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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, silver, 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
and uraniums? 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 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.
Disclosure: I am
long GLD, SLV, GDX.
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