"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, June 1, 2012

Mining Shares Continue to Outperform the Broader Equity Markets

The last time we had a THREE CONSECUTIVE WEEKS during which the mining shares outperformed the broader US equity markets was in late October/early November of 2011.  While the  month of May this year has been attrocious for the S&P 500, it has been an excellent month for the miners. June is starting out on a good note to say the least as we witness today's strong upmove in the mining shares.

My interpretation of this event is that today's payrolls number, which was so horrible that it cannot have any sort of positive spin placed upon it, has jolted traders into moving more and more to the view that the Fed is going to act SOONER RATHER THAN LATER on the next round of QE.

New York Fed Governor William Dudley said earlier this week the following according to reports by Dow Jones:

"If the economy were to slow so that we were no longer making material progress
toward full employment, the downside risks to growth were to increase sharply,
or if deflation risks were to climb materially, then the benefits of further
accommodation would increase in my estimation and this could tilt the balance
toward additional easing."

Today's payrolls number, a sinking Continuous Commodity Index, a swooning stock market which is threatening to turn into a downside rout and interest rates plummeting to more than 60 year, if not all-time lows, has met every benchmark laid out in the above quotation.

This is what has gold soaring this AM and the gold shares moving sharply higher. Silver is being dragged higher by gold but has managed to at least climb back above the $28 level. I do not trust silver until it at the bare minimum gets back above the $29 level and STAYS ABOVE IT.

I still think the Fed would like to see gasoline prices move closer to $2.50/gallon at the benchmark Nymex contract (it is currently near $2.66 as I write this) but if the global equity market rout does not let up, they are going to have a full-fledged rout on their hands and thus may not have the luxury of waiting much longer.

The JUNE Fed meeting is obviously going to be a significant event for the markets.

Incidentally, the yield on the TEN YEAR NOTE has now fallen BELOW the 1.5% level. INCREDIBLE!


  1. Dan, thanks for putting in a way I can understand on what is happening in the markets. Can smell QE coming..!!

  2. You are definitely someone that has something to say that people need to hear. Keep up the good work. keep it up
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