We find markets up strongly again today, and I believe that this will once again be bullish for both stocks and commodities. This is on top of yesterday's big gains, but the jobs report will carry significant weight today, and will push markets and most certainly influence commodities.
Kodiak Oil & Gas (KOG) was up yesterday, but marginally so. We saw better gains with our position in Gulfport Energy (GPOR), but one must remember that Gulfport has been taken down rather strongly as of late. Oil has been holding in strong, and we want to be a part of those companies that are increasing reserves and doing so in North America, specifically the United States if at all possible. We mentioned Chesapeake (CHK) yesterday and just wanted to follow that up with pointing out that the stock has been a top performer lately, and is now looking at taking out $25/share. As previously stated, we do not see the company struggling to meet cash flow needs, as they have plenty of assets and maybe the market is finally seeing this. We also think that the Utica will soon provide news to help begin to demonstrate to investors what the company is really sitting on there.
Gold & Silver
Gold is hovering just under the $1700/ounce level and we imagine that the traders are simply waiting for a direction which will be determined by the jobs report. We would rather not guess what those numbers will be, and are simply thankful that we are long both gold and silver in physical terms, thus reducing our ability to trade in and out ... it is simply a long-term trade here.
We find silver down this morning too below the $34/ounce level. Economic news is far more important for silver than it is for gold as it is an industrial metal, so for those looking to play the economy we would recommend silver, as we have been doing for some time now.
We wanted to point out Molycorp (MCP) taking out $25 yesterday, but the bigger news is that they are merging with Neo-Materials, a Canadian processor of rare earth elements. This merger makes a lot of sense and we see it being a positive for Molycorp. They still need to get their mine up and running and processing newly mined ore rather than the stockpiles which they have been processing since reopening. Molycorp was always one of our picks to consolidate the industry, and many indeed expected this, however we still see a rather large gap in their HREE offerings and wonder exactly where these will come from. One thing we are almost certain of is that they will not come from their recent discovery in California.
Although soybeans are not heavy consumers of potash, higher prices help farmers and in turn help farmers pay for higher cost fertilizers. We view rallies in crop prices as bullish for potash prices moving forward and wonder how low the USDA may revise estimates if the reports are true (see here). We still like Potash of Saskatchewan (POT) here, and think that potash may be one of the top commodities performers for the year.