0

I'm trying to learn the method behind the madness that explains some resource/mining stocks' performance during the last recession (December 2007 - June 2009).

SPY: -38.15% (for comparison)
NRP: -34.71% (peaked at +23.99% during the recession, before falling)
DGL: +9.83% (peaked at +18.38% during the recession)
IAU: +17.76% (peaked at +26.27% during the recession)
GLD: +17.93% (peaked at +26.50% during the recession)
CMP: +49.54% (peaked at +127.53% during the recession!!)

It seems like some natural resource prices get a big bump early-midway during a recession. In the case of CMP, the bump was phenomenal.

I can kind of understand why the gold ETFS went up. Gold is safe. NRP had mixed results, perhaps because some resources went up and others went down. I'm not clear why CMP, that produces rock salt and potash, shot up in a totally crazy fashion during the recession. Were people wearing rock salt and potash jewelery or something?

Is there any known criteria that we can use as a guide to know which resources will go up during a recession?

  • 1
    "some resource/mining stocks" How "cherry-picked" are your examples? How would an "index of resource/mining stocks" compare? I would hazard a guess you could pick 3 or 4 "counter-recession" stocks from almost any market sector if you wanted. – TripeHound Jun 17 at 7:42
  • I really don't get the "cherry-picked" comment. First, I had read an article some time back about gold and natural resources getting a bump early on during a recession. Then I read an article about gold miners doing well during recessions. Then, I did my own research into resource mining stocks and those were what I posted. If you have any better examples, please do share. That's the point of my asking this question. – Zesty Jun 17 at 18:36
  • What I meant was are the figures you quoted typical across the board for mining/resource companies (i.e. the whole sector was counter-recession) or are they some of the few who did well and most of the rest of the sector took a downturn. – TripeHound Jun 17 at 18:41
  • Ah. I don't know whether all gold miners did well, but many apparently did. See seekingalpha.com/article/… and fool.com/investing/2018/05/09/… How I came up with those particular gold miners was through simply a search for gold miners and then I looked at their performance on Morningstar. I then searched for other mining stocks and got articles talking about NRP and CMP. I found it interesting that NRP also got the similar bump early on in the recession before declining.... – Zesty Jun 17 at 18:47
  • ...NRP doesn't have gold. Even CMP doesn't have gold. Yet both got a bump in price early in the recession while the S&P was actually sinking. That's why it looked like a resource thing rather than something specific to gold. That's why I asked the question. – Zesty Jun 17 at 18:49
3

In 2008, gold was up about 4% while the market was down 38%. Yet at one point during the year, it was down 30% from its peak price. The time frame examined can alter one's conclusions. In general, gold is iffy during recessions (down 10% in 1990 and flat in 2000).

Comparing a rock salt and potash miner (CMP) with gold or a precious metals miner is apples and oranges. In order to answer your questions about CMP, you'd have to look at the news in 2008. Were any competitor's acquired? Did they add new products or new manufacturing facilities? Any change in collective bargaining agreements? Automation? New contracts with major suppliers? Corporate acquisitions? And if any of these, what did the the quarterly and annual financials look like?

The only resources that are guaranteed to go up during a recession are negative delta positions.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.