Dateline: 04/17/00
This week we commence putting all our Internet stock information entirely in our Internet Movers & Shakers Report. This page will now feature a retrospective and commentary on the previous week's market action.
Week in Review
I think we can officially call it a crash! The markets suffered their worst single day point drops in history Friday. For posterity, here they are:
| Index | Close (April 14) | Point Drop | % Loss |
| TSE 300 | 8473.50 | -491.91 | -5.49% |
| CDNX | 3362.90 | -363.10 | -9.75% |
| DJIA | 10,305.77 | -617.78 | -5.66% |
| NASDAQ | 3321.20 | -355.50 | -9.67% |
And the indices are off from their recent highs by even larger percentages. The Dow is down 12.3% from its high of 11,750.28. The NASDAQ is off a whopping 35.3% from its high of 5132.50. In Canada, the TSE 300 is off 16.7% from its high of 10,176.70 and the CDNX is down 25.7% from its high of 4526.10.
Of the fourteen TSE 300 sub-indices, only Gold and Precious Metals rose - by 7.03% - on April 14th. As so often happens, a debacle in the general markets heralds a stampede (or at least a mild dash) into gold. Is this a preview of an emerging trend, or as most analysts have commented, a short term correction in the market?
Gold = Financial Insurance
The news that set off Friday's exodus from technology and into gold was news that inflation was on the rise in the U.S. And gold is always seen as a safe haven in inflationary times.
Hard core goldbugs have long predicted a recurrence of inflation and a turnaround for gold. But their timing has been horrendous. Every time gold seems poised to surge, as it did in October when it surged to $326.50, the price gets beaten back down again. Now they hedge their bets with more cautious language. Nevertheless, one day they might be right. One day there may be a bull market for gold.
At the least, analysts like The Privateer's Bill Buckler are absolutely correct when they reiterate gold's role as "financial insurance". Gold may get beaten down, but it never loses its value completely. And in times of trouble, it always comes through. Now is such a time, as noted above.
The gold price itself did not change much during the week, closing at $282.60. It is still cheap and well off its October high. While gold shares have jumped, it's nothing compared to what they will do if the price of physical gold itself takes off.
If you have a cash position and/or some stocks or mutual funds you don't mind ditching at current prices, a small position in gold stocks or mutual funds as a hedge would make good sense.
I've created a new stock table - this time of precious metals stocks. It has only forty listings at the moment of the several hundred Canadian gold, silver, diamond and other precious metal stocks available. But it includes all the companies on the TSE 300 Gold and Precious Metals Index. It includes all the major producers, many intermediate players, and some companies still engaged in exploration and not yet actively in production. I've also linked to my GoldWatch page below - a handy one page guide to gold resources on the Net.
Precious
Metals Stocks List
GoldWatch
Gold
& Precious Metals Net Links
The Weeks Ahead
What do I see ahead? This week certainly brought a strong dose of reality to the markets. Many Internet stocks were grossly inflated in price. Internet companies without real revenues and earnings, or stocks that were trading at prices totally out of proportion to their earning capabilities, will remain beaten down.
But in a market sell-off like this, people tend to throw the baby out with the bathwater. There are many good quality tech stocks that took sickening dives last week - stocks with profits, earnings growth and tremendous upward potential.
The economic climate remains solid. Price inflation, despite Friday's figures, is still low. Tax rates are dropping. Global economic liberalization continues. The technological revolution continues.
Personally I agree with The Successful Investor's Pat McKeough that we are witnessing a bear market trap. But it's a hell of a big one!
The watchword is quality. If you have long positions in quality stocks, they are worth hanging on to. But speculative stocks may be extremely dangerous.
Above all, you should be diversified across a broad spectrum of stocks, not just tech. If you are not diversified, the first thing you should do, in my opinion, is get a modest position in a quality gold stock. A stock that does not engage in extensive hedging is preferred.
When gold spiked in October, the big winners were Bema Gold and Battle Mountain Gold. Pat McKeough recommends IAMGOLD and Glamis Gold. I believe Franco-Nevada is also a good pick. And despite its hedging program, Barrick Gold is one of the strongest and most profitable gold companies in the world today and also worth looking at.
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04/13/00 - Earmarks
of a Swindle
Guest columnist Pat McKeough looks at a Ponzi scheme in this
reprint from The McKeough Report.
04/10/00 - Takeovers
Spark Price Jumps
Three of the top five stocks in our Movers & Shakers Report
prospered on takeover news.
04/06/00 -
S is for Supply and Demand
You can improve your stock picking acumen by understanding the
basic economic concepts of supply and demand. Fourth in our
CANSLIM series.
04/03/00 - Bear or
Bear Market Trap?
Is this the beginning of a bear market or are we
seeing a classic bear market trap?
03/30/00 -
How to...Pages
Check out our new How to Pages for short one page answers to
commonly asked questions.
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