-- Posted Monday, 3 December 2007 | Digg This Article | Source: GoldSeek.com

published Saturday, December 1, 2007

Dear Santa,

First, I want to thank you, TOUT-TV (CNBC-TV) and all the little elves of the “Don’t Worry, Be Happy” crowd on Wall Street for making it a wonderful Christmas period again these last several days. It’s so good to know all is well again, not to mention Elvis and Jimmy Hoffa are with you.

There’s no need to get me anything but I realized this past week or so that there’s one, and only one, perfect gift; could you either get me a membership for the “Plunge Protection Team”

(http://www.nypost.com/seven/11292007/business/the_ treasurys_missing_minutes_mystery_378734.htm ) or better yet, a partnership at Goldman Sachs? (http://www2.goldmansachs.com/careers/)  I’ve viewed their employee video and realized it’s the perfect Christmas gift.

(http://www.youtube.com/watch?v=ZKK61P76WX4 )

XOXO, Peter

Barring some unforeseen circumstance, this will be the last issue of The Grandich Letter for 2007. Our offices will be closed from December 8, 2007 through January 6, 2008.

The markets will trade in more and more of a holiday-like atmosphere as we get closer to year-end. Because of this, we could see moves exaggerated by lack of liquidity.  For the most part, it’s safe to assume we’re not witnessing any earth-shattering changes to longer term directions.

General Overview –

On the slight chance that General Kudlow, King “BooYah” and the vast armies of the “Don’t Worry, Be Happy” crowd on Wall Street umpteenth pronouncement that all is well and it’s safe to go in the water again is wrong (perish the thought), I’m going to watch this video again http://www.youtube.com/watch?v=QxoP_9W6FC8 and remind myself of the following saying before I buy into the latest “all clear” signal:

“He who thinks he is raising a mound may

only in reality be digging a pit.”

-   Ernest Bramah

December is not usually a good month for stock market bears. With the gang on Wall Street’s Christmas bonuses riding on yearly results and a general “merry” atmosphere taking hold through years-end, I fully suspect this latest dip in the bull pool isn’t going to cause a Jaws-like exit anytime soon. However, I do believe it’s actually beneficial to the bear cause, as a major distribution top is forming that can seal the crazed Boo-yahs’ fate for years to come.

So don’t be a Grinch (or feel like one) and not enjoy the next few weeks. All the factors that led me to publish this issue on October 14, 2007, http://www.grandich.com/docs/alert_10-14-07.pdf remain.

Precious and Base Metals –

One should not expect a bullish outlook on gold from Wall Street, mainstream financial media and the public-at-large, because it’s almost certain to come at the expense of financial assets and/or the argument for them.  However, given how incredibly well gold has performed for the last several years versus financial assets, and the fact that it’s latest “pause that refreshes” has once again launched a wave of bearish gold forecasts (Goldman Sachs the latest – I think the G in G-7 now stands for Goldman since so many former executives are making up positions in financial arms of countries), I think its fool-hearty not to give credence to GATA  http://www.gata.org and those of us who know in our hearts that governments and powerful groups interfere in so-called free markets. Yes, it’s frustrating at times when they do, but the amount and the degree in which they have in recent times strongly suggests to me that, as time goes on, the problems they so much want to keep under the rug are becoming more unmanageable for them.

Despite the grief I took through much of 2007 (including from clients and the many who wished to be clients, but in good faith I couldn’t take them on) for being outspoken bearish on base metals and choosing to be greatly over-weighted in precious metals, I believe the price action has proven me correct. Since I get beaten up enough in the junior resource market (where I always stress failure is the norm), I won’t gloat other than to say I see no reason to change that view anytime soon.

Gold –

A dramatic, near parabolic rise from $640 to $840 is now rightfully being digested. As noted earlier, liquidity should dry up as we get closer to Christmas so I wouldn’t get overly concerned whether the next $25-$50 move is up or down. Just stay focused on what got us to this price, the fact that fundamental factors remain supportive, and the world still pretty much hates the shining yellow.

Copper –

It recently tested key support just under $3 and bounced. I do believe it should eventually break that support as a massive top has formed technically and my long-term target of $2-$2.50 looks more likely. I do believe that as the price weakens to a move below $3, one should re-established with some copper exposure.  The $2-$2.50 area should prove to be just a corrective level and in the next 3-5 years a move to new highs above $4 appears in the cards.

Uranium –

The sentiment has gone from extremely bullish to one of concern or outright bearishness. This comes despite perhaps even more bullish fundamentals. I continue to believe uranium exploration, development and producing companies are worthy of consideration.

Cobalt –

A few months back I noted Cobalt appeared to be a metal that could see strong price appreciation. Given this, I found this article most interesting:

Cobalt has been riding high over the past month where many other markets failed to pick up after a slowdown in the third quarter. The weak dollar had some part to play in this, with UK traders reporting both an increase in enquiries and requests by sellers to be paid in sterling.

Having topped $30/lb in mid-October the market continued moving steadily upward towards $35/lb, buoyed by both a shortage of material available in the spot market and bullish sentiment, which has seen investors start taking positions in the market. The London Metal Exchange is also, once again, turning its eye to cobalt to determine whether it, along with other minor metals, could feasibly trade on the exchange.

There are mixed feelings on whether the minor metal markets are liquid enough and would be open to the kind of transparency that the LME requires. A poll by Metal-Pages, however, came out with a surprisingly balanced result, with a small majority of those responding happy to see their metal trade on the LME. Having opened a market in cobalt futures to investors in September, Credit Suisse said the market has been even more successful than expected. This, and the fact that cobalt is already sold on open online systems by producers, makes this metal probably the most obvious candidate for trading on the exchange.

At the moment, producer stocks are said to be either sold out or running low and a small volume of five to ten tones is enough to move the market. On their online trading systems, BHP-Billiton and Norilsk Nickel have been leading the way by repeatedly increasing offer prices with every sale. BHP-Billiton moved its offer price up to $35.50/lb on November 21, having reported a five-tonne sale to North America at $34.75, the highest transaction price ever recorded on its website, while Norilsk Nickel raised its website offer price up to $33/lb on November 22.

Previous to that BHP-Billiton had raised its offer price on 16 November, for the second time in two days, to $33.30/lb on the back of a five-tonne sale. Norilsk Nickel had moved its offer price, first to $31.20/lb on 14 November and then to $32/lb on 19 November, basis in warehouse Rotterdam. In China, Jinchuan Group also lifted its price for 99.8% cobalt metal on 20 November to Rmb578,000/tonne, up from the previous Rmb566,000/tonne basis which has been in place since 9 November.

Not everyone is happy with the rising market. Said one major western consumer/processor: “The market is clearly the hostage of an incredible sense of opportunism... With each quote the Russians move up their price and we have another hit or two on BHP... It is not always easy to beat the bulls. We still believe that the hike is on the basis of speculation and not fundamentals, but the end result is unfortunately the same.”

He put the market, in the penultimate week of November, for 99.3% at $32-33/lb and for 99.8% at $33-34.50/lb, against a more general market range of $33-33.75/lb for 99.3% and $34-35 for high grade.

Previously, the price of cobalt, has topped $30 per lb just three times since the mid-1990s: March, 2007, January 2004 and February 1996.

There are now enquiries for 2008 and demand is also said to be boosted by consumption in China, particularly for making batteries.

In China prices for all cobalt products are rising, as availability of raw materials gets tighter. Concentrate prices are now quoted at $28-29/lb. Some producers are said to have halted production and have started to trade raw materials as they have difficulties raising the cash.

Prices towards the end of November went up to about Rmb630-640/kg ($38.6-39.2/lb) for 99.8% cobalt metal, some Rmb450/kg (US$27.6/lb) for 72% min Co cobalt oxide, while offer prices for industrial chemical cobalt oxalate, used in manufacturing automotive tyres have also gone up, to Rmb190,000-Rmb195,000 (as high as $26,351/tonne) for 31% min cobalt oxalate.

Cobalt has a wide variety of applications in industrial chemicals, batteries, aerospace alloys, land-based turbines and power generators. It is likely to see a growing demand in hybrid vehicles, as the automotive industry strives to be cleaner but still affordable. Japanese car manufacturer Daihatsu Motor Co recently unveiled its new fuel cell technology that eliminates the need for platinum in electrode catalysts. By changing from acidic to alkaline electrolyte membranes it can replace the costly metal with cheaper and less corrosion resistant metals such as cobalt or nickel.

Note: The article continues on to discuss other commodities. For a complete copy of the article the reader is referred to the Metal Pages November Newsletter  at http://www.metal-pages.com/newsletters/200711/#cobalt

U.S. Dollar –

Even beaten-up Uncle Sam is entitled to some holiday cheer. Again, remembering that the drain on liquidity is likely to come as December unfolds, and knowing the big paper profits out there on short U.S. Dollar positions, it would come as no surprise to see the U.S. Dollar Index move back towards, or even above, the 80 level. While it would cause agita for the individual speculator whose time horizon these days appears to be just hours and minutes, it would actually be healthy and useful if it did. Because 80 was a key support area for years, it’s only natural for the market to try and confirm it’s now resistance. I’m not suggesting to get long Uncle Sam, but just suggest not losing sleep over it if it should occur. It would also not surprise me to see some Central Bank intervention in the currency market in the next few months. I may be old-fashioned, but it would be nice to see them act in the light of day for a change.

Oil –

“OH MY GOD”!!!!  Oil has fallen all the way back to $88. It’s cheap again –lol! I’ll spend some time on oil in our January issue.

Mining and Exploration Shares –

Given the relative strength in most metal prices versus price levels of just a few years ago, most mining and exploration shares aren’t even close to full valuation when compared to metal prices of 5, 10 and 20 years ago and their relation to mining and exploration share prices at that same time. There are many reasons for this and here, too, I’ll go into it in January. But let me remind you of a month or two ago when I suggested that we’re likely to see some serious tax-loss selling, which we recently have. This may continue for the next week or two, but with more and more compelling speculations making themselves known in this arena, I’m personally hoping to go shopping (if I can bring myself to step over so much carnage—some of which I and many so-called experts assisted unwillingly in creating).

I keep getting asked, “Through which U.S. brokerage firm do I buy and sell Canadian-listed stocks?”  I personally have my account with Ben Johnson, President of First Securities Northwest, and I recommend that you get in touch with him.  I’ve known Ben for over 20 years and he and his firm are experts when it comes to resource stocks, especially the foreign stocks.  First Securities gets some of the best exchange rates, provides quick executions, and extends great, personalized service and advice.  He also handles private placements and is very adept at removing the restrictions when they become free trading.   His firm offers everything from individual accounts, IRAs and Profit Sharing Plans, to managed accounts.  Give Ben a call and drop my name at (503) 723-4404 or (800) 547-4898 or email Ben@firstsecurities.com.  Sorry, First Securities cannot open accounts for Canadian residents.

Special Tribute –

Two-thousand-and-seven will go down as the best year in the markets for me, but it was also one of the saddest. While I’m grateful for all the times I appeared in the media, I would give them all up for just one more time with the greatest journalist and friend I ever had, Mr. Jim O’Connell.

Each time the music begins for BNN’s “Market Call”, I will always identify it with Jim beginning the best hour in financial journalism worldwide. Whenever I walk into BNN’s offices, I still yearn to see Jim coming down the aisle with his wonderful smile and overwhelming kindness. But most of all, I miss a great friend, who was a part of so many people’s lives five days a week. To his wife, Lisa, family and friends, who all miss Jim dearly, I will remember you during this holiday period and for the rest of my life so I may honor the greatest gentleman I ever knew.

“Those who walk uprightly enter into peace; they find rest as they lie in death.”

- Isaiah 57:2

GONE BUT NOT FORGOTTEN

© Cecilia M. Kocher

The years we’ve shared have been full of joy.

The memories we’ve made will go on and on.

I haven’t stopped crying since you went away,

and I’ve asked God time and time why couldn’t you stay.

You lit up my life, my hopes, and my dreams.

You’ve opened my eyes to see what it all means.

So now that you’re gone how can I forget;

because you were the greatest out of all I have met.

Merry Christmas, Happy Hanukkah and Peace Be With You in the New Year.

Grandich Publications, LLC.

P.O. Box 243  •  Perrineville, NJ 08535

www.Grandich.com

phone • 732-642-3992

email •  Peter@Grandich.com

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-- Posted Monday, 3 December 2007 | Digg This Article

Peter Grandich is the Managing Member of Grandich Publications, LLC (www.grandich.com).
The company publishes The Grandich Letter (first published in 1984) which covers the metals and mining industry, follows world markets and economies, and covers the Canadian markets from an American prospective.

Grandich also provides a variety of corporate finance and development services to publicly-held companies.

Peter Grandich is also the Managing Member of Trinity Financial, Sports & Entertainment Management Company, LLC (www.trinityfsem.com), a Registered Investment Advisor in the State of New Jersey. Trinity provides investment advisory services to individuals, small to mid-size businesses, professional athletes and entertainers.

Peter is a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.

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