The new Gold Rush

Date: Jan 7, 2019

FOR investors looking for the next hot market, 2019 may not seem to be starting off with a lot of promise. Cryptocurrency has turned out to be the folly anyone with any sense should have realized it was from the start, and stocks have spent the past couple of months staggering toward a long overdue return to rational values.

The safe, prudent thing to do, as always, would be to invest in safe, prudent things. Gold never goes out of style. And while corporate bonds might not be a good idea, there are still plenty of issuers of stable sovereign debt instruments to offer choices better than hiding one’s money under the mattress.

But where’s the fun in “safe” and “prudent”? If your intention is to put your money out of sight and let it slowly percolate for the benefit of your descendants, safe and prudent is a good path to follow. If your goal is to earn something substantial in this lifetime, however, catching the “next big thing” is a better choice, provided it represents something tangible (unlike cryptocurrency) and carries a risk level somewhat less than playing the Lotto (also unlike cryptocurrency).

For the next few years, the “next big thing” may be exotic metal commodities, specifically lithium, vanadium and palladium, as well as neodymium and praseodymium. Most of these enjoyed a surge in 2018, and all appear to be headed nowhere but up for at least the next five or six years.

Lithium: Lithium is the most important material in the manufacture of rechargeable batteries, which of course are used in everything from your electric toothbrush to large-scale energy storage systems. Lithium supplies are expected to lag significantly behind demand for several years, even though producers are scrambling to open up new sources outside China, which is both the world’s biggest producer and consumer of lithium.

What is interesting about lithium as a commodity is that most producers are already foreseeing a critical shortage a few years in the future, around 2023 and 2024, based on projections for global electric vehicle production. That presents opportunities for timing investments that commodities usually don’t offer, provided one remains vigilant.

Vanadium: Vanadium had a big year in 2018, because an oversupply that was created a few years earlier finally ran out. In fact, vanadium producers were caught by surprise to some extent by how fast supplies went from a surplus to a serious deficit, with prices for the metal subsequently skyrocketing.

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