Wilderness of Mirrors
Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
Access to raw materials has become essential to the functioning of all industrialized economies. Threats to access and distribution of these commodities could include:
- Political instability of supplier countries
- The manipulation of supplies
- The competition over supplies
- Attacks on supply infrastructure
- Accidents and natural disasters
- Climate change
Every country imports and exports raw materials to one degree or another. As raw materials are the essential’s for a country’s survival, development and progress, everyone is looking for permanent, secure suppliers. A very worrying, and growing trend, is that countries rich in resources are limiting the availability of raw materials – commodities that are the building blocks of modern societies – in order to support their own industries. Such export restrictions could start confrontations over scarce resources.
Countries can restrict the export, or subsidize the import of, raw materials by means of:
- Export taxes
- Export licenses and or quotas
- Operating dual pricing schemes
- Subsidizing the import or local purchase of raw materials
Inflation is a factor and is already infecting commodity prices.
We’re heading to a very inflationary environment. US President Obama is promising trillion dollar deficits for years to come and the US dollar is still the world’s reserve currency. With all exporting countries trying to keep their currencies weaker then the US dollar – to make their exports competitive – the inflation rate is going to rise much higher.
Whenever governments are creating money and spending to excess inflation rears its ugly head and investors move into hard assets. The best hard assets to buy during these periods are commodities.
Our reality is we’re living on a relatively small planet with a finite amount of resources, climate change is increasingly playing a role and we have a growing human population. Accessing a sustainable, and secure, supply of raw materials is going to become the number one priority for all countries. There’s no doubt in this author’s mind we are going to see much tighter supplies of, and higher prices for, commodities.
It’s a fact in the mining world that most discoveries are made by a) junior mining companies and b) old time individual prospectors. In this author’s opinion junior resource companies offer the greatest leverage to increased demand and rising prices for commodities.
If I was looking for superior investment vehicles to take advantage of what I think I know regarding the future for commodities I’d be looking at junior resource companies, not majors, involved in the search for, and development of, the worlds future sources of commodity supply – majors are exposed to various industries such as:
- Storage
- Transportation
- Refining
- Chemical processing
- Retailing
- Distribution
Which are not correlated directly to specific commodity price rises like junior resource companies can be.
Juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines. They already own, and find, what the world’s larger mining companies need to replace reserves and grow their asset base.
Junior resource company’s serve an important role in the commodities markets – they feed the supply chain.
In 1996 the whole junior bull market was centered around Bre-X. Then there was the technology stock boom based on the greater fool theory. The last bull market run for junior companies started in 2002 and imploded in 2007/2008. The TSX (and TSX.V) has experienced three major boom and bust cycles in the last fifteen or so years. This author believes we are on the cusp of another bull market run for junior resource companies.
In a wilderness of mirrors, who can you trust?
“Wilderness of Mirrors” is a phrase coined by the 1950s era counter-intelligence chief John Foster Dulles to describe the intelligence game. In particular, the phrase refers to the difficulty of separating disinformation from truth.
The opportunities in the junior resource sector are significant. But the junior population is quite large and there are literally thousands of stocks to choose from that want your dollars.
There is a steep learning curve and there are serious risks – great rewards come hand in hand with great risk. You must be prepared to do your own due diligence and uncover the opportunities.
You must be able to evaluate these opportunities, pay regular attention to your portfolio, manage the risk and take responsibility for your own decisions.
I keep a vigil in a wilderness of mirrors
Where nothing here is ever what it seems
Vigil in a Wilderness of Mirrors by Fish
Is the junior resource sector on your radar screen? If it isn’t, maybe it should be.
Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com
If you’re interested in learning more about the junior resource market please come and visit us at www.aheadoftheherd.com.
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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.
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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard Mills does not own shares of any company mentioned in this report.
No company mentioned in this report is an advertiser on his website aheadoftheherd.com.
