Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Natural Resources: Stock Up For 2008

6 min read

 

At this very moment, we are witnessing a natural resource explosion of massive global dimensions …
 
Nearly every resource under the sun is surging in value — gold busting through the $800 level … silver up 18% … platinum, 33% … oil nearly reaching $100, its highest level ever … and more.
 
Nearly every stock linked to natural resources is powering higher.
 
Every natural resource-based stock market — Brazil, Canada , Australia, New Zealand and more — is enjoying spectacular gains. Every natural resource-based foreign currency and every commodity-driven ETF is surging in tandem.
 
In sum, we have a natural resource explosion of massive, global dimensions.
Of course, corrections — sometimes moderate, sometimes sharp — are inevitable. But they're bound to be short-lived as three megaforces come together to drive the biggest natural resources boom of all time …
 
Megaforce #1
Massive, Rapid Growth of the World's Largest and Most Populous Continent
 
 
Imagine a continent five times larger than the lower 48 states with thirteen times the population.
 
Then imagine a socio-economic transformation that combines the Industrial Revolution, the Information Age, and the rapid birth of fervent entrepreneurial spirit, all concentrated into one short generation.
 
That's the phenomenon called Asia today — steam­rolling ahead, overtaking the world's leading industrial powers and leaving many in the dust. Here are just the most recent results:
 
* China's third-quarter growth was an astonishing 11.5%, four times faster than ours, with spending on factories and property surging 26.4%, industrial production expanding 17.9%, and the country's trade surplus up 70% in the first nine months.
 
* India is not far behind. Economy — up 8.9% in the third quarter. Money flooding into the Indian stock market — $19 billion so far this year, already double last year's record $9.5 billion. Money to be spent on infrastructure and manufacturing — more than $500 billion in the next three years.
 
* Singapore's economy surged 9.4%, the longest expansion since 1991. Factories, financial services, construction — all booming.
 
* South Korea, Malaysia , Hong Kong, even traditionally troubled sisters like Indonesia and the Philippines — all following a similar path.
 
End result: A megaforce of unprecedented dimensions driving the demand for energy, metals, foods and more. Some examples …
 
Aluminum consumption is rising at nearly 30% annually, hitting a record 14.6 million metric tons this year.
 
Nickel, used to make aluminum, is in such intense demand that inventories monitored by the London Metal Exchange have plunged a whopping 89% in the past 12 months to 3,702 tons. That's less than enough to last two meager days of global consumption.
 
Zinc stockpiles just hit their lowest level since 1991 due to overwhelming demand.
 
And despite the U.S. housing bust, copper demand has exploded to more than 18 million metric tons annually.
 
Gold demand is jumping 20% annually. In the third quarter, which ended August 31, India alone consumed more than half the world's total production.
 
Platinum demand is growing at the highest rate of all time.
 
Demand for coffee, wheat, corn, soybeans, even palm oil is off the charts.
And don't forget crude oil. OPEC nations are pumping at near capacity.
 
Mother Earth is straining to pony up the black gold. But it's still not nearly enough to satisfy the spiraling demand from Asia.
 
Result: The highest crude oil prices of all time in nominal terms, and very close to the highest of all time even in inflation-adjusted terms.

Megaforce #2


The Plunging U.S. Dollar
 
The U.S. dollar has now crossed a landmark that will go down in history as the turning point of our era: The greenback has plunged below its all-time low in 1992 to its lowest level of all time.
 
With this single, landmark event, the dollar has crossed from a period of slow, orderly declines … to a new era of rapid, chaotic declines; from a time when its impact could be ignored … to a time when its impact will be felt everywhere, especially on those assets that rise the most when the dollar falls — natural resources.
 
And as the greenback sinks, foreign currencies soar:
 
The euro is on a rampage, surging by more than 10 U.S. cents just since August and up 11.5% since the beginning of the year.
 
The Canadian dollar surpassed par with the dollar for the first time in 30 years — and then kept right on going. It now buys around $1.00 U.S., the most since 1960.
 
The Australian dollar, which bought 78 U.S. cents just two and a half months ago, now buys 88 cents …
 
The Brazilian real has set a seven-year high … the South Korean won and the Singapore dollar just hit their highest levels in a decade … even the Chinese yuan, forcibly held down by the Chinese authorities, has jumped to a new high.
 
The impact on natural resources is both immediate and long term.
 
The reasons: Nearly all of the world's resources are priced in dollars. So almost as soon as the dollar falls, their prices have to adjust upward to compensate for the dollar's decline.
 
Meanwhile, international investors, still stuck with trillions in falling U.S. dollars, are not standing still. They see what's happening. And they're running for cover, switching from dollars to any and every contra-dollar asset they can lay their hands on — foreign currencies, gold, silver, other natural resources.
 
Buying contra-dollar investments has been the core of our strategy, and we certainly hope you've followed our lead. If so, you already own what millions of investors around the world now crave — investments that go up when the dollar goes down. If not, it's certainly not too late to start, thanks to …
 
Megaforce #3
Central Banks Flooding The World With Paper Money And With Wild Abandon
 
 
The world's monetary authorities see the U.S. housing market in its worst downturn of modern times. They see hundreds of mortgage lenders going broke or on the brink.
 
And they see financial firms reeling from tens of billions of dollars in losses.
 
So they're panicking. Running the printing presses overtime.
 
In the U.S., the Fed has been injecting the most money into the banking system since the 9/11 attacks.
 
In Europe, the supply of money is exploding at its fastest pace in 28 years. In Asia, it's even more extreme — money pouring out of every nook and cranny and flooding into the global markets.
 
Meanwhile, interest rates — normally driven higher by surging economies and soaring commodity prices — are, instead, being held down or even pushed sharply lower.
 
Just in the last two months, the U.S. Fed has slashed its discount rate by 1.25 percentage points and its fed funds rate by .75!
 
The European Central Bank, hell bent on hiking its official rates just three months ago, abruptly stopped. And central banks all over the world did the same.
 
 
No Time Left! Take Action Now … or Never
 
Look. We're not talking about a long-forgotten event or even a soon-to-come storm on the horizon. This is it! These megaforces are here now. Either you do something to adapt … or you could be left behind.
 
These are opportunities that can change your life and secure your future … while the pitfalls could erode — and ultimately destroy — your earnings, your savings and your retirement.
 
And if you're thinking the bulk of the commodity-price rises are behind us, think again. Measured in today's dollars, the price of almost every natural resource on the planet is still far, far below the peak price levels established the last time central banks did what they're doing today.
 
Just to match that peak, the price of aluminum would have to surge by over 2.2 times from its recent peak and the price of tin would have to jump by nearly 2.4 times.
 
If gold rises to the same level as it did back in 1980, measured in today's dollars, i
t would go to $2,271 per ounce — almost triple its most recent peak.
And for some commodities, the undervaluation today relative to their prior peaks is even more extreme: Cocoa, now in rising demand in Asia, would have to sextuple in price. Sugar would have to go up by more than eleven times!
 
Silver, meanwhile, would have to surge to $145, nearly 10 times today's peak.
No one can say with certainty that they will go that far. Nor can anyone be sure their rise will be contained to those levels. But one thing is obvious: There is no evidence that commodities are peaking … and there's abundant evidence that they have much more upside potential.
 
Ditto for ETFs that track commodity-sensitive economies … shares of companies profiting from the resources boom … and foreign currencies that are rising in value as the dollar sinks.
 
What would it take to end this boom?
 
Almost three decades ago, Fed Chairman Paul Volcker ended the last commodity boom with Draconian money-tightening actions — jacking up interest rates by three full percentage points in one single announcement, slapping credit controls on the entire economy, sucking up the world's excess money like a giant vacuum cleaner.
 
Think about that scenario for a moment. Even in your wildest dreams, could you see today's Fed Chairman, Ben Bernanke , doing something similar?
 
If your answer is "no," then you can rest assured that the end of the natural resource boom is not today or any time in the foreseeable future.
 
So … stick with it. Ride this boom as far as it will take you. When we see the opportunity, we will have you take profits along the way. But for the most part, our strategy is to guide you to opportunities that are still in their pre-take-off stage … and use every subsequent correction as a buying opportunity.
 
This South American country's GDP surged 6.1% in the second quarter. It's where we're seeing the biggest gains in decades in employment, consumer spending, and investment … where the single largest export is booming … and where the currency is rising steadily against the U.S. dollar.
 
So how can a conservative investor participate in that country's stable-but-rapid growth?
 
Alternative energy company with soaring profits
 
 
A torrent of forces have converged to create the perfect storm for skyrocketing oil prices:
  • Surging worldwide demand …

  • A new string of Fed rate cuts …

  • The U.S. dollar teetering on the verge of collapse …

  • New tensions between Turks and Kurds …

  • New attacks on oil-producing facilities …
And no matter what you may already own in this sector, the time is right to branch out into alternative energy, fast becoming a national — and global — priority. One of our favorites: Solar energy.

 

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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