Month: April 2012

K, Kinross

Hamilton

k apr 2012

Kinross is another “favourite” stock that has not worked as a calamity hedge and or inflation hedge. It is now trading well below the levels it was at prior to the 2008 financial debacle. During that year, by the way, the stock lost 85% of it’s value despite the implosion of the US financial infrastructure. Now the Europeans are doing their utmost best to upstage the Americans by making their own, arguable, much bigger mess. So far the stock is down roughly 50% , sort of replicating the earlier experience and yet it is impossible to find  more than half a handful of “analysts” that are not absolutely sure that more gold stocks are what is needed.

From an EW perspective, the 50% was well within the range of reasonable expectations, wave 4 is just a little higher and 50/62% is a perfectly normal retracement, regardless of whether one looks at the entire sequence as a single bull move, or starts anew in 2008. In fact in the former case the normal target would be wave 4 of previous degree, in this case at $2.50 or so! Should we trade below about $11 the idea that we are only in a wave 4 with 5 still to come will have to be rejected due to overlap. Should the stock ultimately drop in proportion to the 2008 situation in response to what is going on in Europe it would end up at about  $3. Unthinkable given the present mindset which is exactly why it might happen. First we should get a bounce.

What were they thinking?

Hamilton

When I served in the (Dutch) armed forces the joke was that “kamfer”, a chalk like substance that is extracted from a tree by the same name, was added in small quantities to the food because of the libido suppressing properties that the stuff was thought to have.

Today I hear on the radio that Canada’s DND (Department of National Defence) is contemplating ,as an austerity measure, doing away with a programme that was introduced in 2000 that provided free Viagra to serving members of the forces ( 6 pills a month @ $15 a piece). The government at the time justified supplying the prescription wonder drug to troops as a health policy meant to ensure “all soldiers were mentally fit and ready for the battlefield”. Presumable they would rise to the occasion more eagerly.

If it requires Viagra to make our forces mentally fit one has to wonder why we even have a DND.

IMG , IAMGoldcorp.

Hamilton

img apr 2012

IMG was up 12x in an equal number of years. It started its climb at the same time that gold itself, but also a good number of goldstocks such as Hecla made their lows in early 2001. Most of the gains were made immediately after the great recession when it became obvious to everyone that the provided liquidity (another 5 T Yen worth today by the BOJ) worldwide could only lead to roaring inflation.. This is a very stubborn misconception but the above chart may help to discredit it. Notice that the high of wave 1 at $13, give or take,  has been breached decisively during the past week or more when the stock traded below $12. This either means that the Pavlov dogs do not hear the bell anymore,  that the world has suddenly become a much better place, or the whole theory was bunk to begin with.

Given the overlap etc. it can now safely be assumed that a 5 wave sequence (or , alternatively an a-b-c) was complete at the $24 level, so the stock has lost 1/2 of its peak value and will lose 62% of the gains since 2001 at around $11.08 if my math is correct. In more detail;

img apr 2012 s2

Notice that a “logical” point for the correction would be around $9. Logical because that would be where c=a. It does not have to go that far and probable will not. Both the RSI and MACD seem to indicate that a turnaround could happen any moment. We have no idea where the best buying opportunity might be but in terms of buying low and selling high these levels start making sense. The company has just completed a take-over whereby they added some 400,000 ounces to their production at a cost anticipated to be about $80 an ounce. At todays gold prices that leaves a fair margin for error.