Wednesday, October 28, 2009
Dogs, Bears, Coyotes and a little more Lithium
It is 5:42 AM, the coffee's hot and Loquita is catching up on her beauty sleep. Dogs know things that humans don't. You realize this if you've had dogs in your life. The ole Colonel was blessed to have three; two black labs and their sidekick, La Loquita. Henry and Charley have passed on as old dogs do but I think of them quite often and they passed on many canine secrets to my small companion.
Dog owners know that their animals speak to them telepathically. Henry would often berate his master, "You know we'd have more interesting conversations if you had a better sense of smell!" Henry was bear-like, crashing through the sage with forepaws and hind legs moving in opposing lockstep. Charley was the coyote; side-stepping, serpentine, cautious and aware that a misstep in the wilds could be fatal. Henry the Bold, Charley the Protector. Working together they combined their strengths to offset their weaknesses. Smart critters those two.
Markets exhibit some of the same characteristics. For several months we have been bounding through the sagebrush to higher and higher bluffs without much concern for what dangers may lie ahead. The Dow Jones broke 10,000, the S&P raced past 1100 and commodities have been on a tear. Oil jumped above $80 and copper finally broke the $3 mark. Henry the Bold.
This week fear has returned to the marketplace and the pace is more cautious. Stock markets, oil and copper along with the precious metals are in retreat. Money is fleeing riskier assets to seek safe haven. Charley the Protector.
What's changed? One theory is that global stimulus is slowly coming to an end. Australia was the first to tighten monetary policy by raising interest rates. India and Norway are following Australia's lead and it is suspected that South Korea will be the next to hit the brakes. Fear arises as investor's contemplate a global recovery without central bank training wheels. Interestingly, there is renewed vigor for foreigners to buy U.S. debt as evidenced by a record breaking auction of 2-year Treasury notes yesterday and a rebound of the poor U.S. dollar against the euro and yen.
Is the Colonel worried? Nay, actually I'm relieved to see a little fear dampen cheap money speculation. I get scared when everything is up, up and away. We've come a long way since the March lows. Let's follow Charley Dog's lead for awhile; side-stepping, serpentine, cautious and aware that a misstep in the marketplace could be fatal.
I'll close on a positive note, lithium is back in the news. The Report has been tracking lithium and vanadium as two strategic metals that may have a big footprint in our future as the next generation of electric and electric hybrid vehicles roll down the highway:
The Next Big Thing for Northern Nevada? (9/28/2009)
A Big Step into the Future for Eureka County? (10/23/2009)
Last week there was a panel discussion at the Managing Supply Chain Risks for Critical & Strategic Metals conference in Washington. Here is a link to a Reuter's article on the meeting:
Lithium outlook bright with auto electrification
Jay Chmelauskas, president of Western Lithium Corp. (WLC), said:
"I think that the future of transportation and energy is in electrification and smart grids. For electrification to really take place, you need a number of drivers, and we are seeing these catalysts today in Beijing ... in Washington, in terms of energy independence and 'green' air quality requirements..."
"Will it happen? Yes it will, but where is that inflection point? I think it is in the next five to ten years from what we see happening..." (Reuters, 10/27/09)
David L. Trueman, consulting geologist with Avalon Rare Metals Inc., stated:
"We are recognizing that lithium is perhaps the Holy Grail of the electric vehicle and variations of the electric vehicle..." (Reuters, 10/27/09)
WLC presently holds "potentially one of the world's largest strategic, scalable and reliable sources of high-quality lithium carbonate" located in Kings Valley, Nevada (Humboldt County). WLC has recently expressed interest in the vanadium deposits in Eureka County's Gibellini mining district.
That's not all bad buckaroos!
Enough talk, let's walk the walk:
4-WD is ON - the VIX or "fear index" is is above 25 ,off-road market conditions ahead (what's this?)
Yellow light is ON for possible adverse regulation/legislation (mercury emissions)
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is down $0.79 in early trading to $78.76 (December contract); Gold is down $0.4 to $1035.0 (December contract, most active); Silver is down $0.150 to $16.390 (December contract); Copper is down $.0255 to $2.9735 (December contract); Molybdenum is steady at $11.75.
The DOW is down 29.55 points to 9852.62; the S&P 500, down 9.37 points to 1054.04. The miners are getting stomped:
Barrick (ABX) $34.83 down 3.49%
Newmont (NEM) $42.37 down 2.10%
General Moly (Eureka Moly, LLC) (GMO) $2.22 down 5.13%
Freeport McMoran (FCX) $74.86 down 3.34% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are on the mat, (a "tell" for General Moly):
Nucor (NUE) $39.78 down 3.02% - domestic steel manufacturing
ArcelorMittal (MT) $34.22 down 3.77% - global steel producer
POSCO (PKX) $106.77 down 4.16% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 2.90% to $1,154,166.02 (what is this?).
Photographs by Mariana Titus