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Bull Plows Ahead Since our last update, some metals prices - gold and silver in particular - have been off, but some others keep pushing ahead. Last month we mentioned the stunning rise in the price of molybdenum. It was then trading for $32 per pound, up 1,262 percent in three years. But "Moly" traded last week at $35 per pound. Another example of a metal that continues straight up is selenium. That's one of those toxic metals that can be so plentiful at times that it becomes hazardous waste. It is then a disposal problem for the mines that produce it as a by-product. Last week, however, selenium saw a high of $50.00 per pound. It averaged $2.76 in 1999. Also, and to a somewhat lesser extent, we are experiencing dramatic price rises for tellurium, and tungsten. While these metals have demonstrated continuing, even frenzied price rises, most all metals have been very much higher in the last couple of years. Still, current prices do not reflect anything much other than the early days of an unfolding bull market with years of "legs" on it. Demand for many raw materials continues to rise, and suppliers are years from being able to catch up, if ever. That means rising prices will continue into the foreseeable future. IS THAT DAYLIGHT AHEAD, OR AN ON COMING TRAIN? 12 January 2005 - Stunning trade figures reported today. http://my.netscape.com/corewidgets/news/story.psp?cat=50580&id=2005011209040002106021 You know, the expectation was that as the dollar weakened, our trade gap would improve as our goods become cheaper to foreign buyers. Instead, the gap just got suddenly a whole lot worse, rising to very nearly 724 billion dollars (annualized from the November report). Since the October number moved from a revised (upward) 56 billion dollars to 60.3 for November, that represents a stunning escalation of 7.7 percent for one month alone. In the meantime, the trend for U.S. exports has been stabile to falling. What's it mean? The U.S. Gross Domestic Product (GDP) was most recently estimated at around 12 trillion dollars. The annualized trade deficit figure from November, then, compares to 6 percent of GDP. Historically speaking, no nation has long sustained a trade deficit exceeding 5 percent of GDP without also suffering a severe economic "adjustment." My only questions are 1) how bad is this "adjustment" going to be, and 2) will it come swiftly or slowly? The overriding influences here are related to the stunning growth being experienced by China and India, though that is not obvious to many observers. They are replacing the United States as the largest consumers of natural resources, and, while this is happening, industrial commodities are in higher demand than can be supplied, with many types of materials reaching or exceeding "peak" production in planetary term. Therefore, we have to expect that there are not enough raw materials available to feed Asia's growth without also taking something away from the formerly dominate producing/consuming nations who can no longer compete as effectively for markets and resources. But a trade deficit by itself does not have to be damaging. In this situation, when the West is experiencing slower growth and increasing competition for resources (much of which has to be imported) domestic growth is held back, causing reduced hope for offsetting the damaging effects of trade deficits and, in our case, deficit spending. For investors, then, the trend is clear. The commodities that comprise the raw materials market are as important for Asian growth today as they were for the United States during our heady growth period of the Industrial Revolution. Therefore, should you need to invest for your future, should you need an anchor your current assets, don't overlook the natural resources sector. Karl Marx said, "Capital is money, capital is commodities. By virtue of it being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or, at the least, lays golden eggs." But he was speaking from another time. Now, in an era where money is paper and has "value" by fiat, it loses purchasing power quite dramatically over time. Should you not, then, be converting paper capital into it's other form, commodities like metals and energy - things that can "bring forth living offspring?" Along these lines, and as an aside, I received a promotional e-mail from Forbes Newsletters (associated with Forbes Magazine), Professional Timing Service editor, Curtis Hesler. He advises 1) buy some energy stocks; 2) avoid bonds; 3) be cautious about stocks in general; and 4) move into gold-related assets. In regards to his fourth point, he says we are in the early stages of the third great gold bull market of the last 100 years. (Forbes Newsletters) THE
CHINA SYNDROME: 12/23/2004
- Chinese banks begin to make gold available to retail clients. 03/01/2005
- BHP sees Chinese demand for commodities continuing in 2005. 01/12/2005
- Chinese mining companies look to Latin
America for resources. QUOTES FROM SELECTED READINGS: "The spectacular growth of the last two decades, it now turns out, was a mirage generated by the smoke and mirrors of rising debt and the willingness of the rest of the world to accept a flood of new dollars. Just how much the U.S. owes will shock you. But even more shocking is the fact that we're still at it. Like a family that has maintained its lifestyle by maxing our a series of credit cards, America is at the point where new debt goes to pay off the old rather than to create new wealth. Hence, the past few years' slow growth and steady job losses." The Coming Collapse Of The Dollar And How To Profit From It, James Turk and John Rubino, Doubleday Inc., 2004. Some
thoughts: End
legal tender laws. End government debt as an "asset" for
reserve banking. End the Federal Reserve System. "The
study of money, above all other fields in economics, is one in which
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Larry S. Levy is editor of Arts 'n Mines, a private email newsletter for special friends, guests and selected industry insiders. It is not available to the public. EXTRACTS is compiled from portions of the newsletter not dealing with specific mining issues. Mr. Levy also contributes economic and historical commentary on these subjects to international publications. He is retired from his former practice as a property valuations expert, during which time he held leadership roles in the premiere trade associations, lectured, and published articles on valuation topics. |