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Meritocracies, Copper, Batteries, Petrol, Solar and Gold

Larry LaBorde
Posted Nov 7, 2011

Last week the LaBorde family was down in South Louisiana at the New Orleans Investment Conference. After attending a presentation on China by the very passionate Dr. Stephen Leeb, author of Red Alert: How China's Growing Prosperity Threatens the American Way of Life; it became more apparent that China is becoming an economic super predator. His explanation of the current situation seemed comparable to a boxing match. In one corner there stands a boxer who does not know he is in the ring, but he has a very strong reputation. In the other corner stands a boxer who is a little lighter but has been training hard. To tilt the scales farther, the boxer that has been training has also decided to hedge his bets by purchasing all of the boxing shoes, gloves, trainers and ring time while the other boxer was not even paying attention. The United States is not necessarily done for, but it is time for us to at least realize that we are in a fight and act accordingly.

As a long time chess player, Dr. Stephen Leeb expressed that he is downright scared of the way that our opponent is systematically playing an enviable game of strategy and yet we haven't even started to acknowledge that we are engaged in a competition that threatens our entire way of life. His argument was focused around resource acquisition for global economic control. On the surface his reasoning sounded much like many of the ideals that we have previously heard. However, as he continued to speak his argument invoked a mixture of respect for the efficiency of the Chinese machine and shock at how far behind we may be. Some of the high points of his presentation are listed below:

People: Besides having a massive workforce and graduating more engineers each year than we have working in this country, China operates on more of a meritocracy, or by rewarding the merit of individuals, than the US does. An example of this can be seen in that one of the premier female chess players in the world right now is a young Chinese adolescent that was pulled out of the fields when it was recognized that she had an aptitude for strategy as a young girl. If she continues on her current trajectory, Dr. Leeb suspects she will be playing the men soon. It is this mindset of making efforts to elevate their best, brightest and hardest working that permeates much of their society. In business there are more Chinese billionaires being made each year than anywhere else in the world. In government they have repeatedly been cultivating this kind of talent as well and Dr. Leeb believes that this talent is playing the resource war very well.

Copper: China is spending dollar amounts of a similar magnitude in Afghanistan as the United States, the difference is that they are mining copper while we are creating the world's best distraction for them to do so. The reason that getting a leg up on the world's copper supply is exceptionally scary is that copper is at the root of many or the world's future "green" technologies besides being the backbone of many of the world's existing technologies.

Rare Earth metals: "Rare earth metals" are the bedrock of the future of all long-life, lightweight batteries. Over the years China has developed its mines in Mongolia and its processing plants to the point that they now produce 97% of the world's supply. This probably needs no explanation as the world moves into electric cars and even a couple electric planes. Clean energy is a global concern and the efficient storage of this energy is a big concern as well and will only grow in importance over the coming years. China has stopped exporting rare earth metals in raw form and instead will only sell them as components in finished products shutting out everyone else around the world. This gives them a tremendous leg up on all finished products related to rare earth metals, such as batteries and permanent magnet motors, a core component of most high-efficiency electric generators.

Solar Energy: "First Solar" is the name of the U.S. based company that was the second largest producer of solar panels in the world in 2010. Last week First Solar took a 25% bath and the top of the blame list can be summarized with a quote from an article in Forbes from last week, "First Solar did not provide any details but the handwriting was on the wall. Recently, there has been considerable anecdotal evidence that First Solar is no longer competitive with Chinese imports." First Solar was listed number one in the top 25 fastest growing companies in America in 2011. What could bring an innovative giant like this down? According to the article, a $30 billion dollar helping hand of the Chinese government to its entire solar sector making US production not financially feasible at this time. With that kind of help there is just not much a company, or country, can do to prevent China from getting a complete and total lock on the solar industry - a potential lynch pin industry in the forward motion of clean energy.

The Oil Game: Two words, Petro China. Petro China is the traded name of the Chinese National Petroleum Corporation that announced its plans to go public in November of 2007. The company tripled in value once public, was the most valuable publicly traded company on the exchange as of September 28th of 2011, and was the first company to reach a trillion dollar market capitalization. Though the Chinese are gearing up for futuristic energy sources they seem to have a firm understanding that petrol based energy will be ushering us and them into the world of green energy and will be critical in bridging us there.

Gold: What is China doing with gold you ask? They, along with Russia, appear to be slowly but surely attempting to accumulate enough to one day back their currency with it. They are also encouraging their citizens to accumulate gold by opening a new metals exchange and granting tax exemptions. If you have slept through everything else written in this article, this single point should be enough to tip you off that: 1. The US dollar is potentially in more trouble than indicated by the press and 2. If metals become popular in a country with a population of 1.33 billion savers there may be a boost in gold's overall demand; this could potentially resemble the craziness associated with the Tickle-Me-Elmo doll during the 1996 Christmas season.

To quote Dr. Leeb, "We are at war and we don't even know it! Wake up, America!"

Of all the points listed above one is of particular concern to us - it is that China is poised to change the global pricing of gold. We can buy and be holders of Petro China, rare earth metals, copper and stocks in Chinese solar companies; but we sell gold and understand it best. As a result of hearing Dr. Leeb's impassioned views we feel that both gold and silver are positioned very well for motion in a positive direction. It is our position that gold and silver will be rising significantly over the next year, so if you have any questions about acquisition please feel free to give us a call. [ 318-470-7291 ]

Dr. Stephen Leeb was one of the best speakers I have heard this year on things we should be paying attention to that will affect our way of life in the near future. His book will be our next read as these points listed above were just quick highlights from a short presentation he gave at the New Orleans Investment Conference.

Christopher LaBorde also contributed to this article.


Larry LaBorde
Silver Trading Company

Larry lives in Shreveport, LA with his wife Puddy, and sells precious metals at the Silver Trading Company.

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"Please note that I am by no means a financial advisor and all investments should only be made after performing your own due diligence." -Larry


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