Monday, January 12, 2009

The Rise and Fall of the Rhodium Empire

Rhodium

It was a sure thing, right up until the point it wasn't.

Do you know what the fundamentals are for Rhodium? I sure don't. By the looks of it, not many long-term investors did either.

Now check out the one picture (of large mining equipment) I think every commodity investor should see before making a large investment.


September 23, 2007

Productivity Miracle

Topic: Large mining equipment

I find it all quite humbling. Don't you?

This is one reason why I no longer hoard gold and silver, even though I remain a stagflationist long-term.

Here's a related reason.


600 Years of Silver Prices

You will note that it is adjusted for inflation. Some bulls look at that and think it is sure to rebound. That's not quite what I see. Images of large mining equipment fill my head.

2 comments:

Anonymous said...

Stag,

I've been revisiting this over and over lately.

http://en.wikipedia.org/wiki/Peak_oil

You would think that today's lower low oil prices would have put the issue on the back burner for me. Not so. I'm having visions of "it's contained."

And the worst part is that all the easily accessible supplies are controlled by dysfunctional governments.

Stagflationary Mark said...

mab,

Yeah, oil is an entirely different story, isn't it?

Let's talk worst case.

If the world actually started running out of oil in a serious way what would happen to aluminum prices?

On the one hand, it would be more expensive to mine aluminum. The input cost would go up.

On the other hand, without cheap oil we wouldn't be needing nearly as much aluminum in cars and airplanes. The demand and output price would therefore go down.

It would therefore seem that Alcoa might not be the best inflation hedge in a peak oil environment.

I think we're getting a small taste of that dynamic right now.

Check out Alcoa's long-term chart.

http://finance.yahoo.com/q/bc?s=AA&t=my

Something broke.

Alcoa’s Struggles Continue; Analysts Expect a Rough 2009
http://blogs.wsj.com/marketbeat/2009/01/13/alcoas-struggles-continue-analysts-expect-a-rough-2009/?mod=yahoo_hs

Orders are down as a result of waning demand in the world economy, and analysts say Alcoa and other aluminum producers are chiefly concerned with reducing inventories in an effort to stabilize prices, which have been in free-fall. The price of aluminum has fallen to about 70 cents a pound after rising to more than $1.50 a pound in the middle of 2008, and has continued to deteriorate.

Oh yeah, and that's not all of course. Peak oil and peak debt seem to be joined at the hip.

Alcoa Is Hard to Believe In
http://seekingalpha.com/article/114465-alcoa-is-hard-to-believe-in

Long term debt has increased by $2.1 Billion or 33% to an astronomical $8.5 Billion.

Hey, I have nearly a lifetime supply of aluminum foil just in case. If we do someday hyperinflate, aluminum foil isn't going to get any cheaper.

What I don't have is tons of it lying around with hopes of selling it to the next guy for a profit though. I'm not completely crazy.

In fact, I'd lock in every single future purchase I'd ever need to make if I could. Today's prices are just fine by me. It would be comforting to know that my savings did not require a stable currency.