Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Wednesday, June 28, 2006

US imports Could Hit 80% in 2010 -- and THEN It Gets Ugly!

I was reading a post on another site today written by someone who said we should NOT conserve because that's expensive and a bunch of third-world dictators would just use the oil instead. I'm paraphrasing, but that was his basic point.

The logical flaw in the "use the oil before the bad guys get it" theory should be obvious.

Take a look at this chart and see if you can spot an ugly trend...

Do we really want to be MORE dependent on oil we have to purchase from Osama bin Laden's sugar daddies in the Middle East? I think not.
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And Then There's This...

Well, if the Chinese are driving a lot more cars (see previous post), of course they're importing more oil.

Still, if we listen to da bears, the wheels are about to fly off the global economy any minute now.

Anyway, here's the story..

China's crude oil import up 20.5% in May(Xinhua)

China imported 12.4 million tons of crude oil in May this year, a rise of 20.5 percent from the same month a year ago, China Business News said on Tuesday, quoting latest statistics from the General Administration of Customs. Meanwhile, China's crude oil export dropped by 48 percent in May, the report said. Crude oil imports from Angola stood at 3.2 million tons in May, accounting for 25 percent of the country's total imports that month, it said.
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Vroom Vroom! China's auto sales zoom!

I have to say this is bullish news for commodities of all kinds. Still not seeing that oft-predicted slowdown. Maybe down the road a ways ...

China's automobile output exceeds 3 million in first five months

China Association of Automobile Manufactures released statistics showing that in the first five months China's automobile output and sales hit a record high to 3.53 million units and 2.9743 million units respectively, an increase of 31.77 % and 30.84% over the same period of last year respectively.

In the five first months, the production and sales of passenger cars amounted to 2.1677 million vehicles and 2.1127 million vehicles respectively, up by 46.15% and 44.21% respectively, and that of commercial cars grew by 6.19% and 6.61% to 885,300 and 861,600 respectively.
Among the passenger cars, the manufacturing and sales of sedans soared by 56.65% and 55.09% to 1.5524 million and 1.5033 million respectively, Multiple Purpose Vehicle (MPV) climbed to 76,900 and 77,000 respectively and Sports Utility Vehicle increased by 96,400 and 97,500 respectively.

In the first five months, China's automobile imports (including the complete sets of automobile spare parts) have soared to 87,000 units, up by 80% over the same period of last year, according to the statistics released by the General Administration of Customs. Analysts said the dealers increased car imports in the first quarter due to the coming increase of consumer tax from April 1st, but the imports saw a decline in April and further drops in May. Despite that, the imports in the first five months witnessed a surge of 80% because of the sharp increase in the first quarter.
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Are Fed Rate Hikes Near an End? Gold Buyers Think So

Is the Fed nearly done hiking rates? I don't know, but that seems to be the consensus shaping up among some gold investors. Bloomberg tells us...

Gold and silver rose in Asia as some investors bet the U.S. Federal Reserve may be nearing the end of its series of interest rate rises, boosting the precious metal's appeal as an alternative asset.

The Fed is expected to raise interest for a 17th straight time at the end of a two-day meeting starting today, and again in August. Some investors may be betting the central bank won't raise rates more than once or twice more on concern it will slow economic growth
On the other hand, precious metals stocks took it on the chin yesterday (and today in Australia -- again!) so it could still be anybody's game. I'm seeing a lot of support for precious metals at these levels. While a smallish pullback wouldn't be suprising, it would be disappointing to see gold and silver go much lower.
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Latest Column in Money and Markets is Up

Here is is... "Lessons From the Boomtown"

I'm only partly happy with this one, because so much was cut out in the editing process.

The Money and Markets I wrote was mostly about the famous Comstock Lode -- the richest silver find EVER. And since I love history, I had a lot of historical stuff in there, much of which ended up on the editing room floor.

What kind of stuff? For example...

How Comstock Changed Mining ... and the World

The Comstock was very different from other precious metals finds, and it changed mining forever. Some of its lasting effects ...

An organized, professional labor force: Previously, most gold and silver booms attracted hundreds — if not thousands — of independent miners working in small teams. However, the Comstock quickly transitioned into large, well-organized teams of salaried professionals.

Deep shafts: The miners had to be organized. The silver at the Comstock ran deep. By 1879, most miners were working below the 2,000-foot level, and in some cases, below 3,000 feet.

New support techniques: The ore was different, too. It wasn’t in veins or placer deposits in streambeds. Rather, it was in piles of mud often hundreds of feet thick. The old method of propping up a horizontal beam with side supports didn’t work in mud, and quickly became a recipe for death.

A clever mine superintendent named Philipp Deidesheimer came up with a method that worked: As ore was removed, it was replaced by timbers set as a cube six feet on a side. Thus the ore body would be progressively replaced with a square-set timber framework. This new method was so effective it allowed the Comstock miners to sink much deeper shafts and was instantly applied across the West ... and all over the world.

Hydraulic equipment: Water was also a problem in the Comstock. Though the town didn’t have enough clean water to drink, the miners were drowning in it. American ingenuity created some of the most powerful steam and hydraulic pumping equipment anywhere in the world ... and soon it was used everywhere.

Beating the heat: Still, the deeper the miners went, the hotter the water got. On the good days, each man needed 95 pounds of ice and could only work for so long before passing out. On the bad days, miners were literally boiled alive inside their own skins by eruptions of scalding water. So the miners invented new blowers and ventilators to pump in cool air.

From mine shaft to San Francisco treat: Finally, as the shafts went deeper and deeper, the standard hemp rope hauling cages containing miners reached its breaking point ... with catastrophic results. A man named A.S. Hallidie invented a solution — flat, woven wire rope that was much stronger than hemp rope. It also made San Francisco’s cable cars possible.

Comstock silver helped win the Civil War: California gold paid for the start of the Civil War, and $45 million worth of silver from Nevada paid to finish it. Without it, the outcome of the Civil War might have been quite different. A grateful Abraham Lincoln pushed through Nevada’s statehood even though it technically didn’t have enough people to qualify.

A lot of stuff was cut out, but perhaps my editors are right -- it's tedious for many people. Well, maybe I'll write about silver next week and see what they cut out of that one! LOL!

Check out my new gold and energy blog at

Tuesday, June 27, 2006

NOW Barclays Lowers Forecasts?

Oh, come on! Barclays Capital is now cutting its price forecasts for metals AFTER the 20%-or-so decline in gold, copper and other metals -- just as metals seem to be finding their footing!

Barclays blames it on the rates -- they expect the US Federal Reserve to increase rates to 6% this year, from a previous forecast of 5.5%.

"In light of this revision, we expect the recent patternof sideways and highly volatile trading to continue for most ofthe third quarter and so have revised down our average price forecasts for base metals,'' Barclays analysts led by KevinNorrish said in a report dated June 26.

Now here's something interesting: For the year, Barclays cut its average estimate for copper to $6,876 a ton, 6% lower than its earlier projection of $7,300. The metal has averaged $6,047 a ton this year. So while Barclays is revising its price forecasts LOWER, those prices are still higher than where metal is now.

Barclays is also less positive on gold, thanks once again to rising interest rates.

But you know what? 16 interest rate hikes haven't slowed the global economy. What makes Barclays think raising interest rates to 6% will do the trick?

If anything, the US economy is STRONGER than expected. Housing may be slowing down. But in May, U.S. home sales defied predictions of a slowdown and actually rose 4.6%.

And look at durable goods orders. They fell 0.3% last month -- but if you look below the headlines, you’ll see the real news. Most of that drop was due to aircraft orders, which are always volatile. On the other hand …

  • Orders for autos and auto parts rose 2.5% in May.
  • Orders excluding transportation equipment rose 0.7%.
  • Non-defense capital goods orders were up 1% -- a nice reversal of the 1.9% drop the previous month.
  • More importantly for the stocks in Red-Hot Asian Tigers, orders for primary metals rose by 3.5%. That’s HUGE!

The U.S. economy surged at an annual rate of 5.3% in the first quarter, and it’s hard to keep up that pace. Could there be soft spots? Absolutely. But the trend still looks up, both here and overseas.

Speaking of overseas, China's fixed-asset investment -- things like power grids and other metal-intensive projects -- rose 31.3% in the first five months of the year compared to a year earlier.

Here's a funny story. China’s steel mills buy 44% of all iron ore that is traded internationally. Last year, they agreed to pay 71.5% more for iron ore. This year, they vowed to negotiate a lower price with companies including BHP and Rio Tinto. China’s biggest producer, Baosteel, represented the industry at the negotiations. The negotiations dragged on for weeks … then months.

Finally, Baosteel and China agreed to a 19% price hike, bringing them in line with what the Europeans and Koreans have already agreed to.

Interestingly, Zou Jian, chairman of the Metallurgical Mines Enterprise Association of China, has vowed to wreak “revenge” on the miners. What kind of revenge might that be? According to press reports, China will pursue ownership of Australian mines to better lock in supply.

Gee, I can think of a few underpriced miners who would probably benefit from that courtship. And that makes the market even more interesting.

And as for India -- it is just starting -- STARTING -- a massive investment wave into roads and infrastructure. Meanwhile, personal income is growing at a double-digit rate in India, and 24 MILLION Indian households will be able to afford a car for the first time in the next two years.

By golly, I think that's going to require a lot of metal.

So, Barclays lowers its price forecast. Big whoop!

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Solid Support for Silver

I apologize for not posting more frequently, but I've been very busy lately. Yesterday, I sent out recommendations for both Red-Hot Canadian Small-Caps and Red-Hot Asian Tigers. And I've been working on my Money and Markets Column as well.

Here's a (very rough) preview of what's in Money and Markets on Wednesday. You might find it interesting, especially if you're interested in silver...

Silver Finds Strong Support

Last week, I told you a bunch of reasons why silver should head higher. The most basic one is simple supply and demand -- according to CIBC World Markets, there will be a deficit of 77 million ounces of silver this year alone. That’s a powerful force that cannot be ignored.

And investment demand is growing by leaps and bounds. The iShares Silver Trust (SLV) now has 2,404 metric tonnes of silver on its books – that’s close to 86 MILLION ounces, and way, way up from the 1.5 million ounces when the fund started on April 28. You can read the stats yourself by following this link:

If anything, I think CIBC may be underestimating the silver supply deficit for this year.

And a chart of silver shows we may be at a great buying opportunity …

Here’s a weekly chart of silver. Let me show you what I’m seeing …

1) There is support from price action earlier this year, when silver plateaued before its big move

2) A recent uptrend offers support close below current prices

3) The bottom indicator on the chart measures momentum. It shows silver is oversold and due for a bounce. If you bought silver when this momentum indicator was at the same level in August, you got a pretty good run.
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Friday, June 23, 2006

Copper Prices Clawing Their Way Back

Copper stockpiles tracked by the London Metals Exchange dropped to their lowest level in 6 months ... Global inventory now equals just four days' supply ... the strike continues at Group Mexico, that nation's largest copper producer, which has vowed to close its La Caridad Mine rathr than meet miners' demands ... Other miners facing labor contract renewals include Teck Cominco, Codelco and BHP's Escondida Mine, which alone accounts for 7% of world copper supply ... demand for copper is going to exceed supply by 184,000 metric tonnes in 2006 according to Credit Suisse Group.

And yet copper is STILL down 22% from its recent highs?

Sounds like a disconnect in the market ... one that could be fixed rather quickly.
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Thursday, June 22, 2006

World is hottest in 400 years (at least!)

You're going to think this post doesn't have anything to do with commodities, but stick with me a minute and I'll get you there.

The National Research Council -- America's blue-chip science policy organization -- says it has a "high level of confidence" that the Earth is the hottest it has been in at least 400 years and that "human activities are responsible for much of the recent warming."

They issued the report at the request of the chairman of the House Science Committee, Rep. Sherwood Boehlert, R-N.Y. Rep Boehlert is trying to stymie another Republican congressman, Joe Barton from the great state of Texas, who launched an investigation into three climate scientists.

What was Barton upset about? Basically, this chart...

The three scientists had prepared the chart and the research that goes along with it. They came to the conclusion that the Northern Hemisphere is the hottest it's been in a THOUSAND years.

No reaction yet from Barton yet, to the news about the National Research Council backing up the scientists. But there is someone who's been flapping his jaws about global warming lately: Rush Limbaugh.

Earlier this month, Limbaugh ripped George W. Bush a new one for a U.S. report to the UN that -- for the first time -- mostly blames human actions for recent global warming. It says the main culprit is the burning of fossil fuels that send heat-trapping greenhouse gases into the atmosphere. Limbaugh said now White House policy on global warming would be no different than if Al Gore was elected. Limbaugh said: "George W. Al Gore, anyone?"

A couple points...

  • George W. Bush didn't prepare the report. I'll bet you dollars to doughnuts he wasn't even aware of it.
  • There's no sign it will cause any change in U.S policy on anything.

Meanwhile, Limbaugh insists "I don't believe there is any conclusive evidence of global warming."

In the past, Limbaugh has also wondered aloud if the Earth may be COOLING. What evidence is he looking at then?

You know who Limbaugh reminds me of? Kent Brockman, the TV "anchorman" on the Simpsons. You remember the Simpsons episode where Homer (through a serious of hilarious events) ends up on the space shuttle? News announcer Kent Brockman mistakes a floating ant in a space shuttle experiment floating close to the camera for a giant space ant. He then says:

"Ladies and gentlemen, uh, we've just lost the picture, but what we've seen speaks for itself. The Corvair spacecraft has apparently been taken over -- 'conquered' if you will -- by a master race of giant space ants. It's difficult to tell from this vantage point whether they will consume the captive earth men or merely enslave them. One thing is for certain: there is no stopping them; the ants will soon be here. And I for one welcome our new insect overlords. I'd like to remind them that as a trusted TV personality, I can be helpful in rounding up others to toil in their underground sugar caves."

So how does this relate to commodities?

Global warming will not only have a serious impact on glaciers and so on, it's also going to affect commodities. Certain energy sectors should do very well as nations try to come to grips with lower greenhouse gas emissions. Prices of grains could soar if heat waves hurt global harvests. Timber companies are going to have to come to grips with this, as are insurance companies, and entire cities on the Gulf of Mexico and Florida coast.

These are all challenges. But many challenges can also be opportunities.

Best of all, we have some time here -- you don't have to run out and invest for global warming right now. You can do your research.

So let the Limbaughs of the world stay in denial. We need them to take the other sides of our trades.

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Worrisome News on Gold Demand

I have long assumed that the plunge in gold prices would bring physical buyers (jewelers, mostly) out of the woodwork. But now the market may be SO volatile that shell-shocked buyers are sitting on the sidelines. From this story...

Ongoing volatility in the price of gold and silver has subsequently forced physical buyers back to the sideline to wait for some semblance of order to return to the market. Physical traders and jewellers caught short below US$600/oz were wary of further price appreciation and purchased gold all the way to its highs of US$730/oz, only to watch the market correct back to US$545/oz within one month.

"Throughout the Middle East, where large drops in the gold price typically trigger heavy demand for the metal, there has been no such activity," says Hunter. "A possible explanation for this lack of buying interest is reduced cashflow caused by the panic buying over US$700/oz, margin calls against outstanding loans and large declines in regional stockmarkets. A further factor is the speed of the decline from US$731/oz which has prompted many to expect further losses in the near term."

Meanwhile, Asian markets remain in suspended animation as gyrations in precious metal prices continue to confuse and confound physical players throughout the region. Recent stability around US$570/oz has seen the beginnings of physical demand return to the market, however many players are still reluctant to buy at these levels for fear of further losses.

How long will this go on? Or is it ending already? I've been pleasantly surprised by gold's strength over the past few days, and a lot of gold stocks I'm watching seem to be forming solid bases. But is it a solid base or another sucker's rally? Ah, these are the questions that we ponder. Meanwhile, the list of stocks I want to buy at the bottom has grown as long as my arm!

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Seven Metals About to Soar

My latest Money and Markets column is up...

Seven Metals about to Soar (by Sean Brodrick)
Metals prices have fallen to the canvas in the last month, but they aren’t down for the count. Smart investors think ahead. Today, I’d like to give you the info you need to get your portfolio positioned before the natural resource markets take off again.

My editors cut out a lot of my macro analysis; rats! I might have to post it here -- that'll show 'em! LOL!
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Saturday, June 17, 2006

Gold: Where to now?

We got the big pullback in silver (and gold) that I was looking for, and now where are we? Is this bounce the bottom?Oh, I would so like it to be. But I think we're in for a bounce and another leg down.

First, let's look at a chart of gold...

Looking at the chart, we can see that it came down to test long-term support and tested it succesfully. This is very, very good if you're a bull. I could show you another chart that illustrates that an even-longer-term uptrend for gold hasn't even been tested yet.

On the not-so-good side, it would be very unlikely to see a sucessfully V-shaped recovery after such a sell-off. It's more likely that gold is forming a "bear flag," which can take up to 2 weeks to form. It will likely get up to the 608 level. It may even get as high as the 50-day moving average (the blue line on the chart), around 640. This happens for various technical reasons, but the primary reason being that the cruel market gods seem to delight in continually raising our hopes only to shatter them again.

The third leg down could go lower than 540, perhaps as low as 533 or 517 (there is other long-term support there). Or it could just make another trip to 540 and bounce again.

Is this bounce we're seeing now playable? Perhaps -- with the right instruments. But oh, you have to be ever-so-quick, unless you have a really long-term view and a stomach for risk.

What is likely to be the thing that caps the short-term rally in gold? To understand that, we have to look at the technical action in the U.S. dollar ...
This chart shows the US dollar cash index overlaid with the 50-day moving average (the red line) and some common retracement levels. Very simply...

1) Gold and the Greenback are on what I like to call "The See-Saw of Pain." Because gold is priced in dollars, when the dollar goes up, gold USUALLY (not always) goes down.

2) This chart shows the U.S. dollar formed what is called a "head-and-shoulders" formation, which is very bearish. It broke down from that formation and went to lows established in May of last year.

3) Then the dollar bounced. This is one of the major factors in gold's recent sharp correction. But the dollar ran into trouble where the 38% retracement (another common retracement level) intersects the 50-day moving average (the red curvy line).

4) The dollar is now pulling back, and that sends gold higher. But it would not be unusual for the dollar to take another leg higher to its 50% retracement (note that is NOT the 50-day moving average -- the 50% RETRACEMENT is the horizontal purple line across the middle of the chart). This would send gold lower. And just when everyone turns bearish on gold, the dollar will bang its head on its 50% retracement and head lover.

5) The way I see it, the long-term fundamentals are very bearish for the US dollar and very bullish for gold. The dollar's bounce is just that -- a bounce in a longer-term downtrend. The recent pullback in gold is just that -- a pullback in a longer-term uptrend.

That is how I am going to play metals from here.
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Freaky Science Saturday -- Spiders With a Taste For Human Blood!

Once again, I set out with good intentions to do badly needed research on commodities, and end up on an "extreme science" page. So, I thought I'd share. Today's topic: The Vampire Jumping Spider ... the only spider with a taste for human blood!

You may have seen Jumping Spiders before. They come in various shapes and sizes ... some even dress up as ants, which I consider insect mimicry at its most pathetic. I mean, if you're going to be a transvestite arachnid, at least dress up as a Preying Mantis or Whitney Houston.

My until-now favorite Jumping Spider was the one that wears Tom Friedman's Moustache of Understanding. This makes it more qualified to rant about politics than most TV talking heads. I've posted the pictures of both here, and you'll have to admit, the resemblance is eerie. For a better explanation of the Moustache of Understanding, click HERE.

But now I have discovered the Vampire Jumping Spider. It has a taste for human blood, and yet, it has no easy access to human beings – unlike the Camel Spider, which injects people with anesthetic venom, then chew your flesh off. Click here to see a U.S. soldier with a Camel Spider wound. Hey, Jumping Spider, if you want to dress up like other insects, dress up like a Camel Spider – they kick ass!

Anyway, so the Vampire Jumping Spider likes the taste of human blood, but can’t get it (without being squashed). So what does it do? It eats mosquitoes! It seeks out – by sight and by smell – mosquitoes of the Anopheles gambiae family. These mosquitoes are malaria carriers. We want them dead, and the Vampire Jumping Spider is happy to oblige.

The spiders have an overwhelming tendency to eat female mosquitoes already laden with blood. Male mosquitoes are almost never eaten because they do not feed on blood. The spiders can see the mosquito’s belly swell up with blood. And if it’s dark, its unerring sense of smell guides it to its prey.

Here's a photo of a Vampire Jumping Spider eating a mosquito. Ignore the cries of "Help me ... help me ... the spider's going to get me ... ARGH!"

In case you think I'm making all this up, here's the National Geographic page with the whole story:

What does this have to do with the price of gold or silver? Nothing. I just like extreme science and anything that kills mosquitoes. That's why my favorite insect is the skeeter hawk.

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Friday, June 16, 2006

"Excellent!" My latest Interview on

My latest interview is up on Tom (My interviewer, Tom Jeffries) calls this one "Silver Jitters and Montgomery Burns."

As Monty would say: "Excellent!"

You can listen to the interview here:
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Nice Mine You've Got Here ... It's My Mine Now!

Venezuelan President Hugo Chavez ... who acts as though he's in a sitcom parodying a Latin American strongman ... is at it again. Chavez sent a law to his congress that would give the government control of non-productive gold and diamond fields in the country.

Among companies that have gold concessions or contracts but haven't started production are Gold Reserves Inc. and Crystallex International Corp.

You will remember in the last episode of "Leave It to Hugo," Chavez forced oil companies to pay higher taxes and convert their operations into joint ventures with the government. Venezuela is the world's fifth-largest oil exporter.

And loyal viewers from last season will remember that Chavez promised himself in the mirror that he would stop granting mining concessions to foreign companies while creating a state- owned mining company. That was shortly after he sent his whore to spy on the shopkeeper and before he got in a fistfight with Bullock. Oh wait ... that's Deadwood.

Anyway, Venezuela produced 20.5 metric tonnes of gold in 2004. That's small potatoes compared with Peru which produced 173 metric tonnes. Still ... sucks if you're Crystallex. The company would be producing from its yet-to-develop Las Cristinas tract -- Venezuela's largest gold deposit -- except the government hasn't granted environmental permits the company applied for in April 2004.

Anyway, read all about Hugo's latest adventures here:

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Monday, June 12, 2006

More Pain Ahead for Silver

Silver stocks were hemmorrhaging today. And a look at a chart of silver reveals why. Silver broke down through the 50% retracement of its bull run on the daily charts...
What comes next? Perhaps a move down to 10.40, a move that could separate the men from the boys. Remember, though, that A) long-term uptrends STILL aren't broken and B) Silver can retrace deeper than this and it still will be in a bull market. Until the big trend changes, I'll keep playing that and using these corrections to add positions.
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Rally Monkey, Don't Fail Me Now!

Geez, Louise, are you as sick of this correction in commodities as I am? My screens are a sea of red, so red I should grow a longer beard, change my name to Moses and wave my hand to part it.

Yes, yes, we all know that the markets were frothy and this correction is actually a good thing in the long term. Holding through to the end is the smart course, yeah, yeah. And I know we're in a long-term bull market, and in the long-term view of things, this is nothing -- NOTHING!

I'm just sick of all the red.

Well, what do? When the chips are down, call out the Rally Monkey:

Go, Rally Monkey! Go!

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(Shakes fist at sky) "ALBERTO!"

Ah, crap! I was really hoping we would avoid a hurricane this early in the season. But Alberto shrugged off the wind shear and now has winds of 70 mph. If winds hit 74 mph, it's hurricane strength.

Still, if I lived on the coast and had a hurricane wading ashore, I'd rather it just be a category 1. You can get through a category 1 okay (folks in trailer parks, I don't mean you. I hope you're okay, and your possessions survive).
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Sunday, June 11, 2006

And then the Depression Set In ...

Turns out that storm mentioned below turned into a tropical depression.

And Tropical Depression 1 is going to hit Florida

The good news: It's going to come ashore with "only" 60 mph winds. Wind Shear is keeping a lid on it.

Water temperature is a major factor in hurricane formation, but just as important is wind shear, or the lack of it. And recently, the jet stream has moved further south (why? I don't know), putting more wind shear in the way of hurricanes.

Of course, the jet stream could move further north anytime it feels like it.

And if you're interested in this kind of thing, in a "Dear-God-We're-In-a-Slowmotion-Car-Wreck" sort of way, here's a chart showing the historical frequency of storms per month...

This is when a Kosh-esqe voice in my head says: "And so it begins..."

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Friday, June 09, 2006

Maybe it's nothing...

It's a bit too early to tell, but we may be seeing the first storm of the season form in the Gulf of Mexico. So, this post is only for the paranoid or people who live in hurricane stomping ground (me on both counts).

Here is the update...

1130 AM EDT FRI JUN 09 2006



Here is the less-than-organized system they're talking about....

And here are some potential storm tracks...

Now for the good news: None of the models is forecasting more than a tropical storm (50 to 60 mph winds) at peak strength and some are even forecasting that it's much ado about nothing.

Let's hope so. I don't want to see anything this season like some of the storms I talked about in this post.

If the storm does form and head for Louisiana, you'll learn more about it than you ever wanted to know from breathless TV anchors.

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Tom Jeffries Talks Me In Off The Ledge

Here's my latest interview on, where Tom Jeffries talk me in off the ledge.

Click Here!
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Tuesday, June 06, 2006

Amazing Chart on Oil


I am not particularly bullish on oil in the short term, but long-term, man oh man, is this chart bullish!

By the way, According to EIA year-on-year production has dropped - 84,105 in March 2005 versus 84,047 March 2006. Now, taken along with the fact that Iran has to store oil it can't sell, maybe we DO have a short-term oversupply of oil on the market. I'll watch for further developments.
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Oil Rig Exodus

This is interesting news on oil rigs...

an ongoing exodus [of oil rigs] to the Middle East that could cut shelf production in the Gulf of Mexico by as much as 20% over the next 18 months.

As one story says:

GlobalSantaFe announced Wednesday it had signed a contract with the Saudi Arabian oil company Saudi Aramco to send four of its jackup rigs from the Gulf of Mexico to offshore Saudi Arabia.

The Houston-based offshore oil and gas drilling contractor will start four-year terms in the Middle East in early 2007 for its four rigs -- the Main Pass I and IV, and the High Island I and II.


  • If the Saudis have so much oil under their sand -- where they can extract it for about $4 per barrel -- how come they're paying top dollar to drill in the water?
  • How come Saudi oil production is dropping?
  • Not all news is bearish. The Iranians reportedly are storing oil they can't sell on nine Very Large Crude Carriers (tankers) . Why are they pumping and paying to store oil they can't sell?
Gosh, I wish I could make sense out of the Middle East.
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Monday, June 05, 2006

Why oil is headed higher this morning

Those gosh-darned Iranians, always driving up the price of oil with their crazy talk. You’d think they have a vested interest in higher or prices or someth--- hey!

Anyway, read the rest of the story by clicking on this link

I stick by my theory I put forth a few weeks ago that Iran and Venezuela take turns scaring the bejeezus out of the oil markets so they can reap the benefits of higher prices.
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Saturday, June 03, 2006

Paging Agent Mulder...

I do love extreme science, whether it's new life forms discovered in the shadow of Mount Everest, or undersea volcanoes brimming with mutant eels. Well, this one takes the cake: Red material that rained over India years ago turns out to probably be alien bacteria.

As Popular Science Reveals...

  • the particles may lack DNA yet still reproduce plentifully, even in water superheated to nearly 600˚F. (The known upper limit for life in water is about 250˚F.)
  • the particles could be extraterrestrial bacteria adapted to the harsh conditions of space and that the microbes hitched a ride on a comet or meteorite that later broke apart in the upper atmosphere and mixed with rain clouds above India
  • “If it’s true that life was introduced by comets four billion years ago,” the astronomer says, “one would expect that microorganisms are still injected into our environment from time to time. This could be one of those events.”
There are some attempts at down-to-earth explanations for the red rain, including my favorite, "a fine mist of blood cells produced by a meteor striking a high-flying flock of bats." But they don't hold up to scrutiny. Maybe there is a real explanation that does not involve alien bacteria. I think we should get Agent Mulder on it immediately!
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Friday, June 02, 2006

What Iran and Anna Nicole Smith Have in Common

What do Iran and Anna Nicole Smith have in common? Strange behavior, that's what.

Now the strange behavior we might see from Anna -- lovely girl, really -- is humorous. She's the kind of good-timing girl that would drink a dozen shots of Jagermeister, strip naked, cover herself in soap bubbles and hop down the street on a pogo stick, then wake up married to guy 63 years older than her! And I'm not speaking hypothetically. Still, it is to laugh. And I bet she's a lot of fun to hang out with. Those among us who have never dated a crazy woman can cast the first stone.

Iran's strange behavior worries me. My friend, commodity trader Kevin Kerr, recently pointed out to me that the Iranians have chartered a total of NINE Very Large Crude Carriers (VLCCs) to use as storage because of the difficulty in selling heavy crude. 18.4 million barrels in all.

Mind you, it's not like they MUST pump the oil -- it's fine sitting in the ground. In fact, it's good to give oil wells a rest now and then. So why go to the expense of pumping and storing crude oil you can't sell?

Iran is already pumping below their OPEC quota -- maybe it's a matter of saving face. But one thing it illustrates is how the world's refinery system is ill-equipped to handle heavy, sour crude. Refiners are now operating at 91.4% capacity -- the highest rate since last August, the week before Hurricane Katrina slammed into the Gulf of Mexico.

Now, let's say another hurricane hits the Gulf of Mexico hard (hurricane season started yesterday) -- and knocks out refineries that can handle heavy sour crude. Then we might have the crazy paradox of light sweet crude soaring and the price of heavy sour crude sinking.

Back to Iran -- more strange behavior. The civilized world has lined up to offer Iran a huge buffet of incentives to stop its nuclear program. But it seems like Iran is going to say "no" even though it's being offered EVERYTHING IT ASKED FOR. Man, I wish I had my own nuclear program if it will get me on this "goody giveaway" list.

So what's Iran's game? What do they really want? Why are they acting this way? These questions -- or perhaps the fact that there are no good answers -- could help drive oil over $80 a barrel.
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Copper Shortage Disconnect?

A bunch of analysts (most recently Prudential) have been grabbing headlines by proclaiming that copper and other metals are set up for a bone-jarring fall this year -- and could perhaps lose as much as 25% in one day. And copper plummeted limit-down yesterday. And there was weeping and gnashing of teeth.

And the "sell-off" lasted all of one day. Has anyone considered that Prudential and the others might either A) be trying to talk copper down to buy it cheaper or B) be short copper?

Meanwhile, copper and copper stocks are soaring today, because miners walked off the job at the biggest copper mine in Mexico. Demand is still red-hot, and supply, strike or not, can't keep up.

And now -- NOW -- come the voices that say, hey, maybe metals AREN'T about to crash.

"We're about a third of a way through a long-term commodities bull market,'' said Mark Mathias, chief executive officer of Dawnay Day Quantum, a London-based fund manager that has $100 million invested in commodities. "Commodity bull markets tend to last 15 years plus. And we're not saying it's any different this time."

BHP Billiton, the world's largest miner, on May 4 said that in 2006 through 2008 there's likely to be a shortfall of copper concentrate, the raw material shipped by mines to smelters.

Read that again -- TWO FULL YEARS of shortages. Don't you think that's kind of a disconnect with falling prices? I sure do.

No wonder the zinc-copper stock we added to Red-Hot Canadian Small Caps last week is taking off. And the copper-gold stock we just bought in Red-Hot Asian Tigers (for the second time) jumped over 4% today.

We'll be adding more positions soon. This bull market in copper has a long way to go.
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