Metals / Commodities

• Rare Earth Deficiencies, Diagnosis... An Emergency Treatment Plan

  A serious lack of rare earth elements is endemically afflicting the world body politic.  It has been brought on by a chronic combination of American short sightedness and Chinese need for self survival.  It is well known that rare earths, a group of 17 atomic elements are essential for the survival of cutting edge industry in such diverse areas as nuclear launch missiles hybrid autos, wind turbines, solar devices, oncological applications, night-vision devices and petroleum production.  Once upon a time America was a major source for these substances, but Beijing had the foresight to co-opt this essential nourishment for their…

• Water, Not Oil Could Soon Become the World’s Greatest catalyst for Conflict

  Writing about the 1967 Six Day War in his 2001 memoirs, Israeli Prime Minister Ariel Sharon said that "While the border disputes between Syria and ourselves were of great significance, the matter of water diversion was a stark issue of life and death." "People generally regard 5 June 1967 as the day the Six Day War began," Sharon later told the BBC in 2003. "That is the official date. But, in reality, it started two-and-a-half years earlier, on the day Israel decided to act against the diversion of the Jordan [River]." Throughout history, access to water has spawned and escalated…

• Can We Blame Bernanke for the Rise in Food and Commodity Prices?

  It wouldn’t be fair to say that Bernanke is responsible for all the run-up in global food prices. There are many factors at play. That’s not to say the US monetary policy doesn’t have a central role in the global commodities market. The Fed has a big axe. Policies like ZIRP and QE encourage speculation. It's contributing to overheating in a number of countries, this is adding to demand at every level. How much can we blame Bernanke for the increases in global food/commodities prices over the last year or so? My guess is about 25%. I would make a…

• Russia in Joint Venture With Mongolia to Develop Uranium Resource

  Russian President Dmitry Medvedev has signed a law on forming a joint venture with Mongolia to develop a large uranium deposit. Medvedev's signature clears the way for creation of the Russian-Mongolian company Dornod Uran to develop Mongolia's Dornod field with reserves of at least 28,000 tons of uranium. Russia's state nuclear company, Rosatom, has also pledged to help with infrastructure in Mongolia, such as new railway lines, to facilitate work at Dornod. Rosatom has been negotiating with the Mongolian government for months to reach this agreement. It remains unclear how soon work can start since Canada's Khan Resources still claims…

• 2011 Commodities Trading Forecast

  This is my favorite asset class for the next decade, as investors increasingly catch on to the secular move out of paper assets into hard ones. Don’t buy anything that can be manufactured with a printing press. Focus instead on assets that are in short supply, are enjoying an exponential growth in demand, and take five years to bring new supply online. The Malthusian argument on population growth also applies to commodities; hyperbolic demand inevitably overwhelms linear supply growth. Of course, we’re already eight years into what is probably a 20 year secular bull market for commodities and these things…

• A Perfect Storm is Settling Up for the Grains

  I bet I’m the only guy you know whose wedding was filmed by the KGB. In the seventies, my friend, the TASS correspondent, Yuri, shot the entire assembled foreign press at the event at The Foreign Correspondents Club of Japan, undoubtedly for their files in Moscow. What a waste of resources. No wonder they lost the cold war! We’ve stayed in touch through the years, through the collapse of the Soviet Union and the many wars, revolutions, booms, and busts that followed. He now advises a Russian hedge fund. What else? When he called me the other day he was…

• Food Prices 18.5% Higher than a Year Ago

  I am busy working on some bigger projects that I can’t write about yet, but I thought I would put up a little scanned in section from today’s WSJ relating to food prices. Food prices are now 18.5% higher than a year ago, and higher than when they reached their peak in 2008. High food prices are a concern, both for poorer people in the US, and for the huge number of poor people around the world. If food prices go up, many will not be able to pay for sufficient food for a well-balanced diet (assuming they could in…

• Why Commodity Prices are Surging

  Paul Krugman explains the main reason for the rising commodity prices: Today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies. There are many observers who disagree with this interpretation.  They argue it is loose U.S. monetary policy and speculation that is driving the surge in commodity prices.  Krugman notes there is…

• Is Food the New Distressed Asset?

  After my entertaining repast with the head of our nation’s intelligence service, (See: Lunch with the CIA) I had to ask myself this question. During the sixties, new dwarf varieties, irrigation, fertilizer, and heavy duty pesticides tripled crop yields, unleashing a green revolution. But guess what? The world population has doubled from 3.5 to 7 billion since then, eating up surpluses, and is expected to rise to 9 billion by 2050. Now we are running out of water in key areas like the American West and Northern India, droughts are hitting Australia, Africa, and China, soil is exhausted, and global…

• Rare Earth Metals Shortage Made Worse by Smuggling

  Rare earth (RE) metals find application in devices inlcuding wind turbines, hybrid and electric cars, LCDs, fuel cells, nuclear reactors and lasers. China controls some 97% of the world supply of REs, and in July announced a 72% reduction in exports of REs for the second half of 2010, compared with the previous year. It is predicted that in 2012, Chinese domestic consumption of REs will match domestic production, and this year will see a peak in availability and a demand-supply gap emerging on the world markets. REs are not lacking in the earth's crust, and for example cerium ranks…