"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.

Monday, January 4, 2010

How Good Were the Colonel's Predictions for 2009?

Morning Miners!

It is 5:47 AM, grab a cup of 2010 coffee and let's get to work. Nothing like starting the year with a strong precious metal rally. Gold jumped $26 in early morning trading to $1122 and silver followed at $17.345. Copper is continuing a string of new 16-month highs hitting $3.429 today. Unfortunately, oil is also feeling her oats breaking the $80 mark at $81.32. Colder than expected weather in the northeast of the country is driving fuel costs and I'm afraid higher oil prices may be with us for the new year.

The ole Colonel thought it would be fun to see how well the Report did in 2009 with predictions on stock and commodity prices of interest to Eurekans. We've been keeping track with the Colonel's Beer Derby (lower right column of this blog). In the Derby if I'm wrong, I buy you a beer; if I'm right you buy me a one. In 2009 there were 14 bets; 10 beers for the Colonel, 4 for the Readers for a prediction accuracy of 71%. There were some good calls and some bloopers. We'll do a post game in a moment but first let's checkout a few bets outside the Derby.

In late October the Report predicted 2009 closing numbers for gold and the S&P 500 (The Colonel's Outlook for Year's End):

Gold (COMEX, 1600 EST, March - most active contract) $1096
The Colonel's Call $1080 (error, -1.5%)

S&P 500 close 1115.10
The Colonel's Call 1100.00 (error, -1.3%)

What about the top for gold? After gold hit $1226.30 in overnight trading I said, "I think for the moment gold is on hold" (Gold's On Hold...?, 12/03/09). With the fallout of the Dubai debt crisis, it never returned to those levels slumping to $1096 to close the year. Hopefully this morning's rally will be a sign of recovery for the yeller stuff.

That's all good but what about some bloopers? Here are my worst predictions in 2009:

"Oil sees $52 before $62 on or before 5/30/09"

LESSON: Don't ever bet on declining oil prices even when the fundamentals of supply and demand are with you.

"Gold sees $880 before Thanksgiving, 2009"

LESSON: Although gold started last year in the mid-800s it trended ever higher until December. Doubts about the U.S. dollar and low interest rates led to record investor and sovereign interest in gold as a hedge against the falling greenback. This blooper was a bet that gold would have a good pullback before heading higher. It never did.

"The S&P 500 sees 813 before Christmas, 2009"

LESSON: Sometime after the first strong S&P 500 rally from its March low of 666.79, I called for the S&P 500 to break 1000 before year's end. It seemed likely that the S&P would dip to the low 800s before heading higher (still 20% above the March low which seemed like a pretty bullish call in those dark days). Amazingly, the S&P would rebound a startling 67% to close the year without any significant pullbacks. Never underestimate the resilience of markets!

"Moly sees $16.50 before Christmas, 2009"

LESSON: This was more a good will bet than a prediction based on facts. Molybdenum had a nice run above $18 this summer after earlier lows of $8. It slumped after the Chinese completed their stimulus-driven restocking when I made this call. Moly did have a nice year end bounce to $12.50 and the ability to predict moly prices should improve when it makes its debut on the London Metals Exchange this coming February.

What were my best calls? I think once the new dynamics behind gold were apparent, bets that gold would hit $973 by the Fourth of July and $1050 before Christmas were my two favorites. Yee-ha! There is a complete summary of all 14 bets below the sign off.

Predicting equity and commodity prices is really a fool's errand but as I have said before, I'm a happy fool. The trick is being more right than wrong. 10 for 14 is pretty good but can I be this lucky in 2010? Stay tuned pardner, I might be buying you a beer, on the other hand...

Enough prognostication, let's walk the walk:

4-WD is OFF - the VIX or "fear index" remains below 25; smoother road market conditions expected to continue (what's this?)

Yellow light is ON for our fuel gauge with oil above $80

Yellow light is ON for possible adverse regulation/legislation: Cortez Hills & mercury emissions

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

Oil is up $1.96 in early trading to $81.32 (February contract, most active); Gold is up $26.2 to $1122.4 (February contract, most active); Silver is up $0.500 to $17.345 (March contract); Copper is up $0.0770 to $3.4235 (March contract); Molybdenum is steady at $12.50.

The DOW is up 143.97 points to 10572.02; the S&P 500 is up 16.47 points to 1131.57. The miners are rocking in the new year:

Barrick (ABX) $40.74 up 3.44%
Newmont (NEM) $48.64 up 2.81%
General Moly (Eureka Moly, LLC) (GMO) $2.11 up 1.44%
Freeport McMoran (FCX) $83.28 up 3.72% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are celebrating too, (a "tell" for General Moly):

Nucor (NUE) $48.00 up 2.89% - domestic steel manufacturing
ArcelorMittal (MT) $47.76 up 4.39% - global steel producer
POSCO (PKX) $135.75 up 3.55% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 3.00% to $1,312,325.99 (what is this?).


Colonel Possum

Headline Photograph by Mariana Titus

The 2009 Colonel's Beer Derby (summary):

The S&P will break 1000 before New Years, 2009 - beer,
Gold breaks $1050 before Christmas, 2009 - beer, Colonel
Molybdenum sees $16.50 before Christmas, 2009 - beer, Readers
Silver sees $15.80 before Labor Day, 2009 - beer, Colonel
Gold sees $980 before Labor Day, 2009 - beer, Colonel
Gold breaks $973 before July Fourth - beer, Colonel
Oil sees $52 before $62 on or before 5/30/09 - beer, Readers
Barrick (ABX) sees $39 before $26 on or before 5/31/2010 - beer, Colonel
The S&P 500 sees 813 before Christmas, 2009 - beer, Readers
Gold sees $880 before Thanksgiving, 2009 - beer, Readers
Oil sees $54 before $47 on or before 5/8/09 - beer, Colonel
Gold sees $929 before $844 on or before 5/15/09 - beer, Colonel
Gold closes the week higher than Monday's open, the week of 4/6/09 - beer, Colonel
Copper breaks 2-Bucks the week of 4/6/09 - beer, Colonel

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