Short Term Recovery? Commoditie slide, Copper below $2, CS.to, SWC.to, TNR

On Monday everything looked rosy as market climbed and expectations of interest rate cuts and a seemingly stablilized economy was in sight! Nikkei was up 3 days in a row and Asia was still slated for a decreased but still positive 6-7% GDP.

The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output for a given country's economy. GDP is defined as the total market value of all final goods and services produced within the country in a given period of time (usually a calendar year). It is also considered the sum of a value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time, and it is given a money value.

The most common approach to measuring and understanding GDP is the expenditure method:

GDP = consumption + gross investment + government spending + (exports − imports), or,
GDP = C + I + G + (X-M).

But as I stated on the same day, earnings week will not look good. Guess what the headlines are today?

Dow drops 250 in early trading on earnings woes

Dow drops 250 in early trading on earnings woes and fears of deep recession NEW YORK (AP) -- Wall Street tumbled again Wednesday as investors shifted their focus from improving credit markets to worrisome corporate profit forecasts that are raising fears of a deep economic slowdown. The major indexes fell more than 1 percent, including the Dow Jones industrial average, which lost 250 points.

412 points in the early going. On Tuesday, the Dow retreated 231 points after forecasts from DuPont Co., Sun Microsystems Inc. and Texas Instruments Inc. raised fears that companies' outlooks for the fourth quarter and beyond could signal a severe economic downturn.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 26.28, or 2.75 percent, to 928.77, and the Nasdaq composite index fell 23.05, or 1.36 percent, to 1,673.63.

While reduced strains in world credit markets have eased some investors' nervousness about the economy, market anxiety remains high as hundreds of companies this week release third-quarter results and in some cases fourth-quarter forecasts that offer a glimpse of the rough conditions that may lay ahead.

In other news, MacDonalds MCD reported better than expected profits and still on rise - suggesting that people are getting more and more budget conscious - possibly at the expense of their waistlines, but I digress.

On the other side of fence - I caught an interesting segment on BNN last evening. It was a segment interview with your typical fund manager type, this time it was Don Cox from BMO's Global Strategy - he would essentially be the guy directing big big asset manager's on overall investment directions.

Some gems from the interview for those of you too lazy to watch the video:
http://watch.bnn.ca/headline/october-2008/headline-october-21-2008/#clip104894

Unwinding of credit swap non-event? Monday Oct 21 would've been the day Lehman Brothers and etc' other credit swaps are revealed - while there was a drop Mr. Cox indicated the % of risk was already factored into the massive devalued market, no huge catastrophe, yet. The system has already been building in its own defence mechanism says Dan Coxe of BMO Financial Group Asset Manager and he went on to indicate that a short term recovery may even be possible.

When asked about the recent rise in $USD against other currencies - he indicated that as debts unwind and other country's wealthy pour into $USD - demands rise in concert with bad news from Europe and overseas.

When asked if other countries may be in risk of further defaulting - he mentioned that Argentina defaulted back in 1992 - but total amount of debts in Iceland is less than funds$ the Federal Reserve Boards pump into the financial system on a daily basis. A note here - $30 billion in pension funds for the entire country of Argentina, consider that the California State Pension fund was at $250 billion+ with large losses coming from investments in Bear Sterns at $90/share! (good thing they're suing the NYSE for letting them buy that stuff maybe that will bring back BSC!!)

He says liquidity funding from FRB will continue as he believes the problem can and will be solved by dumping more money into the system.

Key recommendation from Mr. Coxe: look for what you want in the good times because it may already be higher in 3 months.

Let's hope he's right! There are truly deals out there right now... blue chip techs like Oracle who properly invested in vanguards like PeopleSoft are still projecting 15% growth per year. Likewise on mining side, GoldCorp, Kinross, Barrick, and Yamana are all trading at earning multiples below their yield.

Minera Andes (expected to make another $6-7 million Q3), NovaGold (who just earned $17 million last quarter), Capstone (recent merger announcement), and TNR Gold (43-101 and costing on Los Azules by December) are all at new lows. Could be time to find that balance you need in your portfolio in these crazy times.

As well, look for deals with Gold, Silver, and Copper down on the Commodities Exchange. The decoupling is still ongoing and 10% of your portfolio in bullion may yet prove to be a prudent investment.

Rob McEwan confirms this strategy and he's the ex-CEO of GoldCorp who brought it to the lowcost gold producer success. He is currently the CEO of US Gold and has large stakes in Minera Andes and likes Argentina - perhaps he will look into TNR Gold Corp as a possible next acquisition in light of its relations to MAI?