Replies to post #5142 on Mining Sector Ideas

[gfp927z]

Bigworld, >> miners <<

Since the mining stocks are part of the broader indexes, that also added some selling pressure. Rick Rule also points out that the miner's valuations depend a lot on the perceived durability of the higher bullion prices. The bullion price needs to stay up for a relatively long time for the miner's to really benefit. So if bullion soars but quickly crashes, that removes a key valuation support for mining companies. Rick Rule said that in Oct he moved some $$ from the junior miners into the larger 'best of best' miners, and also into physical.

Btw, I did some tweaking to the asset allocation today. Added modestly to the metals on the ETF side to 'average down', and also re-entered the S+P 500 with a 4% allocation. Relatively tiny, but will probably add more (up to 10%) if the market has another down leg. I also bulked up the Treasury bond ladder somewhat. It goes out to Oct 2028, so a 2 1/2 year ladder.

I just can't get too enthused about the stock market. We'll probably get a decent bounce after this war fades, but it's already thrown a serious wrench into the global economy. Usually an approaching election can mean a fairly buoyant stock market, but not if the monthly economic numbers are deteriorating a lot. We'll see what happens.

Trump has a strong incentive to wind down the war, so hopefully Bibi has had enough also. Those hypersonic missiles could be a great equalizer to actually bring some peace to the region. It's surprising the US fell so far behind in that technology.



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[gfp927z]

Bigworld, Looks like Trump's latest TACO move isn't working to bolster the stock market. A 10 day reprieve, but the world is no longer buying into his 'boy who cried wolf' act.

10 days is about the time needed to get US forces in place for an assault on Kharg Island. But the US troop ship will first have to get through the Straits of Hormuz to reach Kharg, and what happens if the ship is hit? But assuming it gets to Kharg and the island is taken, the US then has control over Iran's main oil 'spigot' (90% of Iran's own exports go via Kharg). So that part is good, and gives Trump more leverage.

But even after Kharg is taken, Iran's missiles (and mines) can still keep the Strait of Hormuz closed. By controlling Kharg, Trump can shut off Iran's own oil exports, removing the revenue Iran needs to function. But how long does it take for Iran to then cry uncle? Months? Trump's problem is that the flow of oil from the other Gulf countries will continue to be stopped, and at some point the global economy plunges into a deep recession. It's already been one month, and another month (or two), and the damage to the global economy is massive.

Then there's the escalation risk. We take Kharg, Iran responds by hitting the oil infrastructure of the other Gulf States, the US and Israel retaliate, hit Iran's power grids and water facilities, and Iran responds in kind to hit the Gulf State's power and water grids, etc. Then the whole region takes years to rebuild, and the oil / gas flow can't recover until 2027-28?

This whole thing is crazy. Trump should just declare victory and pull out of the mess. He can restore his pride by bullying Cuba into submission. But will Trump's ego allow him to take the logical path? Seems unlikely.



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