"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.

Wednesday, November 18, 2009

They Drink Beer Louder Than You Sing

Morning Miners!

It is 6:28 AM, grab a cup and let's start the day with a good story. I enjoy listening to country legend Bill Anderson do interviews with other country greats on satellite radio. The other day he told an amusing story about advice he once received from Willie Nelson that has as much wisdom as the Outlaw's famous wit. I found Willie's exact quote on a PBS sponsored website called American Roots Music. Here's a link if you want to pass a good time on your break:

American Roots History - Oral Histories

As Willie Nelson tells the story:

One time I was flying on an airplane, and I just happened to sit next to Bill Anderson. He says, "You do pretty good in those clubs in Texas. I just can't seem to catch on down there. Can you give me any pointers?" I said, "Well, I think they drink beer louder than you sing." And he laughed a little and said, "You're probably right."

The ole Colonel would like to extend Willie's thought to metals this morning. Clearly gold has been the loudest singer in the bar, louder than central banks and investors can swill easy money. It is hitting new record highs this morning on the London spot exchange breaking $1150/oz. There is much debate whether this is all about our weak dollar or fears of inflation or large players like Barrick providing price support on the pullbacks. Lawrence Williams gives an excellent account on gold on MineWeb this morning:

Gold - "raging bull" or should it be "caveat emptor"? (MineWeb, 11/18/2009)

While you check out gold, the Colonel would like to draw your attention to another loud voice coming from the back of the metals saloon. Copper is hitting some high notes that cannot be ignored. To take out U.S. dollar effects, I plotted copper performance versus oil for the past several months (there is a larger and more readable version at the bottom of this blog page).

I call this the "China Chart" because both oil and copper price are sensitive to Asian recovery, especially in China. If you look at the 20-day (1-month) trajectory (blue line), you'll notice that copper has recently gone ballistic with respect to oil. The white vertical arrow shows an upward "stovepipe" momentum. A few months ago both copper and oil were range bound indicated by the counterclockwise white arrow. As a consequence, major copper miners like Freeport-McMoran (FCX) are enjoying 52-week highs. My copper/oil model shows that this morning's COMEX copper price of $3.1315 is near the upper bound of its expected range. That deserves a Colonel Yee-ha! for another loud singer in the bar.

for $80 oil the fair value of copper is $3.01784 in a range of $2.89330 to $3.14237

Enough singing, 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 up 0.61 in early trading to $79.75 (December contract); Gold is up $8.4 to $1147.8 (December contract, most active); Silver is up $0.303 to $18.690 (December contract); Copper is up $.0230 to $3.1350 (December contract); Molybdenum is steady at $12.00

The DOW is down 51.92 points to 10385.50; the S&P 500 is down 4.57 points to 1105.75. The miners are mixed:

Barrick (ABX) $44.65 down 1.00%
Newmont (NEM) $53.20 up 0.72%
General Moly (Eureka Moly, LLC) (GMO) $2.41 up 1.26%
Freeport McMoran (FCX) $84.94 down 0.49% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $42.36 up 0.31% - domestic steel manufacturing
ArcelorMittal (MT) $38.72 down 0.49% - global steel producer
POSCO (PKX) $121.80 down 0.57% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is down 0.17% to $1,298,426.47 (what is this?).


Colonel Possum

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