Economic News & Markets

A.B. Korelin - "San Francisco Fund Manager Extols Virtues of Precious and Base Metals"

Marshall G. Berol, co-Portfolio Manager of the Encompass Fund (www.encompassfund.com), has invested about 35% of the Fund’s assets in precious and base metal companies over the past fourteen months. So far it has been a win for investors.

Berol has been following resource companies for the past twenty-five years, and believes that in today’s environment these companies provide not only effective insurance, but great upside potential for the Fund’s investors.

I recently spent a couple of days with him in Saskatoon and Uranium City, Canada, looking at mining properties. The airplane and helicopter flights we took together gave me the opportunity to pick his brain.

We discussed how last week on The Korelin Economics Report the guests were split 50-50 between optimism and pessimism about commodity prices, and commodity equities.

Regarding base metals, Lawrence Raulston and others feels that an unprecedented buying opportunity exists today. On the opposite side, Paul van Eden, Bob Moriarity and others expressed the opinion that copper, nickel and other commodities were something to avoid right now.

Berol is in the camp with our guests who are optimistic about prices. Berol and his co-Portfolio Manager, Malcolm H. Gissen, believe that the supply-demand picture favors the continued rise in the price of the base and industrial metals (copper, zinc, nickel, molybdenum and uranium) for some time to come. While recognizing that there will be price volatility, the demand for these metals continues to grow with the growth of the economies of China, India, the rest of Asia, and South America. Particularly in China and India, the need for the continued building of the infrastructure requires various of these metals, such as copper for wiring, nickel and zinc for steel manufacturing, molybdenum for pipelines, and uranium for the fuel for the 440 nuclear plants currently operating, and the approximately 100 new nuclear plants now under construction or planned, around the world. The growing consumer class in these countries also want housing, refrigerators, automobiles, cell phones, etc.

The demand continues to grow, and it is increasingly difficult, time-consuming and expensive to bring new mines into production, or even increase the output of existing mines. This is due to increased environmental requirements, the need to accommodate the local people, and the fact that the “easy” material has been found. New discoveries and mines are in increasingly difficult geographic locations or less stable geopolitical areas.

I completely agree with Berol. I went on record some time back stating on the air that I was a long-term bull in both the base and precious metals sectors. Everything I learned as both an undergraduate and graduate student indicates that for a while it simply makes sense.

Berol also believes that it makes as much sense in the gold and silver areas, to which I agree. While some of the underlying factors involving gold are different, there is still a supply-demand imbalance that is not likely to correct for years. Gold isn’t so dependent on the infrastructure build-out as the base and industrial metals, but it does have the additional historic demand factors of “storehouse of value” in difficult times, and demand from an expanding middle class for jewelry and gift giving. Silver has increasing industrial uses, as well as consumer demand. Recall that only a few years ago, the silver bears were saying silver “was dead” because of it’s decreasing usage in photography. The fact is that silver has gone from $3.00-$4.00 per ounce to over $11.00 (with a high around $15.00) in that time frame.

The investment climate today is anything but stable and the gyrations in the conventional markets, as measured by the Dow, the Nasdaq Composite and the S&P are truly frightening. You cannot open a newspaper today without reading about serious liquidity concerns around the world. It’s enough to scare anybody.

I truly believe that fear is the incorrect emotion here. Rather than be fearful investors need to be optimistic. Why? Simply put, we have an unprecedented opportunity for profits from investing in precious and base metals and the related public companies. Listen to The Korelin Economics Report (www.kereport.com) and hear discussion with experts in this field and see if you don’t agree.

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Al Korelin is the host of “The Korelin Economics Report”. This radio program features discussions with political figures, newsletter writers, analysts, portfolio managers and company executives. None of the guests appearing on the program pay any fees and if Mr. Korelin or any of the guests own shares in any company that is discussed, that fact is clearly disclosed. Mr. Korelin’s firm, A.B. Korelin and Associates, Inc., has been providing regulatory consulting services to public companies for the past twenty five years.

Al Korelin Speaks to Congressman Ron Paul About Gold and Patriotism

A number of years ago, I met Congressman Ron Paul of Texas in his Washington D.C. office. The Congressman had appeared on our radio program a number of times prior to that so I was familiar with his philosophy about the direction in which the United States was headed. After we talked, he introduced me to Judge Andrew Napolitano who is currently the Senior Judicial News Analyst for Fox News Channel. My family and I then listened to a presentation given by Judge Napolitano to a group of us in which he discussed his reasons for believing that the United States was moving dangerously away the Constitutional basis on which it was founded.

Congressman Paul agrees with Judge Napolitano and has based his campaign for the Republican nomination of the President of the United States on his notion that the federal government is disregarding the Constitution and that this practice must be stopped.

Unfortunately, the vast majority of Americans do not understand Congressman Paul’s views. It is my contention that this is because he is unfairly being labeled as a radical extremist.

Two glaring examples are the pictures being painted of him regarding his views on gold and his views on patriotism.

Regarding the belief by most Americans that Congressman Paul believes that the United States should immediately return to a gold-based currency, nothing could be farther from the truth. On The Korelin Economics Report, Congressman Paul stated that returning to a gold standard overnight would be impossible for the United States. What he is on record as saying is that he believes that the fiat currencies in existence today will ultimately fail as they always have in the past. He feels that only those economies with an asset-based currency can prosper for an extended period of time with the wealth being distributed equitably among the citizens.

Regarding his patriotism, witness the initial debate among Republican candidate hopefuls. During that debate, former New York mayor Rudy Giulani responded to the Congressman’s statement that many people believed that the motive behind the terrorist attack on the World Trade Center was actually prior U.S. actions in the Middle East. Mayor Giulani indignantly played the “patriot card” and demanded that Congressman Paul retract his statement. As a point of fact, the Congressman’s statement was based on two paragraphs in the CIA Report the subject of which was the 9/11 attack. The millions of people who watched this particular debate were never made aware of where the congressman obtained his information supporting this statement.

If you want to hear exactly what Congressman Ron Paul believes, with no editing whatsoever, visit the Korelin Report website

GaveKal Reports

GaveKal Daily Report - Wednesday March 7th 2007

As anyone who has read a financial newspaper over the past two weeks
undoubtedly knows, there has been a lot of focus on the deteriorating
situation facing US sub-prime lenders. And there are indeed signs of
increased stress: delinquency rates on these risky home loans are rising
(see chart), sub-prime lenders are going belly up at an alarming rate, and
US financials have been underperforming significantly.

Many analysts are now touting this development as the tip of the US
debt-iceberg, and the first step of a major correction in the mortgage
market. In turn, this will then go on to seriously hurt overall US
consumption, prompting a global slowdown. But how big an impact will the
sub-prime story really have on the economy as a whole?

Read the complete daily report here

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