|September 4, 2009|
With the radio blaring "Shut Down" I pulled into the Texaco station to fill up…
$38.50 later, and still in a Wilson brothers mood, I recalled that gas was just 30 cents a gallon when the song debuted. On the surface, with just a tenfold increase in the price gas in 45 years, energy would appear to have been a bummer of an investment.
Imagine the entire population of the world is just 100 people.
Of those 100 people, only five live in the United States. You and four other Americans must compete with the other 95 for survival. Right now the five are looking pretty good.
What will the 95 do to catch up to the five? What would you do? One thing they won't do is agonize about their carbon footprint. There is a direct correlation between energy use and per capita income. In other words, the more energy a country uses, the wealthier its citizens become.
China has a population of 1.3 billion. Put another way, 20 of every 100 people on the planet are Chinese. It may surprise you that very few people in China own a car.
Back at the gas station…
As The Beach Boys finished their song, I reflected on how much the world has changed since the sixties. Is this the beginning of the end of an era? Will the "five" continue to control as much of the world as they do now? I doubt it.
"Catch a Wave (and you're sittin' on top of the world)"
The above quote is courtesy of The Beach Boys, 1963. Our own Rusty McDougal believes you should get your board in the water. That is, you should be overweight in energy (versus the S&P). He should know. He's been following the energy and natural resources sector for almost 20 years.
The "September Effect" is in effect…
We hope you took our recent advice to lighten up on equities and increase your allocation to metals. Two weeks ago, we wrote, "September might be one of the worst months for stocks, but historically it is a very strong month for gold. Use the "September Effect" to your advantage. Lighten up on stocks and be sure your wealth is protected with the Midas metal."
But the precious metals are responding to much more than a seasonal trend. There are powerful fundamentals at work too. And one point of extreme strength is the growing demand in China.
China is urging citizens to "cash in" on gold and silver…
When the Chinese invest in a market, the world takes notice. But this time it is not just Chinese companies and state-owned investment funds that are doing the investing.
Poor man's gold…
Asian cultures have a longtime affinity for precious metals. For the Chinese, it began in the 1500s when Spanish galleons began bringing silver from Mexico to trade for silk and spices. Still today, the Chinese word for "bank" means "silver movement."
Hi Ho Silver… Away!
I turn to Rusty on matters of precious metals, particularly silver. He has studied the silver market daily for almost 15 years. Rusty says, "The silver market is much more volatile than gold. During the last major precious metals bull market, gold rose 2,429%... while silver gained 5,555%."
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