Wednesday, August 26, 2009
Is the Cavalry in the Long Dusty Valley?
It is 5:44 AM, grab a cup and Yee-ha for hump day! I don't know why but the ole Colonel feels like we've come to the part in the movie where the cavalry is descending into a long dusty valley. All is quiet and the scouts are looking for Indian silhouettes on the bluffs. The Duke is riding point; he just looked back at us, you know the look.
We've had a great ride so far. The broader markets have been up, up and away; by my count there have been eight new 52-week highs in the S&P 500 in just a little over a month. The talking heads are bubbly on the tube and they've resumed taking potshots at Nouriel Roubini and Meredith Whitney. As we've reported before, these two predicted last year's financial disaster with nearly 100% accuracy several years before it occurred (Look for Change in Familiar Places). Now they are receiving scorn for their less than rosy recovery outlooks. Roubini (aka Dr. Doom) predicts a dip in commodity prices before the end of the year (Moly Hits Magic Number, Dr. Doom Speaks to Miners) and banking analyst Dick Bove has replaced Whitney as the new "Banking Savant". I remember Bove famously urged folks to buy Citigroup stock around $20 after the collapse of Bear Sterns calling it a "generational opportunity". A year later Citigroup was a penny stock. So much for listening to that joker.
Where am I going with all this? The Colonel is a born optimist but a cautious one. I do believe we've turned the corner and better days lie ahead. It just seems the party has started a little too early. Dennis Gartman, the "Commodity King", offers some sage advice; base metals collectively have a PhD in economics. He believes they are good leading indicators of things to come and our favorite base metal in the Report has been copper. If we break $3 soon we may be galloping out of the valley with no arrows in our hats. If we stall and start heading towards $2.50, there may be an overdue pause in the party.
Here's a three month chart of molybdenum, gold and copper. Hmm, a little flat lately buckaroos.
To complete the picture, here is a chart of silver and gold over the same time period. Not much to write home about.
On the positive side, the lack of wild swings in this data bodes well for price stability. The big question is whether we are near a top with volatility returning in the Fall or ready for a breakout to higher prices. I'd at least cinch your saddle, pardner. Don't touch that dial.
The Duke just looked back, let's walk the walk:
All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)
Oil is down $0.67 in early trading to $71.38 (October contract); Gold is up $3.7 to $949.7 (December contract, most active); Silver is up $0.045 to $14.355 (September contract); Copper is down $0.0195 to $2.8735 (September contract); Molybdenum holds steady at $18.00
The DOW is up 26.52 points to 9565.81; the S&P 500, up 3.43 points to 1031.43. The miners are mixed:
Barrick (ABX) $34.04 down 0.33%
Newmont (NEM) $40.04 down 0.65%
General Moly (Eureka Moly, LLC) (GMO) $2.80 up 4.09%
Freeport McMoran (FCX) $63.64 down 0.73% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed, (a "tell" for General Moly):
Nucor (NUE) $46.44 up 0.15% - domestic steel manufacturing
ArcelorMittal (MT) $36.12 down 1.58% - global steel producer
POSCO (PKX) $93.91 down 0.98% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is up 0.08% to $1,105,236.21 (what is this?).
Photograph of Dennis Gartman, Financial Post (Canada)