|
On
June 25, Bernanke left key short term rates unchanged at 2%, citing
"considerable stress" in financial markets and tight credit
conditions. The Fed also cautioned about the upward pressures on prices
caused by rising oil and other commodity prices. On the same day, Mr. Warren
Buffett fingered "exploding" inflation as the biggest risk to the
economy. Buffett said on CNBC "It's huge right now, whether it's steel
or oil. We see it everywhere."
The
markets spoke convincingly on Buffett's side as oil has zoomed up and set new
highs while the Dow has been in a freefall. Clearly the Fed has not done
enough to calm inflationary fears. As more data emerges on the plight of the
financial sector, we see that there may be more bank bailouts coming in the
near future. As we saw in the case of Bear Stearns, the banks own so much
equity in one another that the collapse of one bank could lead to a
chain-reaction collapse. Because of this, there's every reason to expect that
bailouts will be extended to the troubled financials stocks that can't cover
their losses. Meanwhile, the costs would be paid by anyone holding
dollar-denominated assets.
Gold
has been buoyed by oil's rise and is now sitting around $920/oz after
Tuesday's step back. More interestingly, gold stocks measured by the XAU
index have defied the general equity downtrend and held fairly steady.
On
the junior gold stocks, one company that caught my eye on the volume gainer
board is Axmin Inc. (AXM),
a gold explorer in West Africa.
 
Axmin
was a favourite of several fund managers in 2003. The stock went from 30
cents to $1.7 by the end of 2003. Since then, it's been treading water and
reached a 3 year low of 40 cents on heavy volume in late June. The company
was 40% owned and locked up by a private group, which makes it a tight
shareholder structure.
At
roughly a $100 million market cap for 4 million oz of gold of decent grade,
AXM is a good speculation. Note that they recently closed a private placement
at 40 cents, therefore a good entry point is the low 40 cent range with
profit taking at 200 DMA of 70 cents within the next 4 months. For disclosure
purposes, I'm not affiliated with Axmin in any way.
Right
now, I'm in Singapore
speaking at Terrapinn's Commodity Investment World 2008 Conference. Rising
prices, US
inflation, and the banking sector are hot topics, and I did interviews with
people from both Dow Jones and Bloomberg, who quoted me in an article this
morning: http://www.businessday.com.au/
Click
here to find out more about the conference and the speaker lineup: http://www.terrapinn.com/2008/commodity/
I'm
also excited to announce that we've done a complete renovation at my home
site, Goldmau.com, giving the site and updated look and
added a news headlines feed with only the most relevant economic news. In
addition, headlines are accompanied by exclusive commentary from myself and
other Goldmau analysts as they're published.
By :
John Lee, CFA
Goldmau.com
John Lee is a portfolio manager at
Mau Capital Management. He is a
CFA charter holder and has degrees in Economics and Engineering from Rice University.
He previously studied under Mr. James Turk, a renowned authority
on the gold market, and is specialized in investing in junior gold and
resource companies. Mr. Lee's articles are frequently cited at major resource
websites and a esteemed speaker at several major resource conferences.
Please visit www.GoldMau
for instant market alerts and stock updates.
| 
