The Investment Philosophy Thread

[Julius_Seizeher]

With the runaway success of the penny stock thread ongoing, I am compelled to facilitate an investment philosophy dialogue here. I will go into detail regarding what I see happening on the world stage, where I think the demand is going, and what industries I am investing in. I have no need to pump the stocks I believe in, if I refer to specific companies I am merely sharing my enthusiastic opinion on what they are doing and where I believe they are going.

Thus far as an investor I have developed a strong focus on what I call "building block of civilization" kind of markets. I no longer invest in who's making the better mousetrap; I buy companies that are pulling the raw materials out of the ground to build the mousetrap. These include resource/mining verticals in precious metals (gold, silver, copper), Rare Earth Elements (Niobium, Molybdenum, Lithium, Uranium), and Agricultural Commodities (namely Potash). Also included in my "building block of civilization" definition are energy companies (oil wildcatters, natural gas, electrical production, nuclear).

Obviously, now is a good time to be bullish on precious metals. Gold is having a heyday, and I'm betting that it's only getting started. IMO, the amount of debt held by fiat currency nations functions as a support for the escalating price of gold; we will likely see fluctuation in the short-term but I believe the price of gold is just taking off. Fiat debt, coupled with the MASSIVE worldwide short positions in gold that were perpetrated by the anti-gold banking cartel as a means to suppress its price, are among the factors driving more money into gold as investors flee from dubious baseless currencies. Investor demand, short covering, and world economic conditions have created the perfect bullish storm in gold. Silver is also seen as highly undervalued, and it's industrial uses are growing constantly. Copper is also heating up, as China is trying to gorge itself and has stopped selling it as well. These metals are on fire, and fundamentally are showing that they have wonderful futures ahead of them.

I also believe that the ease by which retail investors may buy these metals, in the form of ETFs, is a bullish driving force.

Next come the REEs. You've probably never heard of the RESTART Act, but rest assured your Congressman has signed it into law. The domination of the Rare Earth Element market by the Chinese has presented a 'clear and present danger' to the security of the US. REEs are used in every high-tech device you can think of, especially those in machines used by our armed forces. Twenty years ago, we allowed our domestic REE industry to wither and die, because we could just buy it from China. Now, China is no longer playing ball and we have to rebuild our REE mining/production infrastructure. This industry is just beginning to get serious investor attention, but I have no doubt that those who rely on the WSJ and Fortune magazine will soon be buzzing about REEs.

Then there's good 'ol potash. In case I'm the only farmer on this site, I'll inform you that potash is corn fertilizer. The expanding world population, and the upstart growth of several former third-world nations, is creating a gargantuan demand for potash. Hell, BHP (the biggest mining company in the world) just made a huge buyout offer on PotashCorp, who is now trading at $150. Potash is going to be RED hot for a long time - about as long as people need to eat, capeesh?

Armed with my belief in the future of the aforementioned commodities, I buy early-stage mining verticals with big assets, a scaleable advantage in production, and sorely undervalued share prices. I have a group of 5 companies which I am buying as much as I can get, and there are additional contenders for my portfolio as well. Of course, this is more speculative than buying miners who are already producing, but this SOP allows me to reap the greatest potential on that money. There is much that must happen before a company begins producing, so once you have proven underground assets, you are given a window of time to buy the stock (often years) while the company is putting it all together.

I consider myself an acolyte of Buffett-style value investing, only with the Risk dial turned up another couple notches, and with a focus on resource verticals. I don't follow the P&D squads and I don't practice santeria (aka technical analysis).

So what intelligent assertions are you guys making in the market?

 

[Bible_Belt]

Good luck with your investing. I have been away from the markets for a while. But I do remember back in the day while day trading on a slow afternoon that I would occasionally buy some Potash Corporation of Saskatchewan shares just so that I could announce to a day trading chat room that I had just bought some POT. Nicor was another fun stock, because after you bought it, you then had GAS. If it went down, you had GAS pain.

You of course sound very intelligent, and I hope your investments work out. One small thing I might be able to convey to you is that the problem with being smart is that the market is always smarter...even when it isn't. A stock can be the greatest value in a sector, but buying it will never pay off unless the crowd later agrees with you. Predicting the future swing of the crowd's emotions is more important than being correct in any sort of logical sense.

 

[synergy1]

Regarding REE, an article talking about china leveraging what they have - 95% of the total REE production. The same materials we use for batteries, military apps and the like. Hippies cry foul on oil and our dependence on OPEC for motor oil ( which comprises of a measly 30% of the total production world wide), but seem to forget a real problem relying on a country that holds much of our debt.

http://www.zerohedge.com/article/china-halts-rare-mineral-exports-us-and-europe-prices-set-surge

JS, I am with you on the little i know about junior mining companies. One has to be somewhat savvy on the industry as there appears to be a bunch of fraud being promoted by higher ups within these companies. Costs including transportation to the mine, and extracting the ore are also an issue which can cut into the profits of these companies.

 

[cordoncordon]

With the runaway success of the penny stock thread ongoing, I am compelled to facilitate an investment philosophy dialogue here. I will go into detail regarding what I see happening on the world stage, where I think the demand is going, and what industries I am investing in. I have no need to pump the stocks I believe in, if I refer to specific companies I am merely sharing my enthusiastic opinion on what they are doing and where I believe they are going.

Thus far as an investor I have developed a strong focus on what I call "building block of civilization" kind of markets. I no longer invest in who's making the better mousetrap; I buy companies that are pulling the raw materials out of the ground to build the mousetrap. These include resource/mining verticals in precious metals (gold, silver, copper), Rare Earth Elements (Niobium, Molybdenum, Lithium, Uranium), and Agricultural Commodities (namely Potash). Also included in my "building block of civilization" definition are energy companies (oil wildcatters, natural gas, electrical production, nuclear).

Obviously, now is a good time to be bullish on precious metals. Gold is having a heyday, and I'm betting that it's only getting started. IMO, the amount of debt held by fiat currency nations functions as a support for the escalating price of gold; we will likely see fluctuation in the short-term but I believe the price of gold is just taking off. Fiat debt, coupled with the MASSIVE worldwide short positions in gold that were perpetrated by the anti-gold banking cartel as a means to suppress its price, are among the factors driving more money into gold as investors flee from dubious baseless currencies. Investor demand, short covering, and world economic conditions have created the perfect bullish storm in gold. Silver is also seen as highly undervalued, and it's industrial uses are growing constantly. Copper is also heating up, as China is trying to gorge itself and has stopped selling it as well. These metals are on fire, and fundamentally are showing that they have wonderful futures ahead of them.

I also believe that the ease by which retail investors may buy these metals, in the form of ETFs, is a bullish driving force.

Next come the REEs. You've probably never heard of the RESTART Act, but rest assured your Congressman has signed it into law. The domination of the Rare Earth Element market by the Chinese has presented a 'clear and present danger' to the security of the US. REEs are used in every high-tech device you can think of, especially those in machines used by our armed forces. Twenty years ago, we allowed our domestic REE industry to wither and die, because we could just buy it from China. Now, China is no longer playing ball and we have to rebuild our REE mining/production infrastructure. This industry is just beginning to get serious investor attention, but I have no doubt that those who rely on the WSJ and Fortune magazine will soon be buzzing about REEs.

Then there's good 'ol potash. In case I'm the only farmer on this site, I'll inform you that potash is corn fertilizer. The expanding world population, and the upstart growth of several former third-world nations, is creating a gargantuan demand for potash. Hell, BHP (the biggest mining company in the world) just made a huge buyout offer on PotashCorp, who is now trading at $150. Potash is going to be RED hot for a long time - about as long as people need to eat, capeesh?

Armed with my belief in the future of the aforementioned commodities, I buy early-stage mining verticals with big assets, a scaleable advantage in production, and sorely undervalued share prices. I have a group of 5 companies which I am buying as much as I can get, and there are additional contenders for my portfolio as well. Of course, this is more speculative than buying miners who are already producing, but this SOP allows me to reap the greatest potential on that money. There is much that must happen before a company begins producing, so once you have proven underground assets, you are given a window of time to buy the stock (often years) while the company is putting it all together.

I consider myself an acolyte of Buffett-style value investing, only with the Risk dial turned up another couple notches, and with a focus on resource verticals. I don't follow the P&D squads and I don't practice santeria (aka technical analysis).

So what intelligent assertions are you guys making in the market?

What are the 5 companies you are presently buying?

 

[Perry]

i was looking forward to where this thread was going. lets keep it going eh? :rockon:

 

[Julius_Seizeher]

I want to keep it going too. But, I want to stay away from recommending stocks; let's keep it philosophical, so the stock police don't come in here and accuse us of orchestrating pump n dumps.

 

[Hikapo]

Sounds good. I will be following the thread.

 

[Alle_Gory]

With the beginning of the currency wars, I can see the American dollar taking a dive. It should have started already after that $600billion cash pump from the Fed last week (to create 'jobs' yeah right). De-valuate the dollar, have less debt to pay off. Things will be cheaper in America and foreign goods more expensive. I forsee less cheap crap being imported from China and more of it being made domestically. Maybe a chance for the manufacturing industry to rebuild itself from the ashes.

That and China's tight grip on rare earth metals is making others very uncomfortable. There's other deposits that can be mined. Afghanistan maybe? It was a big deal on the news awhile ago. Not sure if it means anything.

This won't be good news for China and they're going to be PISSED. They've been more brazen with their show of strength recently. Not sure if that's strategic or just to show off their new military hardware.

Those are my 'intelligent' assertions for the time being.

 

[Julius_Seizeher]

Afghanistan could potentially be a mining powerhouse, although it will be decades before those deposits are remotely feasible to mine. In the mining business, you must have political stability and a strong, mining-friendly government.

I think the United States should make mining a focus of our effort in Afghanistan, as a means to help foster a real economy there versus a bunch of goat-herding opium growers shooting each other.

As for China, they recently announced that they would begin selling some REEs again. It's only a measure to alleviate the firestorm they created in the REE world, but it's too late: the cat's out of the bag. Their announcement last summer compelled the West to pull their head out of their asses and realize that we have allowed our REE infrastructure to disappear, and that we absolutely NEED to get it back.

I'll also introduce in this post my newfound distrust of ETFs. They are the hot new thing, but no one really understands how they work and I believe they could potentially be a source of future bubbles and troubles in the investing world. It is clear to see that a triple-leveraged short ETF would have to engage in naked shorting to fill demand after a certain point, because there are only so many margin (ie:legally shortable) shares to go around. I don't trust em, and I'm calling 'caveat emptor' on ETFs, especially 3X leverage ETFs.

 

[Alle_Gory]

You're right about Afghanistan, but what bothers me is the focus put on it. The media views everything through government apporved rose tinted glasses. What the media focuses on, the government focuses on.

I'm looking mostly at the propaganda outlets. Fox, CNN, MSNBC... etc. All heads of the same beast.

To me Afghanistan tells me there is a huge interest in minerals especially rare earth metals. There was also talk of South America last I did research. Chille I think, not sure with that one.

 

[Quiksilver]

I have some friends who live in Japan and also a friend who is teaching English in China. Here is what I gather from them about what's been happening with China:

- China/Japan/Korea/Russia is a very volatile region and are often at odds with each other.

- There are a few small islands in the middle of the Yellow Sea to which Russia/China/Japan all lay claim to and all think is in their own territory.

- This island has rich deposits of gold, uranium, silver (and other rare earth minerals), as well as rich fishing grounds in the surrounding reefs and shoals. ie. very economically beneficial to 'own' it.

- Chinese fishing boat rammed a Japanese coast guard vessel near this island. Friends in Japan say that this fishing vessel knew what it was doing, not just your average fisherman.

- China then got angry at Japan for straying too near "its" interests. Of course they all think they own it so this is very confusing.

- Japan expresses anger.

- China cuts off all rare earth metals exports to Japan. Japan makes a lot of hi-tech devices such as cell phones, televisions, and other equipment. These all take rare earth metals, so it can stifle the trade economy of Japan.

I do not know if I read this here or somewhere else, but whoever said it was correct. When they said that China cutting off its rare earth exports (REE), China showed its cards and now all other nations are 'banding together' to fight against the Chinese trade policies. It backfired, but they are neck-deep and will be reluctant to admit they were in the wrong (Chinese culture).

It's a mess, but at least we caught a glimpse of their plans. Buy rare earth assets and mining corporations, and use that supply as leverage against other nations for political reasons. Nations will be more reluctant to pawn off their natural resources to Chinese MNCs when we now know how they will use that power.

 

[Stud]

Julius...

you're strategy looks like a sound one and it sounds like you are well versed on investing matters, but the true question is, how successful have you been following it? if you have not been, it does not mean you are wrong, perhaps too early/late to the party. I would be interested too hear if / how well this has been working for you.

 

[Alle_Gory]

China has a vested interest in the separation of North and South Korea. Why? Because a United Korea can poses a threat. Throw in the Japanese and you have a real danger to China.

This is why North Korea still exists and why the US doesn't do anything about it despite constantly being threatened.