Several market forces are pushing the price of gold down today, as concerns over Ireland's sovereign debt has the euro under pressure, pushing up the value of the U.S. dollar, while pent-up concern over the probably of Asian countries raising their interest rates become a reality, as South Korea was the first to take the action to battle inflation. Most thought China may first take that step.
South Korea raised their interest rates by 25 basis points to 2.50.
The U.S. dollar index rose in response to the weakened euro, gaining $0.79, increasing to $79.14 earlier in the day.
Interest rates became a major concern when China revealed their consumer price index was higher than expected, reaching 4.4 percent, generating speculation they would raise interest rates to combat inflation.
Gold prices will probably remain under pressure until the interest rate scenario plays out, the continual uncertainty surrounding the European Union sovereign debt crisis is handled.
The problem with the European sovereign debt crisis is there appears to be a lot of shady dealings and data still being presented as the condition of some countries, as Greece has again stated their numbers are probably lower than believed concerning their deficits.
Socialism isn't sustainable, and these countries better stop their entitlement programs and mentality before the region becomes an economic graveyard. They're already well on the way.
Once the Ireland situation is taken care of, or at least a bailout is accepted by them, the euro will move stronger against the U.S. dollar, helping gold to rebound again.
But there will still be the interest rate scenario left to play out, which when Asian nations announce they're going to raise them, will cause pressure to again be brought on gold prices in response.
It looks like we're going to end up having opposite economic pressure on gold, which will probably result in a lot of volatility until the narrative is more clear.
Spot gold prices have fallen by over $26 an ounce as of about 2:00 PM EDT.
Showing posts with label China Inflation. Show all posts
Showing posts with label China Inflation. Show all posts
Tuesday, November 16, 2010
Friday, October 15, 2010
Peter Schiff On Gold, Dollar, Inflation, Fed and China
Peter Schiff is known for his justified criticism of the Federal Reserve and the disastrous policies they've enacted which is the destroying the economic life of the United States and its citizens, and ultimately affects nations around the world.
Although he sees a disaster coming if they don't change course, there are things people can do to protect themselves against the addictive Federal Reserve policy of printing money, which is another way of saying inflating.
Today they've attempted to change the name to quantitative easing to make it sound like they're doing something different. But it's the same thing.
While Schiff sees hope, he doesn't think the government and the Federal Reserve will do the right thing, and they're going to keep on inflating. Which means they're going to print money to acquire bonds. It's only a matter of how much they're going to buy, not whether or not they're going to do it.
The result of all this will be gold prices and many other commodity prices continuing to rise, the U.S. dollar continuing to collapse, and inflation in other areas soaring.
Schiff says the government will attempt to hide the amount of inflation they're creating, but the ongoing rate of unemployment will force them to continue to print money, which will eventually reveal the monster they've created, as they acquire an enormous amount of bonds with each round of quantitative easing.
Another possible scenario, says Schiff, is he sees the possibility of Treasury yields being held back by the Federal Reserve. At that time corporate and municipal bonds would probably surge, which could woo the Fed into acquiring them too. If that happens, in Schiff's view, he sees the potential complete collapse of the U.S. dollar.
Probably the best hedge against all of this happening, or even part of it happening, is to hold gold.
Schiff says he believes gold and the Dow will eventually move to a 1-to-1 relationship. He has no idea what that number will be, but if the Dow were to move to 10,000, he sees gold moving to $10,000. If the Dow is at 3,000, he sees gold at $3,000 an ounce, etc.
According to Schiff, he sees a correlation between the bear markets of 1930s and the 1970s. In 1932 said Schiff, an ounce of gold equaled the value of the Dow. The same happened in 1980 after the bear market of the 1970s.
When the Dow shrinks in value, it tends to line up with the price of an ounce of gold.
If we end up entering into a period of hyperinflation, all bets are off there as far as the value of the dollar, which could lost almost all its value, according to Schiff.
Besides gold, Schiff likes the agricultural sector, energy, commodities in general, and China.
Everyone should own at least some gold says Schiff.
Although he sees a disaster coming if they don't change course, there are things people can do to protect themselves against the addictive Federal Reserve policy of printing money, which is another way of saying inflating.
Today they've attempted to change the name to quantitative easing to make it sound like they're doing something different. But it's the same thing.
While Schiff sees hope, he doesn't think the government and the Federal Reserve will do the right thing, and they're going to keep on inflating. Which means they're going to print money to acquire bonds. It's only a matter of how much they're going to buy, not whether or not they're going to do it.
The result of all this will be gold prices and many other commodity prices continuing to rise, the U.S. dollar continuing to collapse, and inflation in other areas soaring.
Schiff says the government will attempt to hide the amount of inflation they're creating, but the ongoing rate of unemployment will force them to continue to print money, which will eventually reveal the monster they've created, as they acquire an enormous amount of bonds with each round of quantitative easing.
Another possible scenario, says Schiff, is he sees the possibility of Treasury yields being held back by the Federal Reserve. At that time corporate and municipal bonds would probably surge, which could woo the Fed into acquiring them too. If that happens, in Schiff's view, he sees the potential complete collapse of the U.S. dollar.
Probably the best hedge against all of this happening, or even part of it happening, is to hold gold.
Schiff says he believes gold and the Dow will eventually move to a 1-to-1 relationship. He has no idea what that number will be, but if the Dow were to move to 10,000, he sees gold moving to $10,000. If the Dow is at 3,000, he sees gold at $3,000 an ounce, etc.
According to Schiff, he sees a correlation between the bear markets of 1930s and the 1970s. In 1932 said Schiff, an ounce of gold equaled the value of the Dow. The same happened in 1980 after the bear market of the 1970s.
When the Dow shrinks in value, it tends to line up with the price of an ounce of gold.
If we end up entering into a period of hyperinflation, all bets are off there as far as the value of the dollar, which could lost almost all its value, according to Schiff.
Besides gold, Schiff likes the agricultural sector, energy, commodities in general, and China.
Everyone should own at least some gold says Schiff.
Thursday, July 15, 2010
Marc Faber Says China Growth Should Continue to Weaken
Market pundit Marc Faber, who publishes the famous Gloom, Boom & Doom report, said he sees the economy of China probably weakening over the next several months, and reiterated they could experience a property crash before the end of 2010.
The Chinese economy is already starting to show signs of slowing down, as recent reports say gross domestic product fell from last quarter's 11.9 percent growth to 10.3 percent over the last three months. Analysts had been looking for a 10.5 percent growth rate.
China has been projecting an 8 percent growth rate over the year, but at their current pace should still handily beat that, depending on whether or not the government takes any more steps to cool the economy off, especially the property market.
Some still think China isn't doing enough to slow the economy down, and it will ultimately experience a painful correction in response to that.
China has also been battling inflation, with a goal of bringing it down to 3 percent on the year, which they have now achieved, with it operating at a 2.9 percent rate in June.
The question is whether or not China has done enough to slow things down, and if the pace is low enough. Faber doesn't seem to think so, and he could be right, although, again, he sees it slowing down through the remainder of 2010.
The Chinese economy is already starting to show signs of slowing down, as recent reports say gross domestic product fell from last quarter's 11.9 percent growth to 10.3 percent over the last three months. Analysts had been looking for a 10.5 percent growth rate.
China has been projecting an 8 percent growth rate over the year, but at their current pace should still handily beat that, depending on whether or not the government takes any more steps to cool the economy off, especially the property market.
Some still think China isn't doing enough to slow the economy down, and it will ultimately experience a painful correction in response to that.
China has also been battling inflation, with a goal of bringing it down to 3 percent on the year, which they have now achieved, with it operating at a 2.9 percent rate in June.
The question is whether or not China has done enough to slow things down, and if the pace is low enough. Faber doesn't seem to think so, and he could be right, although, again, he sees it slowing down through the remainder of 2010.
Tuesday, June 22, 2010
Aluminum Prices Going Nowhere Through 2011
A growing consensus is emerging that aluminum prices over the next couple of years are going to remain largely level, and will fluctuate between $1,900 and $2,100 a ton during that time.
The global economic picture, along with the oversupply of aluminum are the major factors cited by economists and analysts as to the reasons for that outlook.
Within those general parameters, aluminum prices are expected to be volatile, mostly on the ongoing battle of China against inflation in their urban property markets, as well as the continuing European debt crisis.
Although demand has been looking good over the long term, the supply is high, and that is negating the increase in demand as far as aluminum prices go, and new aluminum smelters make supply an issue going forward, as it should increase even more as they go online.
Some erratic pricing behavior for aluminum will arise from the inventory deals which could limit supply during certain periods of time, which will be part of the fluctuation in prices mentioned above, but over time that won't have any significant impact on aluminum prices until demand reaches levels where it can't be supplied, which doesn't look to be any time soon.
One new element which isn't being talked about much yet, but which could dramatically change the aluminum demand picture is the news that new aluminum-backed ETFs are going to launch in the latter part of 2010, which could create the type of demand mentioned, changing the overall picture for aluminum.
In that regard, aluminum suppliers could have a harder time meeting demand in the future, increasing the price, but a lot of things have to fall into place for these ETFs to become major aluminum players; like getting the type of financing to take them through the challenges early stages, which is far from guaranteed at this time, but could end up happening over the next several years.
Aluminum looks good over the long term, along with aluminum producers, but in the short term there's very little to get excited about, other than the shares of aluminum companies going down, which will give investors good entry points to invest.
The global economic picture, along with the oversupply of aluminum are the major factors cited by economists and analysts as to the reasons for that outlook.
Within those general parameters, aluminum prices are expected to be volatile, mostly on the ongoing battle of China against inflation in their urban property markets, as well as the continuing European debt crisis.
Although demand has been looking good over the long term, the supply is high, and that is negating the increase in demand as far as aluminum prices go, and new aluminum smelters make supply an issue going forward, as it should increase even more as they go online.
Some erratic pricing behavior for aluminum will arise from the inventory deals which could limit supply during certain periods of time, which will be part of the fluctuation in prices mentioned above, but over time that won't have any significant impact on aluminum prices until demand reaches levels where it can't be supplied, which doesn't look to be any time soon.
One new element which isn't being talked about much yet, but which could dramatically change the aluminum demand picture is the news that new aluminum-backed ETFs are going to launch in the latter part of 2010, which could create the type of demand mentioned, changing the overall picture for aluminum.
In that regard, aluminum suppliers could have a harder time meeting demand in the future, increasing the price, but a lot of things have to fall into place for these ETFs to become major aluminum players; like getting the type of financing to take them through the challenges early stages, which is far from guaranteed at this time, but could end up happening over the next several years.
Aluminum looks good over the long term, along with aluminum producers, but in the short term there's very little to get excited about, other than the shares of aluminum companies going down, which will give investors good entry points to invest.
Monday, June 7, 2010
Copper Falls on Renewed Recession Fears
Copper prices fell even further today, dropping by 5 cents to $2.7660 a pound, or 1.9 percent, as recession worries return as macro-economic data confirms what a number of economists and investors have thought, the we had never left the recession, or there was going to be a double-dip recession.
However you want to describe it, there is little positive happening economically to justify anyone saying we're in a recovery, even if they want to say it's a slow recovery. How about a "no" recovery, which is closer to the truth.
All that has happened is the Obama administration and Federal Reserve spent hundreds of billions with literally no effect.
What had been hoped of course was they would buy time so the economy would recover, but that has failed, and the idea of pumping hundreds of billions more into the economy hopefully won't even be considered, as we are already under water as a nation (referring to the U.S.) and further debt will bring up past the point of no return, if we're not already there.
The nail in the coffin was the jobs report, which finally revealed the faux job number being reported as a reason to justify saying we were in an economic recovery. Now that those that were unconvinced have to face the reality that the private sector isn't producing any jobs to speak up, and the props of hundreds of billions has left us in worse shape, and nothing to show for it except the assertion things would have been worst if the government hadn't taken those steps.
That's an unprovable theory, and in fact a small number of economists have stated from the beginning that it wouldn't work and the government and politicians needed to keep their hands off the economy and let it adjust and fix itself.
Of course they couldn't resist spending our children's and grandchildren's future away, and focused shortsightedly on the present, disregarding the consequences they were warned about.
Either way, we're going to experience difficult times ahead of us, and as copper prices show, there is already a cut in demand, and more to come.
This doesn't mean all commodity prices will fall, as iron ore prices were upped again today for Japanese steelmakers by Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP); although it's questionable as to the sustainability of that move.
But other than gold, and to a lesser degree, possibly silver, most commodity prices will be under strong downward pressure in the near future, as the U.S., China and Europe are all slowing down, and there are really no places to go to make up for that.
However you want to describe it, there is little positive happening economically to justify anyone saying we're in a recovery, even if they want to say it's a slow recovery. How about a "no" recovery, which is closer to the truth.
All that has happened is the Obama administration and Federal Reserve spent hundreds of billions with literally no effect.
What had been hoped of course was they would buy time so the economy would recover, but that has failed, and the idea of pumping hundreds of billions more into the economy hopefully won't even be considered, as we are already under water as a nation (referring to the U.S.) and further debt will bring up past the point of no return, if we're not already there.
The nail in the coffin was the jobs report, which finally revealed the faux job number being reported as a reason to justify saying we were in an economic recovery. Now that those that were unconvinced have to face the reality that the private sector isn't producing any jobs to speak up, and the props of hundreds of billions has left us in worse shape, and nothing to show for it except the assertion things would have been worst if the government hadn't taken those steps.
That's an unprovable theory, and in fact a small number of economists have stated from the beginning that it wouldn't work and the government and politicians needed to keep their hands off the economy and let it adjust and fix itself.
Of course they couldn't resist spending our children's and grandchildren's future away, and focused shortsightedly on the present, disregarding the consequences they were warned about.
Either way, we're going to experience difficult times ahead of us, and as copper prices show, there is already a cut in demand, and more to come.
This doesn't mean all commodity prices will fall, as iron ore prices were upped again today for Japanese steelmakers by Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP); although it's questionable as to the sustainability of that move.
But other than gold, and to a lesser degree, possibly silver, most commodity prices will be under strong downward pressure in the near future, as the U.S., China and Europe are all slowing down, and there are really no places to go to make up for that.
Falling Commodity Prices Suggest Ongoing Recession
The ongoing drop in commodity prices implies the recession continues on, as the decline in prices tell us demand has plummeted.
I say an ongoing recession because I've never believed we've left the recession, but only the government stimulus plans and unprecedented printing of money has kept it from being exposed for what it is.
But whether you want to call it a double-dip recession, , u-shaped recession, or something else, the fact is we're set to face more economic difficulty, and after spending trillions around the world, it has done nothing to stop the recession we've been in for several years, and now has been made worse because of the government spending that has hidden and masked the reality.
There is only one reason commodity prices will drop, and that's based on supply and demand. In this case it's all about demand, which has simply dried up.
That drying up comes from the emerging narrative of slowing demand in China, the European Union, and the United States.
The frantic attempts to spin the situation by the U.S. governments and other governments around the world are no longer believable, and we need to be ready as it hits the fan again.
If spending trillions has ended with nothing, we can be sure spending trillions more will do nothing as well, other than continue to decimate people and their spending power.
Consequently gold prices will continue to rise, as well as quality gold mining stocks, as it becomes the only place of safety that can be counted on going forward.
I say an ongoing recession because I've never believed we've left the recession, but only the government stimulus plans and unprecedented printing of money has kept it from being exposed for what it is.
But whether you want to call it a double-dip recession, , u-shaped recession, or something else, the fact is we're set to face more economic difficulty, and after spending trillions around the world, it has done nothing to stop the recession we've been in for several years, and now has been made worse because of the government spending that has hidden and masked the reality.
There is only one reason commodity prices will drop, and that's based on supply and demand. In this case it's all about demand, which has simply dried up.
That drying up comes from the emerging narrative of slowing demand in China, the European Union, and the United States.
The frantic attempts to spin the situation by the U.S. governments and other governments around the world are no longer believable, and we need to be ready as it hits the fan again.
If spending trillions has ended with nothing, we can be sure spending trillions more will do nothing as well, other than continue to decimate people and their spending power.
Consequently gold prices will continue to rise, as well as quality gold mining stocks, as it becomes the only place of safety that can be counted on going forward.
Teck Resources (TSE:TCK-B) Falling on Economic Uncertainty
Teck Resources (TSE:TCK-B) has dropped today as a growing number of negative economic indicators and situations make it highly unlikely raw material demand will strengthen in the short term.
The ongoing worries and fears over China, Europe and the United States has investors running for safety.
While the European sovereign debt crisis and China battling inflation were bad enough, the jobs report release that revealed the U.S. private sector was doing very little hiring weakened the economic outlook even further, which nowhere to go to find a place where demand for materials, goods and services was rising unimpeded.
There will be a resumption in demand sometime, but that is increasingly looking like it's much further out into the future than being spun by governments and the mainstream economic media.
Most precious metals will remain under pressure until that changes.
The ongoing worries and fears over China, Europe and the United States has investors running for safety.
While the European sovereign debt crisis and China battling inflation were bad enough, the jobs report release that revealed the U.S. private sector was doing very little hiring weakened the economic outlook even further, which nowhere to go to find a place where demand for materials, goods and services was rising unimpeded.
There will be a resumption in demand sometime, but that is increasingly looking like it's much further out into the future than being spun by governments and the mainstream economic media.
Most precious metals will remain under pressure until that changes.
Friday, June 4, 2010
US Steel (NYSE:X) Plummets on EU Exposure
US Steel (NYSE:X) has plunged since its 52-week high of $70.95 a share a couple of months ago, falling even further today after being removed from the "Conviction Buy List" of Goldman Sachs (NYSE:GS).
The major challenge for US Steel is the large exposure it has in Europe, which will cause it a lot of problems going forward, as there are no short-term answers there, and it's questionable whether the EU will survive in the current state it is in.
Add to that China tightening in order to prevent a property bubble there as they fight inflation, and you have a difficult situation for US Steel.
This isn't to say you can't or won't make money on them, as now they're at a cheap price, and could get cheaper. And even in those circumstances there's way to make some quick money.
But for long-term investors, this isn't a great buy at this time until they diversify their markets and better cover situations like these.
US Steel fell to $41.51, a $3.77 drop or 8.33 percent overall, as of 2:42 PM EDT.
The major challenge for US Steel is the large exposure it has in Europe, which will cause it a lot of problems going forward, as there are no short-term answers there, and it's questionable whether the EU will survive in the current state it is in.
Add to that China tightening in order to prevent a property bubble there as they fight inflation, and you have a difficult situation for US Steel.
This isn't to say you can't or won't make money on them, as now they're at a cheap price, and could get cheaper. And even in those circumstances there's way to make some quick money.
But for long-term investors, this isn't a great buy at this time until they diversify their markets and better cover situations like these.
US Steel fell to $41.51, a $3.77 drop or 8.33 percent overall, as of 2:42 PM EDT.
Goldman (NYSE:GS) Cuts US Steel (NYSE: X) From Conviction Buy
US Steel (NYSE:X) has been dropped from the Conviction Buy list of Goldman Sachs (NYSE:GS), as macro-economic conditions are expected to cut into revenues and profits.
The usual recent suspects were identified as the culprits in the case, including China's battle against inflation, European sovereign debt issues, and the oil spill in the Gulf.
Iron ore prices in China have also dropped as well as scrap prices in the United States, which are all pressuring U.S. Steel and its stock.
Goldman did maintain a "Buy" rating on the company and a price target of $73 a share over the next six months.
The usual recent suspects were identified as the culprits in the case, including China's battle against inflation, European sovereign debt issues, and the oil spill in the Gulf.
Iron ore prices in China have also dropped as well as scrap prices in the United States, which are all pressuring U.S. Steel and its stock.
Goldman did maintain a "Buy" rating on the company and a price target of $73 a share over the next six months.
Thursday, June 3, 2010
Citigroup (NYSE:C) Sees Economic Troubles Ahead
Although the mainstream media is attempting to spin some type of recovery, an increasing number of economists and analysts see something different, including some from Citigroup (NYSE:C), who are starting to have a much different take on the situation.
Citigroup analyst David Thurtell said this, “China is cooling from very strong levels, the European recovery threatens to stall, and the U.S. is leveling out.”
Other than that, everything is going fine I guess, at least if you believe news reports.
This is already starting to make a major impact on commodities companies who had especially been looking to China to drive revenue and earnings growth. That has all changed from their efforts to curb their property market which has generated high inflation.
Take it all together and there's no way it can be spun to make it look like we're in a recovery.
The days of being able to count on providers or raw materials to be certain winners are over. We need to comb through data much more closely going forward, as some commodities will do better than others, along with those companies with strong exposure to them.
Citigroup analyst David Thurtell said this, “China is cooling from very strong levels, the European recovery threatens to stall, and the U.S. is leveling out.”
Other than that, everything is going fine I guess, at least if you believe news reports.
This is already starting to make a major impact on commodities companies who had especially been looking to China to drive revenue and earnings growth. That has all changed from their efforts to curb their property market which has generated high inflation.
Take it all together and there's no way it can be spun to make it look like we're in a recovery.
The days of being able to count on providers or raw materials to be certain winners are over. We need to comb through data much more closely going forward, as some commodities will do better than others, along with those companies with strong exposure to them.
Freeport-McMoran (NYSE:FCX) Sees Copper Risk from China Inflation Measures
Freeport-McMoran Copper & Gold (NYSE:FCX) says China's attempt to combat inflation by slowing down their economy could significantly reduce demand for copper going forward.
Copper prices have fallen 15 percent over the last couple of months, and is sure to experience some more downward pressure because of the news from China.
This would also put pressure on margins for Freeport and any company with a strong exposure to copper.
Freeport has plans to spend $100 million in 2010 for copper and gold exploration based on assumptions demand will continue. While for gold that's the case without a doubt, copper looks like it could be in for a rough ride as the U.S. market levels and Europe continues to struggle.
Copper prices have fallen 15 percent over the last couple of months, and is sure to experience some more downward pressure because of the news from China.
This would also put pressure on margins for Freeport and any company with a strong exposure to copper.
Freeport has plans to spend $100 million in 2010 for copper and gold exploration based on assumptions demand will continue. While for gold that's the case without a doubt, copper looks like it could be in for a rough ride as the U.S. market levels and Europe continues to struggle.
Wednesday, June 2, 2010
Alcoa (NYSE:AA), Caterpillar (NYSE:CAT) Up Early in Day
Alcoa (NYSE:AA) and Caterpillar (NYSE:CAT) rebounded nice earlier in the trading session, although Alcoa doesn't seem to have much legs and has eased up some as the trading day goes on.
After plunging yesterday though, any move upward is good for both companies in the current economic environment.
Alcoa rose as high as 1.6 percent before pulling back, while Caterpillar surged 1.3 percent, and has been able to hold that so far.
Until a clearer picture emerges out of Europe and China, this will probably be the way these two stocks perform for some time.
Stock market prices are moving today mostly on pending home sales being better than expected.
After plunging yesterday though, any move upward is good for both companies in the current economic environment.
Alcoa rose as high as 1.6 percent before pulling back, while Caterpillar surged 1.3 percent, and has been able to hold that so far.
Until a clearer picture emerges out of Europe and China, this will probably be the way these two stocks perform for some time.
Stock market prices are moving today mostly on pending home sales being better than expected.
Tuesday, June 1, 2010
Commodity Collapse Close at Hand?
Not too long ago before the depth and width of the sovereign debt crisis in Europe was known, as well as the condition of the Chinese property market, along with its inflation, commodities and commodity companies were considered some of the best bets in the marketplace, and at least a mid-level recovery believed to be close at hand.
That has quickly changed in the last couple of months, with little more than gold being the one commodity that can be counted on to continue rising in price.
“As risk-taking falls, expected growth is reduced,” said Colin P. Fenton, the chief executive officer of Curium Capital Advisors LLC. “Demand for commodities is going to be softer than it might otherwise have been.”
Manufacturing in China, the U.S. and Europe dropped in May, and consequently prices for energy and industrial metals fell along with that.
One of the major commodities uses as an economic indicator is copper, and that fell 7.4 percent in May, the largest drop since January.
Some analysts say it's early in the game to see this in the numbers yet, but they expect guidance to be downwardly revised as the year goes on.
That has quickly changed in the last couple of months, with little more than gold being the one commodity that can be counted on to continue rising in price.
“As risk-taking falls, expected growth is reduced,” said Colin P. Fenton, the chief executive officer of Curium Capital Advisors LLC. “Demand for commodities is going to be softer than it might otherwise have been.”
Manufacturing in China, the U.S. and Europe dropped in May, and consequently prices for energy and industrial metals fell along with that.
One of the major commodities uses as an economic indicator is copper, and that fell 7.4 percent in May, the largest drop since January.
Some analysts say it's early in the game to see this in the numbers yet, but they expect guidance to be downwardly revised as the year goes on.
Freeport-McMoRan (NYSE:FCX) Pummeled on China Index
With the China Purchasing Managers’ Index falling from 55.7 in April to 53.9 percent in May, raw material companies like Freeport-McMoRan (NYSE:FCX) will be under pressure, as before we really get going in some significant activity we're already facing a slowdown.
Analysts had been looking for 54.5, showing the possibility that China was going to slow down is a reality, and questions as to how slow they're going to end up is in the air and concerning the markets.
This comes from the growing inflation in China, which they're fighting by raising interest rates and regulating parts of the property industry.
We'll probably see the market punish some raw material companies like Freeport was today, where they plunged by $3.56 to $66.49 a share, dropping 5.08 percent.
Analysts had been looking for 54.5, showing the possibility that China was going to slow down is a reality, and questions as to how slow they're going to end up is in the air and concerning the markets.
This comes from the growing inflation in China, which they're fighting by raising interest rates and regulating parts of the property industry.
We'll probably see the market punish some raw material companies like Freeport was today, where they plunged by $3.56 to $66.49 a share, dropping 5.08 percent.
Wednesday, May 26, 2010
Shorting Freeport (NYSE:FCX), Teck (NYSE:TCK)?
With both Freeport-McMoRan (NYSE:FCX) and Teck Resources (NYSE:TCK) down over 20 percent, it generates the question on whether shorting them is the best strategy in the near term, as there's little happening in the commodity sector to go long with them at this time.
This of course assumes you're a trader. Obviously this doesn't apply if you want to play everything safe, which isn't necessarily bad in this volatile market. But for those who do trade or want to, volatility is always opportunity, and opportunity is here with the mining stocks.
I bring up Freeport-McMoRan and Teck Resources because of their heavy exposure to copper, which should remain under downward price pressure for some time.
Other than gold miners, mining companies will be under pressure in the near-term, and while we must know the company and what they are exposed to as far as specific commodities, the general sector will continue to struggle because of the expected fall in demand for raw materials from Europe and China, and possibly other regions of the world who are concerned over the unknown ramifications of the sovereign debt crisis and depth of the impact of China battling its inflation problem.
With copper being so tied into the housing market, it should struggle until the economic situation stabilizes, which could be some time to come. Freeport and Teck Resources obviously have strong exposure there, and any other miner that does we should keep that in mind about.
This of course assumes you're a trader. Obviously this doesn't apply if you want to play everything safe, which isn't necessarily bad in this volatile market. But for those who do trade or want to, volatility is always opportunity, and opportunity is here with the mining stocks.
I bring up Freeport-McMoRan and Teck Resources because of their heavy exposure to copper, which should remain under downward price pressure for some time.
Other than gold miners, mining companies will be under pressure in the near-term, and while we must know the company and what they are exposed to as far as specific commodities, the general sector will continue to struggle because of the expected fall in demand for raw materials from Europe and China, and possibly other regions of the world who are concerned over the unknown ramifications of the sovereign debt crisis and depth of the impact of China battling its inflation problem.
With copper being so tied into the housing market, it should struggle until the economic situation stabilizes, which could be some time to come. Freeport and Teck Resources obviously have strong exposure there, and any other miner that does we should keep that in mind about.
Tuesday, May 25, 2010
Citigroup (NYSE:C) Upgrades AK Steel (NYSE:AKS) to "Buy"
Saying he believes the correction of AK Steel (NYSE:AKS) is overdone, Citigroup (NYSE:C) analyst Brian Yu upgraded the company from "Hold" to "Buy."
Yu likes the stainless steel segment of the company, while recognizing the upward pressures on iron ore prices and how they will affect AK Steel and the rest of the industry.
Two forces on working on iron ore prices, one in the short-term, which has already happened, with prices surging, and one for the long-term, which is related to the uncertainties of the potential lowering of demand from China could cause prices to tumble from where they are today.
The near-term term concerns are how the rising prices will affect margins for AK Steel from higher input costs.
Yu likes the stainless steel segment of the company, while recognizing the upward pressures on iron ore prices and how they will affect AK Steel and the rest of the industry.
Two forces on working on iron ore prices, one in the short-term, which has already happened, with prices surging, and one for the long-term, which is related to the uncertainties of the potential lowering of demand from China could cause prices to tumble from where they are today.
The near-term term concerns are how the rising prices will affect margins for AK Steel from higher input costs.
Monday, May 24, 2010
Morgan Stanley (NYSE:MS): Crisis Could Trigger Massive Sell-off
According to Morgan Stanley (NYSE:MS), if the current sovereign debt crisis in Europe continues, we could see a massive sell-off of up to 15 percent in the markets, according to managing director and head of equities at Morgan Stanley India, Ridham Desai.
On the other hand, if things don't worsen, Desai says markets could be up by a similar percentage on the positive side.
As I don't see how things won't worsen, I expect the worst in Europe, and believe we'll see a drop in equities as the width and depth of the debt crisis emerges. We're only at the beginning of seeing a large number of banks in the region default, and countries as well.
Overall, Desai sees India outperforming other emerging markets, and this time that could be the case, depending on how deeply China responds to their inflation problems, which should cut back on growth and related imports for the country.
On the other hand, if things don't worsen, Desai says markets could be up by a similar percentage on the positive side.
As I don't see how things won't worsen, I expect the worst in Europe, and believe we'll see a drop in equities as the width and depth of the debt crisis emerges. We're only at the beginning of seeing a large number of banks in the region default, and countries as well.
Overall, Desai sees India outperforming other emerging markets, and this time that could be the case, depending on how deeply China responds to their inflation problems, which should cut back on growth and related imports for the country.
Wednesday, May 19, 2010
Silvercorp Metals (NYSE:SVM) Falls on EU Debt, China Fears
Silvercorp Metals (NYSE:SVM) (TSE:SVM) got clobbered today, along with most precious metals companies, as the overall sector plunged, with traders taking profits and growing concerns on how the Europe debt crisis and inflation problems in China will have an effect on demand for raw materials.
China is especially a concern for Silvercorp Metals, which operates solely in the middle kingdom, and uncertainty as to how deeply China will take measures to battle inflation. They've already raised interest rates, and have introduced more regulation into the property markets.
The issue is demand and nothing else, and Europe and China are major markets to have both potentially decline in demand at the same time, which could very easily happen.
Silver producers like Silvercorp Metals can be hit hard because it's used in so many products, which if cut back, could decrease demand in a big way, along with earnings.
Silvercorp was down over 8 percent at the close, but has regained some of that in electronic trading.
China is especially a concern for Silvercorp Metals, which operates solely in the middle kingdom, and uncertainty as to how deeply China will take measures to battle inflation. They've already raised interest rates, and have introduced more regulation into the property markets.
The issue is demand and nothing else, and Europe and China are major markets to have both potentially decline in demand at the same time, which could very easily happen.
Silver producers like Silvercorp Metals can be hit hard because it's used in so many products, which if cut back, could decrease demand in a big way, along with earnings.
Silvercorp was down over 8 percent at the close, but has regained some of that in electronic trading.
Did BHP (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale SA (NYSE:VALE) Iron Ore Pricing Strategy Backfire?
The quick change in the economic scene has put pressure on iron ore producers BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Vale SA (NYSE:VALE), as the surety that the commodity bull market would continue on unabated could come back to haunt them.
While there is no doubt the commodity bull market will keep going, the corrections and probable short-term drop in demand could hurt the companies.
Some China observers think the three iron ore producers may have believed China would continue on with their double-digit annual economic growth, but I would be surprised if that was so, as many economists and China leaders have said they think it would be closer to the upper single digits.
With the growing inflation and housing market challenges growing, China is taking steps which could cut their annual economic growth in a way that could cause some short term pain to them.
Even a drop in growth of one or two percentage points in a country as large as China would have dramatic impact on the three companies.
The change in the way iron ore is priced is a good move over the long term, but in the short term, as we probably will soon see, it isn't as favorable to the businesses.
Iron ore pricing was recently changed from a benchmarking system of a year, to that of three months in most cases, and to a smaller degree - one month.
Even short-term this would and will benefit the iron ore miners, as long as prices continue to go up. If not, they're going to get hit hard by a fall in prices, which at this time is likely to happen.
While there is no doubt the commodity bull market will keep going, the corrections and probable short-term drop in demand could hurt the companies.
Some China observers think the three iron ore producers may have believed China would continue on with their double-digit annual economic growth, but I would be surprised if that was so, as many economists and China leaders have said they think it would be closer to the upper single digits.
With the growing inflation and housing market challenges growing, China is taking steps which could cut their annual economic growth in a way that could cause some short term pain to them.
Even a drop in growth of one or two percentage points in a country as large as China would have dramatic impact on the three companies.
The change in the way iron ore is priced is a good move over the long term, but in the short term, as we probably will soon see, it isn't as favorable to the businesses.
Iron ore pricing was recently changed from a benchmarking system of a year, to that of three months in most cases, and to a smaller degree - one month.
Even short-term this would and will benefit the iron ore miners, as long as prices continue to go up. If not, they're going to get hit hard by a fall in prices, which at this time is likely to happen.
Tuesday, May 18, 2010
Teck Resources (NYSE:TCK), Potash (NYSE: POT) Rebound
Potash (NYSE:POT) (TSE:POT) and Teck Resources (NYSE:TCK) (TSE:TCK-B) have rebounded nicely so far today, getting clobbered in Monday trading, as the market continues to digest the implications of the EU debt crisis and the China inflation concerns.
Teck Resources was up just under 5 percent in New York and Toronto, and was especially heavily traded in Toronto.
Potash was up about the same in Toronto and New York as well, gaining just under 1.5 percent as of about 1:00 P.M. EST.
The European debt crisis has crowded out a lot of economic news lately, but the China story has to be considered by investors as to how deeply they may cut back on imports in response to dealing with their inflation challenges.
Even a cutback of 1 percent with some raw materials or products could make a huge impact on some companies, depending on what raw materials they decide on.
Already the iron ore industry has had to lower prices in response to declining demand, although that is unique in the sense of bitter battles over price points for the material used to make steel. So that could be part of the China strategy to get a lower price.
Teck Resources was up just under 5 percent in New York and Toronto, and was especially heavily traded in Toronto.
Potash was up about the same in Toronto and New York as well, gaining just under 1.5 percent as of about 1:00 P.M. EST.
The European debt crisis has crowded out a lot of economic news lately, but the China story has to be considered by investors as to how deeply they may cut back on imports in response to dealing with their inflation challenges.
Even a cutback of 1 percent with some raw materials or products could make a huge impact on some companies, depending on what raw materials they decide on.
Already the iron ore industry has had to lower prices in response to declining demand, although that is unique in the sense of bitter battles over price points for the material used to make steel. So that could be part of the China strategy to get a lower price.
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