Wednesday, May 13, 2009
More Words than Wealth?
It is 6:18 am and the sun is shining. Let's start with some good news: gold came out punching in early trading at $928. It fell back some but has kept the gold miners up in an otherwise down day.
The ole Colonel is starting to believe we'll end this recession with more words than wealth! Let's chew on a few to understand what's driving the markets this morning. By now, we're all familiar with deflation because the talking heads refer to it when they try to tie today's economy to the Great Depression. Deflation is a decline in general price levels often caused by a reduction in the supply of money or credit. Fear of deflation is a gold price slayer so we don't want nuthin' to do with that economic bugaboo. Our next word is disinflation , a little nicer since it is just a reduction in the inflation rate or rate at which prices rise. Deflation is a popped balloon; disinflation is one that's just a little soggy after the party.
OK enough school, here's what's going on:
"Excluding petroleum, import prices were down 0.4% from March, and were 5.6% lower on the year, the largest decline on record. That suggests steep drops in oil and commodity prices at the end of last year are no longer driving U.S. disinflation, but rather the global economic downturn. The World Bank and International Monetary Fund expect global gross domestic product to contract this year for the first time since World War II." (WSJ, 5/13/2009)
Yikes! Economists are party poopers, keep'em off your property! Oil broke $60 in early trading, fell back and the broader markets are taking a stumble.
Chuck the fancy words, let's walk the walk:
Oil is down $0.16 at $58.88 (June contract). Gold is up $1.6 to $925.5 (June contract); Silver is struggling to stay above $14 at $14.020; Copper is retreating 0.0570 to $2.0290 (July contract); Molybdenum is hanging steady at $9.70.
The DOW is down 142 points to 8327.50; the S&P 500, down 15.32 points to 893.03. The gold miners are happy in a sorry crowd today:
Barrick (ABX) $35.66 up 1.60%
Newmont (NEM) $44.60 up 0.63%
General Moly (Eureka Moly, LLC) (GMO) $1.72 down 7.03%
Freeport McMoran (FCX) $46.91 down 4.48% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are lousy (a "tell" for General Moly):
Nucor (NUE) $41.07 down 3.88% - domestic steel manufacturing
ArcelorMittal (MT) $25.20 down 3.93% - global steel producer
POSCO (PKX) $82.83 down 3.65%- South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is down 2.17%
Nuts, let's go outside and enjoy the sunshine!