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Meritocracies,
Copper, Batteries, Petrol, Solar and GOLD
Last week the LaBorde
family was down in South Louisiana at the New Orleans Investment Conference.
After attending a presentation on China by the very passionate Dr. Stephen Leeb, author of Red Alert: How China's Growing Prosperity Threatens the American Way of Life; it became more apparent that China is
becoming an economic super predator. His explanation of the current situation
seemed comparable to a boxing match. In one corner there stands a boxer who
does not know he is in the ring, but he has a very strong reputation. In the
other corner stands a boxer who is a little lighter but has been training
hard. To tilt the scales farther, the boxer that has been training has also
decided to hedge his bets by purchasing all of the boxing shoes, gloves,
trainers and ring time while the other boxer was not even paying attention.
The United States is not necessarily done for, but it is time for us to at
least realize that we are in a
fight and act accordingly.
As
a long time chess player, Dr. Stephen Leeb
expressed that he is downright scared of the way that our opponent is
systematically playing an enviable game of strategy and yet we haven’t
even started to acknowledge that we are engaged in a competition that
threatens our entire way of life. His argument was focused around resource
acquisition for global economic control. On the surface his reasoning sounded
much like many of the ideals that we have previously heard. However, as he
continued to speak his argument invoked a mixture of respect for the
efficiency of the Chinese machine and shock at how far behind we may be. Some
of the high points of his presentation are listed below:
People:
Besides having a massive workforce and graduating more engineers each year
than we have working in this country, China operates on more of a
meritocracy, or by rewarding the merit of individuals, than the US does. An
example of this can be seen in that one of the premier female chess players
in the world right now is a young Chinese adolescent that was pulled out of
the fields when it was recognized that she had an aptitude for strategy as a
young girl. If she continues on her current trajectory, Dr. Leeb suspects she will be playing the men soon. It is
this mindset of making efforts to elevate their best, brightest and hardest
working that permeates much of their society. In business there are more
Chinese billionaires being made each year than anywhere else in the world. In
government they have repeatedly been cultivating this kind of talent as well
and Dr. Leeb believes that this talent is playing
the resource war very well.
Copper:
China is spending dollar amounts of a similar magnitude in Afghanistan as the
United States, the difference is that they are
mining copper while we are creating the world’s best distraction for
them to do so. The reason that getting a leg up on the world’s copper
supply is exceptionally scary is that copper is at the root of many or the
world’s future “green” technologies besides being the
backbone of many of the world’s existing technologies.
Rare
Earth metals: “Rare earth metals” are the bedrock of the future
of all long-life, lightweight batteries. Over the years China has developed
it’s mines in Mongolia and it’s
processing plants to the point that they now produce 97% of the world’s
supply. This probably needs no explanation as the world moves into electric
cars and even a couple electric planes. Clean energy is a global concern and
the efficient storage of this energy is a big concern as well and will only
grow in importance over the coming years. China has stopped exporting rare
earth metals in raw form and instead will only sell them as components in
finished products shutting out everyone else around the world. This gives
them a tremendous leg up on all finished products related to rare earth
metals, such as batteries and permanent magnet motors, a core component of
most high-efficiency electric generators.
Solar
Energy: “First Solar” is the name of the U.S. based company that
was the second largest producer of solar panels in the world in 2010. Last
week First Solar took a 25% bath and the top of the blame list can be
summarized with a quote from an article in Forbes from last week, “First Solar did not provide any details but the
handwriting was on the wall. Recently, there has been considerable anecdotal
evidence that First Solar is no longer competitive with Chinese
imports.” First Solar was listed number one in the top 25 fastest
growing companies in America in 2011. What could bring an innovative giant
like this down? According to the article, a $30 billion dollar helping hand
of the Chinese government to it’s
entire solar sector making US production not financially feasible at this
time. With that kind of help there is just not much a company, or country,
can do to prevent China from getting a complete and total lock on the solar
industry—a potential lynch pin industry in the forward motion of clean
energy.
The
Oil Game: Two words, Petro China. Petro China is the traded name of the
Chinese National Petroleum Corporation that announced its plans to go public
in November of 2007. The company tripled in value once public, was the most
valuable publicly traded company on the exchange as of September 28th
of 2011, and was the first company to reach a trillion dollar market
capitalization. Though the Chinese are gearing up for futuristic energy
sources they seem to have a firm understanding that petrol based energy will
be ushering us and them into the world of green energy and will be critical
in bridging us there.
Gold:
What is China doing with gold you ask? They, along with Russia, appear to be
slowly but surely attempting to accumulate enough to one day back their
currency with it. They are also encouraging their citizens to accumulate gold
by opening a new metals exchange and granting tax exemptions. If you have
slept through everything else written in this article, this single point
should be enough to tip you off that: 1. The US dollar is potentially in more
trouble than indicated by the press and 2. If metals become popular in a
country with a population of 1.33 billion savers there may be a boost in
gold’s overall demand; this could potentially resemble the craziness
associated with the Tickle-Me-Elmo doll during the ‘96 Christmas
season.
To
quote Dr. Leeb, “We are at war and we
don’t even know it! Wake up, America!”
Of all the points
listed above one is of particular concern to us—it is that China is
poised to change the global pricing of gold. We can buy and be holders of
Petro China, rare earth metals, copper and stocks in Chinese solar companies;
but we sell gold and understand it best. As a result of hearing Dr. Leeb’s impassioned views we feel that both gold and
silver are positioned very well for motion in a positive direction. It is our
position that gold and silver will be rising significantly over the next
year, so if you have any questions about acquisition please feel free to give
us a call.
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