"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Thursday, November 19, 2009

If God Had Money

Morning Miners!

It is 6:07 AM, allow the ole Colonel to pour you a little Thor's java and spin another tale. Yesterday, we recalled Willie Nelson advising country legend Bill Anderson to sing louder than than Texans drink beer (They Drink Beer Louder Than You Can Sing). Today's story is about that do-wacka-do feller, Roger Miller. I saw Roger play in the 1960s and we'll close on that memory in a moment. I heard Willie Nelson on satellite radio the other day tell a story about when he and Roger watched a sunset somewhere in Texas while traveling. Willie commented about its beauty and Roger Miller said, "Just think what God could have done if he’d had money!"

Now I think Our Maker has better things to do than worry about the monetary woes of mortals but if He did give a hoot about the U.S. greenback He wouldn't have much budget to create things. Given the present state of the dollar we'd probably have to be content with a Big Canyon in Arizona instead of a grand one and Mt. Whitney may have been named Mt. Wimpy.

Fortunately the U.S. dollar is picking up a little steam this morning as gold takes a pause from its meteoric rise. Still the dollar index (USDX or .DXY or "Dixie") dropped below the 75 level yesterday. When we last reported on the dollar in October (Whistling Dixie...What is a Weak Dollar?), the Dixie had just hit a 14-month low at 75.63. When the Dixie was first established in 1973 it gave a value of 100 to the U.S. dollar against a basket of currencies.

The dollar was backed by gold until FDR dropped the gold standard in 1933. I found a short video history of that event on YouTube:

FDR takes United States off gold standard

It is interesting to watch because many of the same conditions are similar to today's situation; the economic turmoil of the Great Depression and severe global trade imbalances. As reported by The Economist recently, Dylan Grice of Societe Generale calculated a present day value for gold if the U.S. had remained on a gold standard. By his calculations the Federal Reserve has a monetary base of $1.7 trillion while it owns 263 million troy ounces of gold; that converts into a gold price of $6,300 an ounce!

Maybe I'm just stubborn but the Colonel believes the dollar will again have its day especially when we remember that 70% of the Dixie is the euro. Until we pick up some momentum economically in this country we'll probably have to contend with a weaker dollar and higher gold prices. Say, that's not all bad in a gold mining town.

Oh, what about Roger Miller? Bless his departed soul, I say him play at the Troubadour in Santa Monica in the mid-1960s and he was as crazy on stage as his do-wacka-do lyrics. Here is a video of him singing "King of the Road" from those days. "Rooms to let for 50 cents" was a pretty strong dollar then even if it was a flop house buckaroos!

King of the Road – Roger Miller

Enough tall tales, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, smoother road market conditions expected (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 $2.25 in early trading to $77.85 (January contract, most active); Gold is down $9.8 to $1131.4 (December contract, most active); Silver is down $0.195 to $18.220 (December contract); Copper is down $0.0340 to $3.0765 (December contract); Molybdenum is steady at $12.00

The DOW is down 160.14 points to 10266.17; the S&P 500 is down 20.20 points to 1089.60. The miners are grumpy:

Barrick (ABX) $42.96 down 1.78%
Newmont (NEM) $51.18 down 2.88%
General Moly (Eureka Moly, LLC) (GMO) $2.35 down 4.86%
Freeport McMoran (FCX) $82.83 down 4.86% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are down, (a "tell" for General Moly):

Nucor (NUE) $40.50 down 3.39% - domestic steel manufacturing
ArcelorMittal (MT) $37.60 down 2.69% - global steel producer
POSCO (PKX) $119.56 down 1.81% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 2.46% to $1,264,518.95 (what is this?).


Colonel Possum

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