Interesting day yesterday, eh?
I'll focus on Molycorp but the thinking is similar for the whole group.
These are capital intensive businesses, the companies are generally underfunded.
What to do? If you find yourself a market darling you sell stock.
How do managements suddenly thrust into the spotlight react? They want the stock up.
None of the U.S. and Canadian names are in production which, paradoxically, means they can achieve higher prices for the stock than if they were tethered to earthly reality by discounted cash flows or proven reserves.
You can go with "inferred" which pretty much means "pick a number". Managements will let their investors dream, not disabusing them unless they are required to by securities law.
Because there are no metrics that make any sense you need to be as much a psychologist as a wonk, take the measure of the market's aggregate emotions and bet accordingly.
So where are we now?
After yesterday's 12.92% decline the folks who were basing their decisions on hope decided "I'll see how it opens, and maybe get back some of the loss". When the stock opened down they lost their faith and with the vehemence of an apostate renounced the stock.
That set the immediate term bottom at $50.33. The stock turned and buying started coming in from shorts covering, their thinking is "Well, with the weekend coming.../I'll book it/I'm a freakin' genius" etc. and you get the $3.90 swing to where we are right now, up $1.26 at $54.12.
I'd look for a whole bunch of "news" releases from the whole group over the next week or ten days, starting with the smaller names, their attorneys usually aren't as squeamish. But the NYSE listed issues will be sending stuff to BusinessWire (a Berkshire Hathaway company) and you'll see the fear and greed thing play out.
In the case of MCP they, in addition to wanting the stock up for possible financings they also have the lock-up period for insider sales ending on the 20th.
I'm guessing their releases will read really well.
More later.
