"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO), McEwen Ming (MUX) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Tuesday, June 30, 2009

Sunny Weather for the Eureka Fourth!


Morning Miners!

It is 5:45 AM and the coffee machine just beeped. Looks like the National Weather Service predicts sunny weather and clear skies for the Fourth! The markets are pretty quiet on this holiday week so the ole Colonel thought it's a good day to introduce some exciting new features for the Report. Eric Pastorino has created a blog site for Mountain View Estates which I have included in the "Discover Eureka, Nevada!" section to your bottom right. The headline photo today is a panoramic view from 10 prime view lots at the northwest end of town that he and his brother Dave have been busy preparing for sale including over 1000 feet of new sewer line. Check it out!





At the bottom of this page you will find real time stock quotes together with live updates for 36 domestic stock and international stock markets. Let's say you wanted to track General Moly performance throughout the day. You would type 'GMO' in the stock quote window and the price quote will appear alongside the ticker symbol. If you place your cursor over the symbol, a minute-by-minute graph appears of general Moly's price performance during the trading day.

If you wanted to see how Eureka Moly's major investor, POSCO, is doing you'd add 'PKX' to your stock quote list. Since POSCO is a South Korean steelmaker, you can track that country's stock market, the KOSPI, by looking for the Korean Flag in the list of major markets. How cool is that? Who needs the Colonel anymore? Shucks, I'm going fishing.

Before throwing a line, let's walk the walk:

Oil is down $0.46 to $71.03 in early trading (August contract); Gold is down $4.2 to $936.5 (August contract); Silver is down 0.005 to $13.970 (September contract); Copper is down $0.009 to $2.3170 (September contract); Molybdenum is steady-eddy at $10.58.

The DOW is down 103.77 points to 8425.61; the S&P 500, down 11.11 points to 916.12. The miners are mixed:

Barrick (ABX) $34.04 down 2.61%
Newmont (NEM) $41.52 down 1.91%
General Moly (Eureka Moly, LLC) (GMO) $2.34 down 0.43%
Freeport McMoran (FCX) $50.83 up 0.99% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down (a "tell" for General Moly):

Nucor (NUE) $45.00 down 0.55% - domestic steel manufacturing
ArcelorMittal (MT) $33.24 down 0.36% - global steel producer
POSCO (PKX) $83.03 up 0.55%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.60% to $999,465.25.

Cheers,

Colonel Possum

Monday, June 29, 2009

The Duke Returns One Month Later, Newmont News



Morning Miners!

It is 5:57 AM, the coffee is hot and it's a short week for some as the Fourth heads our way. Last month there was a lot of excitement in the credit markets. This is akin to saying loud rock music was heard coming from the nunnery. Credit or bond markets are usually the shy retiring sister to their flamboyant sibling, the stock markets. Lately, the action has been in the former stirred up by periodic government auctions of Treasurys to raise money for our ailing economy. This affects practically everything from the price of gold to consumer credit; notably mortgage and credit card rates, new car loans and CD yields at your bank.

The Report promised in the blog, Where's The Duke When We Need Him?, to report key interest rates so you can track where we're going as time marches on. Here are last month's numbers compared to today's national averages (WSJ Market Data, 6/29/09):

10-yr Treasury Note 3.70% vs 3.47%, down
Money Market 1.33% vs 1.29%, down
5-year Bank CD 2.73% vs 2.65%, down
30-yr mortgage, fixed 5.09% vs 5.68%, up
15-yr mortgage, fixed 4.71% vs 5.04%, up
New-car loan, 48-month 7.48% vs 7.30%, down
Home-equity LOC, $30K 5.79% vs 5.81%, up


Ohh Nooo Mr. T-Bill !!! If you're saving money, you're making less and if you're fixin' to buy a home you'll pay more than a month ago. The only good news for the consumer are car loan rates which have dropped slightly. This makes some sense since the government really wants you to buy a new car now that they own two of the three U.S. automakers. The ole Colonel is not even going to talk about credit card rates which presently live in a house of mirrors reflecting bank desires to raise them and confusing legislation to protect the consumer.

Is the government plan for the credit markets working? This is what the Report said last month:

"...the 10-year note is key in setting mortgage and other consumer credit interest rates which the government has been working like the dickens to keep contained. The Fed has gone beyond cutting rates to directly purchasing such financial assets such as mortgage-backed securities, as well as printing new money to buy Treasury notes for the first time in half a century. Yikes! All of this effort is to reflate housing and get us back on track economically." (Eureka Miner's Market Report, 5/28/09)

OK, the 10-year T-Note rate is now lower but mortgage rates are moving higher. Am I missing something here? We'll watchdog these rates at the end of every month until Gentle Ben and Tiny Tim show up at our party with champagne. The Colonel actually wishes them the best, I'd love to see all of this magically work at the end of the day (or year or years or decade?).

Now a little catch up on two other news items that could impact Eurekans:

BEIJING -- China will push reform of the international currency system to make it more diversified and reasonable, and to reduce excessive reliance on the current reserve currencies, the People's Bank of China said Friday. (WSJ, 6/27/09)

Last week this was the idea of Li Lianzhong who heads the economic department of the Party's policy research office. Now it looks like an official party line. Remember this effort will no doubt cause China to increase their considerable gold reserves which supports higher gold prices (i.e. less supply and more demand from the world's largest gold producer, China - bingo!).

By the by, here is a link to a ranking of buyers and sellers of gold from fellow blogger, NSE 955 . I can't attest to its accuracy but it appears to be good and fairly recent data:

World's top 10 buyers & producers of gold


The last item is a big step for Newmont:

DENVER, June 25, 2009 -- Newmont Mining Corporation (NYSE: NEM) is pleased to announce that it has successfully completed the acquisition of the remaining 33.33% interest in the Boddington project from AngloGold Ashanti Australia Limited, a wholly-owned subsidiary of AngloGold Ashanti Ltd. Newmont now owns 100% of the Boddington project, which is the largest gold project in Australia.

The BIG news coming at us this week will be the June employment report, which will be announced earlier than usual on Thursday. The U.S. markets will be closed Friday for the Independence Day holiday.

Enough talk, let's walk the walk:

Oil is up $1.70 to $70.86 in early trading (August contract); Gold is down $5.3 to $935.7 (August contract); Silver is down 0.272 to $13.890 (September contract); Copper is down 2.95 to $2.3385 (September contract); Molybdenum is steady-eddy at $10.58.

The DOW is up 76.78 points to 8515.17; the S&P 500, up 5.88 points to 924.78. The miners are mixed:

Barrick (ABX) $35.05 up 0.06%
Newmont (NEM) $42.43 down 0.16%
General Moly (Eureka Moly, LLC) (GMO) $2.50 down 3.85%
Freeport McMoran (FCX) $50.67 up 0.24% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up (a "tell" for General Moly):

Nucor (NUE) $45.55 up 0.89% - domestic steel manufacturing
ArcelorMittal (MT) $33.64 up 0.99% - global steel producer
POSCO (PKX) $83.50 up 1.51%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.06% to $1,016,544.65.

Cheers,

Colonel Possum

Friday, June 26, 2009

Guns-A-Blazin', Oil & Gold-A-Risin'


Morning Miners!

It is 6:17 AM and TGIF! The coffee is hot and we have an exciting Eureka Fourth of July celebration to look forward to next week. Today, The Report introduces a "Eureka Upcoming Events" section located beneath the "Rancher's Corner" to your right. We're kicking things off with Joe Swanson's Wild West Show, "Guns-A-Blazin". Pardners, this is a good'un! Bullets will start whizzin' at noon and 2 PM to make this an extra special Fourth. Send in more events and the Colonel will post them.

(BBC/AFP Image, 6/26/09)

Speaking of guns-a-blazin':

"Oil prices rose above $71 a barrel Friday as renewed attacks on oil facilities in Nigeria raised supply concerns and as the dollar slipped further against the euro, drawing investors into commodities." (WSJ, 6/26/09)

Here come the bad ole good days again; London spot gold broke $948 after lunch London time. Although both gold and oil are now pulling back we are reminded how sensitive the markets are to geo-political as well as global recovery woes:

"Nigerian militants said they attacked a Royal Dutch Shell wellhead in the southern Delta state in response to a government operation against them, hours after the nation's president offered them amnesty in exchange for laying down their arms.

The militant Movement for the Emancipation of the Niger Delta has been battling for a larger share of the country's oil revenues.

'One way or another, Nigerian disruptions should lead to an acceleration in the reduction of ... crude oil stock,' said Olivier Jakob of Petromatrix in Switzerland.

Oil was also boosted by a drop in the value of the dollar, against which it typically trades inversely. Commodities like oil and gold are used by investors as a hedge against inflation and dollar weakness." (WSJ, 6/26/09)

One more item to support the "Love the Treasurys, hate the dollar" sentiment that has become the rallying cry of investors lately:

"Treasury prices soared as strong demand for the government's $27 billion seven-year-bond auction completed the Treasury Department's hat trick in a week of record supply.

'One thing is quite clear," said Dan Greenhaus, strategist at Miller Tabak & Co. 'The Treasury is having relatively few, if any, issues selling its debt.'" (WSJ, 6/26/09)

Maybe gold will pick the UP elevator sooner than the Colonel thought given all this week's news. Nuts, I'll stick with my predictions:

Gold will see $880 before Thanksgiving

Gold will break $1050 before Christmas


Enough blazin' prognostication, let's walk the walk:

Oil is down $0.66 to $69.567 in early trading (August contract); Gold is up $5.6 to $945.1 (August contract); Silver is up $0.185 to $14.190 (July contract); Copper is up $0.0090 to $2.3105(July contract); Molybdenum is steady-eddy at $10.58.

The DOW is down 36.73 points to 8435.67; the S&P 500, down 3.28 points to 916.98. The miners are mixed:

Barrick (ABX) $35.57 up 0.88%
Newmont (NEM) $42.83 down 0.58%
General Moly (Eureka Moly, LLC) (GMO) $2.40 up 0.84%
Freeport McMoran (FCX) $50.83 up 0.16% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up (a "tell" for General Moly):

Nucor (NUE) $45.73 up 2.28% - domestic steel manufacturing
ArcelorMittal (MT) $33.51 up 0.60% - global steel producer
POSCO (PKX) $82.56 up 0.27%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio update is unavailable for technical reasons this morning. Maybe it got hit by one of Joe Swanson's whizzin' bullets!

Cheers,

Colonel Possum

Thursday, June 25, 2009

Even More Gold for China?



Morning Miners!

It is 8:25 AM, the coffee is cold and it was all hands on deck in the shop this morning! We'll make this a short one so you can get back to work. There is some interesting news coming out of China this morning that may prove supportive of higher gold prices as it plays out. The Report signaled that China had more gold reserves than the world thought last April in the blog, Lower Propane Bills and More Gold in China. Before April the reserve estimate was 600 metric tons; on April 25th, the China News Agency Xinhua announced that current reserves were actually 1,054 metric tons. The Eureka Miner's Market Report said then:

"This puts China on par with present investor holdings in the gold ETF, GLD (1,105 metric tons as of 4/22) and number seven in the gold reserve list (the United states is still number one at 8,133 tons). So now, the awaking dragon is not only the world's largest gold producing country but has also been putting it away on the sly. The good news is that China demand supports gold prices and may offset the potential volatility of large investor holdings."

This morning, Reuters reports:

BEIJING (REUTERS)- China should buy more gold because the dollar is poised for a fall and the metal is needed to support the greater international role envisaged for the yuan, a senior researcher with the ruling Communist Party said on Thursday.

Li Lianzhong, who heads the economic department of the Party's policy research office, said China should use more of its $1.95 trillion in foreign exchange reserves to buy energy and natural resource assets.

Speaking at a foreign exchange and gold forum, Li also said that buying land in the United States was a better option for China than buying U.S. Treasury securities.

"Should we buy gold or U.S. Treasuries?" Li asked. "The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice." (Reuters, 6/25/09)


There is no suggestion in this article that Li is revealing an agreed party line but there does seem to be a favorable sentiment developing towards gold given the revelations of last April. Down the road it seems China also has plans for the yuan:

"If the yuan should go international or become a reserve currency, China needs more gold to back that," Li said. When the yuan does become an international currency, which Li acknowledged was a long way off, he said the composition of the SDR should be reformed to include the Chinese currency. (Reuters, 6/25/09)

The SDR stands for "special drawing rights" and refers to a basket of currencies established by the International Monetary Fund every four years. Presently its composition for 2006-2010 is:

USD (dollar) - 44%
EUR (euro) - 34%
JPY (yen) - 11%
GBP (pound sterling) - 11%

Apparently China wants more gold and a chance to add the Yuan to the SDR basket. Let's get this all down to where the goat can get at it. Whether it is inflation fears or the Chinese, demand support for gold should grow. The ole Colonel said a few weeks ago that if gold dropped to $920 he would buy, and he did.

Enough talk, let's walk the walk:

Oil is up $1.67 to $70.34 in midday trading (August contract); Gold is up $3.3 to $937.7 (August contract); Silver is up $0.075 to $13.985 (July contract); Copper is up $0.0520 to $2.3195(July contract); Molybdenum is steady-eddy at $10.58.

The DOW is up 153.79 points to 8453.65; the S&P 500, up 31.78 points to 917.92. The miners are still rocking:

Barrick (ABX) $33.18 up 1.76%
Newmont (NEM) $42.53 up 1.21%
General Moly (Eureka Moly, LLC) (GMO) $2.35 up 2.62%
Freeport McMoran (FCX) $50.28 up 3.03% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are snapping back (a "tell" for General Moly):

Nucor (NUE) $45.07 up 2.01% - domestic steel manufacturing
ArcelorMittal (MT) $33.08 up 1.82% - global steel producer
POSCO (PKX) $81.87 up 2.79%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is back in the black, up 1.81% to $1,002,280.55.

Cheers,

Colonel Possum

Wednesday, June 24, 2009

Update for Eureka Ranchers, A Jump in Gold



Morning Miners! Morning Ranchers!

It is 6:07 AM and we have a full break room this morning. Lee sent us over some fresh coffee and donuts from Raine's this morning and the ole Colonel must admit that it tastes a lot better than what comes out of our boiler maker. She also informed me of two great links to add to the Report's Rancher's Corner:

Nevada Livestock Marketing, LLC

Superior Livestock Auction

The first provides full-service cattle sales & marketing serving the Fallon, Nevada and Outlying Areas; the second, a video auction service used by many Nevadans and similar to Western Video. For the ranchers and farmers that missed our kickoff in May, here's the link:

Checkout Our New Feature: "Rancher's Corner"


You can find the Rancher's Corner to your right. Thanks to Lee and all the other contributors that have made the Report better with their ideas and links. Keep'em coming!

This may prove to be an interesting day for the markets with the Federal Reserve statement expected at 2:15 AM (ET) concluding their two-day meeting. London spot gold is sensing something in the air jumping to $940 after traders returned from their pub lunch (London time). Other Fed-sensitive contracts demonstrated a slightly stronger U.S. dollar with respect to the euro and yen, and weaker compared to the Canadian loonie. All these trends could amplify or reverse depending on what Ben and the Boys have to say about inflation and the economic recovery this afternoon.

I'll close today with a currency chart missing from yesterday's discussion (Ask the Loonie Bird, Ask the Metals). Given the recent enthusiastic participation in our debt auctions, there is buzz about foreign investor sentiment: "Love the Treasurys, hate the dollar." Yesterday, we observed a weakening in commodity-sensitive currencies (loonie and aussie) and a mild recovery in the dollar. A reasonable question is why the dollar rally hasn't been stronger. The answer is that inflation fears in the U.S. are moving money into the euro (QEC U9) instead of our dollar (DX U9). Here's a chart of both for the last 3-months:


Oh-oh, a few ranchers just dozed off. Let's get them some more of that good Raine's coffee!

Enough talk, let's walk the walk:

Oil is down $0.26 to $68.98 in early trading (August contract); Gold is up $16.5 to $940.8 (August contract); Silver breaks $14 up $0.255 to $14.100 (July contract); Copper is up $0.0630 to $2.2615(July contract); Molybdenum is steady-eddy at $10.58.

The DOW is up 87.67points to 8410.58; the S&P 500, up 12.78 points to 907.88. The miners are rocking:

Barrick (ABX) $33.61 up 1.27%
Newmont (NEM) $41.82 up 1.21%
General Moly (Eureka Moly, LLC) (GMO) $2.32 up 5.45%
Freeport McMoran (FCX) $49.56 up 5.04% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are snapping back (a "tell" for General Moly):

Nucor (NUE) $45.09 up 2.52% - domestic steel manufacturing
ArcelorMittal (MT) $33.31 up 4.26% - global steel producer
POSCO (PKX) $80.77 up 2.89%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is rebounding nicely, up 3.05% to $999,562.52.

Cheers,

Colonel Possum

Tuesday, June 23, 2009

Ask the Loonie Bird, Ask the Metals


Morning Miners!

It is 6:19 AM and we're firing up a second pot. The ole Colonel is a little late this morning because there has been so much data to sort through after yesterday's commodity massacre. The Eureka Miner's Grubstake Portfolio was down 6.91% shedding $70,384 for its largest daily loss - ouch! This quote from Metals Monthly pretty much sums up the situation:

"Are the green shoots of spring turning into the full blossoms of summer? Or is a late frost about to descend?" asks the VM Group, a specialist London-based metals analytics organisation, in its latest Metals Monthly for Fortis Bank.

The Report has been expecting a a summer slump in gold and the broader markets; yesterday may very well have been the warning shot for more to come. Fortunately, gold reversed early this morning (London time) after flirting with $914. There will probably be a relief rally today but the larger question is what next? I don't know the answer but it is always good to look at the metals and commodity-sensitive currencies for clues. The following charts suggest a weakening in the commodity reflation story may have started early this month. Here is a plot of the Canadian dollar ("Loonie", QCD U9)) versus the Australian dollar ("Aussie", QAD U9) for the last 3-months:


Although they are a hemisphere apart, the currencies of these two resource-rich countries are nearly identical in their performance. Note that both started to reserve their upward trend in early June. The story of the U.S. dollar (DX U9) is the inverse as shown in this chart plotted against the Aussie (QAD U9). This relation is not unexpected since the dollar index is based on a basket of global currencies but the counter-trend character with a commodity-sensitive currency is pronounced:


As the U.S. dollar has strengthened, gold has declined in their classic relation. Here are gold and copper, our favorite canaries in the global recovery mineshaft, for the last 3-months. The copper trend remains positive but weakening as doubts about the real strength of China's recovery emerge:


Where do we go from here? Stay tuned, the Colonel has got you covered.

Enough chart talk, let's walk the walk:

Oil is up $0.33 to $67.82 in early trading (August contract); Gold is up $2.3 to $923.3 (August contract); Silver is up $0.100 to $13.805 (July contract); Copper is up $0.0535 to $2.1855(July contract); Molybdenum holds steady at $10.58.

The DOW is down 23.28 points to 8315.73; the S&P 500, down 1.59 points to 891.45. The miners are recovering somewhat:

Barrick (ABX) $32.06 up 0.60%
Newmont (NEM) $40.22 up 0.88%
General Moly (Eureka Moly, LLC) (GMO) $2.07 down 2.82%
Freeport McMoran (FCX) $46.71 up 3.39% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are so-so (a "tell" for General Moly):

Nucor (NUE) $43.21 down 0.48% - domestic steel manufacturing
ArcelorMittal (MT) $31.13 up 1.83% - global steel producer
POSCO (PKX) $78.42 up 0.09%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is shaking off a little dust, up 0.34% to $952,168.11.

Cheers,

Colonel Possum

Monday, June 22, 2009

Is Gold Ready for the Down Elevator?


Morning Miners!

It is 6:08 AM, the coffee is hot and clean cups are on the hook. My sweetheart took the headline picture a few years ago. We were on the north side of Lone Mountain looking down a long dusty road to Devil's Gate. I thought this to be a fitting image to start the week; economic recovery is in view but there's still a long way to get beyond the Devil's Gate.

This could be a tricky week for gold and stocks. The ole Colonel has warned in previous blogs that this summer and fall could have a few speed bumps for both. One catalyst is the outcome the Federal Reserve meeting this week:

"...the Federal Open Market Committee will hold a two-day policy meeting, ending Wednesday with a statement expected to walk the fine line between the need to continue goosing the economy and the need to keep inflation at bay." (WSJ, 6/22/09)

Other influences are the recent cautious to gloomy remarks from the European Central Bank and World Bank:

WASHINGTON -- Developing countries' net private capital inflows fell 41% last year and will be cut nearly in half this year, the World Bank said in a report that offers little hope that the countries will provide the spark for the global economic engine.

Meanwhile, European Central Bank Gov. Jean-Claude Trichet said Sunday that the ECB expects the global economy to moderate its slide over the remainder of the year and resume climbing in 2010.

The World Bank estimated in its annual development-finance review that gross domestic product in developing countries will grow just 1.2% this year, well off the 8.1% pace in 2007 and the 5.9% gain in 2008. (WSJ, 6/22/09)


The London spot market appears to be anticipating something with gold dropping from a $934 open to sub-$920 just several minutes ago. We'll see what happens later this morning but I'm prepared to buy little chunks on the way down and will stick with my prediction that gold will hit $1050 before Christmas. How about a Colonel "tweener" prediction between now and a bump up:

Gold will see $880 before Thanksgiving 2009

I think stocks are looking a little scary too. We've seen a greater than 40% gain in the S&P 500 since the "Devil's Triple Six" low of March 6 (S&P intraday low, 666.79) to an intraday high of 956.3 on June 11th. That's a big bounce for an economic ball that's still losing air. There will no doubt be a rally in stocks late this year when fund managers try to dress up their books, so there should be some buying opportunities for equities in the summer slump. I'll talk about a conservative approach to buying a falling market for us old timer's later this week. How about some more market predictions?

The S&P 500 will see 813 before Christmas 2009
The S&P 500 will break 1000 before New Years 2009


In the meantime, put on your seat belts. We're off to Devil's Gate!

Oil is down $2.16 to $67.86 in early trading (July contract); Gold is down $16.1 to $920.1 (August contract); Silver is down $0.420 at $13.780(July contract); Copper is down 0.0665 to $2.1840(July contract); Molybdenum holds at $10.55.

The DOW is down 129.76 points to 8409.97; the S&P 500, down 17.81 points to 903.42. The miners are down big time:

Barrick (ABX) $32.23 down 5.18%
Newmont (NEM) $40.16 down 4.11%
General Moly (Eureka Moly, LLC) (GMO) $2.47 down 3.52%
Freeport McMoran (FCX) $46.85 down 8.10% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down too (a "tell" for General Moly):

Nucor (NUE) $45.00 down 3.60% - domestic steel manufacturing
ArcelorMittal (MT) $31.30 down 6.09% - global steel producer
POSCO (PKX) $79.81 down 4.09%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is back in the red, down 3.82% to $980,386.08.

Cheers,

Colonel Possum

Friday, June 19, 2009

A Great Week for Eureka and General Moly


Morning Miners!

It is 6:00 AM sharp, grab a cup and let's have a Friday wrap. The theme for this week was to identify positive signposts for the economic future of Eureka County. The Report looked at commodity reflation, stabilizing credit and equity markets, an outlook for inflation and the increasing importance of the BRIC countries for commodity-sensitive economies. That's a lot of territory pardner and we're not done.


General Moly held their annual meeting in Lakewood, Colorado, yesterday and presented a top notch overview of where they've been and where they're going. Here's the link, a must read for anyone living in our area:

Building Foundations - Positioned to be Become the World's Largest Primary Molybdenem Producer

If you like to dig into the numbers, you might also want to checkout their Annual Report.

General Moly Annual Report - Form 10-K

Their annual meeting was quickly rewarded by a target price increase to $3.40 by National Bank this morning and a "Buy" recommendation from Blackmont Capital earlier this week. Folks, in the dreary days of March, General Moly had a low intraday price of 64 cents; yesterday, they closed at $2.44 and briefly touched $3.15 this month.

What's going on? In their overview, there is an excellent discussion for why the molybdenum market is poised for a rebound citing lower global inventory levels, market discipline from existing producers and China beginning to buy molybdenum from western producers (China has been historically a self-sufficient moly producer). Interestingly, they also see less and less by-product production coming to market as copper production shifts from the Americas (where moly exists as a by-product metal) and toward Africa and Asia (where cobalt and gold exist as by-product metals rather than moly).

On a daily basis, the Report has tracked the price of molybdenum as well as the stock price of key domestic and global steel producers. Moly has surged from sub-$8 April lows to the latest price of $10.58. Although we're far from the 2008 $30-plus highs, molybdenum is back on the march to higher prices. In addition, global steel producers such as ArcelorMittal(MT) have doubled their stock price since their March lows. As another good sign for GMO, Deutsche Bank raised MT to a "Buy" recommendation this week.

The General Moly report also reaffirms its commitment to Eureka County in terms of community involvement, the educational foundation to benefit our high school students and the site preparation for housing future employees and family. The Colonel gives the Eureka Moly folks a hearty Cheers!

Enough talk, let's walk the walk:

Oil is up $0.30 to $72.21 in early trading (August contract); Gold is up $0.4 to $935.0 (August contract); Silver is up $0.025 to $14.265 (July contract); Copper is up 0.30 to $2.2750(July contract); Molybdenum holds steady at $10.58.

The DOW is up 56.23 points to 8611.83; the S&P 500, up 8.40 points to 926.77. The miners are kicking butt:

Barrick (ABX) $33.68 up 1.75%
Newmont (NEM) $41.83 up 1.01%
General Moly (Eureka Moly, LLC) (GMO) $2.48 up 1.64%
Freeport McMoran (FCX) $51.92 up 2.81% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are rocking (a "tell" for General Moly):

Nucor (NUE) $47.40 up 1.96% - domestic steel manufacturing
ArcelorMittal (MT) $33.10 up 2.32% - global steel producer
POSCO (PKX) $83.76 up 1.47%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is a happy camper, up 1.16% to $1,020,041.33.

Cheers,

Colonel Possum

Thursday, June 18, 2009

More Thoughts on Gold and '57 Chevys


Morning Miners!

It is 6:14 AM and it looks like we got a good'un outside today! Before we get back to work, let's drill a few more core samples on the latest inflation data. Yesterday we learned the Consumer Price Index (CPI) data rose 0.1% in May from April but fell 1.3% compared to one year ago. If you look at the broken line to the left of Mr. T-Bill, you can see where we are and where we've come since 1999. The big drop off is the largest annual decline in almost 60 years. So what?


The dark CPI line is the "unadjusted" number that is used by the government to gauge inflation and "real" interest rates. The lighter line is the CPI less food and energy for those of you that don't eat or drive. The latter is used to gauge how well the Fed is doing in trying to rein in their team of wild economic horses. Less food and energy, it is fairly stable at 2% and everybody gets a pat on the back at the Federal Reserve.

The rest of us live with the unadjusted number. The good news is that at these depressed levels, inflation is not a problem in the near term. If you have money socked away at the Nevada State Bank in a Certificate of Deposit (CD), it is not slowly vanishing into thin air. A real interest rate or inflation-adjusted return of 2% is fine for preserving (if not making) capital and that's not hard to achieve even with today's low yield CDs (for number geeks, see note 1)

The tougher question is what will happen in six months to a year from now given the government's propensity to print money and run up debt. The prevailing fear is a possibility of Jimmy Carter-style double-digit inflation. This has brought a lot of folks into the gold market including the ole Colonel. Back in April, the Report looked at who holds the gold in the world: Who's Got the Gold. Amazingly, more people now hold gold in the Exchange Traded Fund GLD than all the gold in Switzerland and roughly the same amount as China (after this April article we learned that China has been squirreling away more gold than anyone thought, Lower Propane Bills and More Gold in China). There is a brief CNBC video on GLD near bottom of this blog.

I remain a gold bull but a word of caution is in order. Although gold is the traditional inflation hedge, the Colonel gets a little nervous when everybody starts doing the same thing. A "crowded trade" begets bubbles and we are now too familiar with their fate after living through 2008. Other large holders such as the International Monetary Fund (IMF) may also start dumping gold to raise more money for strapped developing nations.


The bottom line is to take it slow, gold is an excellent way to diversify but may see some wild swings as we move further down the bumpy road to recovery. There is also the slim chance that the government gets this right; the economy rebounds, future inflation is only moderate and the "new" General Motors introduces a car as cool as the turquoise '57 Chevy.

Enough smokin', let's walk the walk:

Oil is up $0.21 to $71.24 in early trading (July contract); Gold is up $4.6 to $940.6 (August contract); Silver is up $0.020 at $14.300 (July contract); Copper is down 0.0045 to $2.2550(July contract); Molybdenum holds steady at $10.58.

The DOW is up 58.57 points to 8555.75; the S&P 500, up 6.18 points to 916.89. The miners are up:

Barrick (ABX) $33.97 up 1.74%
Newmont (NEM) $42.39 up 0.98%
General Moly (Eureka Moly, LLC) (GMO) $2.36 up 0.43%
Freeport McMoran (FCX) $50.67 up o.38% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down (a "tell" for General Moly):

Nucor (NUE) $46.72 up 0.73% - domestic steel manufacturing
ArcelorMittal (MT) $32.30 up 1.54% - global steel producer
POSCO (PKX) $82.50 up 0.57%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is back in the black, up 0.37% to $1,009,597.19.

Cheers,

Colonel Possum

Note 1: As an example of nominal (CD yield) versus real returns let's say you bought a $5,000 CD with a 3.7% coupon last May. It matured last month and the bank returned to you 1.037 x $5000 = $5,185. The year-to-year unadjusted inflation for May is reported to be -1.3% so the "real" return on your money is:

"real" return = ((1 +.037)/(1-.013) - 1) x 100% = 5.06%

Let's now say inflation is flat from here but you could only find a CD with a 1% coupon last month. In a year from now, your real return is equal to the new CD rate since the year-to-year change is assumed to be zero. If you reinvested all of your money, the bank now returns 1.01 X $5185 = $5236.85. Over two years your annualized "real" return is 2.3%, still comfortably above the 2% recommendation. Sleep tight friends.

Wednesday, June 17, 2009

CPI Report, Barrick raised to $46

Morning Miners!

It is 5:50 AM and the coffee is hot! The big news today is the Consumer Price Index or CPI:

WASHINGTON -- U.S. annual inflation slid deeper into negative territory in May as consumer prices posted their largest annual decline in almost 60 years. Still, a slight rise from the prior month and an increase in core prices that exclude food and energy support the growing sentiment at the Federal Reserve that deflation risks have waned. However, there's little evidence that inflation is taking hold, either, a concern that has crept into bond markets in recent weeks. (WSJ, 6/17/09).

We visited the Producer Price Index or PPI yesterday and the conclusion was similar, no inflation fear for the near term. There's an important lesson here, just because the government is printing Monopoly money today doesn't mean you'll be hauling your dollars in a wheelbarrow to shop at Raine's tomorrow. Next year? Maybe.


Mark Spitznagel who made a fortune predicting the "black swan" that hit markets last year says yes to out-of-control inflation down the road. "Black swan" alludes to the once-widespread belief that all swans are white -- proved false when European explorers found black swans in Australia. A black-swan event is something extreme and highly unexpected. He is creating a fund that places bets on options tied to assets expected to benefit from a big leap in prices, including commodities such as corn and crude oil, and options on shares of oil drillers and gold miners. It also will short (i.e. bet against) Treasury bonds, likely to weaken in an inflationary economy.*

Is this feller right? Who knows, but the ole Colonel is going to sock away a little more gold just in case. The London gold spot market dipped to $928.50 presumably on the CPI news. If we get to $920 in the next week or so, I'm backing up the truck for a little chunk of glitter.

There is a second bit of good news today. The Barrick (ABX) price target was raised by Toronto Dominion from $41 to $46 this morning. If ABX gets to $32, I'm picking up some of that Canadian glitter getter too.

Enough talk, let's walk the walk:

Oil is down $0.80 to $69.67 in early trading (July contract); Gold is down $0.3 to $931.9 (August contract); Silver is down $0.035 at $14.095 (July contract); Copper is down 0.0200 to $2.2355(July contract); Molybdenum hold steady at $10.58.

The DOW is down 20.71 points to 8483.96; the S&P 500, down 4.90 points to 907.07. The miners are down:

Barrick (ABX) $32.83 down 1.74%
Newmont (NEM) $41.49 down 0.93%
General Moly (Eureka Moly, LLC) (GMO) $2.13 down 7.79%
Freeport McMoran (FCX) $50.61 down 3.40% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down (a "tell" for General Moly):

Nucor (NUE) $46.16 down 1.49% - domestic steel manufacturing
ArcelorMittal (MT) $30.92 down 3.97% - global steel producer
POSCO (PKX) $82.57 down 1.41%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is in the red falling 2.43% to $990,509.82.

Cheers,

Colonel Possum

* WSJ Article, "Black Swan Trader Bets on Inflation", 6/16/2009

Tuesday, June 16, 2009

The Road from Eureka to Yekaterinburg


Morning Miners!

It is 5:52 AM, the coffee is hot and we're packed to do some traveling eastbound. Tucked away in the Ural mountains of Russia is the historic city of Yekaterinburg, namesake of Tsar Peter the Great's wife Empress Catherine I. It is also where nobility came to a bloody end when the royal family was executed by Bolsheviks during the Russian Revolution. Yekaterinburg is deep in the heart of Russian copper mining country and this week hosts the first summit meeting of the so-called BRIC group — Brazil, Russia, India and China.


Why is this important to Eureka, Nevada? The BRIC countries comprise 15% of the world economy and remain for the most part on a solid growth path even in the shadow of a global downturn (see note 1 below). Equally important, the BRIC holds 40% of the world's currency reserves. Coupled with a voracious appetite for raw materials, they are exerting increasing influence on the fate of the US dollar. Dollar denominated commodities are at the center of Eureka County's economy so it is important to watch the actions of these powerful emerging economies.

Yesterday, the Russian minister, Alexei Kudrin, said his country had "full confidence" in the U.S. dollar and it was "too early to speak of an alternative" reserve currency.

Today Russian President Dmitry Medvedev seemed to contradict his minister in a speech to the summit. He said that the world needed new reserve currencies, "We have to consolidate the international monetary system, not only through the consolidation of the dollar but the creation of new reserve currencies."

Interestingly, the Kudrin comment contributed to Monday's pop in the dollar, drop in gold and sell off of dollar-denominated commodities. The Eureka Miner's Grubstake portfolio (a measure of Eureka's future economic health) dove 4.7%, the largest daily drop since its inception.


In early morning trading, the direction of the dollar, gold and commodities is back on the rise. Can this be attributed to the Medvedev speech? This is debatable since there are other factors (e.g., positive housing and PPI news) that are also moving the markets. The ole Colonel will say that the goings-ons in Yekaterinburg are something to watch as carefully as a rattler in the sage. Even less comforting was the surprise appearance of President Mahmoud Ahmadinejad at the summit today. His attendance had not been expected due to the post-election turmoil in Iran. What's this joker doing there anyway? (see note 2)

OK, let's close on a happier note with another positive signpost for Eureka County:

"Tuesday's [Producer Price Index or PPI] data suggest that while deflation risks may be waning amid rising oil prices, the falling U.S. dollar and apparent stabilization in the economy, there is little evidence that inflation is taking root." (WSJ, 6/19/09)

Enough feel good stuff, let's walk the walk:

Oil is up $1.47 to $72.09 in early trading (July contract); Gold is up $7.2 to $934.7 (August contract); Silver is up $0.150 at $14.180 (July contract); Copper is down 0.0155 to $2.2695(July contract); Molybdenum got another little shove up to $10.58.

The DOW is up 10.21 points to 8622.34; the S&P 500, up 2.73 points to 926.45. The miners are mostly up:

Barrick (ABX) $33.81 up 2.77%
Newmont (NEM) $42.30 up 1.73%
General Moly (Eureka Moly, LLC) (GMO) $2.48 up 0.41%
Freeport McMoran (FCX) $55.10 down 0.07% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up (a "tell" for General Moly):

Nucor (NUE) $47.97 up 4.85% - domestic steel manufacturing
ArcelorMittal (MT) $33.47 up 2.10% - global steel producer
POSCO (PKX) $85.51 up 2.96%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.58%.

Cheers,

Colonel Possum

Photos from Google Earth and Associated Press

Note 1: The aggregate GDP 2009 growth for BRIC is estimated to be +3.4% with a global GDP contracting more than 2.0% over the same period. The ole Colonel used the IMF GDP dollar estimates for 2008 derived from purchasing power parity (PPP) calculations together with GDP predictions for each country cited in the latest Economist (June 13, 2009). For the number geeks, here are my calculations:

Brazil 2008 GDP $1.98T down 1.5% in 2009 = $1.95T
Russia 2008 GDP $2.26T down 5.0% in 2009 = $2.15T
India 2008 GDP $3.29T up 5.0% in 2009 = $3.45T
China 2008 GDP $7.92T up 6.5% in 2009 = $8.43T

BRIC Total 2008 = $15.45T
BRIC Total 2009 = $15.98T
BRIC aggregate growth 2009/2008 = 3.4%

Note 2: There is at least a marginally valid reason for Ahmadinejad's attendance. This first BRIC summit occurs together with the ninth annual Shanghai Co-operation Organisation (SCO) which brings together Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. India, Pakistan, Iran and Mongolia have joined as observer members. I count more foxes than chickens in this hen house!

Monday, June 15, 2009

Positive Signposts for Eureka County



Morning Miners!

It is 5:54 AM and I just opened a new can of Folgers, grab a cup and let's kick start the week. There have certainly been a lot of challenges in the last year for all of us. Will we look at the headline pictures in several months and laugh that gasoline prices at $2.57 were the good ole days in the middle of some pretty bad ole days? Prices on the rise again and inflation on the distant horizon are all reasonable concerns but shouldn't overshadow some of the good things in the works for our County. As we approach the middle of the year, I thought it might be good to reflect on some of the positive signposts on our road to economic recovery. Here's a few to get started:

Commodity Reflation

Friday, we looked at the rise in key metal prices for the past 6-months. Since Eureka is a commodity sensitive economy, the rise in gold and molybdenum prices bodes well for our major mining interests. Moly bumped another nickel Friday to $10.55 and although gold appears to be in a pullback, I'm sticking to my prediction that it will break $1050/oz by Christmas. Dennis Gartman, the "Commodity King", said on CNBC business news Friday that gold could drop to $880 this summer before rebounding. He also noted that there appears to be a major "mystery seller" when gold approaches $980. The Report will watch for this key level; I'm betting we break it and intend to add some gold when we're in the summer slump. For miners, the race will be metal price versus the rise in oil which pushes production cost. Much of the recent run up in oil is speculative money, a fall back to supply/demand fundamentals would be a welcome sign. Let's see if there is a decent pullback from $72 oil in the next month or two.

Stabilizing Credit and Equity Markets

The big market event last week was the pop of 10-year Treasury notes to nearly a 4% yield. The government has threatened to buy Treasurys with freshly printed money to maintain low interest rates for the consumer including mortgage rates. The good news is they didn't and normal market forces returned the yield to 3.739% by the end of the week. This is a very positive sign for the credit markets and inflation down the road. What about the stock markets? Given Friday's close this is where we've come since the beginning of the year compared to gold:

DOW Jones: 8,668.39 to 8,799.26, up 1.51%
S&P 500: 903.25 to 946.21, up 4.76%
GLD (gold ETF): 85.9 to 92.17, up 7.30%

That's not bad considering where we've come since the March lows (e.g. S&P 500 up 41.9% from an intraday low of 666.79, 3/6). There is a thought that the equity markets have rebounded too quickly and a correction is probable this summer/fall. I believe this to be true but if we can just return to Friday's close by year end we can claim a positive 2009. Throwing in a 2.66% dividend, flat from here would give you a 7.42% return for the year on the S&P 500. I'll talk a little bit on how to buy the broader markets for us old timers later this week, the Colonel's buying on a downturn.

If you've got some positive signposts to brag on, give me a holler. Tomorrow we'll add some more!

Enough talk, let's walk the walk:

Oil is down $1.25 to $70.79 in early trading (July contract); Gold is down $6.8 to $933.9 (August contract); Silver is down $0.550 at $14.325 (July contract); Copper is down 0.0680 to $2.3055(July contract); Molybdenum is smiling at $10.55.

The DOW is down 206.40 points to 8592.86; the S&P 500, down 22.35 points to 923.86. The miners are down:

Barrick (ABX) $33.55 down 1.29%
Newmont (NEM) $42.20 down 1.21%
General Moly (Eureka Moly, LLC) (GMO) $2.54 down 8.96%
Freeport McMoran (FCX) $56.66 down 3.16% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down (a "tell" for General Moly):

Nucor (NUE) $46.30 down 2.53% - domestic steel manufacturing
ArcelorMittal (MT) $33.40 down 4.81% - global steel producer
POSCO (PKX) $83.55 down 2.86%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 3.33%.

Cheers,

Colonel Possum

Friday, June 12, 2009

Sailors Shouldn't Ride Horses





Morning Miners!

It is 5:57 AM and life is great in the Great Basin! What a day we had yesterday. Early in the morning the Colonel sent a posse into the Valley of Federal Debt to rescue Mr. 10-year T-Bill from a band of ruthless Bond Vigilantes only to find a successful auction of the 30-year long bond. There were rumors that a Sultan or Chinese agents were buying our debt like crazed coyotes; yields stabilized and the equity markets rallied. The Eureka Miner's Grubstake portfolio jumped 2.15% to a 0.61% rise in the S&P 500. These auctions of Federal debt will occur every two weeks for some time and I am beginning to wonder if I really care.

When markets get this confused the ole Colonel is reminded of Dennis Gartman's sage advice, "Metals have a PhD in Economics!" Gartman is known as the "Commodity King" and I believe he's got this one right on. After all, my mission is to help you decide whether current market events point to a sustainable recovery or a head fake in a downward trend. Bond traders are too squirrely for this ole boy and I think it is time to get back to basics: cowboys shouldn't sail boats and sailors shouldn't ride horses.

So what are the metals telling us? I have included three 6-month charts from InfoMine for copper, molybdenum and gold. Looking at the trend lines, I'd say things are looking up for Eureka County regardless of bond trader shenanigans. Copper has been our canary in the global recovery mineshaft and still soars like an eagle. Let's see what the CEO of Freeport McMoran has to say:

NEW YORK, June 10 (Reuters) - Global copper inventories are still low and although metal prices are rising, there is not yet enough demand to increase production, the chief executive of Freeport-McMoRan Copper & Gold (FCX) said on Wednesday.
"Even though we have gone through a worldwide recession, copper inventories globally are very low," Richard Adkerson told the RBC Capital Markets mining conference in Toronto.
"The anomaly is that there has been a dramatic drop in prices, but still there is a tight physical marketplace. That is positive for copper," he said in comments monitored via a webcast in New York.

And this from the Wall Street Journal yesterday:

COPPER: Prices ended on a muscular note amid the weakening U.S. dollar and technical considerations, coupled with strong Chinese import data and general demand bullishness. Thinly traded Comex nearby June copper rose 7.8 cents, or 3.3%, to $2.4380 a pound. The most active July contract also rose 7.8 cents, to $2.4450

That doesn't sound too gloomy-doomy. Molybdenum has also reaped the benefits of the recent rally in steel stocks. There is a nice bathtub formed with a sub-$8 low in April followed by the pop to $10.50 this Monday. No, we're not at the 2008 $30 plus levels but the reversal is very encouraging. The rise in General Moly (GMO) stock to nearly $3 means somebody is buying the global recovery story.

My last metal Eco-101 whiz-kid is gold. The Colonel still holds to his prediction of $1050/oz before this Christmas although there has been a pretty good pullback in the past few days. This afternoon (London time, that is), spot gold dropped to $938. The Colonel is buying a chunk if we we get to $920 or below in the summer doldrums ahead.

Feel better? I'm buying beers for the posse that bravely rode the Valley of Federal Debt. We ain't going back into that territory for some time buckaroos.

Enough talk, let's walk the walk:

Oil is down $1.20 to $71.48 in early trading (July contract); Gold is down $23.7 to $938.3 (August contract); Silver is down $0.663 at $14.830 (July contract); Copper is down 0.0750 to $2.3700(July contract); Molybdenum is happy camping at $10.50.

The DOW is down 17.99 points to 8752.93; the S&P 500, down 5.61 points to 939.28. The miners are down:

Barrick (ABX) $33.80 down 2.48%
Newmont (NEM) $42.54 down 3.56%
General Moly (Eureka Moly, LLC) (GMO) $2.77 down 3.48%
Freeport McMoran (FCX) $59.64 down 1.29% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down (a "tell" for General Moly):

Nucor (NUE) $47.48 down 3.04% - domestic steel manufacturing
ArcelorMittal (MT) $35.24 down 3.43% - global steel producer
POSCO (PKX) $85.78 down 0.22%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.27%.

Cheers,

Colonel Possum

Thursday, June 11, 2009

OHH NOOO Mr. T-Bill !!!


Morning Miners!

It is 5:55 AM and the coffee is double strong. Grab a cup, we've got some serious talk this morning. There are days when we need to look beyond the latest gyrations of the stock and commodity herds, hike to the rim of the canyon and see what's on the other side. There has been a lot of ruckus coming from the next valley over and it threatens to stampede the government approach to recession recovery at home.

The Report first shot a warning flare two weeks ago in the blog, Where's the Duke When We Need Him? At that time, the 10-year Treasury bond (aka T-Bill) unexpectedly jumped to 3.70%. Well pardners, it happened again yesterday and the yield came close to nailing 4.00%.

Why is this a big deal? Let's brush up on some basics. Bonds are stocks' ugly sister; less glamorous and dramatic but no less important. The bond market (also known as the debt, credit, or fixed income market) is a financial market where participants buy and sell debt securities, usually in the form of bonds. Let's say you lend a company $100 by buying their 1-year bond with a 5% yield. In a year, you get back your $100 plus $5. If you get tired of waiting that long to make $5 you can sell your bond in the marketplace. Let's say I buy it for $99; you lose a buck and I collect $6 above my investment at maturity. My yield is $6/$99 or 6.06%. The important thing to remember is that when bond prices go down, yields go up.


OK, enough schooling. The government has been borrowing like crazy to kick start our economy and they do this by periodically auctioning off T-Bills. If things go well, the government gets a good price for their bonds (i.e. low yield or interest rate). This, in turn, keeps down their cost of borrowing and some key consumer credit interest rates. Most notably, mortgage rates are often tied to the 10-year yield.

That's the ideal world, what happens when things go bad?

"A weak Treasury auction sent yields to the highest levels in more than seven months and unnerved stock investors who fear that higher interest rates could choke off an incipient economic recovery.

Stock markets were rattled after yields jumped following a weak auction of 10-year Treasury notes. The yield on the 10-year note jumped as high as 3.996%, highest level since mid-October.

'Higher interest rates are not good for anyone; it's going to kill the refinancing boom and slow the housing market,' said Joseph Saluzzi, a co-founder of brokerage Themis Trading." (WSJ, 6/10/09)


This pop in Treasury yield resulted in a jump in the 30-year mortgage from a fairly stable 5% to 5.79%. Get the picture? And to make matters worse, other countries are threatening to sell T-Bills and move into other debt securities placing additional pressure on yields:

SÃO PAULO -- Brazil and Russia are set to unload U.S. Treasury bonds as they acquire $10 billion each of new International Monetary Fund securities designed to bolster the institution's aid programs, officials in the countries said Wednesday.
The moves are part of a bid by the so-called BRIC nations -- Brazil, Russia, India and China -- to play a bigger role at the IMF and other international institutions. The announcements helped push Treasury yields to their highest level this year on concern that rising U.S. debt has hurt T-bill demand among big holders of U.S. dollar reserves. (WSJ, 6/10/09)

I'm not feeling the love here, buckaroos.

Enough talk, let's walk the walk:

Oil is up $0.54 to $71.87 in early trading (July contract); Gold is down $6.1 to $949.7 (August contract); Silver is down $0.145 at $15.080 (July contract); Copper is up 0.0510 to $2.4180(July contract); Molybdenum is sitting pretty at $10.50.

The DOW is up 96.97 points to 8835.99; the S&P 500, up 10.53 points to 949.68. The miners are mixed:

Barrick (ABX) $34.35 down 2.03%
Newmont (NEM) $48.97 down 1.33%
General Moly (Eureka Moly, LLC) (GMO) $2.70 up 2.27%
Freeport McMoran (FCX) $59.62 down 0.45% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up (a "tell" for General Moly):

Nucor (NUE) $47.56 up 0.34% - domestic steel manufacturing
ArcelorMittal (MT) $35.98 up 2.76% - global steel producer
POSCO (PKX) $84.74 up 3.82%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.49%.

Cheers,

Colonel Possum

Wednesday, June 10, 2009

One-Armed Bandits and $71 Oil


Bloomberg News/Landov

Morning Miners!

It is 5:43 AM and the ole Colonel is back from his road trip. While pushing a lot of highway under my floorboard, an occasional stop at a filling station reminded me that slot machines aren't the only one-armed bandits in this state. That's right pardner, the gas pump sucked a lot bigger hole in my wallet than my last trip a month ago. I know we are entering driving season and gas prices are expected to rise, but as prices crowd 3-bucks there must be something else happening besides an increase in real demand.

What's going on? More and more folks that trade commodities are believing that the global economy is truly on the mend, plain and simple. After flirting with $70 oil last week, the NYMEX light crude futures closed above the seventy mark and opened in Asia this morning above $71, a 2009 high:

"Oil has soared as traders cheered news showing the worst of a U.S. recession is likely over, and brushed off data -- including a 9.4% unemployment rate in May -- that suggest crude demand will remain weak.
'I wouldn't be surprised if we're testing $80 in a week or two,' said Gerard Rigby, energy analyst with Fuel First Consulting in Sydney. 'The momentum right now is too strong.'
Prices have also been bolstered by a weaker dollar and expectations that large fiscal-stimulus spending could spark inflation." (WSJ, 6/10/09)

The Colonel admits that he cheered rising oil prices earlier this year since reflation in oil and metals (e.g. copper) were leading indicators of global recovery. It seemed that oil in the $45-$50 range wouldn't push production costs over the edge for miners who benefited from the higher price of their end product. When oil headed for $60, I bet that oil would return to $52 before $62 and the readers won a beer (see The Colonel's Beer Derby in the lower right column for other commodity bets).

Let's see how crazy things have got in just three months. One indicator of pump prices are the futures contracts for RBOB gasoline on the NYMEX. RBOB (pronounced R-Bob) stands for Reformulated gasoline Blendstock for Oxygen Blending. RBOB is a mouthful of grits but serves as a useful measure of gasoline wholesale prices. Here's the action:

NYMEX RBOB gasoline (July Contract) 3/11 $1.2676 low; 6/10 $1.9940 57.3% increase
NYMEX Crude Light Oil (July Contract) 3/11 $46.25 low; 6/10 $70.70 52.9% increase

And compared to the dollar and gold over the same period:

NYBT US Dollar Index (June Contract) 3/11 89.50 low; 6/10 80.01 10.6% decrease
COMEX Gold (August Contract) 3/11 $897.2 high; 6/10 955.8 6.5% increase

(Note: most active contracts quoted for 3/11/09 intraday low (high) and 6/10 early morning trading)


There is an old saying that you run with the market you have and not the one you think should be. Does a 10% drop in the dollar and signs of global recovery justify 50% increases in the price of RBOB gasoline and light crude oil? Stay tuned buckaroos and watch out for them one-armed bandits at the filling station!

Enough talk, let's walk the walk:

Oil is up $0.69 to $70.70 in early trading (July contract); Gold is up $1.1 to $955.8 (August contract); Silver is up $0.040 at $15.180 (July contract); Copper is down 0.0195 to $2.3460(July contract); Molybdenum sits smiling at $10.50.

The DOW is down 9.68 points to 8753.38; the S&P 500, down 2.61 points to 939.82. The miners are mixed:

Barrick (ABX) $35.79 down 0.91%
Newmont (NEM) $44.38 down 1.14%
General Moly (Eureka Moly, LLC) (GMO) $2.68 up 1.13%
Freeport McMoran (FCX) $59.29 down 0.56% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mixed (a "tell" for General Moly):

Nucor (NUE) $47.09 down 1.40% - domestic steel manufacturing
ArcelorMittal (MT) $34.70 up 0.06% - global steel producer
POSCO (PKX) $81.11 up 0.19%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 0.27%.

Cheers,

Colonel Possum

Tuesday, June 9, 2009

Barrick Price Targets Raised

Good Afternoon Miners!

The ole Colonel just got off the road and normal daily reporting will start up tomorrow.

Here is some good breaking news on Barrick (ABX) Price targets:

UBS $47 from $44, 6/9
Macquaire $48.50 from 46.25, 6/8

To put this in perspective, Barrick is up 43.1% from its March intraday low of $25.54 to a closing price of $36.56 (6/8). A $47 price would be an 84% move.

See you tomorrow,

Cheers,

Colonel Possum

Friday, June 5, 2009

The Barrick Report, General Moly Breaks $3.00


Morning Miners!

It is 6:00 AM sharp. What a beautiful morning for some good mining news! Yesterday, Barrick presented at the Goldman Sachs Basic Materials Conference in New York. Pardners, this is one of the best reports on the future of gold as well as the health of a major Eureka County miner that I have read in quite some time. You've got a reading assignment! Check out their presentation, the link is on the Barrick homepage listed under the Miner's Corner to your right. While Barrick was impressing the Materials Conference, General Moly (GMO) nearly made the $3.00 mark closing at $2.96. This morning GMO broke $3.00 in early trading. That deserves a Colonel Yee-ha!

I'll be on the road again Monday so no Report until Wednesday. We'll chew a bit on the Barrick data when I return. Between road trips we've accomplished a lot thanks to terrific reader input:

1) The Report launched the "Rancher's Corner" for Eureka County farmers and ranchers.
2) The reader's have made nearly $100,000 from their $1M investment in 12 companies that directly or indirectly influence the future of mining in the County. Checkout the Eureka Miner's Million Dollar Grubstake, (yesterday's close $1099,093).
3) The Report expanded the local weather link to include climate information and the weekly Nevada Drought Monitor. You can find all of this under the "Local Weather and Climate" section under the sky picture to your right.
4) There is a new "Reader's Tips - Hot Links" below "Discover Eureka, Nevada" for reader inputs and upcoming events.
5) For us old timers, The Report kicked off its first article for retirees or those of you that are close to going fishing. This will be an ongoing feature to help you hang on to and grow your precious retirement savings. The ole Colonel has just added an "Old Timer's Corner" with a ready link list to retirement articles. Look under, you guessed it, the picture of an Old Timer Miner to your right.

Let's together make this the best Internet source for daily market news and events that affect our County! Keep sending the Colonel your ideas and inputs.

Enough talk, let's walk the walk:

Oil is down $0.15 to $68.66 in early trading (July contract); Gold tumbles $23.6 to $958.7 (August contract); Silver follows, down $0.705 at $15.190 (July contract); Copper is down 0.0405 to $2.2485605(July contract); Molybdenum holds at $10.25.

The DOW is down 22.11 points to 8728.13; the S&P 500, down 5.83 points to 936.63. The miners are mixed:

Barrick (ABX) $35.98 down 4.44%
Newmont (NEM) $45.15 up 4.83%
General Moly (Eureka Moly, LLC) (GMO) $2.99 up 1.01%
Freeport McMoran (FCX) $55.65 down 1.21% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mixed (a "tell" for General Moly):

Nucor (NUE) $46.03 down 0.60% - domestic steel manufacturing
ArcelorMittal (MT) $34.95 up 0.52% - global steel producer
POSCO (PKX) $81.36 down 0.26%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.20%.

Cheers,

Colonel Possum

Thursday, June 4, 2009

A Little Advice from Mark Twain


Morning Miners!

It is 5:36 AM, clean cups are on the hook and the coffee is hot. The ole Colonel is going to chat a bit with the old timers this morning but the young folks are welcome to stay in the break room, there might be something here for everyone. I was sitting on my favorite bench in front of Raine's Market the other day with my faithful sidekick, Loquita. By the by, if you're having a difficult day go sit there a spell, I swear that bench has magical qualities for soothing the soul. I must ask Scott about its history, maybe it has been there since the old Kitchen Market days.

A reader of the Report passed by with two great questions for the Colonel. We're both retired and neither of us are looking forward to returning to the salt mines if we can avoid it. The first question was about the recent rally in the stock market (can it last?); and the second, about the possibility of debilitating inflation in our future. These are important concerns even if you're not retired but getting close to going fishing.

I am reluctant to give anyone advice on what they should do with their money but am not shy about telling you what I'm doing. I'll leave the advice part to Mark Twain who once remarked, "I am more concerned with the return of my money than the return on my money." This is such a sage quote that it was repeated by Will Rogers during the Great Depression and is sometimes attributed (incorrectly) to the famous British economist, John Maynard Keynes. Keynes is important to my story because he had the radical idea that governments should spend money they don't have in hard times to save the ship. More on that in a moment.



Last Fall, it was not unreasonable to fear a massive run on the banks. That didn't happen and I'm convinced our government will sell George Washington's false teeth on E-Bay before they allow that to occur. The Colonel had money in two failed banks, Silver State in Henderson and Washington Mutual, and it was quickly returned by the FDIC. Kudos to Sheila Bair.

That covers the "return of my money" part, what about the "return on my money"? I once explained a conservative approach to investing to a young buck and he remarked, "If you're not making double-digit returns in the stock market, you're an idiot!" I have often wondered how that feller fared in 2008.

I believe there is too much emphasis on getting big returns on your investments especially for older folks. You hear all sorts of crazy stuff like, "you must get at least a 7% return or inflation will eat your life savings away." Talk like that pushes people into the stock market and some poor souls lost 40-50% of their dough last year. Let's face it, even with the recent rally, we're still in a bear market and will probably stay there for a while longer. My rule-of-thumb is no more than 10% of your savings should sit in stocks during such times and no more than 20% in the best of times.

Don't fret too much about your lousy CD returns at the bank for now. Remember it is the difference between yield and inflation rate that counts. Few people complained when inflation was 3% and CDs yielded 5%. Presently inflation is zip (and there is a chance the economy could deflate) so that lousy 2% CD is just fine.

Inflation down the road is a big concern since the government has been borrowing and printing money like A-students in John Keyne's Eco-101. If the economy rebounds and the government can quickly reduce all this funny money at the proper time, books will be written for decades about their success. If their timing is off; books will be written for decades about their failure and the return of double-digit inflation.

Gold is still the best hedge against inflation and it is a wise move to include some in your portfolio. The standard rule-of-thumb is no more than 10% but if things start spinning out of control, I might head a little north of that number. Gold is threatening $1000/oz lately so I'd wait for a good pullback this summer to buy. The ole Colonel will stick to his prediction of $1050/oz by Christmas. These were my thoughts April 6 in the Report:

"Gold stumbled another $20 in early trading to bring us to solid 8-handle country at $877.9 (June contract). Am I discouraged? Hell no. The Colonel bought a little chunk Friday and I'll buy a little more if we fall further. Does anyone really believe there won't be any inflation down the road?"

If we fall back to $920 it might be time for another little chunk.

Have I answered my good friend's questions? There will probably be a good dip in both the stock markets and gold this summer but probably not at the same time. Low rate CDs are good for now but I wouldn't commit to more than a 6-month to 1-year CD at these low yields. Buy gold a little bit at a time on pullbacks, sleep tight at night and join the Colonel on the Raine's bench if you're feeling a little stressed out.

Enough old timer talk, let's walk the walk:

Oil is up $1.66 to $67.78 (July contract); Gold is up $8.0 to $973.6 (August contract); Silver up $0.200 at $15.510 (July contract); Copper is up 0.0365 to $2.2485(July contract); Molybdenum holds at $10.25.

The DOW is down 36.17 points to 8639.11; the S&P 500, down 1,74 points to 930.02. The miners are mixed:

Barrick (ABX) $37.17 up 1.72%
Newmont (NEM) $46.70 up 0.60%
General Moly (Eureka Moly, LLC) (GMO) $2.60 down 3.08%
Freeport McMoran (FCX) $54.51 up 1.58% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mixed (a "tell" for General Moly):

Nucor (NUE) $44.15 down 1.30% - domestic steel manufacturing
ArcelorMittal (MT) $33.58 up 0.09% - global steel producer
POSCO (PKX) $81.00 down 1.85%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.14% at $1,061,862.

Cheers,

Colonel Possum

Wednesday, June 3, 2009

The Drought Down Under


Morning Miners!

It is 5:52 AM and the ole Colonel just watched a pink sky over the Diamond Valley turn to gray. If we were sailors, we'd be taking warning and that's the theme of this blog for what may lay in store for the future of Eureka County's water supply. I am not an alarmist but it is often helpful to look ahead, anticipate the worst and be happy when things turn out better than expected. By now, you may have had a chance to look at the Nevada Drought Monitor link in the Local Weather & Climate section to your right below the sky picture. This information is supplied by the Western Regional Climate Center with updates every week. Presently most of the County is "abnormally dry" or drought level zero (D0). Our southern border with Nye County is "drought-moderate" or level D1 and a bit further south, Nye is experiencing "drought-severe" or D2. The scale goes up to D4 which is time to trade your horse for a camel and watch for happy buzzards.

The Colonel has been anxious to do this piece but a ton of market news got in the way earlier this week: soaring stock prices, $70 oil and gold rapidly approaching the mythical $1000 mark. I think that is typical of most water supply discussions, there is always something else to talk about until it is too late. Ironically, climate change induced water shortages may someday become a much larger impediment to global recovery than the price of oil.

As I said yesterday, local folks are quite familiar with the impact of water on their livelihoods and it seems that good planning is already underway. There is a second water tank under construction for the township and discussions on water were at the forefront during a recent Natural Resources Advisory Commission Meeting I attended. It might be helpful to look at a region of the world that is already experiencing extreme drought.


Many rural areas of Southern Australia are similar to Northern Nevada; they have ranchers, farmers and miners. Unfortunately, they are experiencing the worst drought in over a century. Let's set the stage for further comparison. Australia has states like we do in the U.S. and there are three big ones in its southeast corner: New South Wales (NSW), South Australia to the west and Queensland to the north. I like to think of the more populous NSW as California; and South Australia, as Nevada. Together they share with Queensland a vast water resource called the Murray-Darling Basin. The Murray and and its tributary, the Darling, are large rivers that flow north to south and reach the Southern Ocean in South Australia near the state capital of Adelaide.

Although California/Nevada have a different topography, one thing is as true in Australia as in the States: when there is a water shortage guess who gets the shaft (or perhaps more appropriately, the mineshaft)? The more populous Queensland and NSW comprise four-fifths of the Murray-Darling water resource. Farmers, especially cotton and rice growers in those upstream states account for 83% of the basin's consumed water. You can imagine why it could be approaching "lock n' load" time near the more rural areas at the drying mouth of the river. Government officials just warned Adelaide that there might not be enough water for over one million people to meet "critical human needs". Can you imagine getting that news flash from Carson City?

In fairness, our Humboldt River Basin doesn't directly compare with the Murray-Darling system. However, the High Sierras do their share of grabbing water for the Golden State and there is always that straw that keeps coming our way from a very thirsty Las Vegas. The Humboldt River Basin River Water Authority reports that in 20 years, the population it does serves has more than doubled with further stresses from industrial and mining use. Even with these differences in comparison, it is not unreasonable to assume that an extended drought in the West may very well result in conditions now found in South Australia.

So what are folks doing down under? Here's the good news; the farmers in Adelaide are not stringing up their upstream neighbors, instead they are working together. In the face of crisis it seems innovation and cooperation are saving the day until the drought-breaking rains come. The growers at Langhorne Creek near the mouth of the now salty Murray have formed a company to build a pipeline to secure water from a cleaner (less saline) point on the Murray further east. Australia has devised an interstate water-trading scheme to allow South Australia to buy water from distant farmers in NSW. They have in turn switched to less thirsty crops and keep the difference in store for Adelaide. The wine growers in Adelaide have also discovered new drought resistance vines that still produce quality wine. How's that for turning water to wine buckaroos! There may be lessons here for our county and Nevada my friend although I don't expect too many wine growers in Diamond Valley.

I'll close with another possible turn of events for Australia. There have been recent torrential rains which have brought havoc but also water to this dry land. Eric sent me this picture of submerged haul trucks in an Aussie open pit mine.



Enough dancing in the rain, let's walk the walk:

Oil is down $1.48 to $67.07 (July contract); Gold is down $5.5 to $978.9 (August contract); Silver is down $0.145 at $15.810 (July contract); Copper is down 0.040 to $2.22565(July contract); Molybdenum holds at $10.25.

The DOW is down 84.43 points to 8656.44; the S&P 500, down 13.57 points to 931.17. The miners are down today:

Barrick (ABX) $37.07 down 2.16%
Newmont (NEM) $47.62 down 1.65%
General Moly (Eureka Moly, LLC) (GMO) $2.54 down 5.22%
Freeport McMoran (FCX) $54.95 down 3.39% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are also down (a "tell" for General Moly):

Nucor (NUE) $45.22 down 4.56% - domestic steel manufacturing
ArcelorMittal (MT) $34.13 down 6.13% - global steel producer
POSCO (PKX) $83.40 down 3.01%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 3.13%.

Cheers,

Colonel Possum

Information for this article was derived from the article "In Need of a Miracle", The Economist, 5/9/2009.