Interest Rates, Hamburger Wars, and Tocvan Ventures. Tocvan traded only 280,000 shares for the entire week, of which 199,000 shares traded yesterday alone. Instinet was a big part of the selling yesterday, placing a sell order for about 100,000 shares at $0.40.
The "Sky was Falling Again", this shook out a market sell order all the way down to $0.375, what I like to call the nervous "Nelly" seller. However, this was quickly cleaned up by shareholders with the price closing over $0.41 by the end of the day.
Overall Tocvan has been quiet, there have been no material changes reported, and no real news to speak about.
I believe a good base has formed in the $0.40 price range, a testament to the strength and commitment of the shareholder base.
The markets in both Canada and the US have been in retreat this week, which unfortunately impacts the trading sentiment in most stocks. The US stocks closed in a sea of red on Friday with the Nasdaq dropping more than 2.5%, the S&P 500 by 1.7%, and the DOW by 1%. Overall the S&P 500 dropped about 4% for the week. There are a number of factors pushing the markets down, some say over-valuations are peppered throughout the stock market, others say it is profit taking from a record run in previous weeks. Job reports, unemployment numbers, and gas prices all have an influence as to the direction of the stock markets.
I follow Warren Buffet closely as his approach to investment and valuations has always intrigued me. He sold a staggering $75 Billion of stock in the second quarter of 2024 through Berkshire Hathaway, raising his cash reserves to a record 276 Billion. I am old school and have thought for some time now that the markets are overvalued, but they generally continue to surge higher and defy gravity. I believe there are also far too many stocks that live and die on the hype brokerages and traders create for them. Time will tell, but Buffet has certainly been showing his playing cards lately. That is not to say that all stocks are bad, one just needs a balanced approach.
It looks as though the Feds in the US are ready to start lowering interest rates, the Canadian regulators have taken a more aggressive approach lowering it by another quarter point on Wednesday, with signs of more cuts on the way. Inflation and high interest rates have finally strangled money out of the market over the last 4 years, the average person's pockets have been picked clean. Everyone is learning to live with less, rents have skyrocketed, bankruptcies have increased, but as intended, the net result is that prices have begun to stabilize and even drop.
One doesn't have to look far to see that price wars have begun to emerge as people are eating out less, take for example the "Hamburger Wars" in the fast food industry. I got a flyer the other day from McDonalds offering any two hamburgers for only $10, and even $1 Coffee to compete against Starbucks.
Another example I have personally seen is at the fast food chain Montanas, my favourite place for a steak. The prices have risen lately due to higher supplier costs, and this, as well as other reasons, has turned away customers. I have noticed over the last few months when we tend to visit there are fewer people. We were surprised to see only one other table with customers yesterday when business is usually busy on Fridays. It was the first time EVER our waitress was cut from her shift due to lack of customers. And this is during their peak summer season, not during the cold winter months in January through April when sales are traditionally lower. This is impacting everything from their bottom line, people who serve your food, and even the Uber driver.
Sorry to digress about the economy, but it is impacting everyone and just about everything. The stock market isn't immune, less money means fewer speculators in the junior markets which is where I generally place my mad money. There has also been a shift from stocks to investment products such as GIC's which were recently returning over 5.5% guaranteed, with NO RISK and NO STRESS (I personally rotated money into these types of investments as rates went up).
The good or bad part, depending on your risk level, these investments are starting to unwind as interest rates begin to drop, thus transferring this weath back into the stock markets. Some of this money will go into secure return investments like banks and utilities, but a portion will also go into more speculative and highly leveraged investments. Investors will be looking to more speculative stocks in an effort to get the money they have lost back faster. This rotation of capital will take time as many of the interest bearing investments will not mature for months and perhaps even years, it will happen, patience is required. I have several coming due in ear;y 2025, so I will personally be looking at alternative investments.
One thing my dad always told me, "a resource like gold will always be in high demand as it is very expensive to mine and supply isn't limitless ". The price of gold has risen dramatically over the years, pushing new highs consistently over $2,500 USD. I suspect the price of gold will rise significantly higher as the population of the world continues to grow and as people look for an alternative hedge against inflation.
There are pure gold stocks one can play the price of gold directly, for example, the Sprott Physical Gold Trust (symbol: PHYS). The Trust was established to essentially hold and invest all of its assets in physical gold bullion. It is sorta like watching paint dry but it has provided a great return without the volatility of owning individual gold stocks. For example, it yielded an 8% return thus far in 2024, 12.6% in 2023, and 23.7% in 2020. A small loss of 0.9% and 4.1% were recorded in 2021 and 2022 respectively. This Trust has generated over 42% return in just the last short 5 years. If you believe the price of gold is going to surge higher in the coming years, this might be a good alternative place to park some long-term cash.
This again brings me full circle back to Tocvan Ventures, which I believe has significant upside potential as the resource markets recover and given the production plans they have outlined. Tocvan has an excellent share structure, tight shareholder base, and room to raise money, therefore its exposure to risk is greatly reduced. They also have a guaranteed monthly cash flow of $62,500 over almost the next 18 months and support from a strategic investor. There are many junior resource companies that don't have these metrics and are subject to substantial price deterioration.
I suspect we will see a Press Release soon reporting the results from the 200 soil samples collected during the summer from along the northern and eastern extensions of the Main Zone, North HIll and 4-T Trends. Expanding resources in these areas is important to increasing the potential production footprint and overall size of the mineable resource. I suspect these results will also lead to additional high priority drill targets. I am wondering whether some of these samples were collected when the "Major" was on site for several weeks, potentially making these results even more important.
I am aso anticipating the drilling to begin during the month of September as reported in the previous press release. The first week of September was rather quiet, I am keeping a close eye on the progress going forward over the next several months.