May 6, 2013
- Like rare earths in late 2010, this niche asset class has the potential for rocket-ride gains in a matter of months
- “Round numbers matter”: Elmerraji emphasizes both words in “cautious optimism” as the S&P tops 1,600
- Why one variety of silver isn’t “cheap” even at $24 an ounce…
- “It’s not up to the political players anymore”: The Wiki Weapon is now for real
- The problem with Arizona… reader accuses us of having it both ways on gold… the paradox of barter as “income”… and more!
“If you could figure out a viable way to invest in rare earths,” said adventure capitalist Jim Rogers in mid-2010, “you will probably make a fortune.”
Truer words were seldom spoken… and so well-timed. Bloomberg’s index of rare earth elements more than quadrupled in the following nine months…
The story then — well told in The 5 as long ago as 2008 — was that China had cornered 95% of rare earth production. That’s a nice place to be for a class of minerals needed in everything from smartphones to ballistic missiles. We parlayed it into some nice gains — Byron King got his premium subscribers into Molycorp below $19 and out at $52.52 — a handsome 178% gain in a little over four months.
The story since then has been one of production slowly coming online in the rest of the world. As the chart indicates, rare earths have been in a vicious slide the last two years. Molycorp trades below $6 this morning.
“It is hard to imagine anything less than a 50-100% increase in price,” Sprott USA chief and Vancouver favorite Rick Rule says, eyeing the next resource niche set for a rocket launch similar to rare earths’.
He’s talking about PGMs, the platinum group metals. “The platinum and palladium mining industry as a whole does not earn its cost of capital,” he explains. “What that means is that either the prices of platinum and palladium go up or there is less and less of it going forward.”
Here too world supply is highly concentrated. You have South Africa, you have Russia… and that’s about it. As we mentioned in late March, the two are looking to form a PGM cartel.
For the first time in seven years, the platinum market has shifted from a supply surplus to a supply deficit.
According to a report from Thomson Reuters GFMS released last Thursday, all three sources of refined platinum contracted last year…
- Mining production: Down 10%
- Recycled catalytic converters from cars: Down 9%
- Scrap jewelry sales: Down 19%.
“Of the three,” says the report, “in absolute terms, the withdrawal of supply overwhelmingly originated from the mining industry.” And the report attributes the cratering of mine production to a phenomenon our research team has labeled the “Rustenburg Effect.”
You can learn more about the Rustenburg Effect and the four key drivers that could put 50-100% gains in your pocket by following this link. In fact, we think the opportunity is so urgent that we’re convening an exclusive briefing with one of the world’s foremost experts on PGMs.
If you want access, be advised the sign-up deadline is midnight tonight. Here’s where to make sure you won’t miss out.
Stocks are meandering this morning. The Dow couldn’t hold onto 15,000 by day’s end Friday, and it’s retreating a bit more as we speak, to 14,957.
In contrast, the S&P is adding to Friday’s record close above 1,600. To be precise, it’s at 1,615.
“While few investors like to admit it, round numbers matter,” says our trading specialist Jonas Elmerraji.
“There’s still a lot of money sitting on the sidelines in this market. Surveys show that most individual investors still aren’t that convinced that stocks are the place to be. So a push through a conspicuous level like 1,600 should help get some attention.”
But Jonas still advises caution: “While there’s no question we’re in the middle of a powerful rally right now, we’re still not in a ‘dartboard market.’ By that, I mean that this isn’t the kind of market where you can pick stocks by throwing a dart at a wall full of tickers and expect to make money. Dartboard markets are real — and I think that we’re on track for one in a couple of years — but for now, selectivity is important.”
[Ed. note: With that selectivity in mind, Jonas has reopened his 21-Day Trading Challenge to new readers. Following the success of his last run, he’s now promising to deliver a slew of chances at consistent short-term gains… such as 85% in 12 days… and 51% in five days. Also, he’ll show you how to repeat the process up to 25 times a year. You can access all the details to Jonas’ unique challenge at this link.]
After a pop in overnight trading, oil has settled back to $95.54 a barrel. Traders reacted to a series of Israeli airstrikes on Syrian army targets — a new ingredient to the volatile mixture that is the Syrian civil war.
“The flagrant Israeli attack on armed forces sites in Syria,” reads a statement from the Syrian foreign ministry, “underlines the coordination between ‘Israel,’ terrorist groups and… the al-Nusra Front” — the al-Qaida types in the vanguard of the Syrian opposition.
One of the Israeli targets: A military research center in Damascus
Coordination? Doubtful. Strange bedfellows? You bet. It’s another illustration of the Sunni-Shiite divide. Israel is concerned about the Shiite regime in Syria supplying weapons to the Shiite Hezbollah militants in Lebanon.
The Syrian rebels, being mostly al-Qaida types, are Sunni — backed by the Sunni regimes in Saudi Arabia and Qatar.
“Israel, as well as Syria and its Lebanese ally Hezbollah, all have little interest in a wider conflict,” says this morning’s Christian Science Monitor. “But as Israel grows more assertive across its borders, the chance of a miscalculation is on the rise.” Best read up on the situation before a miscalculation drives oil to crazy-new heights.
Gold is holding onto last week’s gains — $1,468 at last check.
But silver couldn’t hang onto the $24 level this morning. Platinum touched $1,500 overnight, but has since settled back to $1,493.
Premiums on “junk silver” have hit levels last seen four years ago. Pre-1965 U.S. dimes, quarters and halves have traded at discounts to their bullion value for much of the last 15 years.
But now is one of the exceptions, as judged by Richard Nachbar of Nachbar Rare Coins…
“Most of the largest dealers,” Nachbar tells Ed Steer at Casey Research, “will pay a premium of around 15% to other dealers for minimum $1,000 face value bag deals.” Before gold’s swoon in mid-April, it was less than 5%.
The number of states recognizing gold and silver as legal tender remains one — Utah.
Arizona Gov. Jan Brewer has vetoed a bill that made it through both houses of the Grand Canyon State’s legislature.
The bill was refreshingly short — about half a page long. It defined gold and silver coins and bullion as legal money — useable for payments of debts and taxes. Less symbolically, it repealed the state capital gains tax on precious metals.
Which appears to be Ms. Brewer’s problem with the bill, judging by the statement she issued. “This would result in lost revenue to the state,” it said. Perish the thought…
“Eight months ago,” the Forbes article begins, “Cody Wilson set out to create the world’s first entirely 3-D-printable handgun.”
As we mentioned late July last year, the synergy of 3-D printing and guns began with an anonymous netizen going by the Internet handle “Have Blue.” Shortly after Have Blue went public with his 3-D-printed AR-15 lower receiver, Cody Wilson, founder of the nonprofit group Defense Distributed set out to create “the Liberator,” a fully printable gun freely accessible for download on the Internet.
“Now he has,” announces Forbes.
According to Forbes, 25-year-old Wilson plans to release the 3-D-printable CAD (computer-assisted design) files early next week. “Once the file is online,” the rag goes on, “anyone will be able to download and print the gun in the privacy of their garage, legally or not, with no serial number, background check or other regulatory hurdles.”
Technically, it’s not completely printable. The two exceptions are a single nail used as a firing pin and “a 6-ounce chunk of steel into the body to make it detectable by metal detectors in order to comply with the Undetectable Firearms Act,” says Forbes.
Despite this, interest in his new project, a for-profit hub for downloadable gun files called Defcad, has exploded. “I want Defcad.org to be its own organization and a really serious player in [printable gun] search going forward. I think we can do it in a for-profit way and an authentic way.”
Of course, the political opposition is none too happy. Wilson’s most vocal opponent, Congressman Steve Israel, issued a press release in response to the Forbes story. He wrote, “When I started talking about the issue of plastic firearms months ago, I was told the idea of a plastic gun is science fiction. Now that this technology is proven, we need to act now to extend the ban [on] plastic firearms.”
Because a law solves everything…
“Finally got through the process of buying two Bitcoins this morning,” a reader writes. “But there has to be a better and less expensive way than transferring by wire funds for the purchase.”
The 5: That’s what strikes us as the biggest obstacle for Bitcoin — and perhaps the biggest opening for governments to stick their nose in it.
But it’s still worth your consideration. Our Bitcoin Bible — subtitled The Safest and Easiest Ways to Buy, Sell, Store and Speculate — helps you make the most informed decision possible. Learn how to get your copy by following this link.
“Explain to me,” after we pointed out Friday how Bitcoin transactions might be taxable in the same way as barter transactions, “how any income is derived from bartering? Other than ‘because the IRS says so.’
“Two people exchange goods of equal value. Nothing is gained — how is it taxable income?
“Take it another step further and how is my 100% of my salary considered ‘income,’ unless the value of my labor is zero?
“Oh, I guess I just answered my own question.”
“I understand that opinions can differ as to where a market is going,” writes a reader. “But you (Agora) seem to be supporting two diametrically opposed views as to what may happen in the gold market.
“On the one hand, you have the ever-smug, never-in-doubt Greg Guenthner pointing out that gold is destined to head lower, so don’t buy gold. On the other hand, you trot out Byron King stating that if he is right, we could see gold skyrocket virtually overnight. So which is it?
“My guess is you will say that you are simply showing various opinions by knowledgeable investors. To that point, you would be right. But I also guess that in a future 5 Min. Forecast after gold goes one way or the other, I will be reading that you called this move in gold and you’ll conveniently provide a nice link to the past article (the one that was right, of course).
“Reminds me of taking true/false tests in my grade school days when I tried to devise a letter that looked like both a ‘T’ and an ‘F’ at the same time.”
The 5: Three points…
- It’s true, we don’t enforce a “company line” to which all our editors must adhere. There’s no “my way or the highway.” We respect our readers’ intelligence; we’re confident you can evaluate conflicting opinions and reach your own informed conclusions. Besides, what fun would Vancouver be each year without a little conflict?
- As luminaries from Bill Bonner to Jim Rogers have said here in recent weeks, we’d be happy to see gold tumble even lower than the depths it plumbed three weeks ago today. It would merely afford the opportunity to buy more
- The simplest way to be right no matter what is to dollar-cost average. Buy a little every month. When the price dips, you get more metal for your fiat currency. Luckily, our friends at EverBank are making that ridiculously easy with their automatic purchase plan. Click here to learn how you can get started for as little as $100 a month.
We have a business relationship with EverBank and we may be compensated if you take advantage of this opportunity. But we wouldn’t bring it to your attention if we didn’t think it was a good idea.
“If dollars are no good, why would anyone take them for gold or silver?” a reader inquires, rhetorically, we think. “Just who are these insane buyers that trade gold and silver for worthless paper?”
The 5: Don’t ask, just act!
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Reminder: Access to an exclusive briefing on the “Rustenburg Effect” and how it could drive a niche resource sector to 50-100% gains is available only through midnight tonight. Here’s your last chance to make sure you have a seat at the table.