Nearology

When did the tech boom become the dot.com boom? When anyone with any kind of "business model" slapped a ".com" to the end of their business name, and their stock took off by association, not by analysis or valuation.

When does a commodity boom become a dot.commodity boom? It's when former ".com" types start popping up in the mining index (http://guambatstew.blogspot.com/2005/09/khan-you-say-dot-com-odd-itty.html).

And when "explorers" are ramped up by the company they keep, not the company they are: "Executives at uranium explorer Redport are proving to be devotees of the fad of "nearology". Nearology is a mining industry theory that if a big miner like BHP Billiton or Rio Tinto has a good deposit, each surrounding tenement could be just as good. That seems to be the only explanation as to why Redport shares rose 0.5c to 7.3c yesterday on extremely high volume after acquiring an option on a Kintyre uranium project in Western Australia." (http://www.smh.com.au/news/xchange/managers-5050-on-valuation/2005/09/28/1127804549072.html.)

And when, "A senior vice-president for commodities trading with three or more years of experience would probably get a bonus of more than $US500,000, up 20-30 per cent...." (http://www.smh.com.au/news/business/wall-st-bonuses-heading-for-the-sky/2005/09/28/1127804549084.html.)

It's when "... the Australian sharemarket clocks up gains for a 10th consecutive quarter - having risen more than 60 per cent in the past 2½ years - [and] investment managers are again wondering just how long this run can last.

Nearly one in two investment managers believes the sharemarket is overvalued, the Russell Investment Manager Outlook survey revealed yesterday. The survey of 50 managers found that half think the market is fairly valued, 46 per cent think it is overvalued and only 4 per cent think it is undervalued. Despite this cautious outlook, 36.7 per cent of the managers have a bullish outlook for equities over the next 12 months...." (Id.)

It's when things like this happen: "South African millionaire Brett Kebble, who helped create two of the country's four largest gold producers, was shot dead on Tuesday.... "He was one of the brightest corporate financiers I ever met, and I've met some clever ones in my time...." As a result of derivative contracts Western Areas holds, it sold its gold at $US308 an ounce in the quarter ended June 30, compared with an average market price of $US427.88. Production costs were $US426 an ounce." http://www.smh.com.au/news/business/former-chief-of-african-gold-miner-shot-dead/2005/09/28/1127804549075.html

It's when insiders get the gold and outsiders get the shaft. (http://guambatstew.blogspot.com/2005/08/got-shaft.html)

Now, I don't want to sound like the demand for commodities is going to suddenly disappear (though the normal careful balance of supply that has been upturned by the sudden surge in demand [http://guambatstew.blogspot.com/2005/09/at-coal-face-of-dotcommodity-supply.html] will eventually work out that bit of disequilibrium). I certainly would not question anyone's estimation that BHP or Rio Tinto might be worth a gazillion dollars today or tomorrow. I'm just saying that the rush to the few proven commodity stocks is both driving money into wannabees and into other sectors of the stock market that just do not have the growth potential, and maybe not the valuation, of the big miners. It will come unstuck. It happened before, once in October 1987, right here in downtown Sydney, not that past performance is any prediction of future value.

But in the mean (and boy do I mean mean) time, as Randy Newman sang, short people go no reason to live.