Tuesday, October 20, 2009
From Kenworths to Diamonds to Kartika Trehan
It is 6:04 AM. Grab a cup and let's talk about a powerful force that attracts unexpected outcomes to well intended human actions. It is called "The Law of Unintended Consequences." We've got a "shining" example this morning. The well intended actions in this case come from the Federal Reserve and Treasury who have been working like the dickens to kick start our economy. As a team they have dropped interest rates, printed money, nationalized "too big to fail" and sold all manner of Treasury notes, bills and bonds. They have been busy beavers.
Although they may say otherwise, their actions to date have weakened the poor ole greenback to new 52-week lows. Running for safe havens, investors and governments have shed dollars to buy hard assets causing a boom in commodities and a stellar increase in gold buying from grandma to Beijing. Well, not everyone is buying gold like they used to. The world's greatest demand for gold jewelry comes from India and gold prices north of $1000/oz have spooked customers in the midst of their traditional buying season. So how do you to please your Fall bride? Diamonds of course!
The lovely Kartika Trehan reports from Chennai in Tamil Nadu India that diamond jewelry sales have hit an all time record this year with prices down 7-8% while gold prices soar. If you want a memorable media experience this morning, watch this video of her report:
High gold prices boost diamond sales (Bloomberg UTV, 10/19/09)
So what does this have to do with Kenworth trucks you ask? Last September the Report did apiece on the Diavik Diamond mine in the arctic wilds of Canada [Diamonds are a (Canadian) Miner's Best Friend]. A news article on the mine came to my attention because it was one of the destinations on the popular "Ice Road Truckers" series on the History Channel. A primary investor in the mine project is Harry Winston Diamond Corp (NYSE:HWD). At the time, ole Harry sensed there was a good year ahead for diamonds and he was dead right. On a whim, I bought some HWD in September and it has brought a 31.6% return in just a few days over a month. Now that's a good hedge on a weak dollar, buckaroos.
I hope Uncle Ben is planning to buy his wife diamonds for Christmas. It would be a nice consolation prize for participating in The Law of Unintended Consequences.
Enough time in the jewelry store, let's walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, smooth markets expected in the near term (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 $0.37 in early trading to $79.59 (December contract); Gold is up $3.1 to $1061.2 (December contract, most active); Silver is up $0.085 to $17.710 (December contract); Copper is down $0.0115 to $2.9550 (December contract); Molybdenum remains steady at $13.625.
The DOW is down 31.06 points to 10061.13; the S&P 500, down 3.66 points to 1094.25. The miners are down:
Barrick (ABX) $38.18 down 0.75%
Newmont (NEM) $45.99 down 2.09%
General Moly (Eureka Moly, LLC) (GMO) $2.92 up 1.02%
Freeport McMoran (FCX) $78.96 down 0.05% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are mixed, (a "tell" for General Moly):
Nucor (NUE) $46.07 up 0.63% - domestic steel manufacturing
ArcelorMittal (MT) $39.24 down 1.23% - global steel producer
POSCO (PKX) $115.31 down 2.34% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 0.36% to $1,278,637.36 (what is this?).
Headline Photograph by Mariana Titus, "Blue Space"