Tuesday, March 9, 2010
General Moly $6.50 Target & Country Roads
It is 6:03 AM. Let me pour you a hot one and let's chat about country roads. We'll close on a new CIBC price target for General Moly but first let's checkout the Big Picture. I heard an economist the other day compare the present sovereign debt crisis to traveling on a "country road." Unless you are driving to Austin, Ely or Carlin some may claim you are on country roads in these parts although I can't recall any local folks calling them by that name. "County road" or "Road Not Maintained Beyond This Point - Drive At Your Own Risk" or #@! road are more common nomenclature. In Eureka County, Gloria's Country Roads is where you weigh your hay truck or have a cheeseburger.
Anyway, this economist said that when sovereign debt or default becomes an issue (in the past, think Russia and a few Latin American countries) the world moves off the highway onto a "country road." His point was that the global economy eventually gets to where it should but the pace is slow and you feel every bump. In recent times we drove off HWY 50 in late November with the emergence of the Dubai debt crisis (Dubai, A World Away?). Gold, metals and miners hit a pothole then we got a nice stretch of gravel. Further down this road the solvency of Greece came in question and we hit an axle-breaker in mid-January (Hunker Down or Stand and Fight?). The whole commodity reflation story suddenly looked shaky and mining stocks required a Handyman jack (Freeport Broken, Miners in Correction). The European Union reluctantly patched a rescue plan together and we've been back on gravel most of March...until today. Nuts.
As reported in the Wall Street Journal this morning:
NEW YORK—The U.K. pound and the euro plunged early Tuesday in New York as warnings about deteriorating credit quality in Europe by rating firms prompted investors to seek refuge in the dollar and the yen...The flight from riskier assets, including commodities-based currencies, was triggered by comments on the U.K.'s and Portugal's fiscal problems from Fitch Ratings and Moody's Investors Service. Pressure on sterling intensified on the back of weaker U.K. economic data. (WSJ, 3/9/2010)
You guessed it, gold tumbled to $1110/oz on the London spot market and mining stocks hit some Bean Flat spring mud in early trading. It's not too bad; gold is moving back up and the miner's are headed for the sage to gain traction. My point is that the economist's analogy is pretty much spot on. We will continue to be pounded by sovereign debt issues of developed countries for most of this year whether it is Portugal, Italy, Ireland, Greece, Spain, the U.K., Japan or, perhaps, the good ole U.S.A. Hang in there buckaroos, it may be a rough road but we're traveling in a tough truck.
Now for some good news. CIBC raised their price target this morning for General Moly (GMO) from $4.80 to $6.50. Exactly one year ago the S&P 500 hit rock bottom at 666.79 (intraday low) and GMO hit a $0.65 low. I'd say 65 cents to $6.50 is a pretty long stretch of road. Right now, GMO sits at $3.58 on a down day for metals & miners. Say...we're more than half way there, pardner!
Enough talk, let's walk the walk:
4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners are headed for smoother roads with FCX above $74 (what is this?)
The YELLOW light is switched on our fuel gauge with oil above $80
An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, 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 down $0.59 in early trading to $81.28 (April contract, most active); Gold is down $7.5 to $1116.5 (April contract, most active); Silver is down $0.127 to $17.145 (May contract); Copper is down $0.0230 to $3.3875 (May contract); Western Molybdenum Oxide is steady at $18.25
The DOW is up 11.41 points to 10563.93; the S&P 500 is up 0.79 1139.29. The miners are down today:
Barrick (ABX) $39.45 down 0.58%
Newmont (NEM) $50.85 down 0.41%
US Gold UXG) $2.84 down 1.73%
General Moly (Eureka Moly, LLC) (GMO) $3.58 down 2.85%
Thompson Creek (TC) $14.16 down 1.39%
Freeport-McMoRan (FCX) $80.15 down 0.58% (a bellwether mining stock spanning gold, copper & molybdenum)
The Steels are mixed, (a "tell" for General Moly & Thompson Creek):
ArcelorMittal (MT) $42.26 down 1.68% - global steel producer
POSCO (PKX) $124.49 up 0.13% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is down 0.80% to $1,367,311.70 (what is this?).
Headline photograph by Colonel Possum of Mariana Titus and the Colonel's truck, "Casper"