Thursday, August 13, 2009
Fed Lifts Maidenform, Silver Breaks $15
It is 5:50 AM and the ole Colonel noticed it is getting a little darker every morning. Someone hit the jake brake on summer buckaroos! The Fed boosted markets yesterday by not saying anything much different from their last official statement. Maidenform was a star performer jumping nearly 7%, go figure. I'll cheer anything that gives this recovery added support! Global markets reacted favorably too and I just watched silver break $15 on the London exchange.
As reported by the Wall Street Journal:
"U.S. Federal Reserve officials on Wednesday left official interest rates near zero but suggested the economy is on more stable ground. Information 'suggests that economic activity is leveling out,' the Fed statement said.
Still, officials said they would slow up their plans to buy up to $300 billion of Treasury securities in order to provide a smooth transition in those markets. The unconventional rescue program was widely expected to expire in September. Now, the Fed plans to continue purchases through October." (WSJ, 8/13/09)
Remember that a government buying Treasurys is a government printing money. It is good to see an end to this but troubling that we have to do it at all. Inflation down the road is the fear and you could see it in currency and precious metals. After the statement the dollar went up, gold went down then gold went up and the dollar tumbled. Inflation fears generally support gold and trash the dollar. It is too early to tell what the long term trend will be; if the Fed pulls excess liquidity out of the system in a timely fashion we may have a soft landing. If not? Keep some gold under your bunk pardner.
Ken Heebner, one of the savviest investors around, made an interesting point on CNBC yesterday. Keeping the U.S. credit rating intact is another key element for successful recovery. As we auction Treasurys to raise money there must be buyers or we're in trouble. So far so good, the auctions have exceeded expectations and foreigners are snapping up our debt left and right. Ken observed that the Middle East countries that supply the world oil are some of our biggest customers. Together they apparently exceed Treasury purchases by the Chinese. Ken speculates that countries like Saudia Arabia still depend on us for protection at the end of the day and thereby are willing to lend when we're on the ropes.
While this is good from a recovery standpoint, the logic is frightening. We export national wealth to buy oil, oil-rich nations lend us our dollars back so we can send them back again at a later day, but this time with interest! I'd rather ponder how Maidenform supports our economy than unravel this international can of worms.
Enough global talk, let's walk the walk:
Oil is up $0.43 to $70.59 (September contract); Gold is up $3.8 to $956.3 (December contract, most active); Silver is up $0.240 to $14.825; Copper is up $0.0555 to $2.8790 (September contract); Molybdenum continues to hold at at $18.25
The DOW is down 11.64 points to 9349.97; the S&P 500, up 0.49 points to 1006.30. The miners are still happy:
Barrick (ABX) $34.28 up 2.02%
Newmont (NEM) $41.07 up 1.48%
General Moly (Eureka Moly, LLC) (GMO) $2.78 up 0.72%
Freeport McMoran (FCX) $64.81 up 2.91% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed, (a "tell" for General Moly):
Nucor (NUE) $46.87 up 0.54% - domestic steel manufacturing
ArcelorMittal (MT) $35.54 down 0.14% - global steel producer
POSCO (PKX) $96.62 down 0.01%- South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is up 0.83% to $1,111,898.92