Breezes are better than hurricanes, and showers are preferable to downpours. Too much of a good thing can really be a downer.
It's a similar thing with the recent enormous rally among shares of virtually all metal miners, from BHP Billiton
Although markets are forward-looking, earnings are the spectacles they must peer through. Third-quarter results from the industry were painful enough, but metal prices deteriorated further through the Q4. Gold managed a nice recovery to end the year, but silver, copper, nickel, molybdenum, and zinc all continued to flounder. The abrupt declines sent miners such as Freeport-McMoRan
I have chronicled how the zinc effect had an impact on mining costs even for gold miners, including my top stock pick for 2009: Agnico-Eagle Mines
Too much of a bad thing is clearly a downer, too, so what's the bright side to all of this? Even if the market reclaims some of the recent gains as earnings hit the wires this time around, I believe that a long and sustained rally remains in the cards for the best-positioned miners. Hiccups within a rally are part of the process, and I welcome some near-term declines to set the stage for the next phase of recovery for the miners of metals.
Further Foolishness:
- Looking for a golden opportunity?
- Cheap zinc made this miner cheaper.
- All eyes are on China for metals demand.