November 2014

Gold makes new high

Gold PriceGold reached another new high today. Anaysts say it is asian buying. I have a theory on what is going on, I think asian central banks are moving out of the dollar. I am of the opinion they are buying anything tangabile while they still can. I base this on some news I heard today from published minutes from the last FED meeting. Apparently the FED governors believe “that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy.” Oh boy, if they really stop raising rates the dollar will collapse, can you say hyperinflation. So it would make sense that foriegners, who hold trillions in our dollars, would want to get something of value before the FED devalues the currency. Overall a good day for our stocks I hope you are enjoying the ride.…

Oil hits record

Price IncreaseI know the mainstream media says its a “terror premium” or its about Iran. Quite frankly my view is more demand then supply. Yes there are disruptions in Nigeria and there are still facilities in the GOM offline. Couple this demand with the FED money pump and all commodiites are heading higher. Are we heading for $100 per barrel?…

We will dump the VPU the Vanguard Utilities ETF for a 4.2% loss. We bought it with the expectation that repealing PUHCA would unleash mergers in the utilities industry. Things have not worked out as we hoped and with interest rates rising we will move on to better deals.…

Despite concerns expressed by federal regulators about the growth of nontraditional mortgages, their popularity among borrowers continues to rise, according to statistics released yesterday.

About 26 percent of mortgage loan originations by dollar volume in the first six months of 2006 were interest-only loans, according to the Mortgage Bankers Association, a trade group in the District. Such loans do not require borrowers to pay down the principal.

Analysis: Anything to keep those hpuses moving. So the FED will raise rates on these people. I don’t think so.…

Clive Maund theorizes that the recent silver action may be a precursor to a “superspike” like back in 1979-80. As he cautions, these events only happen once a generation. I would argue that it would not suprise me and we are positioned for a spike. I think the odds favor a pull back as we are way overbought at this point. However I am ready to let the market tell me what it wants to do.…

The reason for this revisit to the “BRIC” story is the enormous amount of press about the “burst bubble” in commodities this month.  It’s an important, some might say, critical, topic.  How we should act and react in the market is intimately related to the type of market we are in.  Viewed in isolation, a bear market rally will look pretty much like a small piece of a bull market rally.  But while you might be looking for periods of weakness to accumulate positions in a bull market you’d be much more likely to be watching like a hawk for any weakness as a sell signal in a bear market rally.

Much of chatter recently focused on “unsustainable” growth in China.  This is said to prove the point that commodity prices have to fall.

We won’t know just how long China’s (or India’s or …) secular expansion lasts until it’s come to an end.  What we do know is that if it looks like recent periods of above trend growth in the region, namely Japan and South Korea, it will last for at least 25-30 years.

This is not wild eyed optimism.  Similar growth periods moving through mass industrialization in both Europe and North America had similar time frames.   That is about how long it takes to move to and through the process and to upgrade infrastructure (both public and private) to the level where it becomes sustainable.   There is absolutely nothing unusual about the length of the China expansion and we expect the one just starting in India will fit the pattern as well.

Analysis: We can see the historical patterns or generational growth and infastructure buildout ie Japan and South Korea. We can reasonably say the same dynmaics will play out in the BRIC countries thereby underpinning long term commodity prices. Once Wall Street figures this out we should a revaluation of the commodity stocks.…

Cameco Corp., the world’s largest producer of uranium, said Monday it was unable to control water flowing into its Cigar Lake project following a Sunday rock slide, and it expects all underground areas to be filled with water.

The company said it evacuated everyone by 11:30 a.m., and it will investigate options to restore access to the mine. Cameco said it is committed to the project, and it will develop new timelines for construction, cost estimates and production forecasts. The mine was originally slated to start production in early 2008.

At 5 a.m. Monday, Cameco closed two bulkhead doors to try to protect the project’s main shaft and key underground infrastructure. The company later, though, found one of the doors did not seal properly, allowing significant water to flow into the processing area.

Cameco said it is adequately positioned to meets its contractual obligations, as it has supply interruption protection in contracts.

Analysis: Well this is no the best of news. This mine was scheduled to come online next year and produce 18 million pounds per year. This is one of the hazards of mining. There are two paths forward for us sell now or hold on ride through this and have confidence management will fix the mine and bring it online in 2008. I am inclined to hold as I have confidence uranium and nuclear power is the only way to go for mass power generation. It will take a few days to digest this information and get a feel for where the stock should trade. You will notice this news got the other uranium stocks to rally hard as this is just makes a bad supply situation worse. I think you can pretty much count on a supply squeeze in uranium. Buying Uranium Particpation Corp. could be a good play here if you do not own it. In summary, I am a long term bull on uranium and I want to own the largest uranium miner so I will hold and add if the stock were to drop enough.…

Fears that the massive Ghawar oil field in Saudi Arabia may have passed its prime have been the stuff of speculation for many years. Ghawar has underpinned Saudi Arabia’s dominance of the oil market ever since it came on stream in 1951. With its ability to pump out some five million barrels per day on average, more than half of Saudi Aramco’s total of 9.1 million barrels per day, the slow death of Ghawar may help to ensure that the low oil prices of the 1980s are but a dream for the average consumer.

Don Coxe, an analyst from the Bank of Montreal, once described Ghawar as having passed “Hubbert’s Peak”, a phrase used in honour of geologist M King Hubbert, who predicted oil field decline in the 1950s. The best indication of this is the steadily increased usage of water injection in the wells. Water injection is normally used on older oilfields to maintain pressure within the well and force out more oil. The problem is, once the water reaches the well head, the field has to be abandoned. Many are now pondering the connection between Saudi production and increasing water usage. As Coxe puts it, “Isn’t water flooding [the] Viagra of ageing wells?”…

CBS Marketwatch:

SAN FRANCISCO (MarketWatch) — As the world seeks alternatives to oil as a source of energy, uranium has been on a tear, scoring a gain of around 700% in six years as interest in nuclear power has revived.
“Uranium’s performance has been in a league of its own,” said Scott Wright, an analyst at financial-services company, Zeal LLC.
Uranium has been one of the best-performing commodities in this bull market, he said. Spot prices are trading at around $56 a pound, an eight-fold increase from as low as $7 back in 2000. See the latest uranium prices.
“And the way fundamentals look today, there could be a lot more room to run,” said Wright.
Crude and gold prices have seen strong gains, but they pale in comparison to uranium. Over the last six years, crude futures are up around 90% and gold futures prices have more than doubled.
The biggest reason for uranium’s rise? Simply put: supply scarcity.…