|
Good Morning Readers.
Before I begin today, I would like to correct
an error of omission to Wednesday’s post on General Moly (GMO). One of
my readers wrote me and told me that while my analysis on GMO was very
well done, I had been remiss in mentioning
one of General Moly’s greatest strengths, their management team. A
visit to this link (http://www.generalmoly.com/index.php?option=com_content&view=article&id=31&Itemid=37) will highlight this brilliant management
team. Suffice it to say that the CEO Bruce Hansen has assembled a fantastic
team of dedicated professionals like Dave Chaput, Seth Forman and Zack
Spencer just to name a few who are focused on getting this project into
production and are in it for the long haul.
I urge my readers to follow the above link to
find out more about this amazing management team and to the dedicated people
who I didn’t mention by name, due to the lack of space, please forgive
me. I do want to reiterate that General Moly is a fantastic project that will
take time but if you have the patience to wait, your patience will be amply
rewarded. Please go tohttp://www.generalmoly.com/ to find
out more about this amazing project which is now at unbelievably oversold
levels.
Yesterday
we saw a massive commodities selloff which I attribute to an unexpected rise
in unemployment benefits which rose to 474,000 last week, the highest level
in eight months, a slight strengthening of the dollar, a massive selloff of
oil prices which fell $10, to close below $100.00 a barrel for the first time
since mid March, and what I characterize as a healthy sell off in commodities
which were long overdue for a correction. Much to my dismay my mining stocks
got caught in the crosshairs and were summarily taken to the woodshed for a
beating. I have learned through bitter experience, however, that at moments
like this we need to keep or nerves of steel and our emotions in check
because what is really happening is that all commodities are moving in lockstep.
The reality is that the prices of rare earth elements (REE’s) are
blasting through the roof. Manufacturers are driving prices in their haste to
secure supply for applications which many of the most sophisticated investors
are unaware of. The manufacturers need the REE’s and are willing to pay
for them on the world market. These high tech corporations need REE’s
to survive.
China has the right stuff but they are claiming, maybe rightfully so that
they need it for themselves. In fact they are venturing abroad to takeover
promising REE Mines all over the world. As I mentioned in Wednesday’s
post there is a Chinese bank that has a loan committed to General Moly in the
amount of $750 million dollars once the permits are in place to fast track
this project into production. America was once the miners to the world but,
alas, they gave it over to the Chinese to improve their profit margins.
Sadly, this is another example of corporate America’s greed and not
seeing the forest for the trees. One thing is certain. North America and
Europe must move fast to develop their own supply because we are going to see
a race to control REE assets globally. I believe that very soon investors
will realize that Gold and Silver are not the only precious metals to use as
a currency hedge and theses overlooked Rare Earths will be very coveted.
I have mentioned to my readers that I have positioned myself in heavy
rare earth deposits in the U.S., Ucore (UURAF), Australia, Lynas Corp
(LYSCF), Canada, Avalon (AVL) and Europe, Tasman Metals (TASXF).
Some of my readers have asked why I do not have a position in MolyCorp (MCP).
I think that while MolyCorp has been heavily marketed and is most certainly
the “darling of the market.” Most investors do not realize that
MolyCorp’s deposits are mostly light rare earths and I am focused on
heavy rare earths, which as outlined by the US Department of Energy are ores
like dysprosium, terbium and europium. The West is struggling to gain
control over the supply of these ores and I believe that some of these gems
like Ucore (UURAF) which have an abundant supply of heavy rare earths will
not last long at these price levels.
I wanted to touch quickly on the silver ETF (SLV) which my readers know I
have been writing about. The good news is that I was right about it being
very over bought and I hope you took profits where I recommended. What
knocked me over, however, was the correction which I predicted.
I wrote that I expected this stock to bounce
against the 50 day moving average and then settle at support at about $34.00
- $35.00. I wrote that if you believe as I do that we will continue to see
massive debts run up by the Fed then Gold and Silver will continue to be a
hedge against the devaluation of the dollar and inflation. While I think it
is a good idea to own some hard silver for what Patrick from
Blanchard’s calls “potato and tomato” money. Hard assets,
however, are very illiquid and I like the ability to move in and out of a
position in silver using the ETF but I digress.
A look at the chart shows a selloff of mammoth proportions which was
something I did not expect. As I have already said, I expected a bounce
against the 50 day moving average before it broke through to support levels
which I thought would be around $34.00. Well I was wrong! As you can see in
the chart it skipped right past the 50 day moving average and closed
yesterday at $33.72. Right now I will wait for the dust to settle and let
this stock find a level of support before I buy back in. I am firmly
convinced that by the end of the year we will see silver at $60.00 and by 2013 we will see silver at $100.00.
However, for right now I have no idea where the panic selloff will end.
At times like these it is important for me to remember that I believe the
dollar will continue to weaken, I believe there will be more quantitative
easing and I believe that gold, silver and REE’s are the bullish sector
to be in. I will continue to keep a close eye on the SLV ETF and look to buy
back in and I will continue to watch my mining stocks, that have been crushed
this week, for opportunities to add to my positions at very oversold levels.
I will
be posting a video of SLV on YouTube today and you can get more of my
thoughts by watching this video. My YouTube name is
“InvestingAdvicebyGeo”.
Please
stay tuned for any updates. Have a Great Weekend!
|
