No. 1 indicator flashes a signal

By Thom Calandra

Speculative fervor poised to return to stock and commodities markets

Indicators are pointing to sharp reversals in both equity values and the prices of some commodities, largely precious metals.

Indicators, both qualitative and quantitative, can be tricky, misleading, and early. In addition, the use of indicators of all stripes, be they technical volatility gauges (VIX), anecdotal, behavorial or mathematical, usually indicates a desire to forecast.

Such desire is usually for the birds – in my book, anyway. Forecasts, be they from economists such as Nobel Prize winner Joseph Stiglitz, or from “Black Swan” practitioners, or from independent newsletters, are merely opinions, and opinions are sometimes right and sometimes wrong.

As a friend of mine, an emergency room physician in Oakland, California, just told me, “Sometimes I make a terrible decision and it works beautifully, and I can make what seems like the correct choice, and it fails.”

Still, like Bob Moriarty at 321gold.com, and James Turk at Goldmoney.com, and others in the world of newsletters and traditional research, I anticipate a probable and imminent rebound in the prices of gold, silver, platinum, palladium, uranium and copper after what has been a four-month funk.

I also see equity values in major markets across the globe rising as mega-investors, flush with that rare commodity, non-leveraged cash, resume their search for leading technologies, humans and services. Only this time, for perhaps the first time in nearly two years, individual securities that represent small and mid-sized companies will stage a steady advance.

In equal words: Speculative fervor to some extent is likely to return to equity markets and commodities markets. See ThomWatch bullet points.

Worldwide markets Wednesday – today – appear to be telegraphing that redemptions of leveraged stocks, commodities and other investments are still occurring. Thousands of securities around the globe are hitting all-time lows. Oil and gold prices continue to head south. And so on.

My No. 1 indicator for speculative fervor represents an objective correlative for extreme risk. I use it as a way of keeping tabs on how the sheiks in Abu Dhabi and the silk suits in Geneva and the brokers in London and Toronto and New York view their chances of making a successful, longish-term investment in something that could provide hefty returns in coming years. Please see ThomWatch thesis.

That indicator is Ivanhoe Mines (TSX: T.IVN, Stock Forum). The company, whose shares I do NOT own, is active in Mongolia and parts of Asia and China. When Ivanhoe Mines shares fall below a $1 billion market worth, as they have Wednesday, I sense among the big money crowd that follows the company’s founder, Robert M. Friedland, that it is time to step up to the plate and buy.

Ivanhoe Mines is in the years-long process of developing a vast copper and gold mine in Mongolia. The company also mines and sells Mongolian coal via a controlling stake in another enterprise. Ivanhoe has approximately $425 million of cash – which these days means nothing to investors. The Oyu Tolgoi project in the Gobi steppelands, a project I have seen and respect, could become one of the globe’s largest copper and gold producers, surpassing mines in Indonesia and South America – as long as it gains the cooperation of Mongolia’s Parliament. See ThomWatch on these points.

A strategic partner, the large miner Rio Tinto, is assisting in that lobbying process. Meanwhile, as Mr. Friedland told me the other day, when I asked him about this intense selling of speculative mining stocks that is occurring everywhere, “Share prices will not have any meaning until forced selling abates after year-end. Our response, like others, will be to hunker down, preserve our cash pools, and cut a deal with the Mongolians, who are getting a sudden education. In our case, extraordinary corporate developments are possible, even likely, due to asset quality. Our company has never been this cheap, but others may say that, too.”

Until then, as discussed here, the 18-month-long (and counting) abandonment of company securities and natural resources, the “100-year drought” in high-risk investments, continues. Investors, as indicated in the Colombia photo my friend Jim Marx shot on our trek to Medellin earlier this year in search of gold, will keep giving speculative investments in mining, life sciences, technology, you name it, in the bronze backside.

I believe, but cannot guarantee, that such rude treatment of investments is close to an easing point of civility.

For the record, Ivanhoe Mines’ shares Wednesday, below US$2 and $2.50 Canadian, represent a market worth of about US$800 million.

At some point soon, I expect our Abu Dhabi robed sheiks, flush with petro-bucks, and others across the planet (sovereign funds, for example, Japanese banks and Swiss pharmaceutical and food companies) who hold non-margined vaults of capital, to start looking for their next 10-year holds. They will be selective – as they can afford to be picky. Please see ThomWatch thesis.

On The Ticker Trax

Later this week, we will sneak preview the subscription report TICKER TRAX BY THOM CALANDRA.

It has been many years since my last service, The Calandra Report, put me at center stage and filled my spirit with a tad too much enthusiasm for the art of researching, globetrotting, then buying and selling stocks and other investments. In include here a link to one of The Calandra Report editions, kindly posted by the nice folks at database operator Fran Finnegan & Co. in San Francisco, just across Richardson Bay from our home. Click here to view it.

As stated in my work and on Stockhouse, I entirely recognize the shortcomings that led to my U.S. Securities & Exchange Commission settlement during those wonderful but manic weeks and months some years ago.

There is plenty more color, cosmic tears and even a life lesson or three in the interview editor Darin Diehl conducted with me not long ago. I know I am tooting my own French horn when I say the two-part interview is worth a brief scan … and can be seen by clicking here.

Ticker Trax By Thom Calandra will explore planet Earth for those few stakes that offer the prospect of excellent, in some cases cosmic, returns. It is for those who are entirely at ease with stratospheric levels of risk.

As we complete our investment research, we fully hope and expect, but cannot and do not promise, stratospheric returns. For example: I personally have been bewildered by the whupping that risk-leaning investments have – I want to say endured but have they really? – have taken these past (choose one) 18 days/weeks/months.

We do hope to increase wealth of knowledge, scope of understanding and size of holdings. We do not envision compiling a portfolio designed for daily, weekly or monthly trading. More TK, as in to come.

HOLDINGS: Thom’s cosmos of holdings is listed for free Stockhouse members on www.Stockhouse.com under the “portfolio setting” for user TCALANDRA. Thom receives no compensation of any type from Robert M. Friedland, or others, in exchange for his commentary. For more ThomWatch, please see Stockhouse and ThomCalandra.com.

THOM’S STORY: For investors who profited from a meteoric rise of commodities, mining and life sciences companies, Thom Calandra acted as a beacon. Thom helped his audience find value in a quagmire of investment choices. Thom co-founded and was the driving editorial force and spirit of CBS MarketWatch, MarketWatch.com and FT MarketWatch in Europe. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom fancied $300-ounce gold before that metal became an investment rage. Thom visited bioscience companies, metals mines and scores of thin-crust pie joints across the planet in a search for profit, fashion and pizze de trippa gorgonzola. Thom's novel PABLO BY NUMBERS was completed in summer 2008.

ABOUT THE AUTHOR

     Thom Calandra

Watch for a new subscription service on Stockhouse featuring Thom Calandra, coming this autumn. It will be called Ticker Trax by Thom Calandra.

For a wide-ranging interview with Thom, please see Stockhouse's series of articles: Taking Stock of Thom. He and his family live in Tiburon, California. Visit his web homes at www.thomcalandra.com and thomcalandra.blogspot.com..