1. So much happened yesterday that it is almost impossible to recount in a single set of Morning Notes. First, General Motors. The auditor of that company suggests that it might cease to be a Going Concern. This should not surprise anyone but it is amos tsignificant and troubling. It sends avery clear message. A new industrial state must be built from the ground up here in North America on a different set of science. Discovery will be foremost in this new framework.
Next, the banks. Citigroup touched 97 cents per share and BAC has lost 32% of its share price. It is now suggested that a number of “Hail Mary” trades were attempted by Merrill Lynch before the merger with BAC. When people become desperate …. .
Finally, it is clear that AIG must be kept up and running because of its counter party exposure through CDS (bond insurance). US retail numbers were lousy except for Walmart. The market (Industrials) fell 281 points. This AM japan and other are falling also.
Gold is a bright spot as is silver an the precious cousins. Hope you have saved some cash and bought some gold expsoure. Our time will come again.
Now for the good news. I think we are near the end of the beginning. It is possible that we will see an equity sell-off extraordinaire in the near-term as people (mom and pop as well as Portfolio Gurus alike) are close to what Dennis Gartman so aptly coined as their “Puke Points.”
We need complete and utter capitulation, of course. That may take the indexes quite a bit lower – 5000 to 6000 DOW Ind, 500 SP500?
CoreLogic reports this AM that 61.7% of Las Vegas homes are in foreclosure or are near foreclosure. (58% are now in foreclosure) Can there be much more????
The Obama Administration is trying to fix the housing miasma, and rightly so. Perhaps both the Republicans and Democrats waited too long on this one problem that has now decimated the banking and credit allocation systems worldwide. It now seems that there is an understandable rule (actually two) for saving homeowners – as much as I feel grimy about the violation of Moral Hazard – the alternative is probably worse – now.
What was it W C Fields said on his death bed – “I’d rather be in Philadelphia.”?
2. Two Discovery names surface this AM. First Quaterra Resources. I am hearing the company was well received in Toronto at PDAC. I was not there bu tspke with several attendees. Copper has raised it head somewhat based on potential for increased China buying. I am with a Toronto Copper guru here in Florida who confirms this. The orders are apparently pouring in from China and elsewhere.
Quaterra just reported a 25.1 million ounce (30 gram cutoff) silver discovery at Nieves in Mexico and has the low cost MacArthur and Yerrington resource of about 800 million pounds and counting.
Stay tuned – this stock is off 83% from its March high last year and I think is a value – I own this stock. Of course very strong economic winds are still in the face of many of these resource companies. But the bottom will be put in.
Datameg announced a deal with a the second largest food service company in the US yesterday. The stock has tripled over the past week or so. I like CEO Jim Murphy. He has taken no salary or options. I am beginning to think he has Datameg turned around in spite of the hundreds of millions of shorts (many naked) oppressing the share price. Please have a look and study this Discovery opportunity. I own shares in DTMG (Datameg).
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Michael Berry has been a portfolio manager for both Heartland Advisors and Kemper Scudder where he successfully managed small and mid cap value portfolios. Dr. Berry has specialized in the study of behavioral strategies for investing and has been published in a number of academic and practitioner journals. His definitive work on earnings surprise, with David Dreman, was published in 1995 in the Financial Analysts Journal.