Tuesday, September 1, 2009
Eureka's Two Aces in the Hole
It is 5:53 AM, the coffee is hot and it is time to put on our thinking caps. There's a safety inspection going on in the shop this morning so we've got a little time to reflect on the last several weeks. Things got exciting on Monday, August 17th when the world decided to have a broad market sell off as reported in Shoot-out at the O.K. Corral. By Friday the 21st, the Report suggested we may be in a giant game of Texas Hold'em; the Turn Card was the Ace of China and Eureka had two aces in the hole, gold and molybdenum (Slow and Easy or Texas Hold'em). The River Card was oil and it hadn't been dealt. We hoped at that time that it showed less than $80 or global recovery might be in trouble. Three aces and a low card for oil looked like a winning hand for Eureka.
Central to playing this round of cards is that Turn Card, China. They've cushioned the recession with a quick and efficient stimulus plan; bought all manner of raw materials, given their folks vouchers to buy washing machines and reluctantly still show up at Treasury auctions to buy our debt. There have been some signs recently that this happy dragon is suffering a little indigestion (if you'll pardon my mixed metaphor of cards and dragons). China's Shanghai stock market has mostly been on a nose dive for the last several weeks. The first big drop was largely dismissed by reporter's comments (including the Colonel's) about the shakiness of the Shanghai as a leading indicator: it is not a mature market, is subject to government influence, lacks institutional investors and is comprised of individual Chinese investing with a gambler's zeal. Hmm...maybe. For all its alleged flakiness, it is funny that yesterday's leg down on the Shanghai caused another panic in the broader markets jerking oil below $70 and holding copper from the ever-elusive $3 benchmark. The response from the talking heads yesterday was yes, the Shanghai is unreliable but it does have a "pyschological" influence on more "sophisticated" markets. This is starting to sound like a lot of bull poop to the ole Colonel.
What's really going on? Let's ask the metals, no B.S. there. Here are three 15-day charts of our favorite metals; copper, gold and molybdenum. Copper is looking a little soft with a downward trend.
Gold is starting to trend up, is a return to safe havens underway?
Molybdenum has stepped down three times from its $18.25 high this year, falling 7% to $17. If it drops below $16.50, I'm turning one dashboard light from green to yellow buckaroos. On a positive note, it looks like General Moly is getting a nice pop in share price today.
Pick your poison, the Shanghai or key metals, I think it is difficult to argue that something isn't setting up for the Fall. Fortunately, oil has suffered too so we might get that low card after all. Is it Dr.Doom's "commodity dip" or just a pause before a year end rally? Stay tuned buckaroos. I wonder how the Duke is doing in the long dusty valley? We'll check with the film crew tomorrow.
Enough talk, let's walk the walk:
All lights are green on the Eureka Outlook Dashboard (upper right, what is this?)
Oil is down $0.14 in early trading to $69.81 (October contract); Gold is down $0.7 to $952.8 (December contract, most active); Silver is down $0.103 to $14.820 (December contract); Copper is down $0.0260 to $2.8525 (December contract); Molybdenum holds at $17.00.
The DOW is down 77.23 points to 9419.05; the S&P 500, down 8.29 points to 1012.33. The miners are mixed:
Barrick (ABX) $35.04 up 0.98%
Newmont (NEM) $40.52 up 0.82%
General Moly (Eureka Moly, LLC) (GMO) $2.88 up 5.11%
Freeport McMoran (FCX) $62.69 down 0.46% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed, (a "tell" for General Moly):
Nucor (NUE) $40.52 up 0.82% - domestic steel manufacturing
ArcelorMittal (MT) $35.45 down 0.51% - global steel producer
POSCO (PKX) $92.13 down 0.73% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is up 0.75% to $1,101,406.76 (what is this?).