Far East Capital Newsletter
Lithoquest - a promising gold explorer in high grade BIFs
5 Feb 2022

In This Issue

Lithoquest - a promising gold explorer in high grade BIFs

The selldown we saw a couple of weeks ago was quite dramatic when you look at the charts of the All Ords and many stocks. While the rebound has been positive, it hasn't returned us to pre-crunch levels yet. In some respects it looks like a smaller scale version of what we saw when the corona virus panic first hit the market. Except back then, to everyones surprise, we saw a very strong market emerge as new money took share prices higher. This time around it is more a case of the bulls battling the bears with there being no clear winner yet.

The vacillation we see is typical of a topping formation after a long bull market, but whether it is really the top or just a redefining period, or even a turning point, remains to be seen. Much depends on evolving opinions about what the higher inflationary environment means. Higher interest rates will have an immediate impact on shares held for dividend yields, but what about companies that are not held for dividend income? Surely there will be other factors at work - often speculative factors.

As yield stocks are sold down, where will the money go? If the new trend is for a succession of interest rate rises, switching into bonds for better returns now is like trying to pick the bottom in a bear market - or as some people say - trying to catch a falling knife. The money is more likely to be sidelined or sent to more speculative situations that offer capital gain opportunities. 

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