The Korelin Economics Report
San Francisco Fund Manager
Extols Virtues of Precious and Base Metals
Al Korelin
www.kereport.com
dispatched Aug 29, 2007
posted Aug 30, 2007
Marshall G. Berol, co-Portfolio
Manager of the Encompass Fund (www.encompassfund.com),
has invested about 35% of the Fund's assets in precious and base
metal companies over the past fourteen months. So far it has
been a win for investors.
Berol has been following resource
companies for the past twenty-five years, and believes that in
today's environment these companies provide not only effective
insurance, but great upside potential for the Fund's investors.
I recently spent a couple of
days with him in Saskatoon and Uranium City, Canada, looking
at mining properties. The airplane and helicopter flights we
took together gave me the opportunity to pick his brain.
We discussed how last week
on The Korelin Economics Report the guests were split 50-50 between
optimism and pessimism about commodity prices, and commodity
equities.
Regarding base metals, Lawrence
Raulston and others feels that an unprecedented buying opportunity
exists today. On the opposite side, Paul van Eden, Bob Moriarty
and others expressed the opinion that copper, nickel and other
commodities were something to avoid right now.
Berol is in the camp with our
guests who are optimistic about prices. Berol and his co-Portfolio
Manager, Malcolm H. Gissen, believe that the supply-demand picture
favors the continued rise in the price of the base and industrial
metals (copper, zinc, nickel, molybdenum and uranium) for some
time to come. While recognizing that there will be price volatility,
the demand for these metals continues to grow with the growth
of the economies of China, India, the rest of Asia, and South
America. Particularly in China and India, the need for the continued
building of the infrastructure requires various of these metals,
such as copper for wiring, nickel and zinc for steel manufacturing,
molybdenum for pipelines, and uranium for the fuel for the 440
nuclear plants currently operating, and the approximately 100
new nuclear plants now under construction or planned, around
the world. The growing consumer class in these countries also
want housing, refrigerators, automobiles, cell phones, etc.
The demand continues to grow,
and it is increasingly difficult, time-consuming and expensive
to bring new mines into production, or even increase the output
of existing mines. This is due to increased environmental requirements,
the need to accommodate the local people, and the fact that the
"easy" material has been found. New discoveries and
mines are in increasingly difficult geographic locations or less
stable geopolitical areas.
I completely agree with Berol.
I went on record some time back stating on the air that I was
a long-term bull in both the base and precious metals sectors.
Everything I learned as both an undergraduate and graduate student
indicates that for a while it simply makes sense.
Berol also believes that it
makes as much sense in the gold and silver areas, to which I
agree. While some of the underlying factors involving gold are
different, there is still a supply-demand imbalance that is not
likely to correct for years. Gold isn't so dependent on the infrastructure
build-out as the base and industrial metals, but it does have
the additional historic demand factors of "storehouse of
value" in difficult times, and demand from an expanding
middle class for jewelry and gift giving. Silver has increasing
industrial uses, as well as consumer demand. Recall that only
a few years ago, the silver bears were saying silver "was
dead" because of it's decreasing usage in photography. The
fact is that silver has gone from $3.00-$4.00 per ounce to over
$11.00 (with a high around $15.00) in that time frame.
The investment climate today
is anything but stable and the gyrations in the conventional
markets, as measured by the Dow, the Nasdaq Composite and the
S&P are truly frightening. You cannot open a newspaper today
without reading about serious liquidity concerns around the world.
It's enough to scare anybody.
I truly believe that fear is
the incorrect emotion here. Rather than be fearful investors
need to be optimistic. Why? Simply put, we have an unprecedented
opportunity for profits from investing in precious and base metals
and the related public companies. Listen to The Korelin Economics
Report (www.kereport.com)
and hear discussion with experts in this field and see if you
don't agree.
* * *
Al Korelin
is the host of "The Korelin Economics Report". This
radio program features discussions with political figures, newsletter
writers, analysts, portfolio managers and company executives.
None of the guests appearing on the program pay any fees and
if Mr. Korelin or any of the guests own shares in any company
that is discussed, that fact is clearly disclosed. Mr. Korelin's
firm, A.B. Korelin and Associates, Inc., has been providing regulatory
consulting services to public companies for the past twenty five
years.
Aug 29, 2007
Al Korelin
email: alkorelin@comcast.net
website: www.kereport.com
321gold Ltd
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