bond will be seen as a sign of Ladbrokes' cash-generating strength in a sector hit by a dramatic fall off in consumer spending that has forced private equity owners to write off their stakes in rival Gala Coral.

 

Ladbrokes, which has a total of 2,700 betting shops in the UK and overseas and takes £14bn in stakes each year, has net debt of £900m, already down by £87m from a December 2008 repayment.

 

The bonds will be paid on July 17 by drawing down cash from a new £500m bank facility. The bookie also has an additional loan of £350m that must be re-paid in 2011 and £250m bond with a hefty 7.1pc interest charge due in 2012.

 

http://www.telegraph.co.uk/finance/newsbys...hare-price.html

July 20 (Bloomberg) -- Tom Watson and Tiger Woods not only lost golf’s British Open, they cost gamblers millions of pounds.

 

Woods was the pre-tournament favorite at 2-1 with U.K. bookmaker William Hill, while Watson, who was 1,000-1 at Ladbrokes at the outset of the event, closed to 7-1 going into the final round at Turnberry in Scotland.

 

William Hill said it took almost 2 million pounds ($3.2 million) in bets before the Open, 50 percent more than a year ago, and kept most of it after Stewart Cink, a 150-1 shot at the start of the four-day tournament, beat Watson in a playoff yesterday to win his first major title.

 

Bookmakers said betting support had grown for Watson, who at 59 was seeking to become the oldest winner of a major, after Woods failed to qualify for the final two rounds for only the second time in a major since turning professional.

 

It’s a “great night,” Hill spokesman Rupert Adams said in an e-mailed statement. “We won over a million on Cink.”

 

http://www.bloomberg.com/apps/news?pid=206...id=apkZ9Lrgy4qY

Might be interesting to put a thread up, degenerate gamblers might be able to share some ideas

 

As for me, I use betfair/betdaq for 98% of my trades. On the very rare occasion, I'll spot a bet in a bricks and mortar establishment that isn't available online. I never follow tipsters. Although there are a few people on the betfair forum who usually have interesting things to say, I'd sooner follow them than what I read in a newspaper. Golf is definitely a sport where there are punters who are turning over a profit. Having said that, if I turned my hand to it, I wouldn't have the foggiest.

I will follow with interest and contribute when I can should you decide to start a thread. Hopefully, others will to.

I enjoyed listening to this, but it leaves me with more questions than answers.

For example, it is one thing to argue that a gold standard stops wars, however history shows that may only work up until the countries that want to fight decide to come off the gold standard. So, what would keep them on it? I'm intrigued to know what mechanism, discipline, call it whatever you like, would be in place to enforce such a system? In other words, what would make it different this time? The answer is surely nothing, because the problem is not really money as such, but the way we see it (or forced to see it) and whoever has the power and control over it. The power brokers would need to be totally committed goldbugs and there is about as much chance of that happening as Gordon Brown ever admitting that he got something wrong.

For my part, most of the speculation I do is through part-time sports betting and trading. Even though I could probably go full-time, I simply don't think that I could deal with the stress of having my entire means coming from gambling! I only ever bet on sports that I can watch live and usually keep it down to tennis, soccer and Gaelic games. My tactic for betting is based on the completely unscientific method of gut-instinct and hunches! I know it sounds ridiculous, but I can often look at an odds market and know instinctively that it's just completely wrong.

 

My primary tennis tactic is finding a highly talented youngster, following him relentlessly and trading on the in-play volatility. Andy Murray was a goldmine for me in 2007 and 2008. Three times I was able to back him at prices of around 100/1 when he then went on to win his match. Of course, I was wrong more often than not with Andy, but when you're dealing with odds of 100/1, you only have to be right 1 time in 100 and you're set. Juan Martin del Potro was doing a great job for me this year until he came back he came back from 100/1 to defeat Nadal in one tournament (guess who got on that trade Now that del Potro has kind of established himself, I'm currently looking for a new up and comer!

 

Don't get me wrong here though. I'm not just blowing smoke up my own ass and trying to claim that gambling is easy. Even on a highly liquid betting exchange with a small operator cut, over 95% of punters will make losses. The obvious key to winning is to make more money than you lose. However, even if you have some sort of edge that ekks out a profit, you need cast-iron discipline. That means that you work with a bank of X and you commit to a maximum bet of YY% of that. Personally, I restrict my self to betting on one event a day (although if I spot a bet I simply can't resist and I'm in profit for a day, I'll allow myself an extra event of trading). I keep detailed spreadsheets of all my trades and have Excel spreadsheets done up so I can gauge my performance and to adjust tact.

 

I sometimes read the betfair forums, but it's almost impossible to pick out the few crumbs of wisdom from the rubbish. Would definitely be interested in getting in touch with other sports bettors/traders who know what they're doing.

I'm not into sports betting/trading, but would be interested to follow as there are similarities with trading the markets. Maybe you would consider setting up a thread where you can post your ideas? Not sure how many sports bettors there are around here.

well of course the state has to be strong if it is able to impose a monetary standard (gold or otherwise) on an entire population.

 

 

 

bit like now then.

 

what else would you expect from a state-imposed currency?

Nothing. I'm countering the argument from those that believe things would be better, or that there is an answer. To many things there isn't.

I found the essay fascinating and has certainly helped with my very limited knowledge on gold and money.

However it has thrown up some questions.

 

You say that various wars wouldn't have happened if gold standards had been kept, however wouldn't there have then been wars to try and conquer land that was in rich in gold?

Also as gold would be a finite source of money, wouldn't this then start drawing the world back to the times when empires existed?

As they could not make money to buy assets they just went out and conquered the assets?

 

I don't know if i'm going way off track here, or my understanding really is terrible.

I have other questions which i will ask later.

I've asked the same questions myself a number of times and don't feel that I've ever got an answer from anyone. There would be wars, just over different things and gold would be something to fight over. The countries that didn't have it would be enslaved or forced into co-operation with the new gold empires. People tend to conveniently forget that gold standards have usually been in operation during periods of empires, with the militarily strong being in control at the expense of everyone else. Most of the world was effectively enslaved.

Here's one critique.

What does a gold standard really mean?

 

Let’s think this through - what does a gold standard really mean? Does the hard money crowd want us to go back to carrying around pieces of gold coinage around? In that case, how do we facilitate global trade?

 

Do we just want to revive a gold backing for money? There isn’t enough gold around in the world to support a gold standard at current gold prices. Rough back of the envelope calculations show that the Fed’s holdings of gold, assuming that it is unencumbered and not lent out, is worth around $200 billion at current prices. Remember that the U.S. Federal Reserve is one of the larger central bank holders of gold in the world. While that change might satisfy the gold bugs, it wouldn’t help the vast majority of the population around the world.

 

One of the assumptions of a gold standard is that the currency is backed by gold at a fixed rate. Anyone could turn in their Dollars, euros, Yens, Pound Sterling and so on, to the appropriate central bank and get gold at a fixed gold price. Such a monetary regime also implies a fixed exchange rate arrangement like Bretton Woods. Instead of allowing the market to determine currency prices, the world would return to fixed exchange rates and periodic exchange rate revaluations. Is that really the regime that we want to return to?

 

A gold standard also creates economic volatility in the economy. Monetary theory is based on the elegant formula MV = PQ. Holding V (monetary velocity) constant, changes in money supply directly changes the GDP level. Under a gold standard, money supply is restricted by the supply of gold, based on world mine output. National gold supply could shrink because of shocks. As an example, the Roman empire was subjected to credit crunches during wartime when hostile forces captured Roman gold and territory.

 

http://www.dailymarkets.com/economy/2008/1...-is-a-bad-idea/

 

First credit crunch traced back to Roman republic

 

Politicians searching for historical precedents for the current financial turmoil should start looking a bit further back after an Oxford University historian discovered what he believes is the world's first credit crunch in 88BC.

 

The good news is that Philip Kay knows how the Romans got themselves into financial bother. The bad news is no one knows how they got themselves out of it.

 

"The essential similarity between what happened 21 centuries ago and what is happening in today's UK economy is that a massive increase in monetary liquidity culminated with problems in another country causing a credit crisis at home. In both cases distance and over-optimism obscured the risk," said Kay, a supernumerary fellow at Wolfson College.

 

The monetary historian is giving a lecture today in which he will reveal how Cicero, the Roman orator, gave a speech in 66BC in which he alluded to the credit crunch. Cicero was arguing that Pompey the Great should be given military command against Mithridates VI, king of Pontus on the Black sea coast of what is now Turkey. He reminded his audience of events in 88BC, when the same Mithridates invaded the Roman province of Asia, on the western coast of Turkey. Cicero claimed the invasion caused the loss of so much Roman money that credit was destroyed in Rome itself.

 

=====================

 

"In second-century and early first-century BC Rome, increased inflows of bullion combined with an expansion in the availability of credit to produce a massive growth in Rome's money supply. This increase in the supply and availability of money in turn resulted both in a major increase in Roman economic activity and, eventually, in the credit crisis which Cicero describes."

 

http://www.guardian.co.uk/business/2008/no...epublic-lecture

The spread betting companies are effectively bookmakers, those are the rules for taxation that they operate under. IG are doing pretty well, you could probably make more out of buying their shares than spread betting with them.

Thanks, I will maybe have a look again at WH. I remember its rights issue was successful and I guess it would be a long term play. But I also vaguely remember that even after the rights issue it still had a fair amount of debt - although I assume this is now comfortably by cash fow and has new banking facilities in place

 

No real new news on WH since the rights issue time, other than its exit from a Spanish experiment

http://online.wsj.com/article/BT-CO-20090514-703599.html

They do have quite a lot of debt, but I expect they will try to run that down from here and they will be reluctant to take on any more. It may take a few years, but this is a recovery play IMHO.

Re PartGaming.

07-04-09 07.04.09 :+6.75, (250) shares in PartyGaming, 888, and Sportingbet rise after PartyGaming announces a settlement with U.S. authorities over its activities prior to legislation outlawing the industry in 2006. The long-awaited resolution is expected by analysts to open a wave of consolidation across the sector and PartyGaming says it has received a favourable response from banks over possible funding for M&A. PartyGaming has agreed to pay $105 million over four years as part of the non-prosecution agreement. "The settlement with the DoJ is better than we expected both in terms of the size of the settlement and payment structure. The settlement with the DoJ should mark a point of inflection for the group which can look forward without being anchored by the past," said KBC Peel Hunt analyst Nick Batram.

 

http://www.sharecrazy.com/share2607share/s...r&epic=PRTY

Probably because it caused so much pain to some with the online gambling co's Remember riding up on PRTY long time back, but wince as the profits disappeared. Tried to trade leaky stories the U.S was about to relent some time back, in the end i just stayed out in the belief it was a bit dicey.

 

Seem to remember one exec got nailed in the states travelling back to the U.k via America on holiday, that said to me they were serious. Never really looked at the sector since, but just noticing it's back in vogue in the mags.

 

From memory, it wasn't just the U.S that had issues wasn't there some threat to BWIN in Austria, Turkey was a bit dodgy too?

 

Maybe worth a look again, or maybe not.

I thought PartyGaming had resolved their issues, or at least come to some agreement with the US authorities?

888 holdings.

888.com is the most popular online casino and poker operator. It is headquartered and licensed in Gibraltar with further offices in Tel Aviv, Antigua and London. It has over 23 million registered member accounts in over 177 countries worldwide and customer support is available in 11 languages - 24 hours a day, seven days a week. 888.com offers traditional casino products such as blackjack, roulette, craps, baccarat, keno, slot machines, video, and a variety of poker games.

http://www.sharecrazy.com/share2607share/s...re&epic=888

Its a shame that this thread does not have more life

 

If one is looking for a growth area in the so called developed world and that is outside of the resources sector then ONLINE GAMBLING certainly springs to mind

 

The traditional large UK bookies have too much debt for my liking

I actually think that the traditional UK bookies could be a good long term bet if they learn the lessons of the last 12 months. For example, William Hill was encouraged by so called banking and city experts to take on a massive amount of debt to buy the Stanley Leisure bookmakers a few years back, because it was the only way to expand and create value for the company. Of course, when everything hit the fan in the last year their share price collapsed because according to those same city experts, they now had too much debt. The short sellers had a field day considering that it fell from around 675 to below 150 in a year, this at a time when it was still making decent money off the punters. The same is true today, with the exception of a few good spells that the punters have here and there, WH and Ladbrokes continue to make good money and will most likely survive the recession/depression because people will continue to gamble. This is the average man in the street's stock market!

WH just had a rights issue to help put their debt house in order, I doubt whether they will be keen go down that route again in the future.

27.02.09 :-6, (236.25) William Hill embarked on a rights issue, scrapped its dividend and renegotiated its banking facilities as it looked to reduce debt and remove uncertainty over refinancing. William Hill said on Friday it planned to raise 350 million pounds ($498.6 million) from a 1-for-1 rights issue priced at a deeply discounted 105 pence per share, 57 percent below Thursday's closing price of 246.75. The company, which is vying with Ladbrokes to be Britain's biggest bookmaker and has 2,300 betting shops, reported full-year pretax profit ahead of expectations and strong current trading as it continued to show resilience against the impact of the recession. Bookmakers are widely regarded as being less vulnerable than other retailers to deteriorating economic conditions given the habitual nature of gamblers and because it is a "low ticket" industry, with an average bet of less than 10 pounds. Shares in William Hill, which have lost 40 percent of their value over the last year on concerns over the refinancing its debt, were down 5.2 percent at 234 pence at 1050 GMT, reflecting the dilutive impact of the rights issue. Analysts said, however, that the refinancing had taken away risks which had weighed upon the stock's performance and the shares are still trading well above the "theoretical ex rights price" of 176 pence per share. "The financial platform has been transformed by the successful rights issues and refinancing.

 

http://www.sharecrazy.com/share2607share/s...er&epic=WMH

Remember all those US problems for on-line bookmakers like PartyGaming a while back? Well, they seem to have done a deal and the share price has recovered by a lot since its low.

Shares in PartyGaming (PRTY) jumped by 31p to 250p after it announced it has reached an agreement with the United States authorities that will protect the online gaming group from being prosecuted for providing internet gambling services to customers in the region. The group said it has agreed to pay 105 million dollars in semi-annual instalments over a period ending on 30 September 2012. Chief executive Jim Ryan said the deal marked an "important day" for PartyGaming. "We are now well placed to seize organic as well as strategic opportunities that previously were beyond our reach," he added. The group also reported trading figures. It said the significant strengthening of the US dollar and competitive pressures in its core poker division were the primary factors behind a drop in quarterly revenues. Group revenues fell to 100.1 million dollars during the three months ended 31st March versus 128.9 million dollars last time. Poker revenue dropped to 53.6 million dollars from 80.7 million dollars, due to foreign exchange movements and competitive pressures from US-facing sites, while Casino revenue fell to 40.9 million dollars compared with 42.3 million dollars, though average daily casino revenue was up by 5% versus the previous quarter. "Whilst the business environment remains challenging, our strong poker sign-ups together with the addition of 60 new games to our casino by the end of the first half, further B2B deals in the pipeline and our strong control of costs, mean we are well-placed to capitalise on our great products, great brands and strong cashflow," commented Ryan.

 

UK-Analyst.com: Tuesday 7th April 2009

PartyGaming (PRTY), the world's leading listed online gaming company, announced that it has signed an exclusive agreement to launch an online poker tournament service in Italy for INTRALOT S.A, one of the world's largest suppliers of integrated gaming and transaction processing systems to state-owned lotteries worldwide. INTRALOT is to be the first member of PartyGaming's poker network in Italy. The company will have new marketing initiatives in Italy including promoting INTRALOT's online porker through its retail network, which includes 600 betting outlets. The two companies under the terms of the agreement will also cooperate to explore further opportunities for providing online gaming services in specific markets throughout the world. Jim Ryan, Chief Executive Officer of PartyGaming, said: "We are excited about exploring opportunities with INTRALOT, a leading global gaming technology and services provider, which has a presence in more than 50 countries worldwide, an extensive business-to-government operation, as well as an established and high growth presence in the Italian market. This is our third business-to-business deal in 2009 and we are confident of continuing to build our portfolio over the coming months." Shares in PartyGaming fell by 0.75p to 219p.

 

UK-Analyst.com: Monday 6th April 2009

Luckily, about 2 months later, I will be a free man & capable to act more deservedly. They could not use …

Can you say more on this?

Lulu the uber bull.

Buyer buyers everywhere!

 

Lulu Egerton

 

This last week has been mad. Low interest rates and worsening economy has spurred people to look at property more closely than ever as their preferred investment. Where else to put your money? We have never been busier and are agreeing terms with Vendors serious about selling. Managing Vendor expectation remains the key issue and the difference between agreeing terms and impasse. A reality check needs to take place before trading copmmences with any real snappiness. Truthfully all prices are probably still 10-15% too high, self evident when we analyse offer levels.

 

My buyers this week range from a hilarious Egyptian who wants to buy a flat up to £2m by next Friday. We've found a perfect uber-cool bachelor pad in a garden square which has his name all over it, but he and I are like traders in the souk fighting over the last dinar, I want him to pay more, he wants to pay less! I've spent today with a lovely American who flew in from New York this morning with her interior designer. She wants to see everything between £5m-£20m in Chelsea and South Kensington. She wants to make a decision by Tuesday. There are 47 houses available to view which is staggering amount in such a small area. A lot of these are 'off market' because Vendors want a discreet marketing campaign. No publicity. No brochures. No floorplans. No photos. Yes, its true, the high rollers are selling up to downsize or leave town. A sense of urgency is driving the serious investors to part with their money, i wonder what they know we dont? Answers on a postcard please.

 

http://blogs.telegraph.co.uk/luluegerton/b...yers_everywhere

 

Bricks & Mortar return to fight another day

 

2009 has started with a whoosh of activity. The bleak autumn a dim and distant memory. We received 51 bids on our clients' houses and flats in January, a further 31 bids thus far in February. While Gordon Brown is busy putting Bank CEOs in the dock, their bonus-friendly staff are busy spending with us.

 

Hooray, the bankers are back after only a short absence.

 

This may annoy some but it delights us. Added to which we have excellent Euro and dollar purchasers licking their lips at the weak pound and favourable exchange rate, giving them a further 25% discount on already depressed prices.

 

They're buying like it's their last day on earth. We have buyers from Monaco, Italy and France as well as those from the Square Mile who are realising value not seen 12 months ago. They're not overpaying by a long mile but cash is king, so if you need to sell, consider any bid you get very seriously. It may be the last one you see for some time.

 

http://blogs.telegraph.co.uk/luluegerton/b...ght_another_day

Heard from someone today that his house sale fell though because the buyer had a mortgage (or thought he had) from the Bristol and West Building Society, which should now be called the Bristol and Gone West.

Talking of Ireland.

Warning that house prices may fall by 80%

 

HOUSING MARKET: IRELAND WILL see more demolition than construction of houses over the next decade, as the economy struggles to recover from the collapse of the housing market and the emergence of “zombie” banks, UCD economist Morgan Kelly told the conference.

 

In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.

 

“Construction, but not demolition, of residential and commercial property will fall to zero for the foreseeable future,” he said.

 

Low levels of education among those employed in construction – where worker numbers peaked at about 280,000 – meant retraining would not be straightforward.

 

Recovery will be slow: “It has taken us 10 years to get into this situation – it will in all likelihood take us 10 years to get out of it.”

 

Mr Kelly said he had been hailed as being extremely prescient as a result of his warnings in relation to the property bubble, when in fact he and a handful of other “amateurs” were merely stating what was obvious.

 

Sparing no blushes, he said professional economists in the Central Bank and the Economic and Social Research Institute “need to look very closely at their analyses of the Irish economy and figure out what went wrong”.

 

Mr Kelly said Ireland’s “reputational capital” had been damaged by “chancers” such as ex-Anglo Irish Bank chairman Seán FitzPatrick, who had been abetted by “buffoons” such as former financial regulator Patrick Neary, Minister for Finance Brian Lenihan and the Taoiseach.

 

http://www.irishtimes.com/newspaper/financ...1738220759.html

House prices fall at fastest pace in 25 years

December 4, 2008

http://www.timesonline.co.uk/tol/money/pro...icle5284863.ece

It's such a shame. Come on everyone, get out there and spend. Let's bring some confidence back, that's all it takes.

Dalai Lama’s 18 rules for living

 

At the start of the new millennium the Dalai Lama apparently issued eighteen rules for living. Are they also the rules of the game. Here they are.

 

1. Take into account that great love and great achievements involve great risk.

2. When you lose, don’t lose the lesson.

3. Follow the three Rs:

1. Respect for self

2. Respect for others

3. Responsibility for all your actions.

4. Remember that not getting what you want is sometimes a wonderful stroke of luck.

5. Learn the rules so you know how to break them properly.

6. Don’t let a little dispute injure a great friendship.

7. When you realize you’ve made a mistake, take immediate steps to correct it.

8. Spend some time alone every day.

9. Open your arms to change, but don’t let go of your values.

10. Remember that silence is sometimes the best answer.

11. Live a good, honourable life. Then when you get older and think back, you’ll be able to enjoy it a second time.

12. A loving atmosphere in your home is the foundation for your life.

13. In disagreements with loved ones, deal only with the current situation. Don’t bring up the past.

14. Share your knowledge. It’s a way to achieve immortality.

15. Be gentle with the earth.

16. Once a year, go someplace you’ve never been before.

17. Remember that the best relationship is one in which your love for each other exceeds your need for each other.

18. Judge your success by what you had to give up in order to get it.

 

From: http://thebluemarbleblog.blogspot.com/2008...for-living.html

There is another post in the blog which is about me!:

http://thebluemarbleblog.blogspot.com/2008...ove-island.html

Probably worth a thread of its own.

Remember seeing a program on the history of the MAN OF THE YEAR covers.

 

Originally, they often had tyrants on the cover[i believe Hitler among others was MAN OF THE YEAR once].

Oh dear.

Adolph Hitler, Man of the Year

http://www.time.com/time/covers/0,16641,19390102,00.html

Billionaire investor George Soros is to tell US lawmakers on Tuesday that “a bubble in the making” is under way in oil and other commodities and that commodity indices are not a legitimate asset class for institutional investors.

He's not the only one.

Oil, Commodity Demand to Drop as Expansion Slows, Faber Says

 

By Millie Munshi and Monica Bertran

 

July 1 (Bloomberg) -- Demand for industrial commodities including oil will fall, pressuring prices, because the financial sector is in ``disarray'' and the economy will continue to slump, investor Marc Faber said.

 

``The industrial-commodity complex is vulnerable because demand will slow down,'' said Faber, publisher of investment newsletter the Gloom, Boom and Doom Report. ``The economy is weakening, corporate profits will disappoint, valuations are not particularly attractive, and the financial sector that serves to channel savings into investment is in disarray.''

 

Demand for commodities will fall after raw materials including oil, corn, copper and gold touched record highs in the first half, Faber said in an interview on Bloomberg Television. The global economic slowdown will last a ``very long time,'' he said.

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Forecasting a bigger drop in the UK than the US, I would say

Barratt Developments was around £10-11 when in the FTSE100, look at it now.

ADVFN Market report.

Among the housebuilders, Persimmon was down 26 at 487-1/2, also under pressure as the company looks set for demotion to the FTSE 250 index next month, leaving no housebuilders in the FTSE 100.

 

And building materials group Wolseley was down 19-1/2 pence at 537-1/2, hit further by Panmure Gordon reiterating its 'sell' rating and 400 pence price target.

 

Among mid-cap housebuilders, Barratt Developments was 10-1/2 pence lower at 190, Taylor Wimpey was down 8 at 85.5, and Bovis Homes fell 19 to 429.

From today's Whisky and Gunpowder newsletter.

The Five Reasons Why Now’s the Time to Buy Junior Miners

 

Gold could be ready to end the summer doldrums even before summer begins.

 

The most relevant area of resistance in the way of this outlook is the 30-point range between $890 and $920. If gold can break through and find support at these values it will be poised to rise for the summer.

 

With that said, I think we’ve had our seasonal low and now it’s gold’s turn to shine…as the most preferable commodity…and better yet, to become money again.

 

Just writing that makes me realize how early in the game it still is. Who today would believe gold will become money again? Yet, at the top of the market everyone will.

 

Here is the best opportunity for us right now…

 

The Five Best Reasons to Buy Good Quality Precious Metal Juniors

 

Most of the small-cap and junior resource market has been in decline since gold first broke the $700 level back in 2006. But that’s all about to change, I have five reasons why you should buy juniors now before the window closes — lets get started…

 

Reason #1, is that, several depressing factors have come together to produce an early seasonal low, at least for the precious metals sector.

 

Reason #2, as implied in the introduction, gold has lagged the commodity cycle because the market is infatuated with the growth in developing countries, and has inferred a “realness” to their demand for commodities. I’ve never disputed that the growth exists… just that there is a lot more inflation, and that inflation is what drives prices higher.

 

I believe the gold market is at a bullish inflection point — a point of recognition of sorts.

 

Reason #3, the precious metal juniors have hardly benefited from the bullish trends in these commodities to date, especially since 2006, never mind the future.

 

Lots of money found its way into the junior segment over recent years, to be sure, but this expansion in capitalization has been dilutive. The Canadian Venture Exchange (CDNX) has had a hard time keeping up with gold itself, and is at its lowest level relative to gold since 2002. Simply put, the juniors should be tracking gold — and right now they have a lot of catching up to do. The result is a widening gap between the values of majors and juniors. In my mind, that gap will soon contract.

 

With that said I think it’s the best buying opportunity in this segment since 2002.

 

Reason #4, The money that has poured into the junior precious metals segment over the past few years has been soundly invested. I am impressed with the value that I’ve seen many juniors create throughout this cycle — the development of assets discovered back in the nineties has been astonishing.

 

Finally, the best reason to own these juniors now…

 

Reason #5, the next takeover wave!

 

Many of the large-cap producers are priced for growth, and they know that if they want to sustain those multiples, they’ll have to buy or find reserves. That’s the incentive.

 

Meanwhile, the juniors spent lots of investment dollars proving up their assets, and the market has ignored them. So they are ripe for acquisition.

 

And, the majors have plenty of cash, thanks to the latest run in gold prices.

 

Some, such as Agnico Eagle have said they’re on the hunt, while others like Gold Fields are obviously in need of assets outside of South Africa. Corrections in the price of gold won’t discourage them.

 

There’s your ammunition, five Solid reasons to make sure you are small-cap and junior miners. These miners won’t remain at these levels long, so now is your chance to get in!

 

I’m working on a more comprehensive target list as we speak. I see a window of opportunity between now and the end of this gold price correction to buy the good quality small-caps and juniors before they take off. The window could close earlier than you think.

 

Regards,

Ed Bugos

UK Coal reported FY07 operating profit up 200% to £82.7m (2006: £27.6m), profit before tax up 292% to £69.0m (2006: £17.6m) compared to £59m expected. EPS up 412% to 59.9p (2006: 11.7p), excluding tax credit, EPS was up 276% to 44.0p (2006: 11.7p). David Jones, Chairman, said: "With a positive outlook for all our businesses, we face the current financial year with considerable confidence."