Canaccord
Gold* (GC : NASDAQ : US$1722.00), Net Change: 70.20, % Change: 4.25%
Barrick Gold* (ABX : TSX : $45.92), Net Change: 1.03, % Change: 2.29%, Volume: 6,259,641
Goldcorp* (G : TSX : $46.31), Net Change: 0.94, % Change: 2.07%, Volume: 4,501,533
Kinross Gold* (K : TSX : $15.28), Net Change: -0.08, % Change: -0.52%, Volume: 6,455,247
Breakfast with Dave Rosenberg was hard to swallow Monday morning. It seems the market should have heeded his warnings. In recent weeks he has cautioned investors, that a U.S. downgrade was going to likely be more negative for the equity market than Treasuries, and that is exactly how the week started off. According to Rosenberg, “The reason is that history shows that downgrades light a fire under policymakers and the belt-tightening budget cuts ensue, taking a big chunk out of demand growth and hence profits. It is not just the United States — the problem of excessive debt is global, from China to Brazil to many parts of Europe. And let’s not forget the Canadian consumer.” He then reminds of the story of the three little pigs. We had a nice twoyear rally in risk assets and something close to an economic recovery, but as he had warned, it was built on sticks and straw, not bricks. Until the economy is built properly of bricks, it will be susceptible to the big bad wolf. He notes that this latest rally was
not much different than the financial engineering in the 2002-07 cycle that gave off the appearance of prosperity. As for our favourite inflation hedge, "Gold is also rallying hard as it becomes oh-so-painfully evident, now with the ECB joining the fray, that debt monetization by the monetary authorities globally is going to be part and parcel of the solution to this leg of the crisis. Expect gold to go much, much higher as well — just to get back to prior highs in inflation adjusted terms would mean a test of $2,300; and normalizing by world money supply points to $3,000 an ounce." We note senior producers typically provide a lower risk way to capitalize on a rising gold price. Canaccord Genuity is bullish on Barrick Gold; Goldcorp; and Kinross Gold.
Gold aside, Rosenberg also addresses the question, are we there yet? He notes, “Everyone is trying to call a bottom now (which is never the hallmark of a panic low) and is what you would like to see to start dipping a few toes back into the market. The term “buying opportunity” is posted in so many circles, and what is interesting is that you never ever hear the term “selling opportunity” on Wall Street. It just doesn’t exist in the industry parlance — not even around peaks! Be that as it may, the market will find a bottom at some point, therefore it is worthwhile to identify and assess what could be trigger points. In my view, the five basic factors include: i) technicals; ii) valuation; iii) fund flows; iv) sentiment; and v) the good ol’ fundamentals. Also have a look at what other catalysts could be lurking around the corner”.