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Finally we started to see some signs of life this week.

My portfolio went from a yearly loss of over 7% at the end of last week to a yearly loss of 5.8% as of today. That’s not great, but we are at least moving in the right direction.

As I said last week, I am now starting to deploy some of my cash.

My first purchase this week was to increase my holdings in RH.V - Red Hill Energy, Inc. I like this one; you can read my detailed comments on the Red Hill Energy blog post I posted on Tuesday February 19. I like the company because it has interests in both coal and uranium, so it gives my portfolio some diversification. Even better, they have a joint venture on the uranium properties with MGA.TO - Mega Uranium Ltd., which shares a CEO with PNP.TO - Pinetree Capital Corp. I don’t own either Mega or Pinetree, but knowing how Pinetree operates it’s not a stretch to assume that if Red Hill finds more uranium, Pinetree will be a buyer, which should drive the price up. Even without the Pinetree angle, I like it, and I may purchase more this week.

Next on my list was to get back into DML.TO - Denison Mines Corp., a stock I haven’t owned for many months.

I put in an order and got filled on Tuesday at $6.93, so obviously I’m happy today. I like the chart because:

• the downtrend going back to November has been broken (although the longer term downtrend remains intact);
• the close at $7.70 means we have crossed over the 50 day moving average (currently at $7.75) which is usually a great buy point; and
• the downtrend in the RSI has also been reversed and is moving in the right direction (although now we run the risk of the RSI getting toppy).

My plan is to put in a sell order around the $10.50 level, since I assume we will hit some resistance just over $11. That would give a nice profit, and would allow me then to repurchase on dips. If it doesn’t get to $10.50, that’s fine, I’m content to sit and wait.

My next purchase was AXR.TO - Alexco Resources Corp.:

I think this chart provides a nice contrast to the Denison chart. With Denison, the short term downtrend has been broken; that hasn’t happened, yet, with Alexco. The RSI and 50 DMA have also not advanced as far with Alexco as they have with Denison. Obviously I’m betting that the Alexco chart next week will look more like Denison’s chart this week, so I started buying at $4.13 on Tuesday, so I’m happy with Friday’s $4.40 close.

Other purchases this week included:

• AMM.TO - Almaden Minerals Ltd.
• FVI.V - Fortuna Silver Mines Inc.
• RES.V - Rare Element Resource Ltd.; and
• IGG.V - Invicta Oil & Gas Ltd.

I had buy orders in on other stocks that, alas, were not filled:

• AEM.TO - Agnico-Eagle Mines Ltd.
• G.TO - Goldcorp Inc., and
• K.TO - Kinross Gold Corp.

Obviously this last list is all gold stocks, so it’s not surprising that my “stink bids” didn’t get filled, given the strength in gold this week.

Again, I’m not worried. We all believe that gold is on a run past $1,000. However, my gut tells me that there will be resistance around the $1,000 level, and a pull back to the $850 level would not surprise me, since nothing goes up in a straight line forever. That’s why I’m not chasing anything. If I can’t get the price I want today, no problem, I’ll be patient, since more opportunities will come.

Does my buying this week mean I believe the bear market is over?

Nope.

The economy is in bad shape. More bank write downs are to come. The Fed will have to cut interest rates again. That will cause a flight to gold, which is good, but it also creates a liquidity crunch which, as we all know, is what tanked our uranium stocks last year.

Therefore, I plan to ride the wave over the next month or two, but I also plan to keep tight stops, and at the first prolonged signs of weakness I will run like a chicken for the sidelines. This is not the start of a glorious new age of easy profits. We are not in 2006. Caution, prudence and discipline are more important than ever, which is why, even after my recent buying, I am still 48% in cash (down from over 60% last week). I will continue to deploy cash, but only if there are deals to be had.

The bear is dead (for now); long live the bear (later in the spring, probably).

Thanks for reading, and please continue to post your thoughts on the Buy High Sell Higher Forum.

Today, a special report on a potential play in coal and uranium:

RH.V - Red Hill Energy, Inc.

Red Hill has been a component of the JDH portfolio for a while now, but I significantly reduced my holdings earlier this year during the correction. I think the time has come to re-visit it.

According to the Red Hill website:

“Red Hill Energy is a publicly traded (TSX-V: RH) mineral exploration company head quartered in Ulaan Baatar Mongolia that engages in the exploration, development and (currently) pre-production of advanced coal projects and a portfolio of uranium exporation projects.  Red Hill is currently advancing three coal resources, in two significant basins towards production with a combined total exceeding the 1 Billion tonne mark of high quality reportable bituminous coal.”

(As an aside, Red Hill has a really crappy web site; I think they should hire a high school kid to re-design it for them, and perhaps even include some up to date information. It’s somewhat embarassing to read on a site what they plan to do in 2007. However, I’m buying an exploration company, not a web design firm, so I’ll ignore that for now).

(As a further aside, the 1 billion tonnes of coal is for all projects, not just the 43-101 compliant ones, as we shall see below).

Coal is obviously an abundant and cheap fuel source, and will be essential for the growth of countries like China and India, until they all have hundreds of nuclear reactors on line.

Red Hill gives exposure to both coal and uranium, which is great.

Here’s the chart:

Obviously the stock has been in a downtrend since April, 2006, but the long term very slight uptrend that started in July 2006 has survived. The RSI downtrend seems to have been halted with the RSI now around 42, a favourable buy point. Also, the 60 cent level looks like a fairly stable floor, so I don’t see a huge amount of downside risk from here.

So, to summarize, exposure to uranium and coal, but high risk because it’s all in Mongolia.

Now, for the kicker.

On December 7, 2007 the following press release was issued:

“Canadian-based Mega Uranium Ltd. (TSX:MGA) has announced the purchase of new mining sites in Mongolia.  On Wednesday the company said it had acquired a 50 percent stake in those sites being operated by Red Hill Energy Inc. (TSX VENTURE:RH). Red Hill currently has ten sites in Mongolia with a total area of 1850 km2. Mega Uranium Ltd is a mineral resources company with a focus on uranium properties in Mongolia as well as Australia, Canada, Cameroon, Argentina, Bolivia, and Colombia.”

In other words, the Red Hill uranium properties in Mongolia are all now joint ventures with Mega Uranium.

As we all know, our old friend PNP.TO - Pinetree Capital Corp. owns, according to their web site, just over 8 million shares of MGA.TO - Mega Uranium Ltd., which isn’t a big percentage of the 180 million shares outstanding , but of course the CEO of Mega is also the CEO of Pinetree, so we know they are joined at the hip.

So let’s put two and two together:

Mega already has an interest in Red Hill. They know what’s going on. Further engineering studies are underway, as noted in a December 21, 2007 press release. That probably means more good news in the future. The press relsease noted that Red Hill has “a combined 208.8 million tonnes of high quality thermal coal.” (They are referring only to their Ulaan Ovoo Coal Project located in north central Mongolia, not all of their properties). At 65 cents per share, assuming around 48 million shares outstanding, Red Hill has a market cap of $31 million, so if you assume that only the Ulaan Ovoo Coal Project has any value, each tonne of coal is worth 15 cents.

Now I realize that coal in the ground is worth less than coal that’s been mined, and I realize that to get the coal from Mongolia to the customers in China requires a few hours on a train, so there are transportation costs to consider, but 15 cents a tonne? Seems cheap to me.

And, that means the other coal projects are worth nothing, and the uranium is worth nothing, which is ridiculous.

If I was Pinetree, why would I not invest directly in Red Hill? Pinetree has an indirect interest in Red Hill through Mega, but this looks like the perfect value play for Pinetree.

Over on the Buy High Sell Higher Forum we have often talked about buying a company before Pinetree invests in it, and then selling it on the inevitable pop. We have also talked about buying companies before The Dines Letter recommends them, again because in the past Mr. Dines has recommended companies after his friends at Pinetree have already taken a position. Well, Red Hill may fit the bill on both counts.

I have had a small amount of Red Hill in my portfolio off and on over the last few months, but I now plan to start buying more in the 65 to 70 cent range. I’m not going to chase it. Red Hill will not be a big component of my portfolio; 2% to 5% will probably be about the right level, given that this is a highly speculative play. However, I think the downside is low, and the upside is large, so it’s a good one for a flyer.

Well, another basically boring week.

My portfolio was up, but that’s not saying much. Last week I was down 8.2% on the year, now I’m down 7.1% on the year, but I am still sitting on 64% cash, until I see a definite move one way or the other, although as I discuss below my plan is to start deploying some of that cash. Let’s look at some specifics:

G.TO - Goldcorp Inc., one of the large, blue chip gold stocks, is obviously in a consolidation phase.

From a peak at $39.03 on January 14, 2008, Goldcorp fell to $33.02 on January 21, 2008, and has traded in that range ever since. In previously announced news this week, Goldcorp has completed the sale of it’s 48% interest in SLW.TO - Silver Wheaton Corp., also one of the stocks on my buy list. The shares were sold at $14.50, with over $1.5 billion going into Goldcorp’s bank account, presumably to fund future increases in gold production.

That would appear to be good news, and given that Goldcorp’s share price has favourable RSI and MACD levels, accumulating at this point is probably not a bad idea. Obviously we will have some down days, so stink bids in the $34 to $36 range may get filled, but that’s not far off the current price, so I see no reason not to be a buyer at these levels.

Speaking of Silver Wheaton:

Since peaking on January 2, 2008 at $18.85, Silver Wheaton has been in an obvious down trend. However, there will be obvious support at the $14.50 level, since a billion and a half dollars was just spent at that level, so I don’t see much downside from Friday’s close at $15.32, so I would rate this one as a buy as well.

Going back to gold, last week I said this: “The chart of K.TO - Kinross Gold Corp. shows a pullback to the line joining the September and January lows, which appear to be holding. (Of course you could draw the line off the December lows as well, which shows that we are well above the uptrend line). The RSI and MACD levels are also favourable.”

Here’s the chart now:

Now I ain’t much for book learnin’, but I do know that when you have a blue uptrend line on the same chart as a red down trend line, something’s gotta give, because you can’t be going up and down at the same time. Given my predisposition to a continued bull market in gold, I would guess that the next leg will be up, and again, I see no reason not be accumulating Kinross at these levels.

(As an aside, our predispositions can be very dangerous, and we probably shouldn’t let them overly influence our thinking. As an example, the Senate hearings this week featuring Roger Clemens were obviously biased. The Republicans all loved The Rocket, and the Democrats on the Committee all thought he was lying. Neither side appeared interested in the truth. They only appeared interested in advancing their own opinions. That’s sad in politics, but very dangerous in investing, where we should try to draw conclusions from as many facts, and as few opinions, as possible).

So what about uraniums?

The spot price has fallen to around $75, which looks bad compared to the $135 level last summer, but $75 is about where the spot price was a year ago, and we were all happy then, so our predispositions may be influencing our opinions. Also, no-one actually buys uranium at the spot price; the long term price continues to hold around $95, which makes most of the junior and senior uranium plays very viable.

Obviously the uraniums have been beaten down along with the rest of the market during the liquidity crunch. If you are a hedge fund and you get a margin call, you sell whatever you’ve got, good or bad, and that drives everything down.

We’ve talked about The Dines Letter and Mr. Dines’ disastrous recommendations during 2007, but he is not alone. Doug Casey admits in his most recent Casey Energy Speculator that the Casey recommended Athabasca uraniums are down 60% since their highs in 2007, even worse than the 55% drop for the index of those stocks as a whole.

Yikes. Obviously the “experts” have been very wrong over the last year.

Or have they? There are two sides to this story.

On the one hand, if your stocks are off 60% from the peak, that’s obviously a bear market, and you should have sold long ago.

On the other hand, if the sub prime mess causes a liquidity crisis and everyone sells everything, and stocks go down, is that Casey and Dines’ fault? If a company is now trading, for example, for less than the cash they have in the bank, is that the fault of the “gurus”, or just a temporary market blip?

The answer is both. Obviously if a stock starts tanking you should sell, but once the selling becomes over done, the time to move in arrives. If I was a senior uranium company, or a junior with cash, and I saw that I could buy a company for basically their cash in the bank and get their deposits for free, I’d be buying.

So, here’s the game plan: Start accumulating the quality juniors (cash in the bank, uranium in the ground, good management), most of which are listed in the right hand navigation menu of this page. I don’t expect to see a big uptick immediately, so pick a nice entry level, and place “stink bids” at that level, so that accumulating can be done on days when the market tanks.

Keep a close eye on the stops to protect capital, build quality positions over time, and wait for the inevitably take over mania to happen as companies looking to expand start buying the under valued juniors.

What specific stocks would I be buying now? I’m not sure; other than the stocks I’ve mentioned, that will be the subject of further research, but my suggested portfolio, which I haven’t updated since the start of the year, probably contains most of what I want to buy.

Enough rambling for this week; Happy Family Day for those of you who live in Ontario; Monday’s a holiday so I assume the Toronto markets will be closed. Thanks for reading, and please continue to post your thoughts on the Buy High Sell Higher Forum.

I have very little to say this week, because, market-wise, very little happened this week.

(Lots happened this week. My plane flight got cancelled on Wednesday due to the weather, and I had the pleasure of spending eight hours in a car in a blizzard that evening to get to my destination. However, that has nothing to do with the market, except, as my wife pointed out, “you can’t predict the weather or the market”, but I digress).

Here’s what I think: very little happened this week.

There was no crash, which is good news. Does that mean we have retested the lows and we are putting in a base? Perhaps, but it’s too early to tell.

As this chart for FRG.TO - Fronteer Development Group Inc. shows, we are back down to the August and September lows, and the RSI and MACD are at buying levels, but until the chart starts to turn up, buying may be premature at these levels.

(A quick glance at the chart of the spot price of uranium on the right hand side of this page shows a similar pattern).

The gold stocks look more promising (and yes, I realize that Fronteer is both a uranium and a gold play).

This chart of K.TO - Kinross Gold Corp. shows a pullback to the line joining the September and January lows, which appear to be holding. (Of course you could draw the line off the December lows as well, which shows that we are well above the uptrend line). The RSI and MACD levels are also favourable.

My conclusion? Gold appears to have paused, and is now resuming it’s upward trend.

It would appear that once a new high is made, which could be anytime, the run to $1,000 per ounce will be fairly quick. $1,000 is a psychologically important level; when gold makes $1,000, it will be on the front page of every newspaper, the public will wake up, and start buying, which probably drives the price to $1,200 fairly quickly, by which time we will have taken profits.

As an aside, it would appear that in the U.S. the Democrats will win the White House on a “change” platform, and once in they will reduce war spending, but only marginally, but they will significantly increase health care and other spending, which will continue the dollar’s decline, and will be good for gold.

Therefore, I will probably be increasing my gold and silver holdings this week, since I’m sitting on lots of cash at the moment.

I was down 7.6% on the year last week, now I’m down 8.2%, but I remain 64% in cash at the moment, and I suspect some of that cash will get used this week.

Thanks for reading, and please continue to post your thoughts on the Buy High Sell Higher Forum.

Today I have decided not to talk about stocks. I’m going to talk about newsletters, since two of them arrived in my inbox on Friday.

First, I got The Dines Letter, the subject of much talk this week on the Buy High Sell Higher Forum. To summarize the numerous posts on the topic, the general consensus is that Mr. Dines is simply a “tout”, someone who buys a stock, then tells everyone to buy it, then as the price is rising he sells it.

His latest example was a new recommendation buried on page 5 this week (I have deleted the stock’s name so as not to be accused of being a tout):

“Stock X , in Supervised List #5, while up 257%, has been an underperformer for some time, which is why we have intermittently graded it “Hold,” to forestall additional buying. With sky-high silver prices a possibility, this one could nonetheless do very well, as even Cameco was able to rise due to nosebleed-high uranium prices. Nonetheless, we want some more action, and we have lost patience with it to the extent that we are hereby replacing it with Stock Y, which we own, but only buy on a dip below $1.50.”

Wow. Talk about a Freudian slip. We want some action, so buy this stock.

I am amazed that Mr. “The High State of Being Honest” doesn’t bother to tell anyone anything about the stock. Fortunately our Forum members took the 30 seconds necessary to do some due diligence: they punched the stock name into Google Finance and found that:

“Stock Y , formerly Stock Z, is a Canada-based company. It was involved in advanced technology to improve environmental air and water quality. During the year ended December 31, 2006, the Company had not commenced any business activities.”

Even more impressive is the list of directors: Sheldon Inwentash, Larry Goldberg, et al, the boys from PNP.TO - Pinetree Capital Corp. Want more? Here’s the press release Pinetree issued on January 31, one day before Mr. Dines’s letter:

“Pinetree Capital Ltd. (TSX:PNP), announces that on January 30, 2008, further to the conversion of certain subscription receipts, it acquired ownership of 750,000 common shares (”Common Shares”) of Stock Y and 375,000 common share purchase warrants (the “Warrants”). Each Warrant entitles the holder thereof to acquire one additional common share at a price of $1.50 until November 6, 2009. In the event that the Warrants are fully exercised, these holdings represent approximately 3.7% of the total issued and outstanding common shares of Stock Y as of January 30, 2008, calculated on a partially diluted basis assuming the exercise of the Warrants only. As a result of this transaction, Pinetree and its joint actors collectively held, as at January 30, 2008, an aggregate of 5,536,331 common shares of Stock Y and rights to acquire an additional 1,337,500 common shares of Stock Y upon the exercise of convertible securities (collectively, the “Convertible Securities”). Of these totals, Pinetree owns an aggregate of 3,940,536 common shares, including the Common Shares, and the Warrants, directly. In the event that the Convertible Securities are fully exercised, the holdings of Pinetree and its joint actors represents a total of 6,873,831 common shares of Stock Y, or approximately 22.2% of all issued and outstanding common shares as at January 30, 2008, calculated on a partially diluted basis assuming the exercise of the Convertible Securities only.”

In other words, Pinetree controls almost a quarter of the company, and we know that Mr. Dines owns some, so obviously this is a company that is controlled by Mr. Dines and Pinetree. It appears to have no business operations. No revenue. It is a shell company that they bought and are now touting.

Great.

Thank you P.T. Barnum.

The Super Bowl is this Sunday. Many of our younger readers will no doubt engage in various drinking games, like having to take a shot of some beverage every time the announcer says the word “punt” or “no, really, the Giants could win this thing.” I propose another drinking game:

As you read The Dines Letter, take a shot every time he uses what I call Dines Initials Confusing Krazy (”DICK”) which are initials Dines runs together to make him look smart, like DIRUBM, DIWPAT, DROLL, DIDIVE, etc. There were over a dozen in this issue, so you’d be on the floor by the end of it.

But isn’t that how magic works? I re-direct your eye with witty banter while I take the coin out of my sleeve.

Dines is the same. He doesn’t go and visit the company and report back on the management, or the resources in the ground, or the business plan. He simply waits for a call from his buddy Sheldon, and then he tells his sheep that he “wants some action”, so buy this stock. That’s it.

Yikes.

So what’s a guy to do?

Think.

That’s exactly what Forum members were doing this week. When Dines made a recommendation, they immediately did some research and realized buying Stock Y was a stupid idea. Stock Y will probably go up on Monday as the lemmings pile in, but a month from now it could well be much lower as the smart money departs. Protect yourself by using your brain.

Another option is to look to others for advice. Casey is one option. Doug Casey is a far right kind of guy, doesn’t like government, wants us all to hide gold in a safety deposit box for the coming end of the world. (He may be right, but that’s a story for another day).

He is also a tout. Every day his subscribers get an e-mailed advertisement from advertisers that in many cases are companies he recommends. The e-mails are clearly labeled as advertisements, but it does raise the question: did he recommend the stock because it’s a good stock, or because he doesn’t want to offend his advertisers? His website also contains advertisements paid for by the companies he recommends.

However, he also gives the appearance of at least doing some research. He doesn’t just recommend a company. He typically provides a multi-page write up on each new recommendation. He talks about their projects, management, financing, and the “push” he expects in the next few months. In most cases he or his staff has actually visited the company’s projects.

Now, doing a bunch of research does not mean you are not a tout. It may just mean that instead of making up sayings like DICK, you are making up a bunch of research to justify your opinion.

However, with a well reasoned argument in favour of buying a company, as a reader I can THINK and make up my own mind.

I don’t buy most of what Casey recommends. He currently has 45 stocks on his International Speculator publication list, and only 5 of them are marked as a sell, so that’s 40 stocks he thinks you should have in your portfolio. And that’s just one of his four publications. If you owned everything he recommends you would have over 70 stocks (some recommendations are duplicated across publications), which is more than the average investor wants to keep track of.

He does, however, actually issue SELL recommendations, which is a rarity for Mr. Dines. And, he does have a web site that is updated daily with new information, so you can go at anytime to see if anything has changed on a stock you own.

This is not an endorsement of Mr. Casey, and it is not a recommendation to purchase his service. Many of his stocks are down at the moment, so he is not omnipotent.

I reference him here only to draw a contrast between two different styles of newsletters. Dines and Casey may both be touts, but at least Casey tries to pretend he is actually doing some research.

Not that any of it has done me much good. I’m currently down 7.6% on the year, but I am 64% in cash at the moment, and I have no plans to start buying aggressively until there is some obvious evidence that some down trend lines have been broken.

That’s enough of my ramblings for today, thanks for reading, and please continue to post your thoughts on your most loved or hated newsletter writer on the Buy High Sell Higher Forum.