Goldman Sachs predicted gold will hit US$1,050 by the end of the year

“It will be hard to raise capital for several years,” analyst John Kaiser warned in a presentation. He said there are around 700 mining companies on the TSX Venture Exchange with negative working capital, and the total number of small miners is shrinking. “They are starting to disappear,” he added.

 Indeed, a lot of junior mining firms have exited mining completely and moved onto some other business, notably medical marijuana. Some of them were at Toronto’s first marijuana investment conference back in June, where the atmosphere was considerably more upbeat than this week’s Cambridge House show.

Lack of cash was a topic on everyone’s mind. Given the rough market conditions, a lot of companies have decided to hoard their cash and do absolutely nothing until market conditions improve and they can raise money again. But miners at the conference said that will not work, because investors will just forget about you.

“If you don’t do anything, there’s no news and you’re not giving the market what it needs,” said Bill Fisher, executive chairman of GoldQuest Mining Corp. and former chairman of market darling Aurelian Resources Inc. “To survive it, you just have to keep active.”

http://business.financialpost.com/2014/09/25/junior-miners-starting-to-disappear-as-grim-market-reality-takes-hold/

North American Large Caps & ETFs

Michael Bowman, Executive Vice President and Portfolio Manager, Wickham Investment Counsel

FOCUS: North American Large Caps & ETFs

Market Outlook:

The S&P 500 is currently trading at a price to earnings (PE) of 17.96. The average is 19.44 so on a PE basis the market is not expensive. If we look at the short to medium term indicators, the Chicago Board Options Exchange (CBOE) Volatility Index equity put/call ratio is neutral as is the Relative Strength Indicator and the Arms index, which is commonly called the short term trading indicator.The Tick indicator is flashing an oversold market with readings of -662, -627, -673 and over the past three days. Readings of -300 are bullish and readings of -700 are extremely bullish.

In addition, the McClellan Oscillator is also showing an oversold market. All that being said, insider selling has reached a 15 year high. On the economic front, the news out of Europe is either bad or real bad. Since Europe is China’s largest export partner, no more can investors construct portfolios on the belief that China is a perpetual economic powerhouse. In 2012, China’s growth accounted for 60 percent of global growth yet today the China bulls have been shrinking along with steadily weaker economic data. As I have said in the past, China has more potential to destroy investment portfolios than any other geopolitical risk. Because of that, I don’t see Canadian commodities lifting their head off the mat anytime soon.

In the U.S., consumer sentiment unexpectedly climbed in August to the highest level in almost seven years reinforcing signs of a strengthening outlook for the latter part of 2014. The Federal Reserve is threatening to raise rates but there are those who don’t see that happening, and in fact, many see more Quantitative Easing. I find the whole interest rate discussion absurd. Rates have been near zero for years so why does the threat of a quarter point rise cause so much concern. As for higher rates, bring ‘em on.

It has been proven that what hurts portfolios are the unknown, and the surprise events. Going back 20 years history has proven that planned events have no bearing on the markets. Y2K, debt ceiling announcements, interest rate hikes, wars, all have no effect over the intermediate term. It is the tsunamis, and the 9/11s that can devastate portfolios.

Top Picks:

SNC-Lavalin (SNC.TO)
ShawCor (SCL.TO)
Northland Power (NPI.TO)

Russell 2000 a Death Cross...

A death cross occurs when a nearer-term 50-day moving average falls below a longer-term, 200-day moving average. Technicians argue that a death cross can be a bearish sign.

http://video.cnbc.com/gallery/?video=3000312853

The chase by Frances Horodelski:

“………and to be brutally honest, unlike their male counterparts with thinning hair, laugh lines, and graying temples, these ladies’ on-camera careers typically have a “sell-by” date…..” Randall Forsyth, Barron’s. Ouch.So with that as your thought for the day, let’s get going.

Last week was miserable for commodity and Canadian stock investors. There were margin calls (or the worry of them) as well as some wholesale selling of Canadian equities (program trades) with no-one on the other side willing to step up. We are also into the end of the quarter which can see wild shifts in portfolios.

At the same time, the U.S. dollar’s bid hasn’t dissipated putting further pressure on the commodity trade. Last week saw the material sub-sector decline almost 5%. Only utilities and industries were up last week on the TSX. In other weakness, the small cap sectors in the U.S. were bleeding and not keeping up with the big cap new highs. Indeed, the Russell 2000 was down 1.21% last week and has declined three weeks in a row.

The week isn’t quite as busy as last week, but influential things are happening. First, we start with merger Monday with more than $25 billion worth of deals announced – all kind of “old-tech” with Siemens buying Dresser-Rand and Merck KGaA buying Sigma-Aldrich. Both deals are all cash and at premiums of 14% and 37%, respectively (with DRC the premium is based on the price before the rumour spiked the stock on Friday and +37% since July). EMC is highlighted in the Wall Street Journal as talking about a potential combination with the likes of Hewlett Packard.

In other news, the week is active with climate change front and centre in advance of the UN’s climate change summit which starts tomorrow. It is also “flash” PMI time (again!) with HSBC’s PMI for China to be released tonight (estimate 50 versus last month’s 50.2). We will see similar numbers for the U.S. and Europe tomorrow with France being the expected very weak link with a 47 level (versus last month’s 46.9). A number under 50 indicates a contraction in the manufacturing side of the economy.

We’ll also get a third and final look at U.S. GDP that is estimated to be even higher than the previous look at 4.2% (that number comes out Friday). There are a few major companies reporting results including Bed Bath & Beyond on Tuesday and Nike on Thursday. We have Blackberry’s new product launch (the Passport) on Thursday.
With respect to monetary policy, this week will see speeches from eight Federal Reserve officials including New York Fed Dudley today. Also today, Mario Draghi attends a European Parliament committee on monetary policy.

Other things to be watching. The price of gasoline in the U.S. is down 34 cents in the past 13 weeks. For context, each penny drop in gasoline adds $1 billion to consumers’ pockets – like a tax cut. Barron’s has bullish stories on Bank of America (50% upside), Yahoo! (potential value to $58) and a positive turn to European equities and beer stocks.
According to people who watch the calendar, beware the autumnal equinox “markets have a history of moving up or down” into this day (uh, duh, don’t they always go up or down?). Alternatively, there is the old “sell Rosh Hashanah, buy Yom Kippur” adage. The Jewish New Year holiday begins Wednesday evening.

According to Richard Ross, technician at Auerbach Grayson who has been negative on equities, watch the dollar index as it approaches the 89 level where previously two spikes there have resulted in a 57% and 17% declines in the S&P 500. Standard & Poor’s notes that 46% of S&P 500 sales come from foreign sources – a strong dollar can ultimately pressure those return profits (I say ultimately because hedging and smooth are on-going ways that big corporations alleviate the immediate pain).

And that’s it. Market weakness is evident this morning as investors grapple with the euphoria of Alibaba, enthusiastic pace of M&A, the narrowing breadth in the markets but more importantly, for Canadian investors, who wants to buy our “stuff” and our companies? It’s tough out there – looking for opportunities requires a very sharp pencil. We’ll cover the opportunities all day long on BNN. Join us.
Every morning Business Day Host Frances Horodelski