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Hi Lou,
What do you think of American Lithium Minerals Inc and the supposed link to the re-birth of GM and other car makers?
Craig
Hi Craig,
Great question! You have identified the time-honored tradition of jumping on a band wagon and riding the wave. For a period of time, simply invoking the sacred words will move stocks higher. During the tech bubble, any press release with the word Internet usually did the trick. In the Western Canadian Sedimentary Basin, the mention of the Bakken Formation will generally attract interest.
I get the same gut feeling as you do when I look at American Lithium Minerals Inc. . The fact that the company is listed on the Nasdaq OTC BB puts a warning flag on the track for me. It is a high-risk environment, as I have mentioned several times before.
You can play cards in a legitimate casino that is regulated or in a garage in Brooklyn. It's your call. For my money, go for the facility with the valet parking. Risk management protocols suggest a review and understanding of the environment where your hard earned money will be deployed.
American Lithium Minerals Inc. was listed as Nugget Resources and as of September 30, 2008 was not engaged in any business activity. At best, the company has limited experience in its chosen field of developing deposits of lithium in Nevada.
The connection between lithium brine ponds in Nevada and batteries for the auto industry is not a direct one. AMLM has to first build a facility to recover the lithium from the brine and then sell it to a battery manufacturer, who in turn would sell the batteries to the car makers.
Another question to consider in the AMLM story is whether it is lithium that is in short supply globally or is it the other rare earth elements that go into the batteries that will be in short supply?
Let's look at the chart. Big lift off since May, and RSI clearly shows that the stock was overbought. On average, these types of advances can't be sustained. Although cheers to those who got in at $0.30.
The three-month chart indicates selling from the top and the MACD signaled the turn. If you own AMLM, you want it to hold at $1.00.
Stock trading in a high risk market, company with a resource but no production, stock selling off from an aggressive advance, and no significant news to justify the advance. In these cases, it's not a question of making money but whether you will get pickled.
Have your own question for Lou? Send it in to lschizas@globeandmail.com.
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