Wednesday, February 24, 2010
Freeport, Faith and Ice Fishing
It is 6:49 AM, a little later than usual and the ole Colonel's scratching his head. Most markets are open, there are riots in Greece, the Fed's Uncle Ben has begun his testimony before the U.S. House Financial Services and there is nervousness about platinum/palladium getting hit hard from the the Toyota brouhaha. So what do the markets think? The DOW and S&P are up, the U.S. dollar and gold are down and our global growth canary, copper, has caught a welcome updraft under her wings. I think the Colonel would rather go fishing than try to explain all this today. Of course that may be ice fishing the way the local weather is setting up.
Let's take a break from explanations and fall back on faith. Freeport McMoRan's (FCX) CEO, Richard Adkerson, was on the CNBC Business Network's show "Fast Money" yesterday. I have faith in this guy. He can captain my ship in a storm anytime and he certainly has done well for one of the world's largest and best copper mining companies. He started by saying that he was probably on the wrong show; he wasn't about "fast money" but takes the "long run view." The U.S., Western Europe and Japan are suffering, there are a lot of questions about China but his company is doing well. Adkerson is absolutely confident about future copper demand and he sees his primary challenge to be developing new supplies. Freeport provides roughly half the copper for the U.S and Adkerson is very positive about the domestic side of his business even though 40% of world copper demand is in China. My kind of guy.
Here is an irony for Mr. Long-run-view. In the investment world, Freeport has become the premier proxy stock for global growth. The Report watches it daily along with our local miners. Besides being a mining bellwether, Freeport is often referred to as a "high-beta" trade and is the darling of hedge funds. Consequently, it gets batted around (up and down) by every news story that hits the wire. Look at the FCX intraday highs and lows over the past several years:
FCX 5/21/08: $127.24 (high)
FCX 12/5/08: $15.7 (low)
FCX 01/11/10: $90.55 (2010 high)
FCX today at the market open: $73.58
And you thought copper prices were volatile? Through all the gyrations of share price, Freeport makes money and,according to their CEO, will make more money. Keep the faith buckaroos.
Here's a fun yardstick. Guy Adami, a respected trader on "Fast Money", uses a $74 FCX target to gauge global temperament - higher, life is good; lower, head for the lifeboats. Today we're a thin flat washer below that target, a coin toss on where we go from here. Keep the faith.
Our January article adds further insight on Freeport if you missed it, Freeport "Broken", Miners in Correction (The Eureka Miner's Market Report, 1/31/2010).
Let's save fishing for spring, how about another cup of joe before you go back to shoveling snow?
Keep the faith, now let's walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, smoother markets are expected (what is this?)
The GREEN light is our fuel gauge has returned with oil falling below $80
An ORANGE light is ON for possible adverse regulation/legislation: Miner Taxation, Cortez Hills & mercury emissions
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
NYMEX/COMEX: Oil is up $0.25 in early trading to $79.11 (April contract, most active); Gold is down $5.8 to $1097.1 (April contract, most active); Silver is down $0.048 to $15.840 (March contract); Copper is up $1.25 to $3.2285 (March contract); Molybdenum is steady (yesterday's price) at $17.25
The DOW is up 98.10 points to 10380.51; the S&P 500 is down 9.66 points to 1104.26. The miners are (mostly) happy again:
Barrick (ABX) $37.42 up 0.40%
Newmont (NEM) $46.77 up 0.41%%
US Gold UXG) $2.60 down 0.19%
General Moly (Eureka Moly, LLC) (GMO) $2.55 up 1.19%
Thompson Creek (TC) $13.34 down 0.37%
Freeport-McMoRan (FCX) $73.80 up 0.22% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are feeling better too, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $38.67 up 1.36% - global steel producer
POSCO (PKX) $118.41 up 1.01% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.83% to $1,249,748.65 (what is this?).
Headline photograph by Mariana Titus