Are Industrial Metals a Buy?
Commodities as a whole are rising. As oil rises, the liquid energy to mine anything goes up. With the industrial metals, it is normally a question of what will the global economy look like, or more recently, what will Chinese GDP look like.
In a world where we have a rising middle class and central planner inflation, FutureMoneyTrends.com feels that the commodity bull market has barely scratched the surface in its rise.
Now of course knowing this, we want to think outside of the box and purchase commodities that have been hit hard. Two that come to mind are Iron Ore and Natural Gas. Now natural gas is probably a few years away from being a buy, the fracking boom is now mainstream and is really adding pressure to the natural gas prices. When it comes to Iron Ore (used to make steel) it is shocking to see what has happened in the past few years.
Iron Ore is currently at its lowest level in almost 3 years. Having reached a record $191.00 a metric ton early last year, prices are now around $110.00.
Anyone in the Iron Ore business is in panic mode, the fact is “it has been brutal,” according to Morgan Stanley’s Brendan Fitzpatrick.
Here is the bottom line, Iron Ore prices have collapsed due to increased production going into a reduction in demand. This has created a disaster for the industry and huge opportunity for those looking for a value investment.
Take a look at this 10 year chart. Does the global economy feel like it did in late 2008/early 2009 when the Dow Jones was approaching 6,000, oil below $40, and silver around 10 bucks per ounce?
This is what you call a perfect storm for value investors and short term day traders.
It has now collapsed in half since hitting a record, this has put a strain on the entire industry from producers literally shutting down production and exploration companies putting things on hold.
For us, this is an opportunity IF you are either a short term day trader or a long term value investor. The fact is the world will need 40 trillion over the next 2 and a half decades for a massive infrastructure build out in Asia and Africa.
Forget about the Chinese, we are seeing a rising middle class and the urbanization of the entire world. Today we have 3.5 billion people who live in urban areas and 3.5 billion people who live rural.
By 2040, Wikistrat projects that we will have 2.9 billion living rural and 6.6 billion living in urban areas. No matter what you think about the U.S. dollar, the rest of the world is going through a massive infrastructure build out!
Every year the world is seeing 75 million people go from rural to urban, 85% of those individuals come from either Asia or Africa.
Iron Ore has collapsed in price, however the current price in our opinion does NOT reflect future demand or even current demand.
FutureMoneyTrends.com is actively looking for new Iron Ore companies managed by the right people, please expect to hear from us further on this opportunity. We want our members to prosper. Keep a look out because we should be profiling a new Iron Ore company within the next 5 days!
