Commodities In Characteristic
Selloff
Once again at the end of 2011
we heard the voices of negation sounding the fear of the bursting of the
commodities bubble. The naysayers come out with their Cassandra calls
whenever commodities go into a characteristic and salubrious selloff. They
never really learn to respect the importance of gold (GLD) and silver's (SLV)
role in the long range secular multiyear ongoing rise.
We emphasized the importance
of avoiding knee jerk reactions when precious metals experience healthy
pullbacks. The first week of January 2012 saw commodities (DBC) rising across
the board as they return from the premature grave to which the naysayers have
assigned them.
One wonders how the short
sellers are enjoying this periodic resurrection in vital metals such as
gold(GLD), silver(SLV), rare earths (REMX) and uraniums(URA).
Transparent Horizon Of Record Low Interest Rates
Attendant to a new rise in
these vital commodities, the economic base should be prepared to receive
them. On January 24th-25th the Federal Open Market Committee will be meeting
once again in Washington. One of the areas on which they will be focusing is
the travails of the U.S. Housing Market and new methods to bring down the
high unemployment rate. The Fed is promising a transparent horizon of record
low interest rates to provoke the banks to lend money.
It is important that the
Eurozone malaise undergo corrective measures in order to restore Europe to
health. Recently Christine Lagarde, Head of the International Monetary Fund,
has expressed broad generalities toward the need of fiscal reforms. It is
hoped that Lagarde will not be a laggard in the birth of the
"EuroTarp" by whatever stimuli to be applied.
Euro Hitting New Lows
The weak Euro is attracting
foreign capital to purchase cheap European natural resource assets. Our
research team is looking for undervalued gold assets in the Eurozone as these
countries are looking to rapidly develop mines to provide high paying jobs
and growth. The Euro has broken the 2011 lows as Merkel and Sarkozy meet to
rescue the moribund Eurozone economy.
It is important that a
coherent plan of attack be formulated rather than the indiscriminate printing
of Euros(FXE), which we are currently witnessing. The Euro is rapidly losing
value. This procedure of currency devaluations is counter-productive unless
corrective measures are instituted such as serious spending restraints, permanent
tax rate cuts and regulatory relief. In plain language, the Europeans and the
Americans can't print more dollars (UUP) without building on a base of
budgetary restraint.
Recovery In Rare Earths, Uranium and Precious Metals
How does this affect our
selected precious metals stocks(GDX), rare earths (REMX) and uraniums(URA)?
This week the rare earths are emerging from their second half 2011 slumber.
It is felt that they will lead the upcoming recovery. This week certain of
the rare earths are producing impressive percentage gains as an augury of
things to come.
China is playing a dual role
not only for their own domestic needs but in establishing a quota system for
exports to other nations. This emphasizes the importance for the West and
Japan to establish an independent role in their own destiny. No matter what
happens in the pending appeal with China at the World Trade Organization, The
West has learned a valuable lesson in geopolitics as the external industrial
nations recognize the importance of rare earth independence.
The uranium sector is enjoying
a profitable week as well. No other area has had to come up from taking a
count so many times. The press has obscured, misrepresented and
sensationalized the true story about the role of nuclear energy(NLR) in a
modern, industrial world. The media has relegated uranium mining to the
status of selling newspapers and TV commercials. The truth be damned. Imagine
when the true story is finally told. Not once have the talking heads
mentioned that reactors that are being built are portable, economical and
safe. The truth can not be suppressed forever.
Swiss Franc Scandal Highlights Investing In Tangible Assets
Important news is just coming
over the wire. The Swiss National Bank Chief has resigned in shame after it
is revealed his wife was selling Francs (FXF) to buy U.S. Dollars (UUP) long
before the central bank sold Francs to slash the value. The Swiss franc is
rising against the dollar. One wonders how many others were involved in that
trade to push the weak dollar higher?
In conclusion, our sectors and
recommendations are once again emerging from their long bases. Reiterating
the long ascendance of these sectors especially in light of all the bullish
forces, patience is paramount albeit painful. We have been advising our
readers that this correction in commodities would be far from terminal and
that it represents a classic buying opportunity.
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Disclosure: Long GLD, SLV, GDX
