Tom Szabo

Investing In a Resource-Constrained World (Part V)

How exactly does a shift to smaller, more full efficient vehicles mean an increase in both platinum and palladium demand? If anything, it could increase the proportion of palladium use, but it will still take several more years--Russia running out of stockpiles or otherwise--for ready inventories to be worked down. I do own some palladium bullion but not because it represents such a great investment opportunity. Rather as diversification because it is one of the few metals other than silver or gold that can be easily purchased by retail investors. The price was under $200/oz. when I bought and every other metal had already rallied by several hundred percent at that point so it was a no-brainer. I will probably sell at $600-700. Your "investment thesis" around SWC and PAL seems to be based on another huge rise in PGM prices but I doubt that is in the cards, and even if it happens, these stocks probably won't move as much as they did at beginning of this year, at least not until they can translate higher metal prices to the bottom line.

I find your comments about gold and silver particularly boneheaded. The investment value of gold is that it is mispriced as money, not that it is money itself. To the extent there is recognition of the negative social consequences to most of the commodity "investing" that is currently taking place, this will invite a major popular backlash. Simply put, the commodity market is broken when higher prices resulting from long speculation (hoarding) cannot encourage additional production as a result of NATURAL CONSTRAINTS IN SUPPLY. The direct beneficiary is gold (and silver) because bullion hoarding is more socially acceptable and may represent one of the few outlets for commodity exposure in a coming investment crackdown. Those hedging dollar exposure with oil or allocating to a broad commodity index for portfolio optimization would be forced into gold and silver, which is where they should be in the first place. In fact, the main historic role of gold and silver are to protest fiscal policy, and only the greed and hubris of Wall Street have permitted a substitution of food and energy for that purpose.