Today, I’m going to do something unusual — I’m going to give you the specific name of a promising company that I think looks ripe for gains. And I’m giving it to you with no strings attached.
Bear in mind, I can only do this very infrequently. Any more would be unfair to my paying subscribers. Still, I think this company is one that everyone should hear about.
But first, let me dispell five economic myths that are now dominating the markets and investors’ minds.
Myth #1
“U.S. Inflation Is Tame.â€
This is baloney!
Sure, producer prices were weak last month. But the core consumer prices, the measure Wall Street and Washington were so optimistic about just a few months ago, has now surged at the fastest pace in a decade.
Even the Fed recognized the seriousness of inflation in its post-meeting statement yesterday. That’s why it said readings on core inflation have been elevated. And that’s why it didn’t even hint at rate cuts.
Moreover, none of this even takes into account the distortions still deeply embedded in the government’s stats, as Martin so clearly points out in his special report, “The Greatest Scam of All Time.â€
Myth #2
“The Federal Reserve
Controls Interest Ratesâ€
Twenty years ago, there was some truth to this. But these days, the overwhelming pile-up of debts changes everything:
- As Martin told you on Monday, the U.S. government and its agencies owe a total of $10.2 trillion, plus …
- The U.S. government has unfunded liabilities of at least $44 trillion, plus …
- Non-government U.S. debt is now $32 trillion, according to the Fed’s second quarter Flow of Funds report, plus …
- U.S. banks are now holding $110 trillion in high-risk bets called “derivatives,†according to the Comptroller of the Currency’s latest quarterly report.
These are huge debts in huge, difficult-to-control markets. Add it all up and you’ll see that the markets control interest rates — not the Fed. The Fed’s rate decisions merely mimic market rates, and rubber stamp them.
Myth #3
“If the U.S. Slows Down, So
Will the Rest of the Worldâ€
This was true in the past, but it’s no longer the case today.
Asian economies — namely, India and China — are now entering new phases of growth. Not only will they continue to be major exporters, they’re also pursuing policies aimed at stimulating internal consumer demand.
India and China are spending hundreds of billions of dollars to build infrastructure and create jobs. In turn, their banks are setting up credit facilities for consumers, issuing tens of millions of credit cards, establishing western-style mortgages, financing for automobiles, and more.
Bottom line: GDP in India and China should continue to rise at double-digit rates no matter what happens here in the U.S.
Myth #4
“The Chinese Yuan
Is Undervaluedâ€
I’ve been saying it for five years now — this idea is just plain hogwash. The Chinese yuan is not undervalued. Rather, it’s actually the U.S. dollar that’s overvalued!
Keeping that in mind will help you greatly over the next few years. Why? Because you can expect the value of the U.S. dollar to decline steadily, driving more and more money out of the United States and into Asia.
End result: More big trade deficits for the U.S., more trade surpluses for leading Asian countries, and more worldwide growth.
Myth #5
“The Nirvana
Economy Is Hereâ€
Just because we have worldwide growth doesn’t mean we won’t have potholes. There are still huge risks — stock market pullbacks … a blow-up in derivatives … another major terror attack … sharp moves, up and down, in commodities … and more.
This is not a Nirvana economy. Protecting yourself against the risks is just as important as going for the profits. Make sure you have most of your money invested conservatively, including cold, hard CASH!
And for money that you can afford to risk, consider this …
Small Palladium Producer
This company is one of the hottest on my radar screens right now. It’s cheap … specializes in mining one of the rarest metals in the world … and has very little competition. In addition, it
- Operates one of the only palladium mines in North America.
- Owns one of the world’s largest open-pit palladium properties, with over 3 million
ounces of palladium, 300,000 ounces of platinum, and 223,000 ounces of gold. - Is cranking up production, with the amount of palladium mined jumping 27% to 47,000 ounces in the first quarter of this year vs. the same period last year.
- Increased revenues 20% and reduced its palladium production cost from $322 to $219 per ounce.
What about the price of palladium itself? It’s in a bull market, but so far it’s lagged well behind the moves we’ve seen in gold, platinum, silver, and copper.
I think that’s about to change because of two primary forces …
Force #1: Palladium is the world’s rarest precious metal.
Total world production of palladium is just over 8.39 million ounces — less than one-fourth of the platinum mined in the world, and less than 1/10th the amount of gold.
Moreover, palladium production is controlled by a handful of key players, with Russia and South Africa leading the pack. These major producers are somewhat unreliable because of economic or political problems.
Any disruption in supply or uptick in demand can easily send the price of palladium rocketing higher.
Force #2: Auto manufacturers are now being forced to use more and more palladium for catalytic converters.
Platinum, the current choice, is too darn expensive, trading at nearly $1,200 an ounce. That’s more than double what it was in 2001.
With most auto manufacturers getting clobbered by a combination of rising material costs, high gas prices, and slowing sales, they need to trim outlays wherever possible.
Even after its recent price dip, an ounce of platinum costs auto manufacturers $1,160, compared to palladium’s $307. Auto manufacturers used 3.8 million ounces of platinum in 2005. If they were to convert just half of that demand over to palladium, they’d save nearly $1.7 billion.
And on top of that, we have rapidly increasing demand for cars in China. Through August, China’s auto manufacturers produced 25% more cars than in the same eight months last year. Last year, there were 24 cars for every 1,000 people in China, but the ratio is expected to rise to 40 cars for every 1,000 people this year.
The upside pressure this could put on palladium demand is extraordinary.
My view: The price of palladium is about to embark on a major move higher. Over the next couple of years, I see it nearly quadrupling all the way back to its record high of $1,125 an ounce in January 2001.
One way to play it? Shares in North American Palladium Ltd. (NYSE: PAL). This is the small company I described a minute ago.
One last point: If you do buy the stock, consider placing a protective sell stop to help protect you from any downward move.
Best wishes,
Larry
P.S. For access to my complete Real Wealth portfolio and recommendations, subscribe to my Real Wealth Report. For just 27 cents per day, I think it will be one of the best decisions you’ll make.
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MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Monica Lewman-Garcia, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.
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