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China’s Insatiable Demand for Minerals and Oil

This article will give you a feel for why my dollars are invested in commodity stocks. China’s demand for Copper, Zinc, Nickel, Silver, Oil and don’t forget clean water will not subside in the foreseeable future.  Read the Week in Review to find out which stocks are benefiting from this trend.

by Joseph Kahama
President of Tanzanian American Development 2000 Inc.
11/22/2006
JS Mineset . com 

After traveling for more than 19 hours between Tanzania and The Peoples Republic of China, I have now arrived. It is a few minutes past midnight now here in the Capital of Beijing and yet the activities by way of trade, commerce and construction are continuing throughout the night as if it is daylight.

On my way to China I had ample time during my flight to read Ted C. Fishman’s book, “China Inc.” (The Relentless Rise of the Great Superpower). I can ascertain that what I read in Fishman’s book is true.

Thousands of construction projects are relentlessly and simultaneously being undertaken in China. From state-of-the art highways to airports, skyscrapers and sports stadiums. This has been the case in two cities that I visited, Beijing and Chang Chung. The story repeats itself in Guangzhou, Guangdong Province, Shanghai, Tianjin and many other cities and towns. China has 160 cities with more than 1 million people. Beijing itself has more than 20 million inhabitants during daytime. I also had the opportunity to visit the Olympic Village 2008 and the mega construction projects being undertaken there, as well as the stadium for the Asian Winter Games 2006, both of which China will be hosting. With many billions of dollars being spent every year on construction, technology and electronics including aircraft fittings and manufacturing by China, it is no wonder there is a great demand for minerals and oil by China. Continue reading “China’s Insatiable Demand for Minerals and Oil”

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The Next Big Thing – Alternative Energy

I live in Massachusetts and formerly worked for a high-tech company, so I witnessed first hand the benefits of the dot com boom.  It was unbelievable as start-ups with nothing more than Power Point slides and a recognized technologist on staff were receiving multi-million dollar investments from the venture capital community.  It would have been a great time to be invested in limousines as the parking lots of these companies were filled with deal makers.  Towards the end of 2000 the excitement disappeared and the Venture Capitalist (VC) where nowhere to be found.  Over the next 6 years, start-ups were few and far between.  Power Point was no longer good enough, the companies needed proven technology with real customer commitments in hand.  Continue reading “The Next Big Thing – Alternative Energy”

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Cheap Gas Is On Its Way

The Peak Oil theory is based on the fundamental observation that the amount of oil under the ground is finite.  Oil in the US peaked in 1971.  This is a well-documented fact.   So, it seems reasonable that other countries will also peak at some time in the future.  The ramifications of this would be extremely high oil prices and would be devastating to any industrialized country dependent on inexpensive oil.  The US being a prime casualty.

A report released this week by Cambridge Energy Research Associates (CERA) stated that the peak oil theory is faulty.  According CERA’s Chairman Daniel Yergin:

 “Each time — whether it was the ‘gasoline famine’ at the end of WWI or the ‘permanent shortage’ of the 1970s — technology and the opening of new frontier areas has banished the specter of decline.  There’s no reason to think that technology is finished this time.”

If technology is going to be our savior – we better get in high gear.  I say we hedge our bet and start getting serious about alternative energy sources.

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Navigating Thru a Trading Fiasco

Two weeks ago the Canadian government announced that it was imposing a new tax on income trusts.  This announcement shocked the market and sent the Toronto Stock Exchange S&P/TSX composite index spiraling down 2.4% for the day.  To put that in US terms that was the equivalent to a 300 point drop in the DOW.  Billions of dollars were lost by this announcement.

Unfortunately I had recently taken a position in Enerplus Resources (ERF) the granddaddy of income trusts.  It was the first Canadian oil and gas trust formed in 1986.  Over the past five years, while the DOW was returning peanuts, its return was over 200%.  It has a 9% yield and pays a monthly dividend like clock work.  The plan was for it to become the anchor stock in an income oriented portfolio that I am building.  As I have mentioned numerous times, to be successful in this market you need to be either a trader or a dollar-cost averager.  Most will be far more successful as a dollar-cost averager.  I have written many articles on the topic on this site.  I make use both styles, but primarily I am a trader. 

On the day of the announcement, ERF dropped 14%.  That might have been the largest one day drop that I have experienced in a stock.  If it is not the largest – it is definitely in the top two or three.  Here are the comments from one mutual fund manager, “There is a knee-jerk reaction out there. You got a lot of mutual funds that might be experiencing cash-ins because the media headlines make the masses want to liquidate at whatever the cost.”  Based on his comments, I would presume that he was advising his clients not to sell.  I have been caught in downdrafts such as this before.  So, I was a seller.  Continue reading “Navigating Thru a Trading Fiasco”

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The Commodities Bull Market is Back

This article was updated on 11/6.  So, if you read it once it is worth a second read. 

It was just a few short months ago many were saying the bubble had burst in commodities.  First of all, I never bought into the bubble talk.  How can there be a bubble in commodities – when not one of your friends can name 5 gold stocks?   Back in the internet bubble days, taxi cab drivers could rattle off the names of internet companies without skipping a beat.  Before there can be a bubble the masses must participate.

The commodity bull market is being driven by simple supply and demand dynamics.   Just think about the amount of copper that will be consumed as China industrializes.  Mass industrialization takes many years.  Everyone knows that Rome wasn’t built in a day and China will be no different.

What the bubble promoters forget is that no bull market goes straight up.  The days of buy and hold – I call it buy and forget are over.  There is no certainty that a stock will be higher in 6 or 12 months although that is what Wall Street teaches.  I believe to profit in today’s stock market you have two choices:

  1. Either dollar cost average (DCA) into a clear cut long term trend like the industrialization of emerging countries.  Refer to the many articles on this site pertaining to DCA.
  2. Learn how to use simple trend lines. 

Looking at BHP’s chart below, the ideal purchase price over the last month would have been around $35. if all the stars lined up you could have purchased it at $35, but more than likely you would have been petrified that $30 was right around the corner.  Using charts, there is a strong likelihood that you could have picked it up at $38. Not quite $35, but in retrospect not a bad price. I think that you would be pleased with a 12% return in 4 weeks.  Continue reading “The Commodities Bull Market is Back”