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January 2007 Update
5 Free Articles on Picking Raw Material Stocks
Introduction by Ken Mueller There is Always a Bull Market Somewhere is a saying heard often on CNBC, the premier financial channel in the U.S. Right now there is a bull market in raw materials sometimes referred to as resource stocks. The conditions for the rise in resource stock prices are because of a perfect storm of increasing demand and lack of supply. There has been very little investment by resource or commodity companies in recent years because of low raw material prices. This has caused a lower supply than usual. The dramatic increase in the populations of China, India and Brazil have fueled the increase in recent demand and will continue to do so for sometime. All new investors should have at least basic understanding of the raw material market.
Included in this months update are four articles by Dr. Russell McDougal from Investors Daily Edge. The subject is evaluating start up or “junior” resource companies. These stocks are on the outer edge of the risk scale but then they also offer large rewards. This type of investing is meant for that 5 or 10% of your portfolio that is reserved for speculation if you are a beginning investor. A proper amount of research is required for investing in start ups but the pay off can be well worth the effort. For the beginning investor I believe the gold and silver markets are a good place to start learning to research an industry sector. These markets are not subject changing styles and a fickle consumer like the retail sector. There is no worry that your product will become obsolete in a month by a new competitor with a slicker machine like the electronics industry. The metals sector offers a great way to look at market fundamentals in their purest form. Whether you invest money or just paper trade resource company stocks the ride can be quite exciting. Before I lead you to the articles on start up mining stocks let me introduce you to some of the big guys. Rio Tinto (RTP) has a market value of $67 billion. Barrick Gold (ABX) $25 billion. Newmont Mining (NEM) $19 billion. Anglogold (AU) $12 billion. As you will see the goal of start ups is to partner or be bought by the big fish. Basically the game is to find the gold and contract with a giant to dig it out of the ground for you to put it in plain language. The first article I will point to is McDougal's Frothometer. It describes the conditions of when the market is too high or "frothy". Knowing when to sell is twice as hard as knowing when to buy! Continue to Frothometer |
by PLP's
Ken Mueller
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