psychology is 90% of valuationMarch 05, 2007
Buying opportunity for risk adverse
Publisher: U308.biz
Buying opportunity for risk adverse
The losses continued to pile up on the resource-heavy Toronto stock market Monday as investors dumped stocks despite enthusiastic cheerleading echoing from the investor's exchange at the PDAC, the nation's largest mining convention which opened in Toronto, Monday.
Toronto's S&P/TSX composite index was off early losses that approached 200 points to close 152.02 points lower to 12,711.25 after shedding 3.6 per cent last week.
Uranium stocks continue to feel the heat. The sector was off by 1.7% with producers, near producers and advanced explorers all feeling the most pressure.
According to Frank Quinby, of SamllCap Investors Inc. "In the microcap world investor psychology is 90% of valuation. The potential mineralization in the ground and the potential upside did not shrink this week.
What did shrink was the premium investors were willing to pay for "a piece of the dream". That's what a potential discovery in mining is until drilling proves up a reserve or until production ensues, sales are booked and cash is deposited.
Did the dreams die today? Absolutely not! They just went on sale.
The uranium mining markets remain strong. There are quality projects, adequate or excellent financing and advanced level of development.
Fear in the market has some investors running for cover. The ones in the greatest pain are the short term traders.
The selling often starts with the best deals because they are the most liquid."
On the TSX, the mining sector retreated almost 5 per cent on top of last week's 7-per-cent loss as investors worry that slowing economic conditions will slash demand for commodities.
The mining sector was up almost 60 per cent last year, partly on strong demand from Asia.
The flight from commodities also hit the price of gold, taking the TSX gold sector almost 2 per cent lower. The April bullion contract on the Nymex faded $4.90 (U.S.) to $639.20.
In the microcap world investor psychology is 90% of valuation. The potential mineralization in the ground and the potential upside of industrial processes or products did not shrink this week.
What did shrink was the premium investors were willing to pay for "a piece of the dream". That's what a potential discovery in mining is until drilling proves up a reserve or until production ensues, sales are booked and cash is deposited.
Did the dreams die today? Absolutely not! They just went on sale.
The uranium mining markets remain strong. There are quality projects, adequate or excellent financing and advanced level of development.
Fear in the market has some investors running for cover. The ones in the greatest pain are the short term traders.
The selling often starts with the best deals because they are the most liquid.
All sectors closed negative.
The sell off was triggered by a drop of almost 9 per cent on Shanghai's stock market last Tuesday --- although analysts think that markets at or near record highs would have found another reason to correct.
New York indexes also finished the session lower after an attempt at a rally fizzled as investors tried to size up where the market was headed following a sizable decline on U.S. indexes last week.
The Dow Jones industrial average was off 63.69 points to 12,050.41 following a 4.2-per-cent decline as investors worry about lower earnings and the possibility of a recession.
A day before the Bank of Canada is widely expected to announce it is leaving its key interest rate unchanged at 4.25 per cent, the Canadian dollar closed down 0.25 of a cent to 84.7 cents (U.S.). The TSX Venture Exchange fell 111.37 points to 2,955.39.
New York's Nasdaq composite index moved 27.32 points down to 2,340.68 on top of last week's 5.8- per-cent loss and the S&P 500 index shrank 13.05 points to 1,374.12.
The energy sector, down more than 4 per cent last week, pared early losses. It was off 1.2 per cent as economic worries sent the April crude contract on the New York Mercantile Exchange down $1.57 (U.S.) to $60.07 a barrel. Canadian Oilsands Trust dropped 77 cents to $26.26 and Suncor Energy Inc. fell $1.13 to $80.41.
Amid non-resource sectors, the financial sector took the biggest hit, down 0.75 per cent. Bank of Nova Scotia declined 45 cents to $49.68.
Even traditional defensive areas sold off, including consumer staples, down 0.4 per cent and utilities off 0.77 per cent.
On the economic front, the U.S. Institute for Supply Management said its February index of business activity in the service sector was 54.3, down from 59 in January. Analysts had expected a reading of at least 57 for the latest month but took solace in the fact that the index was up for a 47th consecutive month.
Concerns about losses over soured loans by subprime lenders in the U.S. also depressed markets.
New Century Financial Corp. reported it is facing a probe into its accounting and stock trading.
Also, HSBC Holdings PLC, Europe's largest bank, said its 2006 profits rose 5 per cent but it booked $10.6-billion (U.S.) on losses on bad loans from its U.S. subprime mortgage operations.
Overseas, London's FTSE 100 index dropped 0.95 per cent, Frankfurt's DAX 30 fell 1.04 per cent and the Paris CAC 40 lost 0.73 per cent.
In Tokyo, the Nikkei 225 index fell for a fifth day, tumbling 3.34 per cent.
Hong Kong's Hang Seng index tumbled 4 per cent to its lowest level since mid-December.