Crazy day in the markets
Posted: Thursday May 6 8:37:18PM 2010
Yes..it was quite the day. At one point today..a small cap that I follow quite closely was trading at 2.38..with only 4 small buy orders before 1 dollar....a market sell order of 12000 shares would have knocked this company down to 1.50 per share. In my view, interest rates in North America are KEY. As long as interest rates remain low...money will keep being funneled back into stocks and commodities. Sure there will be blips like today but with low interest rates...evenutally people have no choice in order to make a return but to put money back into stocks and commmodities. Take oil for example...while OPEC has been a big help in supporting oil price...I think some people are underestimating the impact low interest rates have had in suporting oil. Huge investment firms are throwing money into oil contracts as interest rates are cheap... In regards to small caps...some sectors will do better than others in the next few quarters. I think small gold cap could do well. Large and intermediate gold companies are starting to accumulate huge piles of cash and will continue to have nice cashflow numbers over the next few quarters (at least). Operating cost inflation is quite reasonable in the sector..a great sign. While some of these companies are choosing to do share buybacks and dividends (Eldorado today) with this cash, eventually some of these cash rich companies will start to acquire some of the smaller gold companies. Then investors who get cash from owning shares in the acquired smaller gold companies will look for investment opportunities to invest this cash and it sometimes leads them to buying shares in other gold small caps...this is how sectors get "recharged" with capital. This is also one of the reasons the Canadian ng sector is so bad...not much capital into the sector is coming from companies generating it...capital is just coming in from the odd private placement.