As we look at markets this morning, it is noticeable that Asia was down and down rather strongly and that Europe is now strongly higher. It is apparent that Greece is once again at the forefront of the news cycle, and will remain so probably through Monday. All of this has provided us with a bit of a correction, and it was indeed the largest drop of 2012. China's trade ministry is going to increase imports of energy and commodities we heard this morning, and that is only bullish for commodities.
Two news bits of interest for commodities investors:
1. Australia's GDP grew at half the pace that it was supposed to. Possibly a minor hiccup, possibly something bigger. We think that the natural resources sector will do just fine, but the economy might finally be cooling. Something to watch, and to be aware of.
2. Indonesia is moving to limit foreign ownership of mines to 49%. This is another country looking to keep the riches derived off of the land in the hands of its citizens. Think what you want, but this is only bullish for the value of firms with assets in friendly jurisdictions - especially North America, Australia and Europe.
Gulfport Energy (GPOR) continues to take its beatings. It is not below the $30/share level, and as we stated yesterday we are not buyers unless this becomes ridiculously cheaper - levels we thought we would not see again but seem a possibility now. The company continues to develop its assets, and we look forward to hearing news of their first Utica wells.
Also in the Utica, EV Energy Partners, LP (EVEP) has been rather strong. It fell yesterday, although much less so than its peers. The dividend shields the units from big down days like yesterday, as investors seek safe harbors and that is one reason we have it in the portfolio. The main reason we have it in the portfolio is because we see 50% upside in the shares this year and nothing we have seen has altered this view. We remain bullish even with lower natural gas prices as we believe the company is going to dramatically increase their oil exposure via joint venture and the drill bit.
Gold & Silver
Down would seem to be the trend here, and both have actually bounced off of some levels in the past 24 hours which would make one normally take comfort. Silver has bounced off of the $33/ounce level and now seems to be headed higher as it is wrapped up in the bullish trading in Europe now. Gold is also headed higher from its lows, but appears to be struggling to stay above the $1680/ounce level.
Copper was hit and hit hard yesterday. We are interested in buying copper on pullbacks, but not physical lots, rather we want to own the companies with leverage to copper. Right now that is Freeport-McMoRan (FCX) which traded below $39 yesterday before rallying. This might be a trade today, but we are waiting to buy long-term at lower prices.
We saw big losses yesterday in the rare earths space, with Molycorp (MCP) and Rare Element Resources (REE) down strong early. Molycorp finished below the $25/share level and Rare Element above the all important $5/share level. If Rare Element can stay above $5, we think it might be the way to play rare earths for a trade as the market turns for a 10-20% gain.