YARD SALE (BY ROD BLAKE) RESOURCE WORLD MAGAZINE P 23

A few years ago, I was with a group of friends enjoying a few days of skiing on Big White, near Kelowna, in the beautiful Okanagan area of southern British Columbia. On the second day of our skiing adventure, we were cruising down a somewhat challenging run when my friend, hit an unexpected rut, lost his balance, and literally exploded out of his skis, landing very hard and scattering his ski gear, including skis, poles, toque and goggles, across the hillside. Luckily, the only thing hurt was his ego. Another of our group, surveying the carnage of ski gear, broke us up by exclaiming –“My God! It looks like a yard sale!”

That is what the current resource markets look like to me, a yard sale. You’ve all seen a yard sale. That’s when one of your neighbours decides to discard a good portion of their worldly goods by displaying them haphazardly across their front yard. These sales don’t last very long, as the items are usually bought up quickly at rock bottom prices by opportunistic passersby and shoppers.

This , to me, is the state of the current resource markets. The companies and their share prices are randomly strewn across the marketplace with no real thought to their underlying values. The sellers want out at any cost and bids are enthusiastically filled regardless of the price. It matters little what sector they’re in: precious metals, oil & natural gas, base metals, coal, forestry, or fertilizer stocks. To them, the resource boom is over, they’re cleaning house and don’t want to look at these issues again, for the memories are just too painful. Cash is king, and these sellers want to see the cash in their accounts.

As with most yard sales, I don’t expect this carnage to last very long. It might last longer than a few days, weeks, or even months, but I don’t believe that, and I truly hope that it doesn’t last as long as some of the talking heads are predicting. Regardless of the world’s banking situation, the Third World is still modernizing. North America and Europe are still retooling to become more energy efficient. Governments worldwide are still fighting global warming. In short, the world still desperately needs resources.

As always, the real bargains are companies with confirmed hard assets. They will be taken up first, and those with grassroots projects will be picked up last. So do your homework. Be nimble, pick your sector and place your bids accordingly. You may be pleasantly surprised with the bargains this resource based yard sale may give you.