IAC ... no opinion, I try to play each market with a certain amount of isolation -- but the negative correlation (gold/yen) is better than the positive correlation between gold and the A$.
...and then there's the positive correlation between oil and the $C ... which leaves me asking why the A$ isn't rising with the metals, unless its forecasting something unsustainable in mining because of high energy prices and a possible global slow down (???).
*** Basic Points ~ Supply Side Mineral Economics ***
An excellent weekend read for anyone interested in the PM/BM/Oil markets from one of the best of the best, Don Coxe.
BASIC POINTS February, 2006
Donald G. M. Coxe Global Portfolio Strategist, BMO Financial Group Global Portfolio Strategist, Harris Chairman, Harris Investment Management, Inc. Chairman, Jones Heward Investments Inc.
Supply Side Mineral Economics
Overview
The four-year climbs up the Wall of Worry for oil and mining stocks have reached yet another plateau of Profit-taking, Doubt and Fear.
It is customary to discuss such climbs metaphorically—in terms of constraints on investors' performance because of reduction in available oxygen—"nosebleed levels." Those still eager to buy at Himalayan heights have high hemoglobin counts. Those with normal erythrocyte scores retreat to the grassy uplands below.
The urge that sustains the Everest climber is knowing that It's There. In contrast, mining and oil stocks may not be able to scale new heights without a new reason to buy them. The commodity bull markets that caught Wall Street's Best-Paid (if not brightest) by surprise came from the unexpected growth in demand from Asia, particularly China. Result: for the first four years of the rally, the Street's forward earnings predictions for the commodity companies seemed to have been prepared by the kind of number-crunchers who told Cheney and Bush of the tiny costs of invading Iraq. As Margaret Thatcher noted, "Nothing is more obstinate than a fashionable consensus."
After four years of terror on the Street that commodity prices were about to collapse, leading to four years of error on the Street in earnings forecasts, there are signs of realism. Wall Street analysts no longer collectively assume that oil is headed for $35 and copper for 80 cents. So an equity bull market built on sustained forecasting mistakes about Demand Side growth is running out of steam.
Needed: another kind of surprise to shock the Street and investors. We believe it is coming…soon.
The next years of this bull market will be driven by the Supply Side. We are leaving our cautious Asset Recommendations unchanged.
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