With the New Year upon us, it's vital for mineral investors to look at their portfolio and compare it to the vision of what lies ahead and make sure that they are appropriately balanced for their risk/reward levels.
MetalsNews had an opportunity to speak to Jim Letourneau, author of The Big Picture Speculator for his take on… well… the big picture.
Mr. Letourneau is a speaker and investment newsletter author and his insights are admired and respected. He was talking about uranium, for example when it was at $12/pound, and now it is several times more.
Most importantly, Jim Letourneau is an experienced analyst. He is a Professional Geologist who visits the very sites that he talks about, giving him an insightful edge as someone who sees and understands the full picture of metals investing.
We started by asking him for a brief overview of his perspective in the marketplace. He rightly highlighted just how much people have "bounced back" from the cloud of doom and gloom that hung over investors in January 2009. "If you asked people in January 2009 where the market would be [one year later], very few people would have expected the kind of recovery we've seen. And yet, now everybody is taking it for granted [by thinking] 'Everything's okay and we're back on track'." But Mr. Letourneau is quick to add that he is cautiously optimistic: "You can't have a bull market without a 'wall of worry' and I think we still have that wall of worry. I'm still looking over my shoulder and thinking 'how did this all happen?' And, 'how did we have the biggest financial collapse in history and yet life goes on.' Everyone survived and a lot of people have done really well in the markets."
When it comes to the future of the marketplace, Mr. Letourneau sees opportunity but is slightly cautious. In the mining industry he says, "I'm an optimist. I get excited about new technology in the mining and oil and gas business. There are so many exciting improvements and enhancements." But other areas are tempering his enthusiasm, if only slightly: "Fiscally, we probably haven't solved all our problems but throughout recorded history we were always dealing with financial crises; panics come and go."
Getting back to the metals and commodities market, Mr. Letourneau says, "I'm a big believer in the commodity story and I've been a commodity bull for a long time. Commodities were taken down hard on the back of a financial panic but they've bounced back quickly and they have the best fundamentals. There are a lot of places to be in the market but I like commodities."
Indeed, commodities are hot right now so it's not a surprise to hear that this commodities expert has some opinions on the matter! We pressed him for some specifics, and he gave us some good insight: "I'm a sucker for the rare earths; strategic metals. Often the metals that people can't pronounce are the ones where the biggest returns are. Rare earths are an interesting place to be: Not too many people know very much about them and market caps are small so that's where you can have the biggest squeezes." Later, he broadened his discussion to other metals. "I've liked tungsten for a long time. They go into pipelines and drill-bits and armor and there aren't that many sources of supply. We're moving into a phase in the commodity cycle where security of the supply is critical. These are strategic metals. Some industries can't function without them and sometimes the supplies of metals are not in friendly hands. In the past ten years we've moved away from stockpiles of supply and just-in-time delivery. Now, some of the stockpiles don't exist anymore and the delivery has to come from places that aren't as reliable. If a supply problem happens, it can cripple an industry. We're starting to see some squeezes and price increases. Tungsten's price had held up quite firm for the longest time but the companies that mined tungsten seemed to suffer.
After speaking about rare earths, we asked Mr. Letourneau about a less rare mineral – gold. "Gold has become very hot. India just bought some bullion from the IMF and has got people excited."
Mr. Letourneau is optimistic about oil, too. "When people start talking about peak oil, you can make a strong case for [running out of oil], but we're doing a lot of things that will ensure a long time supply of fossil fuels and it's tough to beat for an energy source."
Lastly, we turned to gold – the hot commodity right now. Mr. Letourneau is optimistic there, too, but gave us a clear-eyed picture of the situation: "I haven't pulled out my crystal ball for gold price. But when I first started my blog a few years ago, $3000 to $5000 an ounce wouldn't shock me if the trends keep continuing. We're in the continuation of a long bull market. It's a good store of wealth. Since it's a multi-year bull market, some years don't see a price change. I'm a long-term fan of gold but I've found that there are bigger gains in strategic metals right now but a lot of money is pouring into gold right now."
For investors who want to buy into gold, Mr. Letourneau points out that "there are so many things you can do. You can buy ETFs. You can buy bullion. You can buy senior producers. You can buy coin. You can buy juniors that are in production or still exploring." As with any investment, he highlights that there are risks: "There's political risk, economic risk… there are many ways that things can fail. There's risk in mining investments so you need to pick good management teams and safe jurisdictions, and know what you're getting into."
So, how does Mr. Letourneau summarize his own optimism? "We live in an interesting time. Commodities are still a solid asset class to be invested in… and there are some interesting opportunities out there."
References
Jim Letourneau
Visit his website: http://jimletourneau
Visit his newsletter site: http://bigpicturespeculator.com