Friday, May 1, 2009
Two Parts Pig, One Part Bird, One Part Human
It is 6:53 am and TGIF! The ole Colonel is getting a little goofy listening to every talking head on television with an opinion on the swine flu outbreak. When I heard a microbiologist describe the H1N1 virus as two parts pig, one part bird and one part human I turned my set off. Isn't this coming from the same corner of the world that brought us Chupacabra? OK, how can we turn this into a miner's market discussion?
The Wall Street Journal reports this morning:
"Stock markets around the world shrugged off some of the worst economic data in decades and the bankruptcy filing of a top U.S. auto maker to post their biggest monthly jump in nearly two decades, capping a dramatic seven-week rebound. The Standard & Poor's 500-stock index, up 9.4% for the month, had its best April since 1938." (WSJ 5/1/09)
Hmm, a lot of irrational exuberance out there and here comes Chupacabra's cousin. I think this whole flu thing is a fizzle but if it isn't a pandemic there will no doubt be something to drive these markets down. Gold is presently getting hammered because money is flowing from safe havens to the stock markets. If there is a reversal in fortunes, there will be a rush back to gold and giddy-up go!
I think the so called "Flu Play" is right in our backyard. Buy gold now? Nah, I think I'll buy Barrick (ABX) instead. Yesterday's closing price was $29.10 and Credit Suisse set a 12-month target price at $40 with a sector outperform rating. That's a 37.5% return on your money buckaroos, sure beats a CD rate nowadays. The other cool thing is that Barrick pays a 1.37% dividend (given yesterday's price), compare that with money market rates that are presently sitting at 1.30%. The downside risk is a 10.5% loss if ABX returns to its March low; 38% upside/10% downside, that's pretty good odds my friend.
The ole Colonel doesn't give investment advice and equities can always go to zero (unlike gold). I just thought you might be interested in what I plan to do if a little furry critter crawls my way.
Enough fear mongering, let's walk the walk:
Oil jumped $1.03 in early trading to $52.15 (June contract). The dollar ("Dixie" or .DXY) is down 0.20% at 84.655. The commodity index (.CRB) is up 1.19% to 225.03.
Gold is in retreat $6.7 to $884.5 (June contract); Silver is down $..035 to $12.290; Copper is back in rally mode, up $.325 to $208.00 (July contract); Molybdenum jumped to $9...yee-ha General Moly!
The DOW is down 42 points to 8126.23; the S&P 500, down 3.69 points to 869.12 falling slightly below the critical level of 870. Miners are mixed today:
Barrick (ABX) $29.98 down 0.41%
Newmont (NEM) $39.15 down 2.71%
General Moly (GMO) $1.5199 down 0.01%
Freeport McMoran (FCX) $43.74 up 2.56% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are still zooming (a "tell" for General Moly):
Nucor (NUE) $41.17 up 1.18% - domestic steel manufacturing
ArcelorMittal (MT) $23.86 up 1.19% - global steel producer