The prices of oil, gold and silver are all presently being
pushed higher by the expansion of popular protests throughout the middle
east. Despite the confident public statements officials in Washington, Saudi
Arabia, and Israel, rest assured that the level of nervousness within those
governments are at their highest in decades. In tandem with the elevated
discomfort in those administrations, the markets continue to notch higher,
with commodities leading the charge.
But
if the perfect storm of commodity price influence that is currently just a
feint wind blowing continues to strengthen, the prices for these commodities
are going to surpass their all-time records in the first half of 2011. That
means topping $1,432 an ounce for gold, $49.95 an ounce for silver, and $147
for a barrel of oil.
Those
two paragraphs were written yesterday before gold broke that record, and
silver set a new 30 year high. Oil is powering higher, and though $147 is
almost a 50% increase from here, remember that when the price spiked to that
level back in July 2008, on March 4th, only 4 months earlier, it was trading
at the $100 range.
From
10,000 feet there’s no surprises. The U.S. Dollar is in the final
stages of deterioration, the nation it supports is broke and is essentially
in a state of default. The pretext of military intervention facilitates the
deployment of armed forces into the world’s oil producing regions. The
U.S. dollar propaganda machine, incessantly ballyhooing an economic recovery
by pointing to the ersatz evidence of robust equity markets, disingenuously
overlooks the fact that the percentage increases in the Dow mimic exactly the
percentage increases in bogus dollar production.
The
only real surprise is the sheer audacity of the American political
establishment and its rapacious capacity for feeding off of its own
impoverished public, anesthetized daily by the talking heads and forced to
lean harder into the strengthening force of that foul wind. Everyone outside
of the U.S., and many within comprehend perfectly that the biggest financial
collapse in history is still underway, and accelerating.
Egg-head
analysts are increasingly impressed with their needlessly complex models of
future resource consumption. These point to a world where we’re running
out of everything in terms of basic non-renewable commodities. Those that are
agriculturally generated are starting to bump up against the ceiling of
maximum possible production, while the land required to produce them is
incrementally compromised by diminishing arability.
The
final converging front of said storm of perfection is manifested by the
inevitable outcome of the information age begun nearly 20 years ago. Despotic
leaders, fortified by U.S. dollars and military support, can longer conceal
the treasonous relationship that forms their base of power, and
coincidentally, net-savvy youths are organizing and sharing information at an
unprecedented rate. The result, collective outrage, is expressed in the form
of protests morphing into revolutions morphing into toppled authoritarian
governments.
The
only thing keeping China and Saudi Arabia from the same fate is robust
economics and ferocious domestic policing. The moment the scale tips toward
poverty and hunger is the moment no amount of internal brutality suppresses
what becomes a preference for a noble death over a miserable life. That
equation is natural law. And natural law, unlike the self-serving rules
foisted on the public sheep and labeled “The Law”, cannot be
broken.
The
Chinese bubble, involuntarily and feverishly inflating through the simple
requirement of nourishment to sustain its unfathomable scale, speeds toward
the inevitable pop, which is the sound heard in the not-so-distant future
when the return to tribal warfare marks the completion of the ultimate cycle.
All
these factors converge to form insatiable demand for tangible value in direct
proportion to the inundation with paper anti-value. That gold and silver are
the principle recipients of that demand is, as noted, no surprise.
This
weekend upcoming will see the beginning of the Prospectors and Developers
Association of Canada convention at the Toronto Convention Center. This is
the world’s largest mining investment and finance conference in the
world, and the expectation this year is for a sell-out crowd. The reason for
that is while the prices of the monetary commodities gold, silver, platinum
and palladium, and the energy commodities oil, gas, uranium, lithium, coal
and rare earths, all power higher, the companies that explore for and
ultimately produce these commodities are where the really big money is made.
The
PDAC conference is the single most important gathering on the planet to
discover investment ideas, listen to presentations by such companies, as well
as a wide range of speakers on topics from mining economics to picking
stocks.
Its
all about leverage. Whereas the price of gold and silver is just about
guaranteed to keep rising in view of all the factors cited above, investors
with higher risk tolerance who want to leverage their investments to these
prices in the desire to realize gains above 100% within two years can do so
by investing in TSX and TSX-listed commodity stocks.
Gold
will likely pile on another $80 – 100 in the coming year, as it has
done for the last 10, which will give it a performance increase over one year
of 6.9% . But buying a junior gold explorer for $0.50 a share, and seeing
that company drill a major intercept that immediately carries the stock to
$5, is a 1,000 % performance, or ten-bagger – the holy grail of
resource investment.
So
you can keep buying the platitudes of CNBC and the Wall Street Journal and
CNN, who want you to think your funds are safer with the major American
investment banks who are their sponsors, or you can quit getting fleeced by
the U.S. government-backed financial services industry and come join the land
of the free up north in Toronto for 4 days and see how it feels to make a
pile of dough.
James West
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