Yes, we are in a secular bear market. The Obama administration is taking the right steps to reinstate trust and attract foreign investments in the US markets, still the recovery will take several years. Best strategy? Bet on China's growth and bet on the continuation of the US recession thus invest in undervalued canadian mining companies which focus on industrial metals, (i.e. copper),rare metals (i.e molybdenum, tungsten) and precious metals as hedge against a rising US deficit / M3 figure. Analysis
Rising commodity prices and shrinking supply in natural resources due to increased Chinese demand justifies the idea that China will continue to advance the Chinese industrialization and strive to extend the Chinese working middle class by another 500 million people over the next 10 years. China recently restricted the export of rare metals such as Tungsten and Molybdenum, while controlling 85% and 43% respectively of the world reserves. Tungsten in example is necessary for light bulbs, while Molybdenum is required to harden steel, thus plays as well a vital role in the construction of nuclear reactors. Many rare metals prices sky rocketed which may help understanding how critical it is to stop the USD depreciation while China not only buys the relevant metals but also acquires producing mining companies and future world class deposits from junior exploration companies in Peru, China, Australia, Chile, Canada and Mongolia. Rare metals' price appreciation is the most transparent one, but Industrial metals and energy metals such as uranium will also become less affordable, thus will eventually make it more difficult for the corresponding industries (i.e. car industry, housing market) to produce cost effective in spite of a depreciating USD which should otherwise help increasing exports, but will irrevocably make natural resources less affordable
My strategy is to bet on undervalued Canadian junior mining exploration companies with exceptional and proven management teams, meaning there are individuals who managed several times to take over an exploration company with a market cap. of CAD 25 million, identified the right properties, found inferred assets, moved inferred assets to the indicated and proven category, completed the relevant 41-101 compliant reports, produced the feasibility study, avoided dilution through either a spin-off of one property, established joint ventures, started early production through the identification of an open pit zone, obtained the approval to construct a mine from local authorities, and eventually successfully either sold the project or in the best case scenario made the CAD 25 million market cap grow to CAD 1 billion market cap range. Example would be David Lowell's team which found the Pierina gold deposit. Mrs. Catherine McLeod-Seltzer sold Arequipa Resources for CAD 1 billion to Barrick in the 90s. Rob McEwen’s accomplishments with Goldcorp were equally impressive. There are numerous "great" people who have proven that it may be not such a bad idea to identify to what companies they are associated with today. And if one looks at the underlying stock's performance they will be all impacted by the general volatility, and may simultaneously move north or south, the share price may at times not move at all. Nevertheless, the moment they reach another stage, such as reporting that 679 million pounds of molybdenum can be moved to the proven category, these stocks will move substantially, very quickly and most definitely north. It's not a question that these stocks will move up, but when the work is done or laboratory results will be delayed or not, or if certain warrants finally expired. Therefore the short answer, if one owns 20 different companies in one asset class, and they continue to move simultaneously most of the time, one should possibly reconsider investing in the relevant the asset class all along. 2. Metals, in particular metals which are needed for China's effort to successfully have another one billion people join China's middle class. China recently announced to stop exporting rare metals. I.e. China controls 85% of the world’s Tungsten reserves and 40% of molybdenum reserves. There is little substitution for molybdenum in its major application as an alloying element in steels and cast irons. In fact, because of the availability and versatility of molybdenum, industry has sought to develop new materials that benefit from the alloying properties of the metal. Potential substitutes for molybdenum include chromium, vanadium, niobium (columbium), and boron in alloy steels; tungsten in tool steels; graphite, tungsten, and tantalum for refractory materials in high-temperature electric furnaces; and chrome-orange, cadmium-red, and organic-orange pigments for molybdenum orange.) Furthermore, foreign concerns about the unofficial inflation in the US M3 figure, and the US deficit, and the fact that gold reached just moments ago the historical mark of $1000 strongly suggest that it may be a good idea to look out for producers which may start generate profits only when relatively high production costs are outpaced. Once again, the exploration will not be able to keep up with the high demand which can be expected when even entities such as the Russian Central bank aggressively start investing in precious metals with the intention to hedge against a depreciating USD. 3. Cash. Yes, as long it is invested in currencies related to mining countries (Chile, Peru, Australia, and Canada). Otherwise, I would suggest buying quality junior miners or producers which trade in the above indicated markets. How long? It depends on the USD.” Analyses are solely the work of the authors and have not been edited or endorsed by GLG. This author consults with leading institutions through GLG Questions for the author Engage this author or other Financial & Business Services experts
Contributed by a Member of the GLG Financial & Business Services Councils Request a Consultation with this Author
News 
Market Data 
Discover 
