No joy for JOYG.....Many have been recently buying names like JOYG (othe...
Suggestion by Just an observation on 2007-11-04 16:16:44
No joy for JOYG.....
Many have been recently buying names like JOYG (others are an analysis for another time) on the recent rally in commodities as whole. The general view is that as commodities such as coal, iron ore, copper, gold rally as a result of weaker dollar, the related mining equipment manufacturers are a buy. This thinking is flawed fron the view that a large part of the recent rally in commodites is NOT due to any net increase in demand in the past 2 qtrs. Granted global demand remains brisk as noted by China's recent GDP metric of 11% plus. However the BIGGEST reason for the push in commodites (gold in particular) is a monetary event. Meaning the economic machinations of a lower dollar increae the nominal price for non U.S. buyers. The point here? Simple. Just because the price of copper is rising due to the deflation of the U.S. dollar, the idea that there is any increased demand for copper is a mistake. So while the idea that an 'owner' of the physical commodity will benefit (as in FCX) is correct, the thought that those that make mining equipment to dig for it will benefit is incorrect. So unless the demand side of the equation for commodities increases, only those that own the actual commodity (think ABX vs gold, FCX vs copper) will benefit from the markets 're-pricing for inflation' the value of these commodities IRREGARDLESS of whether they are mined or not. At the moment, JOYG is a company that is seeing LESS demand for it mining equipment due to the political pressures surronding the coal industry. Should metrics begin to appear to suggest that places like Australia are in fact mining more copper in response to the recent price rise, then the bull case for JOYG will resume. However at THIS moment in time, JOYG is being bought by those that feel it is a 'proxy' for higher commodity prices. This is a mistake from the veiw that commodites are moving higher recently mostly due to monetary events (lower dollar vs the U.S. now exporting economic weakness) and NOT from increased demand. Look for JOYG to 'confirm' this at its upcoming EPS report......it will be a shock to many....just an 'observation'...pat.....
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