Free Editorial

Summer Heat (?)

From the June 12, 2014 HRA Journal: Issue 215

Ok, it could be another head fake (there have been plenty) but the latest move in the gold stocks looks strong enough to be the real thing, even though its just begun.

If it is it will represent a very different outcome for the sector though the summer than most are expecting.  Of course that is the thing about markets.  They have a disconcerting habit of doing precisely what most traders don’t expect.

A couple of HRA list companies that released economic studies have gotten good reactions that don’t seem like one day wonders and a few companies that have released good drill results are also seeing traction that lasted.  That is a better outcome than anyone was seeing a month or two ago.  Nothing convinces management teams its time to get into the field again like seeing another company clocking big gains on exploration results.  The more of that we see the tougher it will be for companies to blame the weak market for their decision to hang back.

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Range Bound

From the May 21, 2014 HRA Journal: Issue 214

The song remains the same.  There have been plenty of triple digit days on the big markets lately but all the movement hasn’t amounted to much overall change in the level of the markets.   We’re heading into what is supposed to be the quiet time of year.  For that reason alone the bias is for slightly lower markets though I don’t see a compelling argument for either “up” or “down” as yet.

Gold has also gone basically nowhere.  That may be a good thing as the Ukraine seems to be off trader’s screens even though the situation seems to get more volatile each day.  Summer approaching argues for lower metal prices but here too things can go either way.

We’re finally starting to see more news flow and that trend at least should continue to improve.  Funding remains tight but companies that have laid out coherent exploration plans are getting placements done.  We’ll see a lot more news in the next 2-3 months and some of the deals I’m tracking should be ready to talk about sooner.  I’m hoping for a break to the upside by the juniors once news flow really picks up –assuming gold hasn’t been beaten down yet again.

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Bipolar Markets

From the April 29, 2014 HRA Journal: Issue 213

Another period of sideways, with a few sharp turns along the way to keep traders on their toes.   We basically stand where we were a month ago and we’re still waiting to see if we get a spring rally in resource stocks that lifts us above the March high for the Venture index. Admittedly, there isn’t a lot of “spring” left to work with and we all know how boring things can get as we exit May.

Like the last issue, I held this one for a few days hoping to see more news to report on and, like the last issue, not too much arrived.  Things are warming up (weather wise). Summer exploration is beginning in the northern hemisphere so news should pick up. For the record, I did add a new company at the SD level and you can expect to see some new choices in these pages soon. I am waiting on technical data for a couple of stories I like.  I need the data to cover them properly but I don’t expect it to change my basic opinion so odds are you see one of these in the next issue.

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Traders Resolve Tested

From the April 7, 2014 HRA Journal: Issue 212

Just when you thought it was safe to go back into the market the gold price and junior resource stocks drop and nervous traders declare the sky is falling yet again.

I’m not thrilled by the market action of the past two or three weeks but I also don’t think the basic narrative has changed.   The gold price has corrected but I don’t think its rolled over unless it gets quite a bit lower.  Likewise, the correction in the Venture Index is not large compared to some of its larger brethren and well within the bounds of what one would see as part of a larger bullish advance.

It’s still very quiet on the news front and this is one issue that needs repair before a strong bull run develops.  Most companies just raised money so it will take time for them to start reporting from the field.  That will help carry things forward and new discoveries and new ideas will help even more.

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A New Resource Bull

From the March 16, 2014 HRA Journal: Issue 211

Its game on in the resource space at long last.  There are plenty of market players that are still cautious but that is how it should be early in a bull market.  Technically, we need to be 20% off the bottom for a Bull to be official but it seems very unlikely we won’t get there now.

As this issue was finished the Crimea announced the voting result everyone expected.  It hasn’t generated a negative impact but it’s too early to sound the all clear on that.  It will be a few days before all the political players have read their lines so things could still go wrong.   I don’t expect too many surprises which means I don’t expect higher gold prices because of Ukraine but the chance of more serious repercussions is real enough.

The elevated rate of financings continues.  Most of it is still going to producers or companies drilling existing exploration successes.  More important will be fund raising for new ideas but we are not quite there yet.

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So Far, So Good

From the February 25, 2014 HRA Journal: Issue 210

We’re one issue into the cycle since I made the start of year predictions.  I don’t look stupid yet which might be some sort of record.   So far, so good.

If the trend of the past two weeks holds up the correction that started 2014 is already over.   If you use the Dow as the benchmark the dip was eight percent.   I’m not sure that is large enough to make me comfortable.

I was hoping for something in the 10% plus range.  That would have been large enough to kill off some optimism and bring some bears out of hibernation.  I’m not bearish myself—I’m looking for a correction, not a crash—but I continue to be uncomfortable about the levels of almost blind optimism in New York.  NASDAQ is particularly scary. Read More

Fearless, Foolish Predictions for 2014

From the January 29, 2014 HRA Journal: Issue 208-209 (Part II)

Major Markets:

2013 worked out much better for most major bourses than even optimistic forecasters expected.  In large part that was due to multiple expansion.  Traders bid up the value of each dollar of earnings and the P/E ratio for the market increased.

That generated great returns last year but don’t expect a repeat.  Valuations are getting stretched and, so far, forward guidance by companies has been cautious.

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QE Unplugged

From the January 29, 2014 HRA Journal: Issue 208-209 (Part I)

As I expected, the US Fed pulled the trigger and announced an initial “taper” of the Quantitative Easing (QE) program.   Starting this monthly purchases of T Bills and Mortgage Backed Securities will be reduced by $10 billion.

Equity markets rallied strongly then flattened as traders locked in profits and awaited earnings and fresh economic readings. Mom and Pop were piling into Wall St but no one who actually works there thought things look very cheap.

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Absentee Santa?

From the December 17, 2013 HRA Journal: Issue 207

Even in a crappy market year-and this has been all that and a bag of chips for resource stocks-traders tend get relief heading into year end.

Ever optimists, equity traders start looking for things to buy (bet on) as the year winds down. Cheap or free booze widely available at company and private holiday gatherings doesn't hurt either. That's what a normal year looks like. 2013 has been anything but normal. Read More

My Big Fat Chinese Plenum

From the November 29, 2013 HRA Journal: Issue 206

No, it's not a glandular condition. China's leaders concluded the third Plenum of the 18th Party Congress a couple of weeks ago. Party Congresses last for five years and Plenums (full meetings) are annual except for the first year of each Congress where there might be two or three full meetings.

Traditionally, the third Plenum is the one where new leadership lays out its long term goals and strategies and it has been third Plenums that were the basis for sweeping changes in China's society and economy in the past 30 years. The mother of them all was the third Plenum in 1978 when Deng Xiaoping started China down the path to "Capitalism with Chinese Characteristics". This was the first third Plenum since the ascension of Chinese leader Li Keqiang and expected to be particularly important.

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