Since those words one part of the metals and mining sector has come alive, although not in a big way. Check out this next chart of GDX and it convincingly illustrates that although the precious metals miners are coming back from the dead, they still have a long way to go to return to levels not seen since March 2013.
GDX data by YCharts
It's too early to proclaim that a bottom was put in the last month of 2013, but the first month of 2014 certainly suggests the possibility. To help support that notion, The Wall Street Journal article made reference to "The rally in highly rated metals and mining bonds has been driven by major players such as Barrick Gold, Rio Tinto (RIO) and Teck Resources (TCK)". This means the credit market is buying the debt offerings of this sector, a most encouraging sign.
Part of the good news with the sector is that many of these companies have faced the belt-tightening realities of lower metals prices in the past year. With a determination to reduce operating costs, leverage and to maintain their credit ratings, the group has taken numerous precautionary measures.
With the possibility looming that big metals consumers like China and Brazil may be facing a prolonged slowing in demand, mining company executives are "becoming more financially conservative, which benefits bondholders at the expense of equity investors," according to Harry Mateer, a credit analyst at Barclays.
But equity investors in companies like Teck Resources, which pays a dividend yield-to-price of 3.43% and Goldcorp, with a dividend yield of 2.43%, are being paid a competitive yield to hang tight and be hopeful.
Those dividends compete nicely with the yield on the 10-year Treasury Bond which, after the Fed's decision on Wednesday, fell to 2.67%, the lowest it's been since last summer. Hmm...on the day that the rest of the market tanks, precious metals stocks rally along with Treasury Bonds.
Treasuries don't have much upside potential from here, especially with the Fed tapering its bond-buying program. On the other hand, the precious metals sector may have the momentum and the long-awaited interest of the investment banking community to keep running up hill in the weeks and months ahead.
In the final analysis, the metals and mining sector may not outperform most stock sectors in 2014 but there's a growing chance it will at least outperform the bond sector.
At the time of publication the author had positions in ABX, SLW, GDX, GG and NEM.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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