Global Resource Alert http://www.globalresourcealert.com Best profit plays in gold and natural resources. Mon, 06 Feb 2012 18:22:57 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Cashing in on Canada: Four Ways to Profit Big From the World’s “Safest Economy” http://www.globalresourcealert.com/archives/cashing-in-on-canada/ http://www.globalresourcealert.com/archives/cashing-in-on-canada/#comments Wed, 04 Aug 2010 14:58:07 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=143 Source MoneyMorning.com:
Cashing in on Canada: Four Ways to Profit —“ Big —“ From the World’s “Safest Economy”

Canada is more than just back bacon, maple syrup, and hardscrabble-mining claims. It’s a leader in natural resources, precious metals, and such alternative-energy investments as oil sands.

In fact, Canada right now boasts one [...]]]> Source MoneyMorning.com:
Cashing in on Canada: Four Ways to Profit —“ Big —“ From the World’s “Safest Economy”

Canada is more than just back bacon, maple syrup, and hardscrabble-mining claims. It’s a leader in natural resources, precious metals, and such alternative-energy investments as oil sands.

In fact, Canada right now boasts one of the world’s most compelling targets for investors’ hard-earned money. Consider that:

  • Through 2008, Canada enjoyed 12 straight years of budget surpluses.
  • Since the outset of the global financial crisis, not a single Canadian bank failed.
  • Canada was the first G-7 nation to raise interest rates.
  • And while Canada has already reaped the benefits of a full 10 years worth of a full-blown bull market in commodities, there are at least 10 years more to go.

Added together, this points to a major potential payoff for those who invest in Canada right now.

Conservative Management Attracts Big Money

If the safety of a nation’s banks is an indication of its economic well being, then Canada gets a clean bill of health, without the need for stress tests. The World Economic Forum has ranked Canada’s banking system as the world’s safest. The U.S. banking system, by comparison, was ranked 40th.

With the looming risk of a double-dip recession in the U.S. market, the potential for a second worldwide slowdown is becoming very real. That’s because the U.S. consumer is still widely considered to be a make-or-break factor in the world’s economic health.

The reality, however, is quite different. Developing-economy countries are increasingly paying more attention to internally generated growth. They will attempt to fuel domestic consumption, while building up their valuable export sector. To achieve these objectives, these fast-growing countries will invest in their own infrastructure, further fueling the demand for natural-resource commodities.

China is an excellent example. China’s own trade surplus has been gradually shrinking, from $295 billion in 2008 to $198 billion in 2009. It was projected to fall to $160 billion this year and could drop all the way down to $100 billion or less by the time the New Year rings in. But that has more to do with China’s growing imports of raw materials – it needs so much of the stuff to modernize and meet the needs of a burgeoning middle class. A rising yuan (China’s currency) will make commodities more affordable, so domestic demand is certain to rise.

In order to satisfy their appetite for energy-related resources (such as oil, coal and uranium), basic metals (like copper, nickel, and zinc), and even agricultural products (like wheat and fertilizers), emerging-market countries are turning to stable, reliable resource powerhouses, such as Canada.

That’s one reason that economists with CIBC World Markets Inc. – a subsidiary of Canadian Imperial Bank of Commerce (NYSE: CM) (Canada’s 5th largest bank) – are projecting Canada will enjoy the fastest growth rate among the world’s seven-most-developed nations (the G-7). [See chart below].

Canada
According to a recent Globe and Mail article, global investors are increasingly looking at Canada as the “Un-American North American play” or the “non-Euro-wealthy economy.” Indeed, CIBC government-debt strategist Warren Lovely told the Toronto-based newspaper that Asian and American central banks and global sovereign wealth funds are increasingly committing their cash to Canada – some of them for the first time ever.

“Those we’ve talked to are getting religion on Canada’s potential outperformance versus a growing list of advanced economies,” Lovely told the newspaper. “It’s hard to recall a time when the country possessed such relative, if not absolute, strength.”

This allure has recently been most noticeable in the net purchases of government and corporate debt from Canada: This past April, in fact, net purchases of Canadian bonds reached a new record for 12 consecutive months, at $95 billion.

It seems the knockout combination of massive resources of nearly every variety, outpacing economic growth, and an enviable banking system combine to make Canada simply irresistible to institutional investors. It doesn’t hurt, either, that Canada’s exposure to both the U.S. mortgage debacle and the European sovereign debt crisis was severely limited.

“The country is getting itself more and more on the radar screen of foreign investors,” CIBC’s Lively told the newspaper.

The Strength to Raise Rates

This “maple leaf” nation of 34 million boasts a strong fiscal foundation at the national level, while its provinces are not in the dire straits of so many U.S. states. More than 400,000 Canadian jobs were lost in the recession. To date, nearly all those jobs have already been recouped.

Bank of Canada (BoC) Gov. Mark Carney was the first G-7 central bank head to raise interest rates in this post-financial-crisis world. And yet, he recently felt confident enough in Canada’s outlook to again raise Canada’s benchmark overnight rate by 25 basis points. This increase – the second in a row – takes the rate to 0.75%.

Even with all the relatively good news, Gov. Carney acknowledges he’s not wearing rose-colored glasses. In its recent Monetary Policy Report, the BoC tempered its outlook, recognizing that European debt crisis may not have run its full course, and that the American recovery is still in a fragile state.

And despite these outlying risks, odds are good that Canada’s economy will continue to outperform that of most other developed nations. Asian growth prospects alone are becoming a significant factor.

Only two weeks ago, the International Energy Agency (IEA) told us that China has passed the U.S. as the world’s largest consumer of energy. Only 10 years ago, China used half what it uses now. With that level of appetite, it’s easy to imagine that China looks to oil, natural gas, and nuclear energy to satisfy her needs to keep the lights on, the factories humming, and the people moving. As it turns out, Canada holds large reserves of each of these energy sources.

A New Energy Bridge

And don’t think the Chinese, or Canadians, haven’t courted each other. Already two of the larger Canadian energy companies, Kinder Morgan Energy Partners LP (NYSE: KMP) and Enbridge Inc. (NYSE: ENB), are proposing plans to transport crude oil to Asia.

China has inked numerous deals over the past three years to buy sizable shares of Canadian oil sands projects. And just recently, it signed a long-term contract to buy uranium from Canada’s Cameco Corp. (NYSE: CCJ). This came on the heels of a visit to Canada by China’s President Hu Jintao, who promised to double Chinese trade with Canada to $60 billion by 2015.

But Canada knows that China’s not the only game in Asia. Korea is one of the world’s largest importers of crude oil. Just last October, state-run Korea National Oil Corp. bought Calgary’s Harvest Energy Trust for $3.9 billion, rewarding shareholders with a 37% premium.

Ride the Loonie

Clearly, Canada is a winner. But how should investors play it?

My first suggestion is to consider the loonie, as the Canadian dollar is affectionately known. Back in 2002, the loonie bought as little as USD $0.62. In October 2007, currency traders had pushed that rate to USD $1.10. Today, we sit near USD $0.96, and the loonie is a good bet to hold its value, and even to appreciate against its U.S. counterpart.

Money flows where it’s treated best, and the massive-and-growing debt loads being carried by the United States and the state and federal level doesn’t portend well for the U.S. dollar’s long-term prospects – or for the European euro, for that matter.

In Canada, by contrast, we see rising interest rates, sounder fiscal management, and a massive hoard of resources to back it all. Given that, the Canadian loonie is set to take flight, or at least maintain its cruising altitude. The easiest way to play the Canadian dollar is the CurrencyShares Canadian Dollar Trust (NYSE: FXC). Even some central banks, like Russia’s, have indicated they’re shifting cash reserves toward the loonie. Maybe you should, too.

Bank on Canada, the Royal Way

The Royal Bank of Canada (NYSE: RY) was founded as a private commercial bank in 1864 in Halifax, Nova Scotia. Today, it is Canada’s largest bank. Here’s how it looks:

  • More than 80,000 employees worldwide.
  • Total assets of $655 billion, with 2008 income of $3.9 billion.
  • Established in North, Central, and South America, as well as the Caribbean, Europe, Asia, and Middle East.
  • A large retail banking presence in the Southeast United States.
  • Operates in personal and commercial banking, wealth-management services, insurance, corporate, investment banking, transaction processing, and trustee services on a global basis.
  • Has paid a common-stock dividend every year since 1870.

Royal currently sports a reasonable Price/Earnings (P/E) ratio of 14, and a dividend yield of 3.7%. That’s way better than you’ll earn in a savings account or even in a standard money-market account – in either the U.S. or Canadian markets. If you’re thinking about investing, but you’re worried we may be headed into a full-blown depression, you’ll be interested to know that Canada didn’t experience any bank failures, even during the Great Depression.

Fertilizer King

Right now, the world’s least-developed countries achieve only 10% of the developed world’s productivity levels. That’s a major shortfall. Yet most food demand growth comes from poorer nations. What’s more, fertilizers boost farm productivity, and are responsible for between 40% and 60% of the world’s food supply.

Fertilizers’ major nutrients – nitrogen, phosphorus and potassium – replenish soils in harvest and add nutritional value to food. According to the International Fertilizer Development Center, “no country has been able to expand agricultural growth rates and eliminate hunger without increasing fertilizer use.”

One of the resources Canada is especially good at producing is potash. And the king of potash resides in Saskatchewan, Canada. Potash Corp. (NYSE: POT) is a clear leader in its field, with one of the lowest production costs anywhere. The company boasts 100 years’ worth of reserves and over 75% of worldwide excess capacity. It clearly dominates this sector.

Six of the company’s potash mines are located in Saskatchewan, and the seventh is in New Brunswick, Canada. Nitrogen production takes place in the United States and in Trinidad, and Potash’s phosphate mines are also in the United States.

The world’s biggest potash producers had slashed production in reaction to the economic crisis, so they can’t immediately return to peak production even as demand returns. That’s really bullish for the lowest-cost producers, as potash prices head higher. So Potash is looking like a good buy at these levels.

A New Bridge to Asia

While some American non-governmental organizations argue over the environmental concerns of Canadian oil sands, Enbridge and Kinder Morgan are looking to submit a plan to transport large volumes of crude on to Asia. By creating this open access to the famished Asian energy market, Canadian oil producers can begin to play American refiners against willing Asian customers, gaining top dollar in the process.

Enbridge Inc. (NYSE: ENB) is one of Canada’s most powerful energy plays. The company is a leader in North American energy transportation, owning and operating the longest crude oil and liquids transportation network. The firm also owns and operates the largest natural-gas distribution company in Canada. Holdings extend into northern New York State, and include transmission-and-gathering pipelines in the Gulf of Mexico.

With a market cap of $18 billion, a P/E near 14, and a 3.4% yield, Enbridge makes for a great play on higher energy prices, and possesses the “wild-card” potential to lever up on access to voracious demand for energy in Asia.

Action to Take: Canada may have been little more than an afterthought for your investments, so far. But it needs to be front-and-center. So consider the CurrencyShares Canadian Dollar Trust (NYSE: FXC) as a currency play on the stronger Canadian dollar, the Royal Bank of Canada (NYSE: RY) as a way to profit from the world’s “safest” banking system, and Potash Corp. (NYSE: POT) as the global king of the fertilizer producers. Finally, look carefully at Enbridge Inc. (NYSE: ENB) as a global profit play on energy, and as a proxy for the higher oil and energy prices that are certain to come.

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]]> http://www.globalresourcealert.com/archives/cashing-in-on-canada/feed/ 0 Special Report: How to Buy Gold http://www.globalresourcealert.com/archives/how-to-buy-gold/ http://www.globalresourcealert.com/archives/how-to-buy-gold/#comments Fri, 23 Jul 2010 14:58:05 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=142 Source MoneyMorning.com:
Special Report: How to Buy Gold

As an analyst and editor who specializes in the natural-resources sector, I spend a lot of time writing about gold, gold mining, and gold investing. Those are popular – and even emotional – topics with investors, which means that the columns, essays [...]]]> Source MoneyMorning.com:
Special Report: How to Buy Gold

As an analyst and editor who specializes in the natural-resources sector, I spend a lot of time writing about gold, gold mining, and gold investing. Those are popular – and even emotional – topics with investors, which means that the columns, essays and advisories I write tend to generate a lot of comments and questions.

I think that’s great. After all, an engaged investor tends to be a successful investor.

Not surprisingly, one question dominates. And that’s the question we’re addressing in this special report.

The question: “How do I buy gold?”

As a service to the Money Morning readers who have asked that question, or who’ve had that same thought, I’ve put together this overview – or primer – that addresses the basic ins and outs of buying gold. In this feature, I address some of the more-common and more-timely questions that I’ve been getting.

How to Buy Gold

Q:   How should individuals buy gold? Who can they look to?

Peter Krauth: There’s nothing like holding a gold coin or gold bar in your hands.   This is the oldest and most direct form of gold ownership.   In some cultures, gold remains the main investment vehicle people use to accumulate their savings.

You can buy gold bars in a variety of sizes and weights, which is how its price is determined.   Non-collectible coins are bought for their gold content, which is usually a full troy ounce.   Just be sure you have a safe place to store your shiny new asset.

Bullion dealers are the easiest way for most investors to buy smaller quantities of gold.   Do some homework to check them out before you buy.   Expect to pay – under normal circumstances – premiums of about 3% to 6% above the “spot” price for physical gold.   But when things get hairy – as they were back in November 2008, in the depths of the global financial crisis – premiums can go up by three to five times, with some dealers charging 10% to 15% above spot.   Obviously, you’ll be better off buying gold on price dips and under calmer circumstances.

A few dealers that have an established reputation are:

  • Kitco.com: Premiums are fair and the selection is usually quite good. They have offices in both New York and Montreal.
  • Asset Strategies International Inc. (assetstrategies.com):   This dealer is located in Rockville, MD.   Asset Strategies also offers gold storage options outside U.S. borders.
  • Camino Coin LLC (caminocompany.com): Burlingame, CA.
  • American Precious Metals Exchange (apmex.com): Oklahoma City, OK.
  • The Tulving Co. (tulving.com): Newport Beach, CA
  • Gainesville Coins (gainesvillecoins.com):   Lutz, FL.

Q: How are gold sales taxed?

Krauth: I was recently reviewing the “Frequently Asked Questions” (FAQ) section of the official Website of the SPDR Gold Trust Exchange-Traded Fund (NYSE: GLD) and found an excellent overview of how the GLD ETF is treated from a tax standpoint. So I’ve included some of it here:

“The United States Internal Revenue Service (IRS) treats gold as a collectible for long-term capital gains tax purposes. As such, gains recognized by individuals from the sale of SPDR Gold Shares are subject to a capital gains rate of 28% if held for more than one year. This rule extends to all gold held by the Trust. Although there are some restrictions applicable to retirement plans such as IRAs and 401(k)s investing in collectibles, SPDR Gold Shares received a private letter ruling permitting investment by such retirement plans.”

Managing Risks/Maximizing Rewards

Q:   Are gold ETFs considered “paper” money for not owning real, physical gold? If so, what is the real risk, if any, of not owning real gold?

Krauth: That’s a matter of opinion.   I’d rather own a nice chunk of an established gold ETF than have no exposure to gold, whatsoever, since it’s typically backed by gold, according to its prospectus.

Let’s be clear: Actual paper money is simply a government-issued note, which is deemed legal tender.   That means the issuer says people can use that currency to conduct transactions. The problem arises in the case of inflation, expected inflation, or hyperinflation, because the public using that fiat currency (not backed by a valuable physical commodity) might lose faith that others will attribute the same value to it in the future.

That being said, gold ETFs are an interesting tool as a convenient way to own a claim on gold.   Nothing will ever replace owning actual gold and safely storing it under your control.


One of the easiest ways to buy such a claim on gold is the SPDR Gold Trust ETF (NYSE: GLD).   With a total value of $50 billion, GLD is now the largest physically backed gold ETF in the world, holding 1,300 metric tons (or 42 million ounces) of the yellow metal in a London vault. GLD shares, which represent one-tenth of a gold ounce, can easily be bought and sold by investors through their brokerage account.

Another option to acquire paper gold is through Perth Mint Certificates (PMC).   Locked away in a vault and insured, this is the only bullion-storage program that is government-backed, with the state of Western Australia standing firmly behind it.

You’ll need to commit at least $10,000 to get started in PMCs. There are also small-but-reasonable fees to obtain your certificate and trade your holdings.   It’s also a great way to gain some international diversification for your gold holdings, by owning it outside of your home country.   For more info go to Perthmint.com (note that Kitco and Asset Strategies also offer the PMCs).

As for the risks of not owning real gold, that’s something each individual needs to come to terms with for themselves.

What I can say is that it is vital for you to know and understand this: Physical gold coins or bars are an unequalled safe haven, due to their liquidity and lack of counterparty risk.   It is the only liquid, universally recognized form of transportable wealth that is not simultaneously someone else’s liability.   That’s what makes gold so desirable.

By contrast, owning paper gold means that – at some level – you’ll be relying on someone else’s promise.   So it may have its place in your portfolio, but you just need to understand it well, and appreciate its inherent risks.

Q:   How much of a risk is there that U.S. President Barack Obama will mirror the move of President Franklin D. Roosevelt and issue an EO (specifically, another version of Executive Order 6102) that would force us all to sell our gold at a fixed (negative) rate to shorten our profits (not to mention also tax us at 40%)?

Krauth: This is a big question.   If you’re concerned that President Obama or his successor (or your own country’s administration) will pull a gold confiscation, then you may want to own some gold outside your country of residence.   That could mean renting a safety deposit box in another country, having an established firm store gold for you, or buying an ETF-type fund which is backed by gold that’s held physically outside your home borders.

One example of this for U.S. residents would be the Central Fund of Canada Ltd. (AMEX: CEF).   It’s a closed-end fund that owns physical gold and silver, and that’s been around since 1961.   It’s domiciled in Canada, with its precious metals stored in the vaults of a Canadian-chartered bank.   CEF often trades above its net asset value (NAV), but you should avoid paying more than a 5% premium.   See www.centralfund.com for more info.

It’s impossible to know if something like an Executive Order will ever come to pass, or if it does, to anticipate the precise wording it might contain – which would determine how the EO would affect different types of gold ownership.   Frankly, I think the current (U.S.) administration, even at the U.S. Federal Reserve level, is so clued out on gold that it’s unlikely to happen any time soon.

But while we’re in the speculation mode, I’d propose that if something like that were to happen again, it would be so far into the future, and at gold prices so much higher than today’s, that you’d still benefit from a considerable gain off today’s levels.

Given that outlook, let’s just say that I’d rather own gold now, even with the chance for an EO someday.

Indeed, the bigger question to ask yourself – in my view – is this: What are the risks of not owning any gold?   Well, the risks are that we wind up in the midst of serious, sustained inflation, or even hyperinflation.   In that case, any cash you own will quickly lose value, while precious metals soar.   And that’s something that, frankly, I’d rather not have to worry about.

Action to Take: Buy some gold – in one or several forms – store it safely, forget about some of these non-issues, and take comfort from the fact that you’ve taken a decisive step to protect your financial future.

Also, if you have follow-up questions, please feel free to send them in to the “Money Morning Mailbag” at mailbag@moneymappress.com.

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]]> http://www.globalresourcealert.com/archives/how-to-buy-gold/feed/ 0 When This Indicator Says to ‘Buy Gold’, It’s Never Wrong http://www.globalresourcealert.com/archives/buy-gold/ http://www.globalresourcealert.com/archives/buy-gold/#comments Tue, 20 Jul 2010 14:58:04 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=141 Source MoneyMorning.com:
When This Indicator Says to —˜Buy Gold,’ It’s Never Wrong

When I recently predicted that the long-term trends were in place to send gold to $5,000 an ounce, I was stunned by all the attention that my forecast received.

Granted, a move of that magnitude represents [...]]]> Source MoneyMorning.com:
When This Indicator Says to —˜Buy Gold,’ It’s Never Wrong

When I recently predicted that the long-term trends were in place to send gold to $5,000 an ounce, I was stunned by all the attention that my forecast received.

Granted, a move of that magnitude represents a dizzying long-term profit opportunity. But that’s just it – it’s a long-term profit opportunity.

I’ve uncovered some profit plays that offer equally hefty gains – but in the short term.

One in particular stands out – a profit opportunity that relates to a signal that I refer to as the “Gold Spike Indicator,” or GSI. Because of the nature of the indicator itself, this profit opportunity is available only four times a year.

And the next “window” of opportunity is just weeks away.

Near-Term Profits Hidden Within Long-Term Gains

Gold has posted some solid gains over the past decade, zooming from about $250 an ounce in June of 2000 to an all-time record of $1,260 an ounce earlier this summer, before trading down to the current level of about $1,160. That zooming long-term surge in the yellow metal has some pundits shouting “bubble.”

My advice: Don’t listen.

In fact, I’ve got two good reasons investors should ignore these doomsayers.

First of all, from a long-term standpoint, one of the first signs of a bubble is a parabolic rise in price – a short-term spike that’s clearly visible on a long-term chart. The more-recent bubbles are fairly easy to spot: Just think about the Nasdaq Composite Index in 1999-2000 and U.S. housing prices from 1997 to 2003.

The accompanying chart of gold prices over the past decade illustrates this very well: One look underscores that there’s been no such short-term price spike.

A Golden Opportunity

But the second reason is even more dramatic: The near-term profit story may be even more dramatic than the long-term opportunity – thanks, believe it or not, to the global financial crisis.

As an aftermath of that worldwide financial mess – currently manifesting itself as an inflation-fueling debt overhang – several of the leading investment banks reconstituted themselves as “bank holding companies.”

This is where the near-term profit story for gold gets quite interesting.

The “Gold Spike Indicator”

You see, while firms such as Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc. (NYSE: GS) may now be officially characterized as bank holding companies, they can’t ignore their investment-banking DNA. And that means that Goldman and Morgan remain major traders of – and holders of – such commodities as oil… and gold.

As bank holding companies, Goldman Sachs, Morgan Stanley and other firms in similar circumstances are required by law to make quarterly disclosures on their holdings – including commodities. And my research shows that there’s a certain “window” during this disclosure period during which some of those commodities can make some pretty hefty price moves.

Gold is one of the commodities that’s worth watching.

In each of the last six quarters, in fact, this indicator has signaled – to the day – the optimal time to buy gold.

How do I use that information? There’s an old investing adage that says: “The best place to look for gold is in a gold mine.”

While some traders use futures or options to play the commodity markets, I prefer to keep my strategies simple: I like to go directly to the source – I believe the shares of the companies that get the gold out of the ground offer the biggest payoffs at the lowest levels of risk.

If you really think about it, this strategy makes the most sense: Investors stand to maximize their profits when they buy into a well-run company that controls sizeable amounts of a rare mineral that happens to be one of the world’s most-sought-after natural resources.

That means it’s time to buy gold-mining stocks. But only certain ones.

Right now, for instance, I’m looking at a junior-metals player with a resource estimate in the millions of ounces. At current prices, its gold holdings are worth roughly $2.5 billion. If gold were to hit $1,425 an ounce next year, as Goldman Sachs predicts, these holdings would be worth more than $3 billion.

And I’ve publicly predicted that gold could hit $1,500 an ounce by late this year or early next year.

What makes this company especially intriguing is the fact that there are two neat wildcards at play here.

First, the company’s resource estimate may be low. There’s a lot of interest in its latest drilling results. A “new” estimate could be announced at any time.

Second, there’s a relationship between the indicator and the company’s stock price. The last time the GSI was available – remember, it’s only available four times a year – this stock zoomed 21% in just a few days.

Vigilance Pays

In that afore-mentioned Money Morning report back in January, I said that I expected gold to eventually reach the $5,000 level. My “gold superspike” prediction got quite a bit of attention. So let me say this: I haven’t changed my mind – I’ve grown even more confident in my forecast. It will take some time for this price point to be achieved, but the long-term catalysts I outlined remain in place

If there’s a takeway message here, it’s this: When it comes to gold, by all means invest for the long-term.

But don’t ignore the short term.

The huge level of debt the United States has taken on as a result of this financial crisis is a long-term positive for gold. All that debt is highly inflationary.

And I continue to believe that gold prices could reach $1,500 by the end of the year. On a straight gold play alone, that would make for a tidy 29% gain from recent price levels.

My short-term target is actually becoming more realistic by the day, given the growing lack of confidence that exists in the U.S. government’s ability to arrest the nation’s financial slide.

This particular “wall of worry” will be very good for near-term gold prices.

That’s a short-term catalyst that no shrewd investor can afford to ignore.


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]]> http://www.globalresourcealert.com/archives/buy-gold/feed/ 0 Oil Prices: Two Ways to Profit From ‘Peak Oil’ http://www.globalresourcealert.com/archives/oil-price/ http://www.globalresourcealert.com/archives/oil-price/#comments Fri, 18 Jun 2010 14:58:02 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=140 Source MoneyMorning.com:
Oil Prices: Two Ways to Profit From —˜Peak Oil’

If there’s one thing U.S. investors need to know about the future, it’s this: Oil prices are headed higher – much higher, in fact, and could well double to reach $150 a barrel.

And if that’s what the future holds, you [...]]]> Source MoneyMorning.com:
Oil Prices: Two Ways to Profit From —˜Peak Oil’

If there’s one thing U.S. investors need to know about the future, it’s this: Oil prices are headed higher – much higher, in fact, and could well double to reach $150 a barrel.

And if that’s what the future holds, you may as well go along for the ride…

U.S. oil prices fell for the first time in four days yesterday (Thursday) – ending a rally that had taken crude prices to a six-week high. Crude oil for July delivery now stands at roughly $77 a barrel, meaning oil prices would need to nearly double to hit my target of $150 a barrel.

But I think that can happen – and here’s why.

A Wakeup Call

America is about to get a sobering slap in the face.

And that slap will have to do with the country’s passive, unimaginative and downright-haphazard national energy plan.

Under U.S. President Barack Obama, it seemed as if the United States was finally going to create the innovative, broad-based and forward-looking energy policy that this country has badly needed for decades.

Then along came BP PLC (NYSE ADR: BP), and the Deepwater Horizon oil spill that now threatens the Gulf of Mexico ecology and the entire U.S. economy. Now the villager pitchforks are all pointing at BP for that mammoth oil spill – instead of at the Inside-the-Beltway crowd as a way of “motivating” them to re-cast the energy policy to account for the BP disaster.

Did BP mismanage this fiasco? That’s a pretty safe bet.

Is offshore oil drilling about to suffer a major kick in the pants? It definitely seems so.

I’m not expecting any new offshore drilling for some time: Public sentiment has swung way against offshore exploration, and I expect the government to seriously ramp up oversight.

U.S. consumers flat out take oil – and energy in general – for granted: The lights come on at home or at work when we flip the switch; the pumps are full when we pull up to the gas station; and oil and energy are still pretty cheap… at least, for now.

But Americans need to realize that “demand” is evolving. Other countries around the world are looking to improve their standards of living. And based on the technologies now available, such upgrades require oil – lots of it, in fact. Oil influences so many facets of our daily lives: Transportation, energy, consumer goods, packaging … the list is long. And given our current plight, that list is also sobering.

I know, I know, we may only now be emerging from a deep recession, Europe’s got big problems, and we could experience a slowdown in growth for Asian economies.   But despite this, oil consumption is still rising.   And America remains a big part of global demand.

America’ Appetite for Oil

The United States consumes 20 million barrels daily.   That’s more than the next-five-largest consumers – China, Japan, Russia, Germany, and India – combined. Of those 20 million barrels, 56% are imported. The imports alone represent more oil than Saudi Arabia produces in a day; in fact, it accounts for nearly 20% of the world’s entire production.

Meanwhile, America’s own oil is drying up. The Gulf spill – and the accompanying ban on offshore drilling – will only exacerbate the shortfall that’s sure to escalate.

Even with all the exploration dollars and the most advanced exploration technologies available, the United States’ oil-production numbers have been heading south for 40 years.

Sure, there have been ongoing discoveries, but too few, and none of the size required to stem the nation’s growing dependence on foreign oil.

Last November the IEA (International Energy Agency) reported that oil production from operating wells has declined by as much as 9.1% annually.   Then in March, the U.S. Department of Energy (DoE) indicated that if investment is insufficient, there could be worldwide declines in liquid fuels production starting next year and stretching to 2015.

But relax.   According to the U.S. Department of Energy (DOE), the concept of “peak oil” is, well, bunk.

Feeling reassured now?   Me neither.   And here’s what’s bothering me…

Slick Contradictions

Last April, in the aptly titled report, “Meeting the World’s Demand for Liquid Fuels, that same DOE projected stable increases in fossil fuel production all the way to 2030.   How anyone can forecast 20 years into the future with a straight face baffles my mind.

Stay with me here, because that same DOE, in that same report, acknowledges that it doesn’t know where this additional production will be sourced.   Their report goes on to indicate that current and known oil production sources will start to decline within just two years.

It would seem the government believes that the expected daily shortfall of an estimated 10 million barrels of crude (again, nearly all the oil the Saudis produce) will just be “wished” into production.

That makes it my turn for making a prediction. And it’s one that I’m pretty confident about making:   I don’t expect anyone to find another Saudi Arabia’s worth of oil anytime soon, much less get it into production by 2012.   But maybe that’s just me.

And when producers are able to fetch $100 per barrel, there’s little incentive to boost production and drive prices back down.   Instead, this allows them to maximize profits, even as they extend reserves. That’s just shrewd business strategy for those producers.

Plus, with so much oil controlled by national governments – Saudi Arabia, Iran, Libya, Algeria, Venezuela, Nigeria, Russia and Mexico, for example – years of severe mismanagement and under-investment bode badly for supply, but bode well for significantly higher prices.

A Pair of Plays on Higher Oil Prices

I don’t see any major production increases anywhere on the horizon, yet demand shows no real signs of easing.   Therefore, the only thing left for us to do is to position ourselves for maximum profit.

After reviewing a number of energy-related companies, securities and funds, I decided on two that offer the right mix of such factors as upside potential, liquidity, safety and timeliness.

Those two oil-related investments consist of:

  • Apache Corp. (NYSE: APA): This is an explorer/producer of oil, natural gas and natural-gas liquids. It’s a $30 billion market-cap company, trades at a palatable Price/Earnings (P/E) ratio of 14, and it pays a small dividend.   The company explores and operates in the Gulf of Mexico, Texas, the Anadarko Basin, Canada’s Western Sedimentary Basin, onshore Egypt, offshore Western Australia, in the North Sea (off the coast of the United Kingdom) and in Argentina and Chile.   I like the geographical mix, as well as the commodity mix, which breaks down as 51% oil and liquids, 28% North American Gas, and 21% international gas. The BP Gulf oil spill seems to have exaggerated recent price weakness for Apache. At the time of this writing, Apache’s shares were trading about 12% below the 200-day moving average and heading north.   Apache makes a great long term “Buy.”
  • First Trust ISE – Revere Natural Gas Exchange-Traded Fund (NYSE: FCG): This is an ETF that tracks the performance of a basket of companies that are focused chiefly on natural gas exploration and production.   The United States needs to continue emphasizing its own energy resources, especially resources of the-more-environmentally-friendly variety.   Natural gas clearly fits that bill, and the stuff is relatively cheap at around $4.80 per million British thermal units (MMBtu). This ETF’s holdings include such heavyweights as Mariner Energy Inc. (NYSE: ME), Brigham Exploration Co. (Nasdaq: BEXP), Pioneer Natural Resources Co. (NYSE: PXD), Forest Oil Corp. (NYSE: FST), EOG Resources Inc. (NYSE: EOG), and Anadarko Petroleum Corp. (NYSE: APC).   The fund is currently trading below its 200-day moving average and its share price also is trending higher.   So the FCG ETF is a clear “Buy” at current levels.

Sure, it would be nice to just move to renewable pollution-free fuels, but that’s decades away – if ever.   Besides, many technologies can’t be converted, so as long as they’re in use, oil will have to fuel them.

If the picture of the future I’ve painted here is one that’s causing angst, or even fear, that’s probably not a bad thing: This is the future I believe we’re going to have to face.

My advice: Get used to it, and get ready for it.   Oil is going higher. You might as well go along for the ride.

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]]> http://www.globalresourcealert.com/archives/oil-price/feed/ 0 How the Greece Bailout Turned Gold Into a ‘Must-Have’ Investment http://www.globalresourcealert.com/archives/greece-bailout/ http://www.globalresourcealert.com/archives/greece-bailout/#comments Thu, 13 May 2010 14:57:59 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=139 Source MoneyMorning.com:
How the Greece Bailout Turned Gold Into a —˜Must-Have’ Investment

With so much uncertainty in the U.S. stock market – not to mention the debt-contagion concerns emanating from Greece and other European Union (EU) countries – it’s more important than ever for investors to hold “hard assets,” such [...]]]> Source MoneyMorning.com:
How the Greece Bailout Turned Gold Into a —˜Must-Have’ Investment

With so much uncertainty in the U.S. stock market – not to mention the debt-contagion concerns emanating from Greece and other European Union (EU) countries – it’s more important than ever for investors to hold “hard assets,” such as gold and other commodities.

In my view, what’s happening in Europe is particularly important for investors to be aware of and understand. The so-called “shock-and-awe” bailout strategy undertaken by the EU and the International Monetary Fund (IMF) – which establishes a $1 trillion rescue package for member-countries facing financial crisis – will not be the answer.

The Looming Inflation Contagion

When it comes to sovereign-default concerns, Greece has so far been the chief culprit. The rescue plan is meant to “scare off” would-be speculators looking to short the euro currency and the bonds of afflicted nations. That may work for a time, as some doubt has been removed by this backstop bailout.

Defensive Investing
The economies of the more fiscally responsible nations are themselves not back to full health: Many of these nations are also saddled with large debts and ballooning deficits. Economic growth is near – or at – zero. Unemployment is high. And the prospects for a major near-term improvement just aren’t that strong.

The bailout plan may provide reassurance for now, but what will happen when the next euro-member country shows up – hat in hand – looking for a loan?

Any funds to be provided to cash-strapped nations unable to refinance their maturing sovereign bonds are likely to come from printing more currency, leading to rampant inflation. Even if governments find ways to underreport inflation, it will nevertheless show up in our outlays for rent, food, fuel, and other daily expenses. The typical consumer will come to doubt the very fiat money he uses daily, as well as the official inflation statistics reported by his government.

Economic weakness tempts nations to devalue their currencies in order to make their exports cheaper in the eyes of consumers in other countries, as well as to stimulate business. The problem is more and more nations have the same goal, simultaneously leading to a “competitive devaluation.”

When fiat currencies lose value because there’s more “paper” in circulation, that’s always measured against something. If they’re racing each other to the bottom, then it’s the “tangibles” that gain in value, as it takes increasing amounts of paper currency to buy a unit of a given commodity. If you add to that a scenario of serious inflation or even hyperinflation, then hard assets could explode in price.

That brings us to gold.

Gold: Now a ‘Must-Have’ Investment

Gold is not consumed much by industry, but it’s been revered since 5,000 years as a “go to” safe haven that stores – and thereby protects – financial wealth. So gold is a “must” as its investment demand keeps swelling.

And gold futures zoomed to a new record yesterday (Wednesday) as worries about the possible inadequacy of the EU bailout package continued to fester. Gold for June delivery – the most active of the futures contracts – jumped $22.80 reach, or 1.9%, to reach $1,243.10 an ounce on the Comex division of the New York Stock Exchange.

If you’re worried about gold being too pricey, set that concern aside: On an inflation-adjusted basis, $1,200 gold is still priced at a mere 50% of its 1980 high.

Commodities as a whole have been in a secular bull market since 2000, one that’s fueled by the modernization of Asia and other developing parts of the planet. While the pace may slow due to an economic crisis, this trend won’t be reversed. That means that – from a fundamental-demand standpoint alone – natural resources will continue to be in a bull market for at least another 10 years.

Asian governments and corporations have been making serious inroads over the past five years to secure supplies of oil, natural gas, and a variety of base metals – including copper, nickel, zinc and molybdenum.

Demand for resources is heating up as these emerging global consumers, wanting to fuel their ongoing growth, compete for limited world supplies – a scenario Money Morning has labeled as the “Great Global Commodities Grab.”

At the same time, these large-scale market players are wisely trading weakening fiat currencies for tangible resources, most of which are (for now, at least) still priced in the once-mighty U.S. dollar.

With all these catalysts in place, it’s clear that commodity prices (including for gold) are headed higher – probably much higher. The bottom line is that allocating a meaningful portion of your investments to commodities will go a long way toward protecting and growing the value of your portfolio in the years to come.

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]]> http://www.globalresourcealert.com/archives/greece-bailout/feed/ 0 By Failing to Lock Up Canadian Oil Supplies, U.S. Exposes National Energy Plan Flaws http://www.globalresourcealert.com/archives/canadian-oil-supplies/ http://www.globalresourcealert.com/archives/canadian-oil-supplies/#comments Fri, 30 Apr 2010 14:57:57 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=138 Source MoneyMorning.com:
By Failing to Lock Up Canadian Oil Supplies, U.S. Exposes National Energy Plan Flaws

Under new U.S. President Barack Obama, it was all supposed to be different. The new administration had vowed to deliver a national energy plan that would guarantee this country’s future energy security. The rich and geographically [...]]]> Source MoneyMorning.com:
By Failing to Lock Up Canadian Oil Supplies, U.S. Exposes National Energy Plan Flaws

Under new U.S. President Barack Obama, it was all supposed to be different. The new administration had vowed to deliver a national energy plan that would guarantee this country’s future energy security. The rich and geographically nearby Canadian oil sands should have been part of that plan.

At the end of the day, the United States dropped the ball on the oil sands, meaning Americans are stuck with yet another pieced-together national energy plan that has more sizzle than steak.

Unfortunately, the cost of this misstep will be higher than ever.

America’s Energy Insecurity

U.S. President Barack Obama has a serious energy dilemma on his hands. This isn’t a new story. In fact, it’s the same dilemma that most U.S. presidents – Republicans and Democrats, alike – have had to face.

What’s different now is the timing.

For the better part of a century, Canadians and Americans have had mostly positive, mutually profitable dealings.

But there were always tensions around the edges.

Former Canadian Prime Minister Pierre Trudeau once famously remarked that Canada’s relationship with its much-larger neighbor was akin to “a mouse lying in bed with an elephant.” And a longtime Canadian investing adage holds that “when the U.S. economy sneezes, Canada catches a cold.”

U.S. presidential administrations – and the current one is no exception – have pretty much taken for granted a potentially limitless access to the abundant resources of America’s northerly neighbor. The attitude comes across as something akin to: “I’ll just come get whatever I need.”

But as they say in the racing world, “you snooze, you lose.” America snoozed on the oil sands, and China beat us to the finish line.

This failure to lock up this energy source is just a part of what’s going wrong with the current U.S. energy plan.

Understand an important point: This critique isn’t motivated by politics … it’s motivated by timing. These miscues are becoming apparent at a most-critical juncture, as this country tries to rebound from the worst financial crisis since the Great Depression. The United States will already be dealing with massive debt costs. Now it appears we’ll be adding massive energy costs into that already-worrisome equation.

In his inaugural speech, with a reference to the “clean-energy economy,” President Obama made it very clear that he wanted to encourage the use of green technologies to fuel America’s energy needs, all the while insisting that energy security remained paramount.

My view is that President Obama had to establish a list of priorities.   He had to decide whether the risk of supply disruptions – in the near term – were outweighed by the benefits of responding favorably to environmental concerns and stimulus for the green power sector.   After all, at the time, stock markets were in the gutter, jobs were being slashed, and the average constituent who’d voted for him saw a pretty bleak future.

If you look at some of the policies that have been enacted since then, it’s clear that the president chose to favor spending on jobs and green energy.

He’s not alone.

You see, governments the world over are rushing to pass “green legislation.” They are now requiring that higher minimum levels of electricity be generated from renewable energy sources in order to help fight global warming.

And they are throwing money at the challenge like there’s no tomorrow.   Indeed, a recent United Nations report stated that worldwide investments in green-energy technology totaled $140 billion in 2008, an outlay that trumped the $110 billion earmarked for fossil-fuel projects – the first time that’s ever happened.

The cynical side of me sees these financial statistics and concludes that the Obama administration must view this current state of affairs as a great opportunity for it to raise taxes and then redirect that additional revenue into the “sectors” it favors – under the guise that it is saving the planet and creating jobs (more on that below).

But the practical side in me realizes that, as investors, we just need to see the opportunity that’s embedded in the new reality, and look for ways to profit.

Here are a few examples of these recent policies in the good ol’ US of A. The investments are fairly substantial. But instead of taking a free-market approach in which the best product, or best technology, carries the day, these surgically focused programs have largely already identified the winning sectors, and winning technologies. For instance:

  • The American Recovery and Reinvestment Act will contribute 30% of the cost to build renewable power plants.   That’s a huge chunk of any project that can be depreciated over five years.   Plus, the U.S. Energy Bonds Program will make loans available at a cheap rate of roughly 5% – or about half what they’d otherwise be. The U.S. Department of Energy (DOE) has earmarked a whopping $10 billion to this program to make it happen.
  • Prospective cap-and-trade legislation is widely anticipated from the Obama administration.   The goal is to cap the pollution any given plant can generate.   If polluters produce carbon dioxide emissions above their allowable limits, they will be forced to buy “carbon credits” from the likes of “green power producers” that generate little or nothing in the way of emissions.   So cap-and-trade is a potential source of tremendous additional income for the entire green power sector.
  • The U.S. government has an obsession with geothermal energy.   The government will be contributing $400 million to the DOE’s Geothermal Technologies Program.   The goal is to enhance research for this sector.   All of this is in addition to the $2 billion that’s already contributed to the DOE to further research and development.

Asia to Canada: Let’s Make a Deal

Critics have blasted U.S. leaders and U.S. oil companies for not locking up as much of Canada’s vast supply of reliable oil as possible. By failing to do so, the United States essentially opened the door for China and other Asian nations, which have been ardently courting Canada.

Just last September, we saw PetroChina Co. Ltd. (NYSE ADR: PTR) pay Athabasca Oil Sands Corp. (PINK: ATHOF) $1.9 billion in cash for a 60% stake in two undeveloped Canadian oil sands projects. It was PetroChina’s biggest acquisition in North America.

In October, state-owned Korea National Oil Co. (KNOC) snatched Canada’s Harvest Energy Trust for $1.8 billion in cash, and the assumption of more than $2 billion in debt – meaning the deal was done at a hefty premium to its market value. KNOC hopes to ship Alberta oil sands to refineries in South Korea.   That move not only helped concretize that Asian nation’s plan to quadruple production from current levels to 300,000 barrels daily by 2012, it also enabled it to move assets out of depreciating greenbacks and into appreciating oil.

Just two weeks ago, the China Petroleum & Chemical Corp. (NYSE ADR: SNP), also known as Sinopec, offered $4.6 billlion for a minority stake in the Syncrude Canada Ltd. oil sands plant.   This attempted deal is causing waves, at least in Canada.

Sinopec is Asia’s biggest refiner, with an expanding capacity to process heavy oil, the kind Syncrude produces before upgrading to synthetic crude.   Syncrude is the world’s largest producer of light sweet crude oil from oil sands.

The deal would give Sinopec a veto over any decision for Syncrude to invest in upgrading more oil in Alberta.   That province would clearly prefer to see upgrading done at home, since bitumen processing creates jobs and tax revenue.   This is the first time a Chinese state-owned enterprise is taking on a share in a major oil producer, so the Canadian government could soon be placing its foreign-investment-review policies under a powerful microscope.

Remember, too, that because of its centralized decision-making, China’s government can act much more quickly, and without having to fear any public-opinion backlash. In the past, China also hasn’t had to worry much about environmental groups or non-governmental organizations (NGOs) – just ask Tibetan protestors.

Another advantage Asian culture has in the realm of planning is its tendency to take a much longer view of major issues. For example, Chinese planners don’t just consider the next quarter or the next year, they will look decades – or even generations – into the future, and will plan accordingly. It’s a lesson Western corporate leaders would do well to observe, and perhaps even copy.

Considering the massive modernization most of Asia is undergoing, you can continue to expect an aggressive acquisition stance to be the norm for some time.

After years of developing nations accumulating western fiat currencies through exports, we’re now witnessing a massive generational transfer of wealth from West to East.

Obama’s Flip Flop

This is sure to remain a hot issue.   But I believe that President Obama’s approach may well be an excuse to favor homegrown U.S. businesses with a less obvious “Buy American” policy.   Here’s what I mean.

I find it particularly interesting that President Obama recently did a complete 180-degree turnabout on his energy policy by opening parts of the Atlantic Ocean and Gulf of Mexico to oil drilling.

Money Morning Chief Investment Strategist Keith Fitz-Gerald attributes the change to an administration realization that a weakening greenback makes it difficult for America to accumulate oil assets outside U.S. borders. I think Fitz-Gerald is right.

So in one fell swoop, the new president can address multiple issues with this single move.   U.S. oil producers must be ecstatic to now be able to explore, at home, over vast areas, and using current technologies.   The lure of some attractive discoveries is strong.   At the same time, the president can now say that he’s dealing with the issue of energy security, since anything newly discovered will be located inside U.S. borders.

More importantly, though, President Obama’s cap-and-trade scheme may be nothing more than an insidious trap for foreign-energy producers, and an effortless windfall for American producers and distributors.   Under such a system, one can imagine a scenario where oil exporters would be required to have a quota allowance to sell into the U.S. market to “comply with environmental laws,” where quota could only be bought from an American concern.   And voilà, a large chunk of the profits end up at home here in the United States, while the exporter’s margins run thin.

It’s true that developing new technologies to produce oil from oil sands more cleanly would counter some of this problem, but that takes years of research and serious funding.   Meanwhile it’s a pretty safe bet even more of those assets will continue to migrate into Asian hands.


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]]> http://www.globalresourcealert.com/archives/canadian-oil-supplies/feed/ 0 Bankster Gangsters: Global Commodities Grab Causes Major Bank Profits to Soar http://www.globalresourcealert.com/archives/global-commodities/ http://www.globalresourcealert.com/archives/global-commodities/#comments Thu, 22 Apr 2010 14:57:55 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=137 Source MoneyMorning.com:
Bankster Gangsters: Global Commodities Grab Causes Major Bank Profits to Soar


Major bank profits are up. Way up.

Goldman Sachs Group Inc. (NYSE: GS) just reported that its first-quarter earnings nearly doubled to $3.46 billion, the investment-banking giant’s second-most-profitable quarter since going public [...]]]> Source MoneyMorning.com:
Bankster Gangsters: Global Commodities Grab Causes Major Bank Profits to Soar


Major bank profits are up. Way up.

Goldman Sachs Group Inc. (NYSE: GS) just reported that its first-quarter earnings nearly doubled to $3.46 billion, the investment-banking giant’s second-most-profitable quarter since going public a decade ago.

JPMorgan Chase & Co. (NYSE: JPM) recently said its first-quarter earnings came in at $3.3 billion, up 55% from a year ago.

And Bank of America Corp. (NYSE: BAC) reported that its earnings for the first three months of the year rang in at $2.83 billion.

For all three of these banking giants, the first-quarter results blew past analyst expectations. Their stock prices? Approaching levels not seen since the start of the financial crisis. In fact, JPMorgan’s stock is within 10% of its five-year high.

Major bank profits are zooming – despite the fact that U.S. consumers are struggling to repay loans.

So how are these guys pulling this off? Well, if you dig, you’ll find that the bulk of major bank profits are coming from stronger trading revenue and other segments that are enabling the largest banks to overcome weakness in the lending area, which decades ago was the banking sector’s bread-and-butter business.

If you dig deeper still, as I’ve done, you unearth one of the key reasons these banking behemoths are booking such massive profits. They’ve been moving enormous amounts of capital into one area of the market.

I’m talking about commodities.

Banks Bet Big on Resources

With major resources like oil, gold, silver, copper, and countless other commodities reaching decade-long highs – and even all-time records – in just the last two years, you can see why the world’s biggest investors are so taken with this sector.

A recent survey of institutional investors showed that nearly two thirds plan to raise exposure to commodities. According to Barclays Capital (NYSE ADR: BCS) “investors expect commodity returns to be robust over the next five years and plan to continue raising their exposure to the asset class to new highs.”

For the big investment banks, the gravitational pull of commodities is evidenced by their escalating commitments. In the next two years Merrill Lynch (now part of Bank of America), plans to grow its commodities team by 25%.

In just the past year, Deutsche Bank AG (NYSE: DB) has launched 11 new commodity indices, three new commodity mutual funds, and one new commodity exchange-traded fund (ETF). Societe Generale SA (OTC ADR: SCGLY) has nearly 400 commodity professionals expecting to double revenue over the next two years.

Barclays Capital set up a shipping division one year ago to support physical trading in oil. Credit Suisse Group AG (NYSE ADR: CS) has an alliance with secretive trading house Glencore International AG (the world’s largest) in order to uphold its large presence in the physical-commodities market.

I could go on and on with details about the burgeoning importance this has for major bank profits. But let me give you one statistic that really cuts to the bottom line: Today, four of the largest U.S. banks have upwards of $4 trillion riding on commodities-related investments.

But there’s more at work here than just hiring staff and grabbing a seat aboard the secular natural-resources bull.

Most investors continue to have concerns about a weak economic recovery, the threat of a double-dip recession, and even speculation of deflationary risks – which is probably one reason that stock-market volume remains so low.

And yet, in the face of all that worry and fear, an intense level of confidence – if not a downright bullish conviction – seems to permeate the investment banks’ upbeat forecasts for gold and oil.

Gold was trading at about $1,150 an ounce this week while the so-called “black gold” – crude oil – was trading at about $84 a barrel.

Goldman Sachs, for instance, is calling for gold to reach $1,350 an ounce in 2010 and $1,425 an ounce by 2011. It’s also forecasting oil to be trading in a range of $92 a barrel to $97 a barrel within three to six months. It’s even predicting an oil shortage for 2011, and is calling for oil – the so-called “black gold” – to reach $110 per barrel by then.

For its part, Barclays believes oil will bump up against the $100-a-barrel level before the year is out, and even sees crude prices reaching $140 within the next five years. Bank of America expects oil to exceed $105 this year, and is forecasting $150 within four years.

So how are these investment banks able to make such bold predictions about rocketing prices? How can they be so confident?

There’s only one answer: They’re taking tangible steps to gain control over commodities supplies – essentially guaranteeing that prices go higher.

Control + Confidence = Profits

My knowledgeable Money Morning colleague Martin Hutchinson has effectively analyzed the implications of hedge funds making investments in “physical commodities” in order to counter potential regulatory moves by the U.S. Commodity Futures Trading Commission (CFTC), which is looking to introduce “position limits” into the futures markets.

Given what hedge funds are doing, it’s not surprising that the big banks and investment banks have been lurking close behind.

Commodities Grab
Already Goldman, Morgan Stanley (NYSE: MS) and JPMorgan Chase control 120 million barrels of oil. But only JPMorgan has supertankers and storage tanks in strategic locations around the globe, which enables it to hold millions of barrels of oil off the market.

JPMorgan and Goldman have begun taking physical delivery of gold when their futures contracts mature. Last August, Morgan Stanley got the okay to trade with Dubai Gold Securities, which will allow it to take physical possession of the gold.

Earlier this year, Goldman and JPMorgan each bought established metals-warehousing facilities. Goldman purchased Metro International of Detroit for $550 million, and JPMorgan bought Henry Bath of the United Kingdom as part of a larger $1.7 billion acquisition. According to industry insiders both deals were done at a premium.

These steps are all aimed at helping ensure the investment banks’ $4 trillion “commodities trade” goes their way.

Here’s what I mean: By taking physical commodities off the market while demand is on the rise, they’re only going to exacerbate supply shortages.

And that’s precisely the point.

Physical supplies are limited, so when a ship full of ore is purchased by a bank and held “off the market,” that can send serious supply shocks through a particular industry. In terms of “gaming the trade,” the inventory can be sold for profit and repurchased later with the intention of benefiting from a subsequent rise in price.

But if you analyze this transaction in isolation, it’s clearly a one-way bet: When an institution buys the physical commodity, its objective is clearly to unload that inventory at a later date and at a higher price – most likely much higher.

Keep in mind that a physical inventory of crude oil or gold isn’t at all like a share of stock or a futures contract – the latter two of which are highly liquid and very easy to sell: For an actual commodity, it takes time to find a buyer.

Intuitively speaking, that brings us to a very clear bottom line. When an institution buys and holds a physical commodity, there’s a very clear belief, confidence or conviction: The price is going to rise – probably by quite a lot.

Only industrial players that use a particular commodity as a raw material, which they intend to consume in the process of creating another product (crude oil becomes gasoline, or iron ore becomes steel, for instance). They certainly don’t want to overpay, but securing a supply of that commodity is essential to doing business.

As the banks take physical delivery of oil they know its price will rise significantly, so they can “double up” and even simultaneously “paper trade” futures for additional profits.

In fact, banks are helping ensure higher prices by effectively limiting the supply of that commodity.

But, being ever the innovators, banks have figured out a still-more-effective way to profit from supplies that fall short of the market demand. And this is something you’re almost certainly never going to read about in the mainstream financial press.

Let me explain.

Hoarding Resources – While They’re Still in the Ground

One of the shrewdest methods to expand control over a commodity is to buy saurian-sized resource deposits while they’re still in the ground – for just pennies on the dollar.

As the price of an underlying commodity continues to rise – as has been the case during the current secular bull market for commodities – the value of that asset increases at an exponential rate. That’s because the cost to control the asset is minuscule in relation to its value.

Interestingly, you don’t even have to extract the resource. You can just hoard it. In other words, you can just sit on it, leave it in the ground, and wait for its “spot price” to rise.

You even avoid the burden of storage costs.

I have to hand it to the investment banks: It’s a brilliant strategy.

Provocatively, investors can now obtain valuable insight into how this strategy’s being applied.

Fallout from the financial crisis forced some banks to become bank holding companies, which requires the quarterly filing of a special form, known as FR Y-9C, which provides a glimpse into which sectors are gaining favor.

Other standard quarterly reporting reveals the banks’ equity holdings. Analyzed together, these two filings show that banks are becoming significant players in resource equities, and specifically in the junior resource space.

It’s easy to see why.

Numerous junior and mid-tier resource companies, with in-ground “inventories,” trade at market-cap valuations at barely 10% of their total net asset value. The attraction is irresistible.

How About a ’10-Bagger’ Return?

Despite the increasing involvement of banks in the natural-resources sector, it’s the exploration companies – and producers that continue to explore – that stand to be one of the most explosive ways to generate wealth.

The reason is simple. Although exploration remains a riskier business, when you hit paydirt the return can be as much as 100 times the amount being spent.

For example, when drilling for oil or natural gas, a $10 million exploration budget could generate $1 billion or more worth of hydrocarbons in the ground.

Now that’s what we call financial leverage.

But there are ways to dramatically minimize the potential risks normally associated with these investments. An oil-and-gas company that’s already producing has better odds of finding more valuable assets on its current property. And those firms that maintain healthy cash balances and that possess little or no debt will achieve better market valuations.

Make no mistake, opportunities abound, but recognizing that commodities are a favored sector is not enough. Understanding which commodities are undervalued at a given point in time – and researching the best-managed and most-undervalued plays – can yield explosive results. The returns can sometimes reach 10 times, or even 15 times, the original investment.

So as you peruse recent headlines describing how the world’s largest investment banks are reporting record profits, are roaring back to record level profits, remember that some of their methods aren’t overly sophisticated – they’re just not mainstream.

And keep in mind, too, that natural-resource stocks – no matter if they are small-, medium-, or large-cap in nature – are a growing and highly effective part of those profit-making strategies.

It’s all about confidence … and control.

And in the commodities sector, banks right now boast both.

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]]> http://www.globalresourcealert.com/archives/global-commodities/feed/ 0 How China Will Drive Silver to $250 http://www.globalresourcealert.com/archives/how-china-will-drive-silver-to-250/ http://www.globalresourcealert.com/archives/how-china-will-drive-silver-to-250/#comments Tue, 13 Apr 2010 20:26:40 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=110 Once upon a time, the Chinese government forbade ownership of all precious metals.

But now, the ban has been lifted. In fact, China just introduced silver bars for investment. And now, state-run China Central Television (CCTV) is running a campaign encouraging the population to invest in silver.

That means there are over a billion potential [...]]]> Once upon a time, the Chinese government forbade ownership of all precious metals.

But now, the ban has been lifted. In fact, China just introduced silver bars for investment. And now, state-run China Central Television (CCTV) is running a campaign encouraging the population to invest in silver.

That means there are over a billion potential new silver investors hitting the market. This is especially significant when you consider the average savings rate in China is 30 to 40%.

But the flood of new Chinese silver investors isn’t the only factor driving up silver prices. The increased use of silver in everything from solar cell technology to medicine is pushing up prices as well.

Read on to discover exactly why silver will make savvy investors rich in the year ahead… and find out the one stock to buy now to take your portfolio to new highs.

Chinese Demand for Silver

Take a second to think how much of an impact this will have on the silver market – the sheer amount of people, and at such a high rate of savings.

Then you factor in Chinese demand for things silver is need to make – cell phones, computer, batteries, silverware and jewelry. China’s silver consumption already accounts for 70% of the global total of industrial use, and its middle class isn’t even close to reaching its spending potential.

What’s more, those aren’t the only reasons analysts are predicting silver prices can reach as high as $100 this year and $250 by 2015.

This free report outlines all the reasons silver is going to continue its ride to another record. It also gives a handful of ways to invest in silver.

Demoting the Silver-Gold Adage

China’s impact on the silver market isn’t the only thing catching the attention of silver analysts. The silver-gold ratio tells a compelling story about the price of silver. Put simply, the ratio means how many ounces of silver it takes to buy one ounce of gold. Historically, that ratio has been about 15-to-1. Right now, that ratio is hovering around 59-to-1.

For silver to ‘correct’ by returning to its long term silver/gold ratio of about 15, gold at $1,000 means silver should be priced at $66 already.

You’d be hard pressed to find anyone who believes that 59-to-1 will hold up much longer because it basically means silver is cheap compared to gold, which opens the door for investors to come in at a good price, such as China. All of China.

More Pressure on Silver Prices

As the global economy expands its size and reach… as technology advances… and as more ways to buy silver becomes available… as silver supplies have dwindled… more factors began affecting the price of silver more exclusively – for better or worse. Some are:

  • Silver’s Industrial Uses: For decades, silver has been more than a collector’s item. It has dozens of uses outside the storage vault. It’s used to make currency, jewelry and silverware. Silver is used to produce highly reflective, architectural mirrors. It’s heavily used in the medical field as an antimicrobial – a killer of some bacteria, algae, fungi and viruses. In the labs, silver is used in photographic films and as a catalyst in chemical reactions. And more applications are arriving soon, including using silver in photovoltaic cells in solar-power technology and in rechargeable silver-zinc batteries. In fact, silver’s use for industry has gone from 35% of total annual production ten years ago to more than 50% today. One source claims that figure is actually 90%.
  • Silver Supply/Demand: Supplies of available silver have dropped by 86% in the past two years. Commodities research firm CPM Group says the current amount of above ground refined silver has fallen from 2.2 billion ounces in 1990 to less than 1 billion today. At the same time that supply is falling, demand is rising… especially industrial demand. The pressure on silver prices will get even stronger as individual investment demand (including the whole Chinese market) goes up.
  • Silver Market Size: Silver is a less-active and lower-volume market than gold, which means that purchases even by individual investors can make an impact on silver prices. Better said, 100 silvers buyers purchasing the same amount as 100 gold buyers will have a bigger impact on the market. Think how much prices can spike when millions of Chinese investors flood the market with silver purchases. Now, combine that with the global return of industrial silver demand.

Silver Price Projections

Money Morning’s Martin Hutchinson believes silver and gold will continue climbing into 2011 and beyond. If enough investor momentum gains – and if China’s push for individual silver investment intensifies – he believes silver could peak past $100 either this year or next.

But, that’s just the beginning. Silver could top out at $250/oz. in the next five years as global mine production crawls in the face of increasing consumer and industrial demand. That’s an increase of over 1,150%.

Bear in mind that silver prices have been moving faster than gold. So those who want to invest in silver better pull the trigger soon, or watch silver’s price explode from the sidelines.

The Best Way to Invest in Silver

Like investing in gold, the most popular ways to invest in silver is ETFs, mining company shares and bullion/coins.

As far as ETFs go, silver investors might want to check out ETFS Silver Trust (NYSE: SIVR). The ETF can be bought and sold just like any stock, and seeks to reflect the value and performance of the price of silver bullion, minus the Trust’s operating expenses. The ETF is backed by physical silver bullion held by HSBC in London.

But, to really leverage the price of silver, take a look at Vancouver-based Silver Wheaton Corp. (NYSE: SLW).

Silver Wheaton which is perhaps the heaviest hitter in the global silver-mining business. It gets its silver from all corners of the world, from the Aurcana mine in Mexico to the Zinkgruvan mine in Sweden. As silver’s price shot up 56% in 2009, Silver Wheaton’s stock more than doubled that with a 124% gain. And in that span, the company acquired competitor Silverstone Resources Corp. and entered into several long-term agreements with Goldcorp and other major miners in which Silver Wheaton will acquire silver mined by them. Look for Silver Wheaton to skyrocket as silver prices rise.

Editor’s Note: Silver isn’t the only commodity in high demand in China. Demand for a substance used in everything from medicines to nuclear bombs already tops production by 16 times… This supply/demand mismatch has doubled the price of this substance in just one year. But the boom has barely even started. Discover the best way to play it (it’s not by buying the substance itself) before demand skyrockets even more.

]]> http://www.globalresourcealert.com/archives/how-china-will-drive-silver-to-250/feed/ 0 How to Profit From the “Fertilizer Wars” http://www.globalresourcealert.com/archives/how-to-profit-from-the-fertilizer-wars%e2%80%9d/ http://www.globalresourcealert.com/archives/how-to-profit-from-the-fertilizer-wars%e2%80%9d/#comments Tue, 13 Apr 2010 20:25:46 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=108 There’s nothing like scarcity and supply disruptions to fuel violent price spikes. And there’s nothing like the basic human needs for food and water to light that fuse.

Today’s world food supplies run on razor-thin inventories.

While the food riots of 2008 have all but disappeared from our short-term memories, the threat of them returning [...]]]> There’s nothing like scarcity and supply disruptions to fuel violent price spikes. And there’s nothing like the basic human needs for food and water to light that fuse.

Today’s world food supplies run on razor-thin inventories.

While the food riots of 2008 have all but disappeared from our short-term memories, the threat of them returning grows stronger with every passing day.

According to the World Bank, food prices increased 83% between February 2005 and February 2008. In April 2008, when the United Nation’s World Food Programme warned that a “silent tsunami” of hunger was sweeping the globe because of soaring food prices, it was more than just a clever sound bite tossed off by a bureaucrat: It was a warning that the world’s poor were being squeezed as increasingly higher portions of their family incomes were being spent on the food they required for their very survival.

Improved fertilizers will be a key to the solution of this problem. And they won’t just promote crop growth – savvy investors who fertilize their portfolios will be pleased with their profit harvest.

Let me explain …

Land Shortages + Demand Growth = Food Shortages

Although commodities – including the grains – entered a secular bull market about nine years ago, if you adjust for inflation back to 1980, soybeans, corn and wheat still remain among the cheapest natural resources around… for now.

More recently, the International Grains Council warned us that global grain supplies are expected to fall by 4.3% in the 2009-2010 growing season.

Right now, sugar prices are near their highest levels in 28 years, and corn prices are being bolstered by rising Asian consumption and supply pinching drought. The Philippines are about to become a net rice importer for the first time in 20 years.

And don’t forget about China, which will once again prove to be the “swing vote” in the marketplace supply and demand tug-of-war that establishes agricultural inventories and prices.

Over the past 10 years, China has transitioned from a net producer of certain grains into a net importer. For instance, it’s now importing corn for the first time in six years. That’s a far cry from 2003, when the Red Dragon was the leading exporter of grains in Asia. The first four months of 2009 saw China’s soybean imports rise a whopping 36%, helping push and sustain the price of that commodity to multi-year highs.

But if we look further out at 10-year projections, the supply/demand picture gets even more alarming. According to the U.S. Department of Agriculture‘s own forecast, “long-term growth in global demand for agricultural products – in combination with the continued presence of U.S. ethanol demand in the corn sector and EU biodiesel demand for vegetable oils – holds prices for corn, oilseeds, and many other crops well above their historical levels.”

Meanwhile, current biofuel targets from the developed nations – as well as Brazil, China, and India – could divert more than 10% of the world’s total arable land from food production into growth of crops for biofuels. Last year, for instance, more than 25% of the total U.S. grain crop was converted into ethanol to serve as fuel.

This new-and-growing challenge for the U.S. farming sector – which has already been watching arable land give way to development – is no small problem. The American Farmland Trust recently warned that here in the United States, every 60 seconds, two acres of agricultural land is lost to development. The Earth Policy Institute indicates that the U.S. area devoted to roads and parking lots covers roughly 16 million hectares, nearly as much as the 20 million hectares devoted to growing American wheat.

This growing scarcity of arable land isn’t just a U.S. problem. This past June, China decided to halt a reforestation program for fears the initiative could help the country run short of marginal farmland needed to keep its people fed.

In less-developed nations, productivity is a major issue. That’s because their farming methods only achieve a meager 10% of the industrialized world’s productivity levels. And yet, developing nations are the main drivers of food-demand growth.

So what’s the solution to the world’s ongoing food shortages and impending crises?

Like anything this complex and geopolitically charged, there’s no single answer.

But one thing is certain – fertilizers will have the biggest impact.

Fertilizers: Ag Panacea/Investor-Profit Catalyst

Until recently, most investors probably thought the word “potash” referred to something that got consumed at a college frat party.

The fact is, potash is a key agricultural ingredient – the unsung hero of food production.

Potash fertilizers increase crop yields, plants’ water retention, and disease resistance.

And this staple of the food-growing process is about to move back into the limelight, along with agricultural resources.

Last fall I attended the Second McGill Conference on Global Food Security. One of the panelists, Dr. Hafez Ghanem, assistant director-general of the UN’s Food and Agriculture Organization, said the world’s population is likely to reach 9 billion people by 2050 – an increase of 2.3 billion. Most of that population growth will be centered on developing nations. The countries most successful at reducing hunger will do so via increased agriculture investments.

But to meet this expanding demand, we’ll need to increase current food production by 70% from current levels – and that’s before we redirect any agricultural production toward biofuels.

It sounds like a major challenge. But as most longtime investors understand, challenges breed opportunity.

It’s estimated that fertilizers have such an impact on agricultural productivity that they’re actually responsible for 40% to 60% of the global food supply.

Nutrients such as nitrogen, phosphorus and potassium are embedded in fertilizers. They replenish soils in harvest and add nutritional value to food – to such a degree that farmers can’t do without them, at least not for long. Each year, the United States exports roughly 80 million tons of grain that contains nitrogen, phosphorus, and potassium. The only way to replenish these nutrients in the soil – ensuring its fertility – is to employ fertilizers, making them essential.

As countries modernize and their populations become increasingly affluent, they also tend to eat better-quality foods. That means that their diets start to include more fresh fruits and vegetables, which require growers to employ increasingly larger quantities of fertilizers. In fact, the International Fertilizer Development Center says that “no country has been able to expand agricultural growth rates and eliminate hunger without increasing fertilizer use.”

The bottom line: Potash is back

“Fertilizer Wars”

Potash fertilizer prices have had a healthy run, climbing from 2003-2004 levels of about $100 per ton to eventually peak at roughly $1,000 a ton in 2008, when numerous crop prices were hitting all-time highs. But like most other basic foodstuffs, potash prices have fallen back to earth.

Last December, the Belarusian Potash Co. struck a deal with China at $350 a ton, setting a what some analysts described as a “price floor” for potash.

As it turns out, those analysts may have been right. In mid-February, North American manufacturers’ potash inventories were reported to have fallen sharply in January. With spring planting around the corner, and overseas sales on the rise, potash dealers stepped up their supply restocking efforts. Farmers had cut back on consumption as a reaction to higher prices. But that hurt crop yields and crop quality. After nearly a full year of fertilizer underutilization, robust demand is returning.

Just recently, Canpotex – the fertilizer-sale consortium for North America’s largest exporters [Potash Corp. (NYSE: POT), Agrium Inc. (NYSE: AGU), and The Mosaic Co. (NYSE: MOS)] – inked a deal with India at $370 per ton, fueling speculation that the previous $350 a ton European-Chinese deal marked a new bottom.

Not surprisingly, merger-and-acquisition (M&A) activity in this sector has been sizzling – so much so that some analysts are referring to the wheeling and dealing as the “fertilizer wars.” CF Industries (NYSE: CF) has made a $4.1 billion bid for Terra Industries Inc. (NYSE: TRA). Agrium has been hunting CF for nearly a year. Recently, Vale (NYSE: VALE) acquired Bunge’s Brazilian fertilizer operations.

And in the past several weeks, BHP Billiton Ltd. (NYSE ADR: BHP), the world’s largest mining concern, bought Athabasca Potash Inc. (PINK: ABHPF). But considering BHP’s desire to be either No. 1 or No. 2 in whichever fields it chooses to play in, the odds are good that it has one of the big North American potash producers within its sights.

Retail investors should do the same.

As the global economy normalizes and food demand rises, look for a supply shock to hit the grains complex – and, by direct extension, the potash-fertilizer market, too.

Remember, the food shortages that led to riots have not gone away. They’re on hiatus -but only temporarily – and could potentially erupt anew at any time.

In my view, you still have a chance to get in near the ground floor in the last sector to join the secular-commodities smorgasbord.

Potash, Agrium or Mosaic could serve as the dessert to the ongoing commodities banquet.

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]]> http://www.globalresourcealert.com/archives/how-to-profit-from-the-fertilizer-wars%e2%80%9d/feed/ 0 How China Will Drive Silver to $250 http://www.globalresourcealert.com/archives/silver-drive/ http://www.globalresourcealert.com/archives/silver-drive/#comments Sat, 27 Feb 2010 14:58:09 +0000 Peter-Krauth http://www.globalresourcealert.com/?p=134 Source MoneyMorning.com:
How China Will Drive Silver to $250

Once upon a time, the Chinese government forbade ownership of all precious metals.

But now, the ban has been lifted. In fact, China just introduced silver bars for investment. And now, state-run China Central Television (CCTV) is running a campaign encouraging the population [...]]]> Source MoneyMorning.com:
How China Will Drive Silver to $250

Once upon a time, the Chinese government forbade ownership of all precious metals.

But now, the ban has been lifted. In fact, China just introduced silver bars for investment. And now, state-run China Central Television (CCTV) is running a campaign encouraging the population to invest in silver.

That means there are over a billion potential new silver investors hitting the market. This is especially significant when you consider the average savings rate in China is 30 to 40%.

But the flood of new Chinese silver investors isn’t the only factor driving up silver prices. The increased use of silver in everything from solar cell technology to medicine is pushing up prices as well.

Read on to discover exactly why silver will make savvy investors rich in the year ahead… and find out the one stock to buy now to take your portfolio to new highs.

Chinese Demand for Silver

Take a second to think how much of an impact this will have on the silver market – the sheer amount of people, and at such a high rate of savings.

Then you factor in Chinese demand for things silver is need to make – cell phones, computer, batteries, silverware and jewelry. China’s silver consumption already accounts for 70% of the global total of industrial use, and its middle class isn’t even close to reaching its spending potential.

What’s more, those aren’t the only reasons analysts are predicting silver prices can reach as high as $100 this year and $250 by 2015.

This free report outlines all the reasons silver is going to continue its ride to another record. It also gives a handful of ways to invest in silver.

Demoting the Silver-Gold Adage

China’s impact on the silver market isn’t the only thing catching the attention of silver analysts. The silver-gold ratio tells a compelling story about the price of silver. Put simply, the ratio means how many ounces of silver it takes to buy one ounce of gold. Historically, that ratio has been about 15-to-1. Right now, that ratio is hovering around 59-to-1.

For silver to ‘correct’ by returning to its long term silver/gold ratio of about 15, gold at $1,000 means silver should be priced at $66 already.

You’d be hard pressed to find anyone who believes that 59-to-1 will hold up much longer because it basically means silver is cheap compared to gold, which opens the door for investors to come in at a good price, such as China. All of China.

More Pressure on Silver Prices

As the global economy expands its size and reach… as technology advances… and as more ways to buy silver becomes available… as silver supplies have dwindled… more factors began affecting the price of silver more exclusively – for better or worse. Some are:

  • Silver’s Industrial Uses: For decades, silver has been more than a collector’s item. It has dozens of uses outside the storage vault. It’s used to make currency, jewelry and silverware. Silver is used to produce highly reflective, architectural mirrors. It’s heavily used in the medical field as an antimicrobial – a killer of some bacteria, algae, fungi and viruses. In the labs, silver is used in photographic films and as a catalyst in chemical reactions. And more applications are arriving soon, including using silver in photovoltaic cells in solar-power technology and in rechargeable silver-zinc batteries. In fact, silver’s use for industry has gone from 35% of total annual production ten years ago to more than 50% today. One source claims that figure is actually 90%.
  • Silver Supply/Demand: Supplies of available silver have dropped by 86% in the past two years. Commodities research firm CPM Group says the current amount of above ground refined silver has fallen from 2.2 billion ounces in 1990 to less than 1 billion today. At the same time that supply is falling, demand is rising… especially industrial demand. The pressure on silver prices will get even stronger as individual investment demand (including the whole Chinese market) goes up.
  • Silver Market Size: Silver is a less-active and lower-volume market than gold, which means that purchases even by individual investors can make an impact on silver prices. Better said, 100 silvers buyers purchasing the same amount as 100 gold buyers will have a bigger impact on the market. Think how much prices can spike when millions of Chinese investors flood the market with silver purchases. Now, combine that with the global return of industrial silver demand.

Silver Price Projections

Money Morning’s Martin Hutchinson believes silver and gold will continue climbing into 2011 and beyond. If enough investor momentum gains – and if China’s push for individual silver investment intensifies – he believes silver could peak past $100 either this year or next.

But, that’s just the beginning. Silver could top out at $250/oz. in the next five years as global mine production crawls in the face of increasing consumer and industrial demand. That’s an increase of over 1,150%.

Bear in mind that silver prices have been moving faster than gold. So those who want to invest in silver better pull the trigger soon, or watch silver’s price explode from the sidelines.

The Best Way to Invest in Silver

Like investing in gold, the most popular ways to invest in silver is ETFs, mining company shares and bullion/coins.

As far as ETFs go, silver investors might want to check out ETFS Silver Trust (NYSE: SIVR). The ETF can be bought and sold just like any stock, and seeks to reflect the value and performance of the price of silver bullion, minus the Trust’s operating expenses. The ETF is backed by physical silver bullion held by HSBC in London.

But, to really leverage the price of silver, take a look at Vancouver-based Silver Wheaton Corp. (NYSE: SLW).

Silver Wheaton which is perhaps the heaviest hitter in the global silver-mining business. It gets its silver from all corners of the world, from the Aurcana mine in Mexico to the Zinkgruvan mine in Sweden. As silver’s price shot up 56% in 2009, Silver Wheaton’s stock more than doubled that with a 124% gain. And in that span, the company acquired competitor Silverstone Resources Corp. and entered into several long-term agreements with Goldcorp and other major miners in which Silver Wheaton will acquire silver mined by them. Look for Silver Wheaton to skyrocket as silver prices rise.

]]> http://www.globalresourcealert.com/archives/silver-drive/feed/ 0