Commodities...The Investment of the Decade

by Michael Checkan

"When gold argues the cause, eloquence is impotent"
-- Publilius Syrus (1st Century B.C.)

The fact is that commodities have been one of the very best investment classes in the New Millennium. This is not only true of gold, the "barbaric metal", but of silver and platinum as well. And, it's not just true of precious metals, but of base metals too. Jim Rogers, financial wizard and author of "Investment Biker", said last year that he would prefer turning gold into lead, instead of lead into gold. Jim had recently returned from China where he saw first-hand the significant demand for copper, iron, steel and lead.

The rise in commodities is primarily due to the fall of the US dollar. I wrote about this "sea change" taking place after almost nine years of a strong dollar. This was the US policy championed by President Clinton's Secretary of the Treasury Rubin. Eventually, this policy evolved into a neutral dollar policy, and today, under President Bush's Secretary of Treasury Snow, it is clearly a weak dollar policy. Now, it is about three years into this cycle and the expectation is that it will continue for another three to five years.

This was the title of an article I wrote for a newsletter that was published on June 1, 2001. I provided five reasons why the dollar would fall. Namely, the slowing of the economy with falling interest rates, the growth of the economy in Euroland, the dumping of dollars by troubled economies (read Japan), the trade weighted exchange rate showing the dollar to be expensive and production capacity utilization rates in the US had fallen.
This was the problem, and my solution was four quick steps to dodge the dollar decline bullet. Namely, for small amounts of money simply sell US dollars and buy cash euros, Swiss francs or English pounds. Two, for larger amounts up to $20,000, purchase commission free travel checks again in euros, Swiss francs and English pounds. Third, from $20,000 to $100,000, consider purchasing an offshore annuity in euros with a "switch option". Lastly, for $50,000 and up, consider purchasing CD's, stocks, or bonds in euros through an offshore bank.
Let's not forget that foreign currencies are a commodity too. The profit for making these investments are; the euro was .8494 and today is $1.20 per euro or a 41% gain, the English pound was $1.3942 and today is $1.78 per pound or a 28% gain, and the Swiss franc was .5546 and today .7725 per franc or a 39% gain.

This article appeared on September 15, 2001 just 4 days after the infamous disaster of 911. I pointed out in the article that readers should consider alternative investments after the securities losses during the past year. Namely, a report featured in the Wall Street Journal (August 16, 2001) "...shows that losses on the NASDQ over the past four quarters wiped out NASDQ profits earned since 1995...."
I made the case for platinum which provides unique opportunities for profit. Namely, "smaller platinum market size means more sensitivity to movement; above-ground platinum supplies are insufficient to provide an adequate buffer; and inelastic demand pervades the industrial sector." Afterwards, I went into the merits of supply and demand for platinum.
The platinum market recently hit a high over $900 and is currently trading at $808 compared to the market in September 2001 of $444 per ounce. Thus, an investment in platinum would have realized a gain of 82%.

This article appeared on April 15, 2002, and pointed out among other things that the dollar was no longer a "safe haven" currency. The US began to have a credibility issue resulting from the terrorist attacks and the improprieties in US business exemplified by the Enron/Arthur Andersen fiasco. Also, US policy as a champion of globalization and free trade was being tested as a result of the imposition of tariffs on steel.
I continued to like the outlook for the euro and the Swiss franc, but added two "commodity currencies", namely, the Australian dollar and the New Zealand dollar. The "Aussie" dollar was trading at a mean rate of .52 per A$ while the "Kiwi" was trading at a mean rate of about .435 per NZ$. Today, the A$ trades at .7239 per A$ for a profit of 39% while the NZ$ trades at .6267 for a profit of 44%.

This article appeared in a October 1, 2002 newsletter suggesting that perhaps "the first 20% of profit may be history, but there is still 60% left for the taking...if you diversify out the of the US dollar now." Also, it was noted, "All four currencies achieved the objective of 10% appreciation."
Another "commodity currency," the Norwegian kroner, was added to the mix of alternatives to the dollar. It was pointed out that this country was blessed with "black gold". "Furthermore, a potential conflict in Iraq could drive oil prices up by 20%, which would mean a windfall appreciation of the country's currency." Of course, unless you have been on the moon, the war in Iraq did contribute too much higher oil prices.

There were other articles in October 2002, "Stocks down, gold up" and in February 2003, "In 2003 and 2004, the Dollar Will Wane, But What Currency Will Reign". The theme of a lower dollar and higher commodity prices continued.

This article, that appeared on August 1, 2003, is all about silver. It tells the story about how Warren Buffet in 1997 bought 130 million ounces or almost $650 million worth of silver. In other words, he shifted about 1% of Berkshire Hathaway assets into "the poor man's gold". Likewise, it was pointed out that George Soros, the man who made a billion US dollars in one day, mainly in the foreign exchange markets, invested significantly in silver too.

Since the fall of 2003, we have provided a blueprint for profit as the commodities bull market continues to unfold. In our January newsletter, Information Line, it stated, "we would expect to see 'dips' in metals and currencies as a reaction to short term news that should not be confused with trend reversal. We would view these 'dips' as buying opportunities."
This too has recently come to pass.

Action To Take: Contact Michael Checkan or his associates at Asset Strategies International, Inc. (ASI). Michael is a regular contributor to Hemispheres on the topics of precious metals and foreign currencies, and ASI specializes in these key commodity areas. Simply call Michael toll free (Canada/USA) at 800-831-0007, directly at 301-881-8600, fax to 301-881-1936, email at assetsi@assetstrategies.com, or visit ASI's web site at www.assetstrategies.com.

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