D.B. Hi Ike, how are you doing?

I.I. I am doing well, thank you.

D.B. Given that their Iraqis were just handed their sovereignty, I would like to revisit the interview that you gave on 11-17-02, with regards to what you thought was going to happen with Iraq, and its impact on oil, gold, and defense stocks.  (see http://marketviews.tv/freeservices/BestoftheBest/021116.htm )

I.I. I guess we can do that. 

D.B. With regards to oil stocks you had said: "..I would imagine that initially there would be a spike up, but eventually -if everything goes as planned- the price of oil  will come down for 2-3 months, and then it will rise back up to the $36-$38 level. Consequently, investors need to focus on the prospects for  oil companies. My top pick would be OXY,  I also like RD, CVX, XOM, SII, BJS, TOT and couple of second tier companies such DNR and COP."  Do you still like those companies? 

I.I. I do because I believe -as I did then- that oil prices -at best- will remain on average above $36.00 per barrel. At worst, who knows? If you recall, in the same interview I emphasized the point that the Saudi Arabian regime was going to come under extreme stress, I opined that the days of the royal family were numbered, and its fate would resemble the fate of the late Shah of Iran. The recent terrorist attacks in Saudi Arabia, are just the tip of the iceberg.  If Saudi oil production is temporarily curtailed, or, lost all together, who knows how high oil prices will spike up. Having said that, I would also add that I would wait for another pullback to buy any of the above stocks. They have appreciated considerably, so, I wouldn't jump on them right now.

D.B. How about defense stocks? At the time when I asked you what companies you liked, you  said: "NOC, ATK, TDY, RTN, AIR, ARXX, AVL, BA, CW, GD. I really like TOD, EASI and UDI."

I.I. I would leave defense stocks alone for right now, even if they pulled back. They have appreciated quite a bit, and given the political uncertainty due to the elections and a possible change in Administration, I wouldn't want to take a chance.

D.B. Not even BA? Boeing is not just a defense company, it's a well diversified aerospace company. Barron's had a very nice assessment of the company in this week's edition.

I.I. Wonderful, now that I know Barron's likes BA, I can die happy! They should have liked it when it  had a P/E of 10, now it's kind of late, the bird has flown. Moreover, I do expect a global economic slowdown  in the next 12-18 months which will hurt Boeing's commercial business, and its stock. When that happens, then it will be a time to reconsider. 

D.B. And how about gold and gold stocks? At the time you liked MDG, NEM, GLG, GG, and ASA.

I.I. As you know I turned bearish on gold and gold stocks back in January of this year.  In fact we sold all of our gold holdings, and we bought puts in the XAU, the June 90s. We made  almost 100% return on those  puts, and I have tried to re-enter a small pilot position in the July 90 puts. At the moment, I am a neutral. My favorite measure for entering intermediate term positions is the ratio between gold and the XAU, right now it is in NEUTRAL territory.

If I look at gold prices in isolation, I would have to say that my conclusion is that gold is going lower. However, when I look at the profound weakness in the dollar, I have a hard time seeing how gold and gold stocks can go much lower from here. In any case, if I was buying for the intermediate, or, long term, I wouldn't buy unless that ratio got near 5.5. If I was buying for trading purposes, maybe I would nimble a little if gold could stay above $400.00 per ounce. Whenever, I do buy again for the intermediate to long term, these are the stocks I would buy: NEM, GLG, BGO, IAM, AAUK, and ASA. 

D.B. What is view with regards to the rest of the market?

I.I. Let's take a look at the charts.

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