Red-Hot Resources

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

Monday, October 22, 2007

Strap in for a Wild Monday

Global markets are red across the board, as investors realized A) the credit crisis is more severe than some thought and B) the US may be heading into recession, and that could weigh on the Global economy. I think the difference this time is the global growth can continue even if the US has a mild recession. If the US has a deeper recession, we'll have to see. I'm hopeful, though, that the global growth engines of China, India, Russia, Brazil and the Pacific rim could keep chugging along even if Uncle Sam sits out the next dance.

If the US dollar continues to weaken, gold stocks should continue to do well -- just remember there could be lower prices in the short term as panicked investors throw the baby out with the bathwater. For those with a longer-term view -- me, and hopefully you -- that means we'll get better prices on great stocks in a bit.

Since the US is such a big consumer of oil, it may be tougher for oil stocks. And uranium stocks, which have only recently started to turn up again, still look pretty good. Maybe partly due to news like this ....

Paladin Says Uranium May Rise to $110 a Pound in First Quarter Paladin Resources Ltd., which runs a uranium mine in Namibia, expects the price of the metal to rise to as much as $110 a pound in the first quarter of next year, a gain of about 40 percent. ``Availability is the issue,'' Paladin Chief Executive Officer John Borshoff said at a BMO Capital Markets meeting in London today. He forecast first-quarter prices at $105 to $110. The spot price of the metal that's processed as fuel for nuclear reactors rebounded to $78 a pound last week, halting a decline from a record $138 a pound in June, according to TradeTech LLC, a Denver-based pricing service.

``I heard a utility participated'' in the transaction, Borschoff said. ``It wasn't just some hedge fund.''

Is there any good news in the world? Well, if, like me, you're from New England, there is THIS and THIS. But I live in Florida, so Sunday's victory by the Patriots was a bittersweet one for me.

And the market action this week may be bittersweet as well -- it may hurt to see the markets pull back, but remember that we'll get good prices on great stocks down the road.

One last note on the US dollar -- Boris Schlossberg, the crackerjack currency analyst at FXCM, has this to say: "The absence of any clear indication of support from the G-7 suggests that monetary officials will not intervene either verbally or physically to stem the dollar's decline. This leaves the greenback at the mercy of the speculators who will likely push it further down especially if they become convinced that the Fed will be forced to lower rates another 25bp in October with perhaps yet another 25bp cut in December yet to follow. The prospect of additional rate cuts and the lack of any political support leaves the greenback wide open to further momentum selling. The G-7 monetary officials may have miscalculated when they assumed that the US currency will continue its decline in a measured fashion. If the EURUSD hits 1.4500 this week, expect far more aggressive rhetoric from the G-7 authorities as fears of dollar dumping will begin to sweep the market."

Be careful this week. Good luck and good trades.
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