Red-Hot Resources

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

Thursday, November 30, 2006

Mike Sounds Off on Bonds

I received this email from my colleague Mike Larson earlier, but Blogger was in a "don't touch me" mood. Now that I can finally post it, I think you'll find his ideas interesting. Mike sent along a chart like the following ...
With the chart, he included this note ...

Folks – The entire bond market is breaking out on big volume today. This is just the 10-year note chart, on which you can see a clear breakout above the 108 20/32 level. Long bonds have a similar chart pattern. On a yield basis, 10-year yields have broken through critical resistance (to the downside) at 4.54% … and are even below 4.5% now. The catalyst was a weak Chicago PMI report. ALSO, the HGX index of leading home building stocks is testing/breaking through the 200-day moving average due to the fact that rates are falling fast enough to actually give some support to mortgage demand.

I have NOT been adding any new home builder shorts for a while due to the technical strength. I have also refrained from shorting bonds and have specifically NOT advocated doing so... [you may] believe that inflation matters to bond traders … that rising oil and gas price are inflationary … that all this easy money will drive up rates … or that a dollar plunge will result in overseas holders dumping bonds, those forces are NOT what are driving the bond market. It is the ECONOMIC outlook. And right now, it stinks.

At some point, maybe people will care. But they don’t yet, and they haven’t for a while (as proven by the five-month, 6-point rally in 10-year prices). I just thought everyone should be aware about this key technical action and its potential implications. Thanks.

Pretty interesting stuff, eh? Is he right? We'll find out -- I tend to be more bullish on the economy than he is. But it's a good reality check to get opinions from people who don't agree with you all the time (if only the insane clown posse in Washington D.C. tried that once in a while). You can read more on Mike's blog at Interest Rate Roundup

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I'll Be on CNBC Friday Morning

Fri Dec 1st 7:30-7:35 am EST Live TV, CNBC, Squawk Box w/ Carl Quintanilla, Joe Kernen, and Becky Quick.

They want to talk about oil. Hmm ... I wonder why. Could it be THIS? Or THIS? Or THIS?

Or my overlooked favorite: Kuwait isn't going to tell us what their reserves are! "We don' have to show you no stinkin' oil reserves figures!"

Makes you think reports that Kuwaiti reserves are only HALF their official estimates are quite true. Maybe that's why they're so eager to cut OPEC production levels.

Anyway, I'll see you at 7:30 if you tune in. I'll be the guy in a total flop-sweat who forgets his own name.

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Raymond James Sounds The Alarm on Natural Gas

I recommend you read the latest Raymond James Energy Industry brief. Update: Raymond James has changed the url on this report and it is not linkable. You can find it by going to: and clicking on the November 27 "Energy Stat of the Week".

Some excerpts...

1) EOG’s work shows that overall U.S. gas decline rates have risen from roughly 21% in 1997 to an estimated 32% this year. Perhaps more importantly, first-year decline rates have increased sharply over the past several years to over 50% in 2005! We look for this trend to continue as operators increase activity in unconventional reservoirs (shales and tight sands) and extract more of the reserves earlier with improvements in completion technology.

2) Chesapeake Energy is the most active driller in the U.S., with a meaningful presence in several of the hottest E&P areas. As shown in the table below, virtually every one of Chesapeake’s major producing areas is seeing first-year decline rates above 50%, and the average is closer to 65%. Keep in mind that Chesapeake has been one of the more successful U.S. gas operators. With a typical first-year decline rate exceeding 50% in many of the other unconventional gas resource plays, it is hard to imagine that the decline rate treadmill will not continue its upward trend.

3) We have shown that combining a conservative 31% base decline rate with our 2007 gas rig forecast of 1,560 (12% year-over-year increase), new production will not keep pace with production declines. Looking ahead to 2007 and beyond, we believe continued increases in unconventional drilling activity and improvements to completion technology should further exacerbate the problem and may in fact leave the gas market undersupplied.


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How Low Can the Greenback Limbo?

Are you watching the crumbling US dollar with the same kind of fear and anticipation that I am? I mean, sure, Red-Hot Canadian Small-Caps and Red-Hot Asian Tigers are loaded to gills on precious metals stocks that are doing very well today as gold soars higher by over $10 an ounce to a 16-week high. But because I live in America, and because I have US dollars in my wallet, I am watching the falling US dollar with some dread.

So how low can it go? Pretty low! Take a look at the chart...

Those two blue lines indicate important support. As you can see, the US dollar has a long way to go before it gets there.

The US dollar is way oversold ... it still goes down. Any optimism has been squeezed out of the market ... it still goes down. Holy Sponge Bob Squarepants, how much lower is it going? I guess it has to bounce sometime ... doesn't it?

I'm so glad we're already well positioned for this. It would have been nice to catch a bounce in the dollar and use that to add more gold and silver positions, but eh ... you can't have everything.

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Wednesday, November 29, 2006

News I'm Reading Today

Foreign traders stumped by nation of Quebec

(The Globe & Mail) Prime Minister Stephen Harper's ambiguous motion to recognize the Québécois as a nation has not only triggered a fractious debate within Canada, but likely left some foreign traders scratching their heads.

U.S. investment newsletter writer Dennis Gartman said ... “The signals sent to foreign investors can only be confusing beyond belief, for if we are confused, and we think we watch Canada political developments as closely as anyone outside of Canada, we can only wonder what the money managers of Stuttgart, of Hong Kong, of Adelaide must be thinking..."

To read the rest, CLICK HERE.

Loonie loses steam

(The Globe & Mail) The Canadian dollar fell the most in a month Wednesday as Europeans sold the currency amid expectations a U.S. slowdown will spell slower growth in Canada.

“People are concerned about Canada going forward and possibly the U.S. economy weakening off a little bit and the Canadian dollar falling,” said Scott Dulmage, head Canadian dollar trader at the Bank of Nova Scotia.

To read the rest, CLICK HERE.

Hedge funds behind last week's dip, Merrill report finds

(The National Post) Hedge funds have often been identified as the primary driver behind scorching price gains for everything from copper to orange juice in recent years, but Merrill Lynch tries to put some actual numbers behind their activity with their weekly hedge fund monitor. Among the findings this week: Macro hedge funds were the primary force behind the equity market correction this spring.

Last week, hedge funds began to sell their record long position in the S&P 500, from an estimated notional US$20-billion to $17-billion.

To read the rest, CLICK HERE.

Australian $ rides on greenback slides

(The Australian) THE Australian dollar continued to rise higher yesterday on the back of a faltering Greenback, passing US78.3c to its highest mark since May last year.

The local unit is being bid higher after foreign exchange traders interpreted a speech from US Federal Reserve chairman Ben Bernanke that US growth was stalling, as meaning the next change in interest rates for the world's biggest economy was probably down.

To read the rest, CLICK HERE.
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Enlist Now, and Win The Global War for Natural Resources

My latest column is up, In it, I talk about the latest developments in the Global War for Natural Resources. I believe this struggle, not the battle with al Qaeda and fundamentalist Islam, will define the 21st century. I've banged the table about this before, but now I'm putting my money where my mouth is and launching a new trading service, with the goal of helping people put their money to work in this War for Natural Resources ... and potentially make a pile of money themselves.

Here are some ways the new service is different from Red-Hot Asian Tigers and Red-Hot Canadian Small-Caps:

1) The new service is US-listed stocks only.
2) It will recommend trades in mid- and large-cap stocks. The trades will also be shorter-term. In other words, these aren't the swing-for-the-fences small-cap trades that RCS and RHAT focus on.
3) The trading is primarily technical and short-term in nature. There won't be long explanations or in-depth analysis (at least in the issues -- we still do a lot of analysis behind the scenes).

There are more differences, and you can find out what they are by calling 1-800-430-3683. Subscribers to Red-Hot Asian Tigers and Red-Hot Canadian Small-Caps will get to test this new service FREE for three months. Just call 1-800-430-3683 and we'll hook you up.

The name of my new service: Red-Hot Resources. Yes, it's the same name as this blog. But we'll probably fold this blog into the new service down the road, as I can only do so many things at once.

You can find out more by CLICKING HERE . Or you can read my MoneyandMarkets column about it by CLICKING HERE.

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Faster GDP Revs Up Sputtering Greenback

From Bloomberg today ...

Dollar Gains as U.S. Revises Third-Quarter GDP Growth Higher

Nov. 29 (Bloomberg) -- The dollar gained the most in
three weeks against the euro after a government report showed U.S. economic growth last quarter was quicker than previously estimated.

Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.2 percent annual rate last quarter, beating the government's initial estimate last month of 1.6 percent growth. Economists expected 1.8 percent growth in the third quarter, based on the median estimate in a Bloomberg survey. GDP has slowed from a 2.6 percent clip in the second quarter.

XX My take -- well, maybe. The US dollar was overdue for a bounce anyway. I have to say I'm not impressed with the bounce it got off this GDP news -- maybe that's because even though 3rd quarter GDP was higher than expected, it's still a slowdown from the second quarter. I'd like for the greenback to bounce higher, and gold to go lower, so that we can get better entry into precious metal stocks. Will I get my wish? Stay tuned.

Oh, and one more thing. Even though this is a backward-looking statistic, higher GDP numbers will probably translate into higher oil prices. That will have to be balanced against the energy reports out today and tomorrow, but it could be interesting.

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Latest Interview on HoweStreet

Have I mentioned that Tom Jeffries of is a lot of fun to talk to? He has that rare gift of putting interviewees instantly at ease. Anyway, if you want to listen to me babble to Tom about gold, silver, oil, etc., CLICK HERE.

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BHP May Be Ready to Start Buying the Smaller Fish

BHP is the world's largest mining company, so what it says carries some weight. Now, BHP is saying that demand for commodities continues to be strong as countries urbanize (that's right along the same lines of the OECD outlook that I wrote about yesterday), and BHP may seek to make acquisitions, especially gold mining companies.

Australian mining stocks are up on the news, but BHP has world-wide reach.

In a story on Bloomberg News Service, CEO Chip Goodyear had some interesting comments...

Demand for commodities continue to be strong, Goodyear said, as countries urbanize. ``Over time, we expect the trend to continue and we see strong support from governments,'' said Goodyear. ``We continue to be quite bullish.''

Demand for iron ore, a steelmaking ingredient, continues to be good, Goodyear said. Demand for coking coal, also used insteelmaking, may be ``softer,'' as China has developed its own supplies faster than expected. Miners are now negotiating with steelmakers to setbenchmark annual prices for 2007.

The Bloomberg piece closes with this: "BHP is spending as much as $13.8 billion on mines andoilfields to meet rising demand from China, the world's fastest-growing major economy. It posted a record $10.45 billion full-year profit in August, and then said it will spend $3 billion buying back shares over 18 months."

Well, sort of. An optimist would say that if a company is buying its own shares, it believes it is undervalued. A pessimist would say that the company obviously can't find better things to spend its money on.

Personally, I look for the small caps to continue outperforming this goliath. BHP is a well-run company and a good stock; I just find better value elsewhere ... especially in stocks that BHP may potentially buy.

So far this year, we've seen $157 billion in mergers and takeovers (including proposals that haven't closed yet) in the mining industry. The way BHP is talking, 2007 could be an EVEN BIGGER year.

Read the Bloomberg story on BHP by CLICKING HERE

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Tuesday, November 28, 2006

Can the Global Economy Switch Engines?

This story from Reuters raises some interesting points on the question: Can the global economy keep humming along if the US economy really slows down?

PARIS (Reuters) - The U.S. economy is running out of steam but Europe's resurgence and Asia's awakening will prevent the world's economy from derailing as it did after the stock market crash of 2000, the OECD said in a report on Tuesday.
"Rather than a major slowdown, what the world economy may be facing is a rebalancing of growth across OECD regions," said Jean-Philippe Cotis, chief economist at the Organization for Economic Cooperation and Development.
In a twice-yearly Economic Outlook, the OECD forecast growth decelerating next year to 2.5 percent across its 30 mainly rich, industrialized member countries from 3.2 percent this year, and regaining some speed in 2008.

Read the rest of the story by CLICKING HERE.

The OECD takes the view that while the US economy is important, the growing economies of Asia could keep pushing the global gravy train even if America gets sidelined. If true, that would be a major realignment of the world order.

Now here's an interesting question: What would happen to the US dollar if our economy is in the dumps and Europe and Asia are growing faster than we are? I'd say the flow of funds would leave our shores and seek better investments elsewhere -- and that could send the US dollar much lower.

Naturally, that would be a huge boost for precious metals prices.

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Fronteer Development Group: Motley Fooled Again?

Anyone who bought my uranium report might have felt some consternation yesterday. Fronteer Development Group, one of the recommended stocks, plunged on the day. That looks bad. But what if I told you the people selling the stock were fools … Motley Fools.

On Friday, an analyst named Seth Jayson panned Fronteer and another uranium stock in the Motley Fool. You can read his article by
CLICKING HERE. Mr. Jayson called Fronteer a “revenue-free wonder” and said he had his doubts that the company could successfully execute its business strategy.

There’s little doubt in my mind that Mr. Jayson’s pan of Fronteer was the catalyst for the sell-off. On FRG message boards some angry shareholders speculated that Mr. Jayson either A) shorted FRG before publishing the article or B) was trying to knock the stock down so he could buy it on the cheap.

The angry FRG fans pointed out that Mr. Jayson was trying to value an exploration stock like a producing stock. Surely, their argument went, no one could be that much of an ignoramus!

Though I enjoy a good conspiracy theory as much as the next person, I have to come down on the side of ignorance, not ill will. Just because Mr. Jayson calls himself an analyst doesn’t mean he’s qualified to analyze anything. Just because Motley Fool publishes his writing doesn’t mean it is serious. Free analysis is worth what you pay for it (readers of this blog should keep that in mind as well).

Sure, the kind of obtuseness Mr. Jayson displayed is usually confined to political journalists – (examples: Candy Crowley, David Brooks, Peggy Noonan – the list is nearly endless). Natural resources analysts usually can at least read a company’s business strategy on its own website before spouting off. Apparently, Mr. Jayson was not able to do that. We really shouldn’t make fun of him -- perhaps he’s retarded. Perhaps Motley Fool is publishing him as part of a community outreach program for the mentally handicapped. We just don’t know.

All joking aside, there are other possibilities. Maybe Mr. Jayson is actually a good analyst and he simply made a mistake. That happens to the best of us. Or maybe HE'S right and I'M wrong -- a smart analyst should be prepared for any possibility.

The good news is it doesn’t look like Fronteer’s stock is suffering overly much. Take a look...

If you hold this move up to the cold, hard light of day, Fronteer enjoyed a great run recently, and it was inflated on speculative money. Mr. Jayson's Motley Fool piece was the prick that let some hot air out of the balloon. That’s all. If someone, say, who bought a certain uranium report recently, was looking for a good entry opportunity into a great stock … well, you know.

Hey, have you seen the price of uranium lately?

How about the price of gold?

Gold broke out of the downtrend that it was in since May and seems to be breaking out of short-term consolidation as well.

Does it give you a warm and fuzzy feeling? It does me.

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Monday, November 27, 2006

Here’s the news on gold…

Gold Gains for Seventh Day in London as Euro Touches Highest Since 2005

Gold rose for the seventh straight day as the euro touched its highest since March 2005 against the dollar, making the metal more appealing as an alternative investment to U.S. stocks and bonds. [To read more, CLICK HERE]

My view: Naturally, with everyone turning bullish on gold at once, the chance for a pullback is high. I’d wait for the pullback and use it as a chance to get in. If we miss it, well, RHAT and RCS portfolios already have plenty of precious metals in them.

What is driving this move? Well...

Dollar's Swoon May Continue

If Data Point to Hard Landing (WSJ subscription required)

TORONTO -- The dollar could be vulnerable to further damage this week after weakening sharply late last week.

Market thinness related to last week's Thanksgiving holiday may have exaggerated the dollar's losses, though there still remains a substantial risk that the selloff is more deeply rooted.

Shaun Osborne, chief currency strategist at TD Securities in Toronto, said the dollar's late-year downward break after months of mostly sideways range-trading is reminiscent of trading patterns in several recent years, when the dollar faded badly against major currencies in the last weeks of the year.

More pressure on the dollar can be expected if upcoming U.S. data releases trail forecasts to the extent that last week's latest jobless claims figures and consumer sentiment index releases did. They could inflame speculation about a hard landing for the economy and looming Federal Reserve interest rate cuts.

Significant U.S. data include the preliminary estimate of third-quarter gross domestic product growth Wednesday, as well as several housing market indicators scattered throughout the week and the November Institute for Supply Management index on Friday. [To read more, CLICK HERE]

But how about silver? I'm glad you asked...

And what about oil? I’m glad you asked …

Oil Shares Signal a Rebound in Crude; Pickens Predicts Record 2007 Price

Oil stocks are signaling that crude prices may rebound to a record in 2007. Benchmark U.S. crude oil is likely to average $70 a barrel next year, according to Dallas hedge fund manager Boone Pickens. Economist Ed Morse at Lehman Brothers Inc., the fourth-largest U.S. securities firm, predicts $72. Either would top the average price for New York oil futures so far this year, $66.73 a barrel, and set a record. [To read more, CLICK HERE]

And don’t forget this one …

Oil Rises After Saudi Oil Minister Suggests Support for Another Output Cut

Finally, China, China, CHINA!

China's Economy May Expand as Fast as 10.7% in 2006 (Update3)

Nov. 25 (Bloomberg) -- China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics. Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006. [To read more, CLICK HERE]

That would help explain this one …

Yuan Has Highest Close Since End of Dollar Link as Asian Currencies Climb

The yuan posted its highest close since the end of a fixed exchange rate to the dollar last year after Asian currencies the People's Bank of China uses to guide its exchange rate surged against the dollar. [To read more, CLICK HERE]

Good news on China should impact copper (positively). We'll see! Happy Monday, and good trades!

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Friday, November 24, 2006

Dollar Takes a Dive and Precious Metals Rally

Here's an interesting story on how the US dollar is taking it on the chin ....

Gold Rallies as Dollar Tumbles on Growth Concerns

NEW YORK (MarketWatch) -- Gold futures rallied Friday as the dollar tumbled to a 1 1/2-year low against the euro and an almost two-year low against the British pound on concerns about flagging economic growth in the U.S.

But they say a picture is worth a thousand words, so check out this chart...
"FREEFALL" pretty much sums up the action in the US dollar. With the greenback hitting 19-month lows, many think the sell-off is overdone. If we get a bounce, I'll use it as a chance to go long precious metals.
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Wednesday, November 22, 2006

The Saudi Arabia of Uranium Says "NO!"

From the LA Times today (free subscription required)...

Mining firms again eyeing Navajo land

Demand for uranium is soaring. But the tribe vows a 'knockdown, drag-out legal battle.'

Crownpoint, N.M. -- When mining companies started calling tribal offices last year, Navajo President Joe Shirley Jr. issued an edict to employees: Don't answer any questions. Report all contacts to the Navajo attorney general.

Decades after the Cold War uranium boom ended, leaving a trail of poisonous waste across the Navajo Nation, the mining industry is back, seeking to tap the region's vast uranium deposits once again.

Companies are staking claims, buying mineral rights and applying for permits on the edge of the tribal homeland. They make no secret of their desire to mine within the reservation as well.

With demand increasing, the price of uranium has climbed to more than $60 a pound. Six years ago, it was as low as $7.

Mining companies are extracting uranium in Texas, Wyoming and Nebraska, and are taking steps to mine in Colorado.

But Navajo country, covering some 27,000 square miles in Arizona, New Mexico and Utah, is the biggest prize of all — "the Saudi Arabia of uranium," in the words of Mark Pelizza, a vice president of Uranium Resources Inc.

Long story short: Pissed off at the horrible treatment they received from mining companies in the past and wary of disasters like the one that sent 93 million gallons of radioactive water roaring through their land in 1979, the Navajos are refusing to talk to the mining companies today. The mining company executives are incensed -- they can't believe the Navajos can't be bought.

We'll see about that. In the meantime, you know what this will do ... yep, drive up the price of uranium.

Read my post at today for more bullish news on uranium. You can read it by CLICKING HERE.


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Easy Come, Easy Go

From the Bloomberg News Service today ...

1) Nov. 22 (Bloomberg) -- Platinum slumped the most in more than six years in London, declining from a record, as some investors doubted the prospect of an exchange-traded fund being introduced for the precious metal.

XX Sean's note -- it was just two days ago that platinum SOARED the most in six years. I'd hate to be one of the guys who bought that rally. Ouch. But if you did, don't worry too much. It should work out eventually. Anyway, it's hard to put too much stock in market action in a holiday week -- that's why most of us don't trade around the holidays.

2) Nov. 22 (Bloomberg) -- Crude oil fell more than $1 per barrel after an Energy Department report showed that U.S. oil and gasoline inventories jumped. Crude-oil stockpiles rose 5.16 million barrels to 341.1 million in the week ended Nov. 17, the report showed. The gain left supplies the highest since the week ended June 30. Gasoline inventories rose 1.41 million barrels to 201.7 million, the first increase in six weeks. Analysts surveyed by Bloomberg News expected a 700,000 barrel oil supply gain and a gasoline drop.

XX Sean's note -- again, just yesterday we saw prices of crude jump after shipments through the Alaska pipeline were cut by 65% and OPEC growled about cutting production again. Well, I'm still waiting for oil to close over the $62 area before I turn bullish again.

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Gobblin’ Up Uranium

My latest post at Money and Markets is about Thanksgiving. For example, I relate this tale...

During World War II, my paternal grandfather invited a British sailor over for Thanksgiving. This guy had been sunk by the Germans three separate times! My father, and his brother and sister made some sweet coin that day, because they charged all the kids in the neighborhood a nickel a pop to look in the window and peek at the buoyant British sea dog.

My paternal grandfather is the stuff of legend. Do you want to hear a story that DIDN'T make it into Money and Markets?

In the old days (around World War II), when you cooked a big turkey, it cooked overnight. And
that meant someone had to get up every hour and baste it, or just stay up all night and baste it.

One year, my grandfather decided to stay up and baste the turkey with a buddy of his ... and a bottle of whiskey. They actually did the basting ... my grandmother found both happily sloshed men still awake in her kitchen the next morning. However, they committed one important error ... THEY FORGOT TO TURN THE OVEN ON.

Ah, the Irish. When you have a lot of people in your family -- my mother had 13 brothers and sisters -- you don't have to make this stuff up, because eventually someone in the family does something worth talking about.

I hope you have a very happy Thanksgiving with you and yours. Canadian readers already had their Thanksgiving, but they can come on down and join us for pie.

Anyway, if you want to read the rest of my column, "Gobblin' Up Uranium,"

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Tuesday, November 21, 2006

Gold Gains as the Dollar Dips tells how a sliding dollar is starting to light a fire under gold today...

Gold plowed ahead Tuesday, helped by speculator interest and a softer dollar. December-dated gold contracts rallied $6.60 to close at $628.70 an ounce on the Comex division of the New York Mercantile Exchange.

Read the whole thing.

But what the story misses is that rising oil prices are also boosting gold. The Trans-Alaska Pipeline just announced it is going to limit the amount of oil it will carry to 35% of normal, and a North Sea platform shut down due to a gas leak.

And then there's the fact that OPEC is talking VERY LOUDLY about cutting output again.

With that going on, who wants to be short oil over a long weekend? Not me! Rising oil prices stoke inflation fears, and that sends gold higher.

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Australian Taskforce on Uranium

The Australian Government's taskforce on nuclear energy has delivered its draft report. In short, the taskforce found that that more uranium should be mined in Australia. It also said a nuclear energy sector would face enormous cost disadvantages compared with fossil fuels. Australia has plenty of cheap coal, but is approaching nuclear power as a way to hit its emissions targets under the Kyoto Accord.

The first nuclear power plant, if greenhouse gas emission reduction measures bring about price parity, will also not be ready to operate until 2021 at the earliest.

Then there’s the other side of nuclear fuel production – enrichment (Australia currently mines uranium, but does not enrich it for nuclear fuel). While the taskforce said downstream processing of uranium(enriching) was difficult to achieve, it’s also feasible and potentially lucrative.

Other points in the report … .

* In one scenario, deployment of nuclear power starting in 2020 could see 25 reactors producing over a third of the nation’s electricity by 2050.

* The challenge to contain and reduce greenhouse gas emissions would be considerably eased by investment in nuclear plants. Australia’s greenhouse challenge requires a full spectrum of initiatives and its goals cannot be met by nuclear power alone. The greenhouse gas emission reductions from nuclear power could reach 8 to 18 per cent of national emissions in 2050.

* Australia has 38% of the world’s low-cost reserves of uranium with most in a small number of deposits. Olympic Dam is the largest deposit in the world and contains approximately 70% of Australia’s known reserves.

* In 2005, Australia’s uranium oxide exports earned $573 million with a record production of over 12 000 tonnes. Exports are forecast to increase strongly both from rising prices and rising production reaching over 20 000 tonnes by 2014–2015. Australia’s present uranium exports are enough to generate more than twice Australia’s current annual electricity demand.

* Australia will increase production over the medium and longer term by expanding existing mines. Each of the three operational mines (Olympic Dam, Ranger and Beverley) can expand production or extend their lives through the discovery of further reserves on already approved mine leases. Many smaller known deposits could be developed relatively quickly, but are currently not accessible under state or territory government policy.

* Canada and Australia produce more than 50% of the world’s natural uranium supply, with five other countries accounting for a further 40%. A number of new mines and mine expansions can be expected in the medium term, while increases in uranium production can be expected from Canada, Kazakhstan, Namibia, Russia and the United States. Forecasts show sufficient capacity over the medium term (to about 2015), but after this time greater uncertainty over both supply and demand is projected. On current forecasts, demand exceeds existing capacity. Thus, there is an excellent opportunity for Australia to fill the gap.

If you haven't read my uranium report, CLICK HERE to find out more about it.And of course, you can read one of my reports on uranium. CLICK HERE.

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Monday, November 20, 2006

M&A Fun Factoids

  • So far this year, mergers and acquisition deals in the mining industry have topped $113 billion US worldwide, according to figures from Bloomberg, as soaring commodity prices drive a takeover surge
  • Total worldwide merger and acquisition activity so far this year has reached a record $3 trillion US.

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Opportunity or Wishful Thinking?

In a report dated Nov. 2, Credit Suisse is saying that China's copper demand growth may DOUBLE next year to 8%. That would create a supply shortfall of 252,000 metric tonnes.

This comes on the heels of Credit Suisse's VERY BULLISH sector review for copper, which it publishd October 12.

Basically, Credit Suisse says that the big problem in copper is not the weakening US housing market -- the number of housing starts in October was the weakest since July 2000 and was down 27 percent from a year earlier -- but rather a credit tightening cycle in China. They believe the credit tightening cycle will end soon.

When that happens Credit Suisse expects a major restocking cycle in China, one that could be between 200,000-400,000 tonnes and add 2% to global demand next year.

Credit Suisse also singled out India, which has announced a $350 billion infrastructure spending programme. India copper demand growth is currently growing 16% per year (starting from a smaller base than Chinese copper demand). Credit Suisse expects India's demand for copper to increase from 4% of global consumption to 10% by 2010.

This is the context in which we must view Freeport McMoRan's $26 billion bid for Phelps Dodge. That bid carries a 33% premium to Phelps Dodge's price before the announcement. Obviously, FCX believes copper prices are going much higher. Standard & Poor's likes the news -- it says it may upgrade FCX.

Meanwhile, The London Metals Exchange said today that copper stocks monitored in its warehouse rose by another 2,050 tonnes to total 158,025 tonnes. LME copper stocks have now risen 44% from a recent low of 109,600 tonnes.

So are Credit Suisse and FXC right? Are the falling housing starts and rising stockpiles of copper just giving us a buying opportunity? Or are they "buying the top" of the market?

Read Credit Suisse's October 12 Sector Review and decide for yourself: Download CS Oct 12 report on Copper (.pdf)

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3 Stories I'm Watching This Morning

1) ALGIERS (Reuters) - OPEC may decide on a second output reduction at its December meeting to strengthen the stability of oil prices, Algeria's Energy and Mines Minister Chakib Khelil said on Sunday. OPEC President Edmund Daukoru, Saudi Arabia and other Gulf OPEC members have all said they see scope for deepening a supply cut of 1.2 million barrels a day when OPEC next meets on December 14, pointing to high fuel stocks in top consumer the United States as evidence that the market remains oversupplied.

2) Gold firmed on Monday after last week's drop in prices spurred buying from jewellery makers in the run up to Christmas, while platinum reversed losses and gained nearly 2 percent on fund buying.

3) $26 Billion Deal Creates World's Top Copper Miner. Freeport-McMoRan will acquire Phelps Dodge for $25.9 billion in cash and stock to create the world's largest publicly traded copper company.

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Sunday, November 19, 2006

Charts for Monday

I just got back from a long weekend at the Miami Book Fair (I found time to work on my new ETF report, so everyone's happy) . What a great time, with great authors. And books! They were selling great books for dirt-cheap prices! I have enough reading material for months.

Now, it's back to the markets. A weekend away can sometimes give you fresh perspective. Here are three charts I find interesting...
Silver spent last week consolidating, but it's still bullish. We could see more profit-taking, but I would expect it to make another attempt to push through overhead resistance at the $13.50 area.

and then there's oil...

Oil skidded lower last week. Oil not only is failing to close above $62, it's in a down-trend. Fundamentally, it's due to warm weather up north and rising natural gas stockpiles. Psychologically, traders say the Democratic win of Congress seems to have taken a US attack on Iran off the table.

Things that could shake oil out of its downtrend include A) if OPEC cuts quotas again when it meets in December -- or if the market THINKS OPEC may cut again and B) when/if Old Man Winter finally take a bite out of the Big Apple.

For another perspective on that, let's look at the XLE (Energy Sector SPDR) divided by the S&P 500)...

For a long time the Energy sector outperformed the S&P 500. Now, hot money is flowing out of that sector. Will it flow back in? Stay tuned.
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Thursday, November 16, 2006

One last fling with Mexican silver

I should have put this link up yesterday, but I'm dragging ass from a terrible cold and I'm wrapping up a new report on ETFs. Anyway, here is yesterday's piece for We're trying to spice up the headlines, so this one is called "Sizzling Silver Miners Down South." It should be my last piece on Mexican silver mines for awhile. Read it HERE.
And here's your verdant photo for the day ... a snapshot I took flying over the Sierra Madre.

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The Roaring Dragon Hungers for Canadian Uranium

This may explain why North American uranium stocks are exploding higher today ...

China sets sights on Canadian uranium

...the Chinese government seems to have a stronger interest in acquiring Canadian uranium to fuel its own, homegrown reactors.
Natural Resources Minister Gary Lunn, wrapping up a three-day visit to Beijing, disclosed Wednesday that he has agreed to include uranium on the agenda of a working group of Chinese and Canadian officials who will discuss energy co-operation between the two countries.
“That was something that was raised by the Chinese officials,” Mr. Lunn told reporters in Beijing Wednesday.
“Obviously they have a very keen interest.... Absolutely we will discuss the possibility of that."

Since China plans to build 30 to 40 nuclear reactors over the next 15 years, it's not surprising they'd come sniffing around Canada's cornucopia of uranium.

And this has sent the stocks in my recent "Golden Age of Uranium" report on a tear. Two of them hit all-time highs today.

So is it too late to buy in? Heck, no! We're only at the beginning of the uranium boom. In fact, since uranium just corrected a bit, this is a GREAT time to buy.

If you haven't read my uranium report, CLICK HERE to find out more about it.And of course, you can read one of my reports on uranium. CLICK HERE.

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Tuesday, November 14, 2006

Infrastructure Spending in Developing Nations is Soaring

Interesting story in Bloomberg today...

"Investment spending in developing markets will rise to about $1 trillion in the decade ending 2014, up from $900 billion in the 10 years previously, according to slides presented by Rice, who oversees an infrastructure segment that includes jet engines, energy equipment and services, aircraft leasing, locomotives, water treatment and oil and gas."

In the more short term, "sales from emerging markets will reach $27 billion, led by spending on the development of infrastructure ranging from airports and roads to water-treatment plants and hospitals."

That's kind of a disconnect with what we see happening with the price of copper, lead, and other materials, but those may just be short-term fluctuations. Let's watch for the longer-term trends to develop.

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Monday, November 13, 2006

While America Fiddles, Russia and China Build Empires of Oil

Here's the news from the BBC that was lost in the weekend shuffle ...

Russia's state-run oil giant Rosneft is to build hundreds of petrol stations in China as part of a plan to double its business in Asia.


Russia is seeking to diversify its energy exports away from Europe and is already building two gas pipelines to China.

Russia is planning to increase the amount of oil it sells to China in 2007 by 53%! Russia's real oil wealth is in natural gas, and that's what the two pipelines are about. China is also moving to invest heavily in Russia's oil and gas companies. China National Petroleum Corp (CNPC) and state-owned Russian company OAO Rosneft recently formed a joint venture, Vostok Energy, to carry out oil exploration in Russia.

Bilateral trade between Russia and China will hit US$60-80 billion by 2010, and China will invest US$12 billion in Russia by 2020, starting with $1 billion immediately.

And let's not forget India, which is seeking its own oil deals with Russia.
New Delhi is seeking a slice of the Sakhalin III oil and gas project. It also has promised to buy 50 million tons of crude oil annually from Russia, is offering incentives to Russian companies to build refineries in India and supports Moscow's bid to participate in the proposed US$7.4 billion Iran-Pakistan-India (IPI) gas pipeline.

Meanwhile, the US is fixated with celebrity marriages, politicians are positioning for the 2008 elections, and our money, manpower and resources are being sucked into the vortex that is the ongoing fiasco of the war in Iraq. Remember how "liberated" Iraq was supposed to flood the US with cheap oil. How is that working out?
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Monday Charts of Gold, Silver and Copper

Some information below taken from US Global Investors Alert for Nov 10, 2006 …

China’s central bank chief said the country was eyeing “lots of instruments” as alternatives to US dollar reserves. Along with the combined dollar weakness, this news sent gold soaring almost $18 on Thursday.

China’s move to diversify its reserves could potentially underpin gold demand for years to come, according to Dennis Gartman, a respected investment newsletter writer. China has about 1 percent of its reserves in gold and Gartman expects this to rise to 5 to 6 percent in the next 15 years. Such a move would suck up TWO YEARS worth of global gold production.

Investment in South Africa’s mining sector has slowed as legislation over the government taking control of mineral rights and rules regarding black economic empowerment (BEE) have contributed to delays in mineral development.

In India, the rules regarding custody of securities were amended to allow the outsourcing of safekeeping of bullion to outside agencies, thus paving the way for the launch of exchange-traded gold funds in the country.

Now for silver ...

Silver looks even more bullish than gold. Read my recent MaMs (Examples HERE, HERE and HERE) for why.

Now here's copper ...

Copper prices came under pressure this week after London Metal Exchange inventories gained 7,000 metric tons, or 5 percent, and an analyst forecast calling for a 30-percent price decline next year to $2.40 a pound.

Keep your eye on: Reuters reports Peru's mining unions are preparing to strike over compensation issues. Union leaders will meet on Nov. 22-23 to determine further action. Peru produces 7.6 percent of the world's gold, 3 percent of the world's copper and 1.7 percent of the world's zinc.

This week, in, I plan to write more about silver. Stay tuned!

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Sunday, November 12, 2006

My latest Interview on

Tom and I talk about silver, copper, Mexican mines and more.

You can listen by clicking here:
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Friday, November 10, 2006

IEA Reduces Oil Targets ... It's Almost Time to Buy

Crude oil is pulling back this morning after the International Energy Agency cut its global demand forecast for the third consecutive month. As Bloomberg says ...
The energy adviser to 26 nations reduced its projection for world oil demand this year by 80,000 barrels a day. Demand will expand 1.1 percent to 84.5 million barrels a day, down from an earlier forecast of 1.2 percent, the IEA said in a monthly report. Demand will drop because China, the world's third-largest oil importer, will have slower gains in gasoline use, the IEA said.
Looking down the road, the IEA expects more of the same...

The Paris-based IEA also reduced its 2007 world consumption estimate by 80,000 barrels a day and cut next year's forecast for oil demand from the Organization of Petroleum Exporting Counties, the so-called ``call on OPEC,'' to 28.3 million barrels a day. Last month it estimated that 2007 demand from the 11-nation group would be 28.5 million barrels a day..

Well, considering the IEA's piss-poor track record on predicting these things, I'm actually feeling rather bullish. You know what else makes me feel bullish? This chart of crude oil...

If crude oil closes back over $62 (roughly) that would be bullish. The bottom oscillator on the chart is RSI, a measure of momentum. It's also rising -- also bullish.

We'll see how crude looks on Monday. Have a great weekend.

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The Next Sci-Fi Channel Movie of the Week

Giant Ravenous Snails Invade Island of Barbados
(And no, I'm not making this up)
BRIDGETOWN, Barbados (Nov. 9) - Ravenous giant snails that emerge from the ground by night are thriving on the tropical island of Barbados, destroying crops and prompting calls for the government to eliminate them.
A nocturnal survey last weekend found hundreds of thousands of African snails - which are often about the size of a human hand - swarming the central parish of St. George, the country's agricultural heartland, where farmers complained of damage to sugar cane, bananas, papayas and other crops.
"We saw snails riding on each other's backs and moving in clusters," said David Walrond, chairman of the local emergency response office that organized 60 volunteers for the expedition. "You're just crunching the shells as you're walking through."

Amazingly, these African snails didn't arrive in Barbados until 2000, when one hitched a ride on a cargo ship. Actually, there's enough fodder for a few Sci-Fi Channel movies here: The chairman of the local emergency response office said the snails can lead to an increase in the populations of rats, which prey on the fast-multiplying creatures, and mosquitoes, which breed in water that collects in shells of dead snails.

So, I'm thinking the first movie will be called "OOZE!" and it will be followed by "SQUEAK!" and then "MOSQUITO HOLOCAUST!"

What does this have to do with natural resources? Not much, though maybe it's time to buy butter for escargot. It's just that I like weird science, and it's Friday.

Also, how soon before some of my co-workers blame this on the new Democratic majority in Congress (LOL!)?
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Thursday, November 09, 2006

Update -- Gold Breaks Out

The action in gold today is warming the hearts of gold bulls. Take a look at the chart...

What's moving gold today? I can think of a few forces. Here is one of them: The China syndrome. While many analysts are too quick to blame China for everything including a rainy day, it is true that China, because of its huge population, booming economy and massive foreign reserves, is a factor in the markets. Today, Reuters reported that the People’s Bank of China may shift some of its $1 trillion in foreign reserves out of the dollar. That is adding extra weight to the dollar’s decline. Since gold and the dollar sit at opposite ends of the see-saw of pain, as the dollar goes down, gold goes up.

And do you want to know something really bullish? As big as gold's move is today, the PERCENTAGE winner is silver -- up 4% compared to 3% for gold. I expect that outperformance to continue, too.

Use pullbacks to get in. It looks like the precious metals bull market is ready to charge.

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Wednesday, November 08, 2006

Let's Take a Look at Gold

Gold pulled back sharply this morning. Is this the pullback we've been waiting for ... a consolidation of the big gains after its recent upside breakout? Marketwatch thought so...

SAN FRANCISCO (MarketWatch) -- Gold futures fell as much as $7 an ounce Wednesday morning, as traders mulled mid-term election results - a resounding victory for the Democratic Party -- by locking in some of the metal's recent gains.

Ah, so it's those darned Democrats at fault, eh? Ha-ha! Well, maybe not...

I have to say that gold is showing suprising strength here -- I was expecting a pullback after the big run-up the metal has had recently. A consolidation is normal and necessary for any bull run. But gold looks very strong. What is the metal trying to tell us?

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Tuesday, November 07, 2006

Bloomberg Wakes Up to Uranium's Potential

We keep having discussions at work about uranium -- despite the success of my "Golden Age of Uranium" report, I have trouble convincing The Powers That Be that people are interested in uranium.

Sigh. Maybe THIS will change their minds ...

Nov. 6 (Bloomberg) -- Uranium is the energy investment of choice for a growing number of hedge funds, who say a sixfold gain since 2001 is just the beginning of a rally that will last years.

"We're in an historic uranium shortage,'' said James Passin, who manages $580 million at New York-based Firebird Management LLC and began buying shares of uranium producers five years ago. "We're in a global nuclear revival.''

You can read the rest of the story HERE.

The stocks in my uranium report continue to accelerate. Where's that pullback we're all waiting for? LOL! Looking forward, I think these stocks will continue to be market leaders. Their big moves aren't over ... they're just beginning.

If you haven't read my uranium report, CLICK HERE to find out more about it.

And of course, you can read one of my reports on uranium. CLICK HERE.
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Are Better Winds Blowing in Bolivia

Investors have been running like hell from Bolivia for over a year – and rightly so – because that county has been nationalizing natural resource companies.

Now, Coeur d’Alene Mines – which has a big project in Bolivia – says things are changing for the better.

From MineWeb…

Coeur d’Alene Mines President and CEO Dennis Wheeler told analysts Monday that he believes that the climate in Bolivia is going to remain favorable for foreign investment with no current plans to hike taxes.

Really? So stories like this aren’t harbingers of bad things to come? Well, THAT’S a relief!

Hey, Wheeler has been to Bolivia recently – I haven’t – so he probably knows much better than me. Either that, or Coeur d’Alene Mines, which is throwing more money on top of an already substantial commitment in Bolivia, is wearing the investment equivalent of “beer goggles” – and the company may be surprised when it wakes up to something its buddies wisely avoided.

Good luck to Coeur d’Alene. I wish them the best of luck, and I’ll keep my eyes peeled for confirmation of Bolivia’s change of heart.

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A Series of Unfortunate Events

I should be back home safe in my bed tonight. However, I am stuck in Houston. Why? Well, I had a little airline problem.

It seems I can’t have a field trip to a resource without something going wrong on the airlines. Unlike my adventure in late August, this time, at least, I did not lose my luggage and my remaining clothes did not end up smelling like stale urine.

Anyway, this time, our plane was late ... very late. Because apparently they had rain in Houston on Monday morning, that delayed our plane arriving in Mexico – by THREE HOURS.

“Don’t worry, everyone is delayed – you’ll still catch your plane,” the helpful Continental Airlines attendant told us. I knew it was a lie from the first time it passed his lips.

The plane shows up. We get on – and the stewardess continues saying: “Don’t
worry, everyone is delayed. You’ll probably still catch your plane.”

We arrive in Houston – and sit on the tarmac for half an hour because all the gangways at immigration are filled with delayed planes. So now I’m four hours late. Maybe our planes are waiting for us, eh?

Not a chance! It was all a cruel, cruel lie! I called Continental and not only had my connecting flight already left, they booked me on the next available flight – 2:20 PM the next day! Dammit!l

Well, at least I’m not sleeping at the airport. Instead I’m in a hotel I’ve never heard of in a room that smells funny. I’m not sure if it smells like some fruity pipe tobacco or maybe just a dead old man who’s been left under the bed or something. I’m too tired to look – if you’re under there, you’ll have to carry on without me, Pops.
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Monday, November 06, 2006

Pouring Molten Silver

At the end of the day we saw workers pouring molten silver. This is my first attempt with a YouTube video ... lets see how it works...
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Back On The Surface

Well, that was quite a trip! I'm back on the surface after visiting an underground Mexican silver mine.

I looked at the mine and its mill from top to bottom.
And by that I mean I started at a cliff top and worked my way all the way to the bottom of a mine shaft 140 meters below the surface … I talked to the people working there and examined the rock in the mine, drill cores and charts of their drilling results.

I’m not a geologist, but you don’t have to be one to come to some simple conclusions: It is a rich mine … the proven resource is likely just the tip of a MUCH LARGER resource … and I believe this stock is an easy double in the next year.

The trip started at a hotel in Durango, Mexico, where I joined a select group of other analysts before dawn. We made our way to the airport and crammed into a small plane. So small, in fact, that I had to crouch over to fit my big ol' American body in.

After a 45-minute ride over steadily rising plains dotted with orchards and farms, we flew over the foothills of the Sierra Madre. We landed in a horse pasture. I know this because the pilot had to chase away the horses before we could take off on our return journey.

The countryside was beautiful.

A quick survey of the town from a cliff-top showed us the area’s rich history. The Conquistadors started mining here in the 1500s, and the countryside is littered with abandoned tunnels, crumbling workings and even the tall stone smelter chimneys of Cornish miners who came here to mine tin. And yet despite the hundreds of small-scale efforts and a few really big and organized projects, one explorer after another missed the silver
motherlode that the company I visited is sitting on.

After a delicious breakfast of eggs and home-made salsa and a quick mine safety course (Rule #1: Don’t Die), we strapped on our gear and boarded motorized carts for the trip into the mine.

First, we passed through the old, historical workings. Then the shaft pitched downward and we started our descent. Looking up at the roof of the shaft, we could see the remains of the ore vein, and it guided our path lower. There are about five or six areas in the mine that are being actively worked to one degree or another. The main body of the work is being done in a rich area of nearly-white rock against which the dark streaks and specks of the silver ore stood out sharply.

“This,” one worker told me, handing me a piece of the ore-rich rock, “is the honey-pot of the mine.”

Workers in one section were busy drilling holes for explosives. The mine blasts twice a day – making sure everyone is safely outside first – and then they go in and scoop up the ore. At right, you'll see a photo of one of the drills that make the holes for the explosives.

About 60 dump trucks per day make their way up the mine and deliver ore to the mill to be crushed and processed.

We pulled into alcoves as the big trucks roared past us. The silver vein dives into the Earth at about a 52-degree angle. The miners get as much of the ore as they can in one area, then tunnel around in a circle to mine below where they went before. We followed this path deep into the mine, a 7-kilometer road that ended 140 meters below the Earth.

It was the end of the road, but not the end of the vein. Indeed, the miners are finding that the ore is getting RICHER as it goes DEEPER.

to be continued ...
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Sunday, November 05, 2006

I'm Off to Seek The Treasure of the Sierra Madre

This morning, I hopped aboard a plane to fly to Charlotte, then Dallas, then Durango Mexico (the whole trip takes about 12.5 hours). Now, I'm writing from my hotel room in Durango. The beer is good and the spiders are aggressive (one jumped on me as I enjoyed a cervesa downstairs -- it wouldn't be Mexico without large insects).

Anyway, tomorrow morning, I'm climbing into a small plane to fly over the Sierra Madre to a little silver mine that is gearing up to become a major producer.

The plane flight aside -- I hate flying, I especially hate cramped commercial flights, and 12.5 hours of it was brutal -- this is the part of the job I love.

I really enjoy getting out in the field and seeing
what geologists and miners are accomplishing. It is exciting stuff, and the lifeblood of our business.I should be able to post to my blog at least once or twice on this trip.

Unlike my recent trip to Labrador, Durango isn't THAT remote. It's a far cry from the days of old when prospectors trekked far, far from anything resembling civilization to follow their dreams.

But the dreams are still there ... just the transportation and the method of prying those dreams from the earth's grasp have changed

Have a great weekend -- I'll keep you posted.

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Friday, November 03, 2006

Sizing Up Silver

Since I posted a chart of gold earlier this week, I thought it's time to post silver. As I've written recently in and Dow Jones Marketwatch, I think silver is already lifting off the launch pad.

I'm going to try to use the linkable version of to see if I can show you why... (Click on the chart below to go to the full-sized version)

You can see that ...

1) Silver made a nice double bottom in September and October
2) Silver is now moving higher. I'd expect some consolidation on this rally, but silver might get to 13.25 before it does that.
3) Looking at the momentum oscillators on the bottom of the chart, stochastics are oversold, but they can stay that way for awhile. They are bullish.
4) MACD, a more long-term measure of momentum, looks bullish, keeps rising, and has more upside.

These are strictly technical aspects of silver's move. Fundamentally, the supply-demand squeeze is getting tighter. Industrial use for silver is rising. The SLV, the silver ETF, is a huge source of new demand. Demand for silver jewelry in India -- which is the biggest market in the world for gold -- is rising. And now the Chinese are trading silver futures in Shanghai on a trial basis. That will likely become permanent, and become an investment option for 1.3 billion capitalists.

Tomorrow, I'm flying down to Mexico to check out a silver mine. The kind of stocks I'm interested in Mexico -- well-run Canadian companies who are reopening legacy Mexican silver mines -- are looking as bullish as a day in Pamplona. I think they're going to look even better as time goes on.

I believe silver is going to $20 in the next year -- perhaps sooner than many think!
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