Wind Powered Bulldozers?

Morning Miners!

It is 5:52 AM and the ole Colonel is writing about something potentially troubling for rural communities in the future. Eric linked me to an article in the online Construction Equipment magazine last night. I've added this link to Miner's Corner to your right; here's the article:


Now Is Not Too Soon to Retire Tier 0 Diesels


Apparently, older diesel-powered equipment (tier 0 and tier 1) is in the sights of the government to ensure compliance with newly evolving emission standards. This includes off-road machines and that covers a lot of territory in our community. The standards are toughest in California but the old saying, "As California goes, so goes the nation", is never truer when it comes to emissions regulation:

"The writing on the wall says your Tier 0 diesels have to go. Same thing goes for most Tier 1 machines. Owners have some control over when, but by 2013 or 2014 in California, few firms will be able to afford to keep pre-1998 off-road diesel engines. You won’t want them and, here’s the kicker, neither will anybody else.
Regardless of whether or not your state adopts California’s In-Use Off-Road Diesel Vehicle rule, in the next five years most major metro areas in the United States are going to force by regulation or lure by incentive heavy equipment owners to retire or replace Tier 0 and Tier 1 diesel engines and upgrade Tier 2 and Tier 3 engines to the cleanest possible exhaust emissions standard." (Construction Equipment, 5/1/09)

Don't let the term "metro areas" fool you buckaroos, there might be a G-Man looking at your old D-8 dozer before you know it!

On a brighter note, commodities and miners are happy campers today as silver returns to $14 pasture.

Enough clean air, let's walk the walk:

Oil is up $0.74 at $60.84 (July contract). Gold is up $1.7 to $928.4 (June contract); Silver is nicely breaks $14 at $14.230; Copper is up 0.0275 to $2.0970 (July contract); Molybdenum holds at $10.25.

The DOW is up 98 points to 8573.69; the S&P 500, up 14.3 points to 922.44. The Miners are hot today:

Barrick (ABX) $35.49 up 4.41%
Newmont (NEM) $44.91 down 3.08%
General Moly (Eureka Moly, LLC) (GMO) $1.77 up 4.73%
Freeport McMoran (FCX) $51.90 up 4.81% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are mostly ripping (a "tell" for General Moly):

Nucor (NUE) $43.06 up 2.90% - domestic steel manufacturing
ArcelorMittal (MT) $30.77 up 5.92% - global steel producer
POSCO (PKX) $86.10 down 0.09%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 2.95%

Cheers,

Colonel Possum

Eureka Looney Tunes

Morning Miners!

It is 6:52 AM and we have another beautiful day in the Great Basin! I can remember putting a roof on our breezeway last year at this time amid high winds, rain, sleet and snow. What a difference a year makes. The same can be said of markets and it looks like we are having some improving weather there too. The broader markets have pulled back some in early trading today but both the DOW and S&P 500 had monster rallies yesterday (up 2.85% and 3.04%).

The Colonel's mission this week is to figure out how all this might affect gold in the near term. Although predicting gold prices is a fool's errand, I'll give it my best shot this Friday. Today we'll take a peak at commodity-sensitive currencies; the Australian dollar (Aussie) and the Canadian dollar (Loonie). Both have had significant rallies from their March lows as our dollar has retreated from its highs during the same time period. Here is the comparison including gold movement from its March low:

U.S. Dollar down 8.4%
Aussie up 24.2%
Loonie up 11.8%
Gold up 4.1%

Although I hate to see our greenback take a whooping, these currency trends potentially bode well for Eureka's commodity-sensitive economy. Typically a falling dollar supports rising gold prices. Economic conditions in resource rich Australia and Canada are helped by rising commodity prices, the same is true for Eureka. The Wall street Journal takes note of this movement in the Aussie:

"Most Asian currencies rose against the U.S. dollar as investors proved willing to take on perceived risk. The Australian dollar, for example, hit a seven-month high against the U.S. currency, and dealers said some central banks were buying dollars to curb their local currencies' advances." (WSJ, 5/19/2009)

Another piece to our puzzle.

That's all folks! Let's walk the walk:

Oil is up $0.15 at $59.74 (July contract). Gold is up $0.8 to $922.5 (June contract); Silver is stays barely below $14 at $13.980; Copper is up 0.0202 to $2.0940 (July contract); Molybdenum holds at $10.25.

The DOW is down 13 points to 8491.02; the S&P 500, down 0.79 points to 909.57. The miners are mixed today:

Barrick (ABX) $33.08 down 1.17%
Newmont (NEM) $42.27 down 0.28%
General Moly (Eureka Moly, LLC) (GMO) $1,61 unchanged
Freeport McMoran (FCX) $49.42 up 1.54% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks follow Asian rallies (a "tell" for General Moly):

Nucor (NUE) $41.26 up 0.84% - domestic steel manufacturing
ArcelorMittal (MT) $28.69 up 0.81% - global steel producer
POSCO (PKX) $85.05 up 1.25%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.19%

Cheers,

Colonel Possum

Where Does Gold Go Next?

Morning Miners!

It is 6:34 AM and boy, did we have a fun weekend in Eureka! The annual Show What Ya Brung car show had about twice the number of entrants as last year and there were some mean machines lined up on HWY 50. The ole Colonel saw the new GM Camaro for the first time and it is a beauty! Hopefully, the two-year waiting list will help that ailing automotive icon get on her feet. My favorites are still the old muscle cars of the 1960s and early 1970s and there were aplenty; 409s, 442s, 454s, 427s...Yee-ha! The Beach Boys singing "409" on a sunny day across a shutdown Federal Highway full of heavy metal is something to tell the grand kids.

OK, time to get back to work. Grab a cup and let's talk gold.

This report has covered a lot of aspects of gold price in the last several months (see archives in the right column). I thought it timely to carry this conversation forward because so much is happening on the international stage that could give that yeller metal a pop or drop in the coming months. The recent election results in India are a good example:

NEW DELHI -- A surprisingly strong showing by India's ruling Congress party gives a decisive mandate to Prime Minister Manmohan Singh and raises hopes that an important engine of the developing world will continue on a path of economic reforms. (WSJ, 5/18/09)



Photo: Reuters

The Indian stock market jumped 17% this morning on that news until the deluge of buy orders triggered market circuit-breakers. How might that influence gold? On the demand side, India is the world's biggest consumer of gold, primarily for gold jewelry. In the last several months the Indian demand has dropped off sharply. Watch for irrational exuberance to reverse this trend.

So did gold go up this morning? Nope, it's down $10 last time I checked and that brings us to another factor in gold prices: safe haven for investors. The rise in the Indian markets has lifted everyone else including our own DOW and S&P. There is a nice relief rally going on this morning and money is flowing away from safe havens like gold to equity markets. Remember that investors are now the sixth largest holders of gold with over 1,100 metric tons socked away in such things as the exchange traded fund, GLD. OK, who wins this race? More to come buckaroos and you can bet the ole Colonel will be tracking this one on a daily basis. I'd like to close this week with a gold price prediction; stay tuned.

Enough talk, let's walk the walk:

Oil is up $1.42 at $57.76 (July contract). Gold is down $10.1 to $921.2 (June contract); Silver is stays below $14 at $13.710; Copper is up 0.0095 to $2.0270 (July contract); Molybdenum holds at $10.25.

The DOW is up 130 points to 8398.94; the S&P 500, up 12.22 points to 895.10. The miners are mixed today:

Barrick (ABX) $32.65 down 2.51%
Newmont (NEM) $43.78 down 1.41%
General Moly (Eureka Moly, LLC) (GMO) $1.57 up 3.29%
Freeport McMoran (FCX) $46.99 up 4.03% (a bellwether mining stock spanning gold, copper & molybdenum)

Steel stocks are up and away on the Indian news (a "tell" for General Moly):

Nucor (NUE) $39.85 up 2.44% - domestic steel manufacturing
ArcelorMittal (MT) $26.86 up 4.39% - global steel producer
POSCO (PKX) $82.24 up 1.91%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is up 1.56%

Cheers,

Colonel Possum

Markets and Mormon Crickets

Morning Miners!

It is 6:23 am and we've got a terrific weekend looking at us! There will be a super-duper car show and sale in Eureka on Main Street (HWY 50) and tonight Patrick Ball is coming to the Opera House. This is a great show; I've seen it before and plan to be at the door with my sweetheart at 6:30 pm sharp to buy tickets. If you see me there, give the ole Colonel a hey-howdy! Checkout the "Eureka Opera House" link on the right of this page for more details.

In the meantime grab a cup and let's talk markets and Mormon crickets.

The oddity of rising oil prices in a declining global economy has dominated the market news this week. The latest theory is a whooper-dooper so put on your seat belt. First let's cover some basics. There are only two forces that move markets; the law of supply and demand and the law of fear and greed. The first is pretty simple. If you want a widget and they are in short supply, the price goes up. If folks are sick and tired of seeing all the widgets at WalMart, the price goes down to clear the shelves.

The market influence of fear and greed is a little harder to understand and has all the logic and predictability of one million Mormon crickets crossing Highway 50. Greed creates price bubbles, fear blows them out quicker than a Tonopah low. The good thing is that the net effects of fear and greed are zero in the long run as markets return to the fundamentals of supply and demand eventually (i.e. cricket infestations don't last forever).

OK, is that it? Not quite, markets behave as described in the absence of government meddling. Throw those jokers in and a third force pops up: the law of unintended consequences. Now we're ready for our whooper-dooper ride to the nuthouse.

U.S. Treasury Bills are a typical a safe haven for investors and countries. In good times, China bought T-Bills to finance all the widgets we wanted but couldn't afford. They had a bunch of our dollars and socked it away in our Treasury notes to get a reasonable interest rate.

When times got tough the Fed dropped their interest rate target to stimulate a sick economy, when they got to zero they stopped. Their next hat trick was to buy our own T-Bills with freshly printed money. That's called quantitative easing in economic parlance; counterfeiting, if you and I do it. The idea was to keep interest rates so low that folks would move their money away from safe havens and put it back into the sick economy. How cool!

Unfortunately, one of the destinations for all this newly emboldened money was crude oil futures and up went the price of oil. That doesn't help anyone except the bad guys! Here's how the Wall Street Journal tells the story this morning:

"Oil is really floating on cheap money. Quantitative easing is, as intended, pushing investors toward riskier asset classes such as equities, high-yield debt -- and crude. Investors in oil funds push up futures prices, making it profitable for others to store crude and sell it forward; another reason inventories are high. When these are liquidated, crude prices will likely fall fast, absent a "V"-shaped economic recovery, which looks unlikely. Indeed, in supporting commodities prices at the expense of consumers, central-bank policy risks unleashing stagflation, not reflation." WSJ (5/15/09)

Time to leave the nuthouse, let's walk the walk:

Oil is down $0.46 at $58.16 (June contract). Gold is up $1.8 to $930.2 (June contract); Silver is stays below $14 at $13.960; Copper is down 0.010 to $2.0160 (July contract); Molybdenum is up again to $10.25.

The DOW is up 55 points to 8387.00; the S&P 500, up 2.83 points to 895.90. The miners are down today:

Barrick (ABX) $33.76 down 0.35%
Newmont (NEM) $43.06 down 0.61%
General Moly (Eureka Moly, LLC) (GMO) $1.60 down 0.03%
Freeport McMoran (FCX) $45.86 down 0.25% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $39.60 up 0.20% - domestic steel manufacturing
ArcelorMittal (MT) $25.94 up 0.39% - global steel producer
POSCO (PKX) $80.71 down 0.56%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.61%

See you at the Opera House!

Cheers,

Colonel Possum

Copper Drops Below $2

Morning Miners!

It is 6:25 am and I wish the ole Colonel had better news on copper, our old standard bearer for global recovery. It has reversed lately and dropped below 2-bucks this morning in early trading. Let's check the Eureka Miner's Million Dollar Grubstake to see what it tells us. For new readers, the Grubstake is a portfolio of twelve stocks that directly or indirectly influence the future of mining in Eureka County. You can see the makeup of the Grubstake by checking the blog archive in the right column of this report. It should be a pretty good barometer of fair weather or storms ahead in the economic recovery.

Gadzooks! We've lost $67,440.27 in the past three days, that's down 6.7% from Friday's close. Thank heavens this is only monopoly money buckaroos! What in tarnation is going on? Here's what the pointy-shoed Wall Street boys are saying this morning:

"Oil prices fell to below $57 a barrel after a new [International Energy Agency or IEA] study predicted demand would fall by 3% this year and as weak U.S. retail sales and housing figures dampened optimism about an economic turnaround." (WSJ, 5/14/09)

Does the Colonel believe they are right? Heck, I'm an optimist. The water is always a little cold when you jump in for a swim. This recovery will recover, it just might take a little longer than we'd like. I will put my money where my mouth is on oil prices and put down my first bearish beer bet on that overvalued commodity:

Oil sees $52 before $62 on or before 5/29/09

For the new folks, The Colonel's Beer Derby is a series of beer bets on commodity prices (also in the right column of the blog).

Enough of all this gloom and dooming, let's walk the walk:

Oil is down $1.00 at $57.00 (June contract). Gold is down $0.7 to $925.2 (June contract); Silver is slipped below $14 at $13.905; Copper is retreating 0.0430 to $1.98.75 (July contract); Molybdenum has a nice pop to $10.10.

The DOW is up 10 points to 8294.92; the S&P 500, up 4.95 points to 888.87. The
miners are down today:

Barrick (ABX) $34.22 down 0.38%
Newmont (NEM) $42.75 down 0.49%
General Moly (Eureka Moly, LLC) (GMO) $1.46 down 7.01%
Freeport McMoran (FCX) $45.02 down 2.15% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $39.28 down 0.76% - domestic steel manufacturing
ArcelorMittal (MT) $25.00 up 2.42% - global steel producer
POSCO (PKX) $79.49 down 1.94%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 0.90%

Looks like another sunny day outside, let's enjoy the weather and forget the markets!

Cheers,

Colonel Possum

Gold Breaks $929 - Beer, Colonel!

Howdy Miners!

Gold broke $929 (June contract) in intraday trading, closing out another bet in the Colonel's Beer Derby (see right column):

Gold sees $929 before $844 on or before 5/15/09

The highest price today was $931.4 pulling back to $925.9 at the close.

This was a squeaker with only three days left. Hey, the ole Colonel is 4-for-4 with only one open bet, don't you think I'm ready for a stumble? Only Bernie Madoff was right all the time and he wasn't even in the game.

Send the ole Colonel your beer bet on the future!

Cheers,

Colonel Possum

More Words than Wealth?

Morning Miners!

It is 6:18 am and the sun is shining. Let's start with some good news: gold came out punching in early trading at $928. It fell back some but has kept the gold miners up in an otherwise down day.

The ole Colonel is starting to believe we'll end this recession with more words than wealth! Let's chew on a few to understand what's driving the markets this morning. By now, we're all familiar with deflation because the talking heads refer to it when they try to tie today's economy to the Great Depression. Deflation is a decline in general price levels often caused by a reduction in the supply of money or credit. Fear of deflation is a gold price slayer so we don't want nuthin' to do with that economic bugaboo. Our next word is disinflation , a little nicer since it is just a reduction in the inflation rate or rate at which prices rise. Deflation is a popped balloon; disinflation is one that's just a little soggy after the party.

OK enough school, here's what's going on:

"Excluding petroleum, import prices were down 0.4% from March, and were 5.6% lower on the year, the largest decline on record. That suggests steep drops in oil and commodity prices at the end of last year are no longer driving U.S. disinflation, but rather the global economic downturn. The World Bank and International Monetary Fund expect global gross domestic product to contract this year for the first time since World War II." (WSJ, 5/13/2009)

Yikes! Economists are party poopers, keep'em off your property! Oil broke $60 in early trading, fell back and the broader markets are taking a stumble.

Chuck the fancy words, let's walk the walk:

Oil is down $0.16 at $58.88 (June contract). Gold is up $1.6 to $925.5 (June contract); Silver is struggling to stay above $14 at $14.020; Copper is retreating 0.0570 to $2.0290 (July contract); Molybdenum is hanging steady at $9.70.

The DOW is down 142 points to 8327.50; the S&P 500, down 15.32 points to 893.03. The gold miners are happy in a sorry crowd today:

Barrick (ABX) $35.66 up 1.60%
Newmont (NEM) $44.60 up 0.63%
General Moly (Eureka Moly, LLC) (GMO) $1.72 down 7.03%
Freeport McMoran (FCX) $46.91 down 4.48% (a bellwether mining stock spanning gold, copper & molybdenum)

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

Nucor (NUE) $41.07 down 3.88% - domestic steel manufacturing
ArcelorMittal (MT) $25.20 down 3.93% - global steel producer
POSCO (PKX) $82.83 down 3.65%- South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is down 2.17%

Nuts, let's go outside and enjoy the sunshine!

Cheers,

Colonel Possum