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December 28, 2005


This week is shaping up to be vaguely familiar. A sharp drop on the first trading day followed by low-volume nothingness. It's reminding me of the not-so-distant past… namely last week.

Today's action wasn't quite so boring, though. We saw big movement in metals and energy. With the shinies following through from yesterday's sharp gains, the miners finally got into gear. We saw Newmont Mining up over 3% and Pan American Silver up almost 2%. There was no obvious driver of the strength, though it was not unexpected. I still anticipate a spike in metals prices than will dwarf the Oct/Nov fireworks.

Oil spiked 3% after Iran's deputy oil minister expressed a desire to cut oil output. The statement is probably nothing more than political jockeying, but traders are fickle. Combine a tablespoon of fickleness with a near-record number of non-commercial oil shorts, and you have the recipe for today's price gains. Although I expect energy prices to surprise traders with relative tameness in 2006, a political crises could bust those expectations. Also, oil's longer-term price bias is upwards. Therefore, I intend to soon be building a small portion of the energy portfolio I've previously discussed.

Disclosure: Long NEM, PAAS Calls


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