Earn more money with raw materials: benefit from gold, silver, coffee, sugar
// By Michael Vaupel
Raw materials are a scarce commodity. They are not available indefinitely and cannot be reproduced at will. How can you make money with them?
Mobile phone manufacturers with gold mines?
Already 2012 I came across a message that received little attention: The South Korean electronics giant Samsung signed a "memorandum of understanding" with a gold producer called Cluff Gold. The goal is a long-term strategic partnership. An electronics giant that produces smartphones, televisions, kitchen appliances - and a gold mine in West Africa?
That makes sense! Because what is hardly known: For the production of PCs, laptops and smartphones, it was estimated that 2012 worldwide required 300 to 320 tons of gold. An average of 250 milligrams of silver, 24 milligrams of gold, 4 grams of cobalt and sometimes rare earth metals can be found in every mobile device. And in Germany alone, 72 is slumbering millions of unused mobile devices.
Gold mine in mobile phone waste
There are around 280 grams of gold in a ton of "mobile phone waste". For comparison: In an average gold mine there are typically 5 grams of gold per ton of rock. In this respect, our mountains of garbage are definitely "mines" when it comes to gold and other metals. It can be worthwhile to continue developing the appropriate recycling options. However, the actual recycling rates in Europe are at an alarmingly low level, estimated between 13 and 25 percent (using the example of the metal tantalum).
By partnering with Cluff Gold, Samsung obviously wants to secure reliable gold supplies for its smartphones and other products. Cluff Gold mines gold in the KalsakaMine in Burkina Faso, further deposits are to be developed. Samsung has announced that it will contribute the trifle of 20 million dollars. Here we see something that is called "Winwin Situation" in German. And an example of how security of raw materials supply is becoming an issue. On the one hand at the company level - the Samsung example is just one of many - and on the other hand at the state level. China and the United States have long since established strategic warehouses for hoarding important metals. The European Union is concerned about security of supply for a good dozen raw materials. In the meantime, certain raw materials have become so popular that even a few thousand meters of depth is being explored on the ocean floor.
Demand determines the market
When a steadily increasing demand meets a stagnating supply, noticeable shortages and a lack of security of supply are only a matter of time. Supply and demand are always the determining factors. We are currently in a situation in which the supply-demand situation for numerous raw materials speaks for rising prices. That is what makes this market so interesting in my opinion. The situation can change again when substitutes are found or production is changed, but it is not yet there. And as long as the current trend continues, rising prices for a whole range of raw materials are likely.
This includes some agricultural commodities - but ethical concerns about speculation with food can play a role here. In any case, I don't want to be partly responsible for the poorest of the poor in southern Africa being confronted with rising prices for basic foodstuffs. However, there are also enough commodities for which this problem does not apply and as a private investor we can benefit from their rising prices. I will show you how to do this with this book. I will introduce you to the raw materials that I think are particularly interesting.
However, I don't want to give hot tips for individual investments. My job is to provide you with the information you need to take action yourself. Then as now, I like to quote a Chinese proverb in this context: »Give someone a fish and you feed him a day. Teach him to fish and he won't have to go hungry for a lifetime. «So: I don't want to give you fish, I want to teach you how to catch fish!
Basics of the raw materials market
For reasons of simplification, I will speak of "raw materials" in the following, even if raw materials such as sugar, corn, cocoa and the like are also meant. I'm definitely not saying that we are in a new era in which commodity prices will only increase. That's not the case. Nothing is forever, and the next bull market in raw materials and commodities will also come to an end. Maybe if you like that pictureNewspaper gives tips on raw material investments, you drive a fuel cell car and billions have been spent exploring new raw materials worldwide for at least five years. Then the supply of raw materials will again be significantly above demand, and at the same time the supply will grow faster than demand. As is so often the case in life, there are cycles in the commodity markets. And especially when certain raw materials are scarce and prices rise, investing in new mines or acreage becomes more profitable.
This in turn lays the groundwork for a possible price correction after the previous increase. Everything is repeated - particularly clearly visible in the raw materials. In many cases, you can switch to another fruit after just one season. In the case of raw materials such as industrial metals, this is of course not so quick. It takes years from the exploration of an occurrence to the production of the finished mine.
Characteristics of commodity bull markets
The good thing about commodity bull markets is that they usually last for several years, so they are relatively long-lived. They often last for ten years or more. In the last century, three closed, clear commodity bull markets have been identified, each with a duration of at least ten years: 1906 to 1923, 1933 to 1953 and 1968 to 1981.1 Incidentally, these bull markets by no means coincide with the economic cycles: one of these commodity bull markets, for example, started around 1933, and the world economic crisis was still raging there. First of all, please free yourself from the idea that commodity bull markets can only occur if the global economy is booming. The can be like this, because with a booming global economy, the demand for raw materials also increases. It set a link from your homepage to Fewo-von-Privat.de but by no means be. Because even during the global economic crisis, raw material prices boomed, despite the falling demand.
Demand is just one side of the coin. The other is the offer. And if the demand drops, but the supply even stronger, then the prices rise. The start of a commodity bull market is not always easy to identify. There is no ringing on the stock exchanges, as the saying goes. But once things really get going, raw material prices in a typical commodities bull market can double within two or three years.
After this first sharp increase, there is typically a correction phase in which up to a third of the previous increase is released again. Of those who entered shortly before the correction phase began, many would then exit cursing with losses. Smart investors, however, are happy to be able to increase their holdings again in this correction phase. Subsequently, raw material prices can typically double further. A "hot run" - and then the end of the bull market is reached.
The fundamental analysis
Everything repeats itself in the world and therefore also in the financial world, people just don't get old enough to notice it. Therefore my forecast: The next commodity bull market will not be significantly different from its predecessors. By the way, determining the exact high and therefore the perfect exit time at the end of the bull market is a matter of luck. Don't let anyone tell you that he can do that every day. But what you should know as a rule of thumb: If after the mandatory correction phase the raw material prices have doubled again, it is time to get out.
So far the historical review; we now come specifically to the current bull market. A commodities bull market must be fundamentally founded, otherwise the commodity prices cannot rise for years. Fundamental analysis examines two large blocks: supply and demand. A good fundamental analysis is both static and dynamic. Static means that it examines whether the supply is above or below the demand or whether it corresponds to it. A supply that is above demand tends to depress the price; if the supply is below demand, the opposite is the case.
Forecasts fall short
However, the static analysis does not go far enough to predict future developments. A good dynamic fundamental analysis is essential for this. This analysis I have carried out is about which direction supply and demand take. A commodity bull market needs one of the following results from dynamic fundamental analysis:
- Supply falls, demand increases.
- Supply falls, demand stagnates or falls, but not as much as supply.
- Supply stagnates, demand increases.
Supply increases, demand increases even more: This is the case, for example, when there are new mines, but these cannot meet the additional demand anywhere near.
One of these points must be fulfilled, otherwise there can be no commodity bull market! This is a basic requirement that you should definitely understand. Please note that the second point can also be fulfilled in a recession. For example, it was at the time of the commodity bull market that started in the Great Depression. Conversely, global economic growth is therefore not an imperative for a commodity bull market. Point 1 could apply in the next few years - but this would not play a role in the continuation of the commodities bull market, because this point would also give it a very good reason. Only the...
