Commodity Recap
I’m back from my two week paternity leave break, and I’m happy to say that my son Beckett is healthy, happy and beautiful.
I also want to thank everyone who sent well-wishes. The delivery went great and my wife and I couldn’t be happier.
And I’d also like to thank my co-workers who pitched in to help keep the Resource Prospector fresh and timely while I was out.
I have a ton of catching up to do (over 500 emails in my inbox to go through!) but I’m thrilled to be back at work.
The past two weeks flew by, and I will be trying to get my bearings over the next few days. If you have any specific questions about a certain commodity or publicly traded company, please send them my way at editorial@resourceprospector.com.
I’m also on about 4 hours sleep, as a mixture of anticipation of coming back to work, and a cranky infant kept me up – so bear with me if I seem a bit frazzled today.
Suffice to say that though the last two weeks appeared to have been some of the most interesting and tumultuous, with silver and oil prices getting rocked, and sovereign debt issues raising their head again in Europe, as well as the continuing sagas of War and debt here in the United States – I can confidently say that all of the major themes I talk about in this letter are still in place.
It’s been more of the same.
It’s important to re-evaluate your investment thesis on an ongoing basis. When the facts change, you should be prepared to change your investment strategy.
I buy gold and silver, oil and coal, natural gas and potash – not because I have any special affinity for commodities, but rather, because it makes sense to invest in these things.
Why does it make sense to invest in commodities?
It might seem like I’m repeating myself, but governments have been waging a quiet war against their paper currencies. That’s old news – but it hasn’t changed. I’ve noted many times that our elected officials aren’t just unwilling to bolster the dollar with sound policies. They’re actually incapable of doing so at this point. The austerity ship sailed years ago. Now we’re looking at a variety of default scenarios, inflation being the most likely.
Most governments, especially in the west, have also been waging war against producers. Through taxation, regulation, and legal obfuscation, it’s been extremely difficult to be a producer of nearly any commodity I’ve mentioned.
Opening a new mine or drilling a new oil well are incredibly expensive and regulated prospects in most countries.
In the case of commodities like corn and wheat – where the United States Government has tried to make it easier for producers, their efforts have had the opposite effect.
That’s because Government bureaucrats have made it easier for corporations to operate as state-sponsored monopolies. There’s little competition in American agriculture- and that’s by the design of the corporations and the bureaucrats.
That lack of competition means that prices will inevitably rise. I expect there will be a renaissance of American farming in the next 10-20 years as a natural backlash to higher food prices, but until it happens, you should be looking for ways to invest.
So, until governments cease devaluing paper currencies, and until the shackles of regulation, taxation and red tape have been removed from producers, we should expect to see commodity prices rise.
And we should invest accordingly.
Kevin McElroy
Editor
Resource Prospector
