4/26/07 - CDE (NYSE) - Coeur D'Alene Mines Corp In the News

Coeur D'Alene Mines Corp (CDE on the NYSE) – a Nevada Mining company - was in the news here this week. They have acquired 2 Mexican mining companies and in so doing have become the world’s largest producer of silver. While I like this company as an operator, I don’t think they represent any worthwhile opportunity for the stock investor.

First, the company has a very large number of shares outstanding (too much dilution), so any good news is spread too thinly to really make the stock price pop upward.  

Second, their big cash cow, the Rochester silver mine in Nevada, is shutting down in 2007. It is just out of ore. This is not too hard to understand, Rochester has been operational and producing millions of ounces of silver for something like 15+ years. While leaching of the heaps will continue for a while, out put will drop off and there will be significant expenses for reclamation.

Third, their two big new mines – the sources for future earnings – have big question marks hanging over them. Their Alaska project is mired down in the court system with intractable lawsuits from extremist environmental groups. Coeur D'Alene Mines has gotten an undeserved bad rap arising from the publicity garnered by the environmentalists in their hunt for donations. Who knows when the project may be allowed to proceed – the courts can take just about forever (and that’s exactly what the environmentalists want). Their other big new mine is located in Bolivia, a south American nation run by a socialist leaning government which will likely seize and nationalize the project as soon Coeur gets it operational (see related comments from my April 16, 2007 BLOG). All of this spells really bad news and a whole lot of uncertainty for the future earnings of CDE.

At this time, the 52 week low is $3.90 per share, and the stock is trading at $3.94 right now after the merger news is out officially. It doesn’t seem like the market is all that excited about CDE’s merger with these two Mexican operators, and honestly, neither am I.

(I have no ownership in this company)
Chris

4/26/07 - Stock Market Newsletters – Are they written by hucksters or are some of them worth it?
 

My vote is: Hucksters.  Look – with the advent of the internet, anybody can publish an investment letter. No one regulates or oversees such folks – all they do is publish their opinions through the internet, and you pay $150 a year for the privilege of getting their emails. There are no guarantees that they are the smartest guys in the room, and who knows what kind of research they do (Look, I’m effectively doing a newsletter here myself, I’m just not charging you anything for it).

Many newsletter writers have monetary ties to companies you do not hear about. This leads to serious conflicts of interest, and there is virtually no means to find out about it. 

For whatever reason (I think because 1. It’s the fad, and 2. Its easier) most letter writers today are chartists of one flavor or another. Well, as the one of the last of the Mohicans when it comes to believing that fundamental forces move the market, let me tell you a big secret among stock commentary letter writers: All the forms of chart reading, from Elliot wave charting to whatever flavor you choose, are simply and purely horse manure. There is simply no scientific support for them. Like palm reading, tarot cards and astrology, chart reading is highly subjective and open to the interpretation of the reader. One need only look to an assortment of Elliot wave experts and see that one looks at the chart of a certain stock and sees it will be heading upward, while another views the same chart and foresees the stock heading downward. Most chart interpretation is based on patterns of squiggles in the chart lines, but how a chart appears is heavily dependent on the parameters of how you draw it. Seeing various “head and shoulder” or “cup and saucer” patterns are very much like Rorschach inkblot tests – you project your thoughts and feelings onto the meaningless inkblot. Investing based on chart squiggles? - Yikes!

The prices of stocks and commodities yoyo up and down with a general long-term trend in an upward direction, and it always has been so. Just because a stock or commodity price moves up for a week doesn't mean it will move upward for the next three months. Just because a stock or commodity price moves down for a week doesn't mean it will move downward ward for the next three months. In the same way, just because it was warm in New York for a week in January, it doesn’t mean winter is forever banished. Just because we have a couple bad hurricane seasons back to back doesn’t not mean all such seasons will be bad from now on (Just ask the morons that used to work at Amaranth - and the poor fools who had their money invested there). What a short memory we all seem to have!

So the next time your letter writer says “Its the end of the world! The markets are going down to nothing” Jus wait and don’t get too excited. It wont be long until another letter writer will proclaim “Its a moon shot, the price of gold is going through the roof and straight to the moon! Don’t get too excited over that either....... The market goes down and everyone gets worried the market will implode. But after a few weeks of solid gains, the worry dries up and the market get overbought. What happened to all that worry?

There’s going to be loads of fast steep drops and sharp jumps in the stock markets, gold and silver from here on out, you can bet on it. These shakeouts are necessary to get weak players out of the market.

I think anyone who studies the fundamental facts and charts can do as well as some over paid letter writer. Most well paid stock market letter writers do not out perform the market, nor do they out perform the stock picks of monkeys armed with darts. I highly doubt those who track commodities or currencies do any better. There are studies done concerning the Hedge Fund operators, the most over paid by market advisors far, showing that they also, do not, as a whole, outperform the market. So why do some folks pay good money for newsletters, mutual fund managers and Hedge fund operators when scientific study shows they are no better in the long run than market indexes? I don’t know – there is simply no rational reason.

Personally, I think you might as well flush your cash down a toilet as invest in newsletters. You'd be much better off to just buy some gold or silver with the money. Or even better yet, grab a pen, develop a talent for writing BS, and then start your own newsletter, charge other people money and invest the cash you make in stocks or precious metals.

I believe in free information – at least you don’t have to pay to read it. Yes, I do have advertiser-supported content, but like TV, radio and newspapers, you don’t have to pay to see the information and opinions of the writer.

Chris