Dave Gonigam – June 20, 2012
- Buy time: Old-timer in the resource space says, “Some of the best plays on Earth are cheap”
- No matter what central bankers do, “we’re not coming to the end of large, growing demand for resources,” says Byron King
- High demand for oil, rare earths… and three “technology materials” Byron says you can’t afford to miss: Are you signed up for his conference call yet?
- A fool and his gold are soon parted… A nickel-and-dime fee with Soviet-style enforcement… many suggestions for rubber-stamping dollar bills… and more!
“This is when I make most of my money,” says one of Byron King’s many contacts in the resource space.
“This” being a time like now… when resource stocks have been beaten to a pulp and left for dead.
“He’s lived through market cycles going back to the 1960s,” Byron explains by way of background.
Then this individual added, “You don’t make your money when you sell something. You make it when you buy it. Right now, I’m looking at a landscape in which some of the best plays on Earth are cheap.”
This morning is an excellent time to step back and assess the big picture — the picture that won’t be affected by whatever the Federal Reserve decides this afternoon.
The markets are in suspended animation, traders holding their collective breaths. But here at The 5, we take some deep, relaxing breaths with the help of Byron King, one of the most even-tempered fellows we’ve had the pleasure of meeting…
“Maybe,” suggests Byron, “we’re coming to the end of a certain monetary and political model that supports the overfinancialization of the world.”
“In that arena, the old model may have outlived itself. Change is due. But we’re not coming to the end of large, growing demand for resources.”
“Looking ahead,” he goes on, “more and more people seek a better standard of living.
“When you look at the world’s problems in another light — literally, riots in the streets of Europe, the Middle East and elsewhere — it’s a sign that people collectively are sick and tired of traditional politicians and political models that take the road to national insolvency. The old guard hasn’t delivered on economic improvement, and in a wired world, people know it.”
“I can’t say what changes we’ll eventually see. No doubt, we’ll live with transformations to political and economic structures in Europe, the Middle East, Asia and even here in North America. The details will unfold in due course. But if the politicians don’t deliver, then they’re toast.”
“What will it take to grow economies and improve peoples’ standards of living? Start with more resources. More oil, copper, aluminum, concrete and much, much more. More resources to make more stuff.”
None of this is to deny the reality of the moment when it comes to resource stocks, especially the juniors: “There’s no pretty way to paint the picture,” says Byron. “There were weeks in which share prices declined, declined and declined some more.”
It’s a situation Byron is convinced cannot last.
“We’re in that part of the market cycle where things are low — the ‘buy low’ part of that old piece of market advice about when to buy and when to sell.” Hence the old-timer’s remark about how times like these are when he makes a killing.
“Contrary to a recent editorial drumbeat in the Financial Times, I don’t believe that we’ve somehow come to the end of the commodity cycle, or supercycle or whatever else you want to call it. Out of 7 billion people in the world, under a billion live anywhere near a ‘high’ standard of living. Resources still matter, and the fact is that there are NOT enough resources to go around. No way.”
Case in point: oil. At $83.59, it remains close to an eight-month low. “But I believe we’re near the bottom for oil prices,” says Byron.
The reason is one he’s discussed here before: “Many of the world’s key producers cannot afford to sell their crude for under about $90 per barrel — not for long, anyhow.
“If the oil price decline continues, we’ll be in territory in which the marginal, tech-intensive barrels are uneconomic. Past a certain point, those barrels will remain in the ground. Then watch for a supply squeeze, and an oil price spike to follow.”
Another case in point: rare earths. China says this morning the decline in its rare-earth reserves is “accelerating.”
That could be a problem for everything that requires rare earths — from mobile phones to hybrid-car batteries to ballistic missiles. China still accounts for over 90% of world production… but sits on only 23% of world reserves.
“After more than 50 years of excessive mining,” says a policy paper issued by the Chinese cabinet, “China’s rare-earth reserves have kept declining and the years of guaranteed rare-earth supply have been reducing.”
That’s the official line. Here’s the rest of the story: “China no longer views itself as a mere commodity exporter,” Byron explains. “China no longer has to ‘export stuff’ just to raise cash. China has plenty of cash.”
“The Chinese realize that, over the past 30 years, they’ve ‘high graded’ many of their best ore deposits, and used or exported valuable products at lowball prices. That’s coming to a halt.”
“China is joining the rest of the world in approaching resource development from the standpoint of lowest cost per ton. That is, keep costs down, supply constrained and prices high. That’s where the money is.”
“Despite immediate stock market problems and economic uncertainties,” Byron concludes, “it’s important to look ahead.”
“After a forest fire, new trees begin to sprout. In fact, I believe that despite all the negativity, the world is on the cusp of truly astonishing breakthroughs in materials technology.”
The next big breakthrough in resources will come, Byron says, with three high-tech substances without which the future simply can’t happen: graphene, vanadium and beryllium.
“The futuristic technology applications are wide ranging,” he says. “We’ll see new kinds of batteries and super-dense power storage — enough to light up entire cities. There will also be ultra-high-strength lightweight materials — 200 times stronger than steel.”
“Looking ahead, you should expect to see all manner of almost incredible electrical, electronic, magnetic and optical applications. It’s not ‘Star Trek physics’ of the 23rd century, either. Some apps will become evident within about a year or so as several new kinds of products exit the pipeline from name-brand companies like Samsung, Nokia and IBM.”
In other words, the time to move is now. This is the time to “buy something,” as the old-timer put it, to make the big money. It’s an even bigger opportunity than the one Byron scouted out during the rare-earth boom two years ago.
Then, he delivered a 109% gain in a little over two months… and 178% in just over four months. Now the story is much longer term… and far more lucrative.
That’s why he’s been busy arranging a conference call in which readers can listen in and learn for themselves. On the line will be three CEOs, along with resource-investing pros Sheldon Inwentash and Rick Rule.
“We’ll cover everything we know,” says Byron: “the timelines of the three companies involved… their risks and potential rewards… why they have the potential to ignite a new wave of industrial revolution… when and how to take positions in them if you want to get in on the action… how much money I believe they could make you — everything.”
The call is set for 3 p.m. EDT next Monday, June 25. If you can’t listen in “live,” we’ll have it archived for access later. Don’t miss out on this invitation-only event.
As noted above, markets are moving little today while traders await the oracles at the Fed. Stock indexes are flat. Gold traders are taking some profits; the bid is down to $1,602.
J.P. Morgan Chase says it’s managed to unload most of the position laid on by the “London Whale” that led to a $2 billion loss.
At least that’s according to “people familiar with the matter” who wanted to plant the story with CNBC… Heh.
The estimate is that 65-70% of the position has been unwound. Funny, CNBC’s sources wouldn’t let on how much bigger than $2 billion the loss will surely turn out to be.
Object lesson about wealth preservation: Don’t try crossing international borders with 110 pounds of gold.
That’s what an Italian businessman did last week at the Swiss border, at least according to Italian tax police.
The gold, worth $2.5 million, was stashed in a hidden compartment of his car. Both the man and his daughter who was with him are charged with smuggling.
“Italians are believed to have billions of euros in undeclared wealth stashed in Switzerland,” says a Reuters dispatch, “funds that Italy is trying to have the Swiss authorities tax retroactively.”
“Nevada has a nifty little scam imported from the Soviet empire,” a reader writes, adding to our chronicle of nickel-and-dime taxes and fees.
“Anyone can inform (rat out) on car owners with out-of-state license plates. (Even a snowbird (golden goose) passing through).”
“Once ratted out, for a mere $100 per car, you are then allowed to pay to have your car(s) registered in Nevada at the regular fee. Then in a few weeks — for me, anyway — I get to pay another state to register the car.”
“Beware of states that have no income tax. They get you with a thousand cuts.”
“My rubber-stamp protest,” a reader writes after we solicited suggestions yesterday for pithy messages to put on dollar bills, “would be the phrase ‘End the Fed.’”
“It’s short and to the point. I would curve it around the top side of the Fed emblem on the Federal Reserve Note. Ideally, its color should be red. Alternately, it would be a dialogue balloon pointing as if the president were saying it. Imagine seeing ‘End the Fed’ coming from George Washington. Not so sure, however, about the guy on the $10 (Hamilton).”
We got a handful who agreed on “End the Fed.” Variations on the theme include…
- Audit the Fed
- Where’s the Gold
- Federal Reverse Note: Worth Less Every Day
- Save me from the Fed
- Trillions more on the way: Coming soon from a Fed near you
- Zimbabwe or Bust!
- Swap this for real money — gold
- Stealing your money since 1913.
A few readers invoked the Creator…
- In God we trust, the rest pay in silver or gold!
- In gold alone we trust
- God don’t TRUST this worthless Promissory NOTE.
“Under ‘IN GOD WE TRUST,’” one suggested, “stamp ‘UNLESS HE PAYS IN FIAT MONEY’ in red capital letters.”
“Actually a twofer, and very apropos. Fiat money is also a religion: an object of worship, a symbol of tribal affiliation, a leap of faith, an intangible idea of value… and an absurdity full of contradictions. It is a lie, used to control, cheat and manipulate the masses.”
“Maybe,” one reader suggests, “just stamp the picture of the little Monopoly dude’s face over whatever president is on the bill.”
A few of them leaned political…
- If you vote for a Republicrat, YOU are the problem
- U.S. Congress: Liars on the Right and Liars on the Left.
- Red Tick or Blue Tick, taxpayers are still the hosts
- ”None of the above” on every ballot-every election!
- Write in Ron Paul.
“My daughter,” says the person who submitted that last one, “loves writing that on all our dollars — bright red, pink, etc.”
“I like Doug Casey’s motto,” writes one reader: “‘I.O.U. nothing — The Fed’”
That’s among several random suggestions, not easily categorized…
- The Buck Stops WHERE?
- Not Your Daddy’s Gold Certificate
- Don’t Tread on Me!
“How about this one?” a reader suggests. “Maybe on a $50 bill – it’ll fit soon enough: ‘If I was REAL, I could be redeemed for a silver dollar!’ Or even an ounce of silver.”
One reader with time on his hands came up with a bunch on his own…
- Spend Me Before I Shrink More
- I’m Melllllting
- How Will I Look With Eight More Zeros?
- I Used to Buy a S***load More Stuff
- I Used to Get a Gallon of Gas Before the Fed Wrecked Me
- Inflation? HAHAHAHAHAHAHA
- Ron Paul Is Right
- Hold Me Gently Before I’m Gone
- Remember When Being a Buck MEANT Something?
- While You Held ME I Became Worth Less
“How about a stamp,” writes our final contributor, “that says simply ‘1776,’ to go with the idea that Americans should unite and send the IRS exactly $17.76 in taxes this year = we the working MINORITY have had enough. Done. Game over. Stop the insane spending and debt escalation, and about the only way to do that is to stop the flow of money from the already overburdened taxpayer.”
“Another idea would be a 49%er stamp to mean that the money touched the hands of someone in the minority who actually EARNS the money, i.e., gets out of bed and goes to work every day, making a living supporting the zombies.”
The 5: Hmmm… That’s an interesting variation on the zombie “ammo” that took over our virtual pages in recent days…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Looks as if the Fed split the difference…
- No change to the target date on zero interest rate policy: late 2014
- No new “quantitative easing,” but…
- Operation Twist, which was set to end June 30, will now go on till Dec. 31.
So the Fed will continue selling short-term Treasuries and buying long-term debt, the better to suppress interest rates.
The major stock indexes are falling, but not precipitously. Gold has surrendered to $1,600 and oil has sunk below $82.
We await Ben Bernanke’s news conference later today; we’ll peel the onion in tomorrow’s 5.
P.P.S. A last-minute program change meant that Addison’s radio interview scheduled for last night was canceled.
“Radio is interesting these days,” says Addison. “The host runs the show out of his own office in San Diego — no studio. The studio is in Greenwich, Conn. When Jeffrey Tucker interviewed me while substitute hosting The Peter Schiff Show, he did so from Auburn, Ala.”
The folks at Business TalkRadio Network hope to reschedule the interview soon. We’ll keep you posted.