Getting Ready for Turkey Day

I am seeing a flurry of stories that base metals miners are rushing to shut down. Just look at some of the headlines from the past couple days:

Zambian copper workers face layoffs ... Indefinite shutdown for world top tantalum miner ... Mwana Africa shuts Zimbabwe nickel mines ... Denison Mines delays uranium project ... Norilsk Idles Two Mines ... I could go on, but you get the picture. This is happening because the global economy is tumbling into recession (See the China story linked below). But down the road, this is also setting up a supply squeeze and subsequent rebound.

And it's not just base metals: Australia's 2008 gold output may fall to lowest level since '89 .

In Other News ...

Gold equities expected to pay off for the patient

Scotia Capital analyst Trevor Turnbull remains bullish on gold, noting that dollar demand for the metal reached an all-time quarterly record of US$32-billion in the third quarter as investors flocked to safety. He also highlighted the identifiable investment demand gold offers, which includes ETFs, bars and coins.

XX Sean's note -- this guy's picks will look familiar to buyers of my gold report. By the way, did you get yesterday's update to "Your Golden Parachute for 2009"? It's an important one!

Gold is the answer. Now what was the question? While gold has hardly been seen to be performing well in recent months, and has failed to meet gold optimists' more extreme, or even more mild, expectations, it has still performed less badly than most other sectors of the market. As has been noted here on several occasions actual physical demand has remained extremely strong, both in eastern and western markets. Major gold suppliers have run out of inventory and seem to be having difficulty replacing it, while ETF demand remains very positive.

Synchronized Recession, Synchronized Stimulus?

If all the countries (or all the relevant countries) were to stimulate simultaneously, then the aggregate world economy would look a lot more like a closed economy, and the multiplier would be larger yet again.

Figure 1: From visualization of OECD Economic Outlook 84 [link]. Blue is negative growth, darkest blue is -9.335%; orange is positive growth, most orange is +9.335%. White is zero; gray is "no forecast".

A Global Downturn Puts the Brakes on China's Industry It is happening faster than most anyone predicted: China’s economy, long the world’s fastest-growing major economy, is slowing down. Economists are forecasting that after growing nearly 12 percent last year, China’s economy could slow to 5.5 percent in the fourth quarter of this year — a stunning retreat for a country accustomed to boom times.

The Western Financial System We Knew Has Collapsed

Getting banks to lend again is even more essential than getting primary and secondary markets for illiquid structured financial products going again. It may be even more important than getting the regular commercial paper market going again, important though that is. Small and medium enterprises rely overwhelmingly on banks for external finance. Without access to bank loans, credit lines and overdraft facilities, countless SMEs that would be perfectly viable with a functional financial and banking system are threatened with bankruptcy. Without working capital, businesses go out of business. Banks are essential. But they are not lending. Why? A number of possible explanations suggest themselves.

And now for some good news ...

U.S. Mortgage Rates Fall on $600 Billion Fed Plan U.S. mortgage rates fell more than three-quarters of a percentage point today ... The average U.S. rate for a 30-year fixed mortgage ended the day at about 5.5 percent after falling to as low as 5.25 percent, according to Bankrate Inc. It was 6.38 percent this morning.

XX Sean's note -- I'll be traveling for Thanksgiving, so my computer access over the long weekend will be very restricted. Have a great holiday, stuff yourself silly, and I'll talk to you on Monday.

Check out my new gold and energy blog at MoneyAndMarkets.com