Basic Points - The Globe and Mail

The ObamaMama Bear Market?
There has been one relatively sustained beam of optimism during the weeks when
the S&P was declining almost daily: commodity stocks.
So why didn’t we see
the coming Crash?
The commodity stocks did in fact bottom-out on relative strength quickly, and
outperformed from November until the broad market began rallying again last
week.
Some market forecasters have been noting that, even when the S&P was falling,
and major US banks were struggling to stay alive, the commodity stocks were
quietly outperforming. This implies that there is light at the end of the tunnel. If as
the grisliest of bears growl, a global Depression looms, then why are raw materials
stocks outpacing other equities? The only commodity producers which delivered
good returns to investors during the Depression were gold mines. (Admittedly, it
should be different this time: China is stockpiling metals and oil, thereby providing,
in effect, a form of safety net for producers.)
Barrick Gold Relative to S&P 500
October 1, 2008 to March 16, 2009
160
140
120
122.3
100
80
60
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
Goldcorp Inc. (GG) Relative to S&P 500
October 1, 2008 to March 16, 2009
170
150
130
91.6
110
90
70
50
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
34 March
THE COXE STRATEGY JOURNAL