What CNBC Isn't Telling You About This Popular Commodity
Commodities / Gold and Silver 2010 Sep 11, 2010 - 01:25 PM GMTBy: DailyWealth
Matt Badiali writes: This week, I shared an important chart with readers of my S&A Resource Report advisory.
This chart can help you make a lot of money in the next few years. One look will tell you a great deal about the potential of a certain commodity we need to invest in right now.
For the moment, we'll call it "Commodity X."
As you can see, this commodity has gone unloved and ignored by the market for a long time...
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The perfect time to buy a commodity is after it has suffered years of neglect... when most producers of that commodity have quit the business out of disgust... when years of low prices have set the stage for a big pop higher. These left-for-dead investments can make for hundreds of percent gains in a short time.
The chart of Commodity X shows this kind of asset... one most folks wouldn't guess if you gave them 10 tries.
You see, in most people's eyes, the price of Commodity X has skyrocketed. This has left many talking heads on CNBC claiming it is overvalued and due for a fall. They say it can't sustain its current price, which is near its highest level in more than 20 years.
But as you can see, this commodity is still way off its previous highs. It's why legendary investor Jim Rogers is always saying he'd rather buy this commodity than gold.
So what is Commodity X? Natural gas? As I've mentioned several times in DailyWealth, a North American supply glut has depressed the price of this clean fuel. Corn? You don't hear much about corn these days. Uranium? Coffee? Orange juice?
No... Commodity X has been in the headlines nearly every day in the past month.
Commodity X is silver.
As you can see from the chart above, silver enjoyed a huge bull market in the 1970s. During those years, inflation was running rampant. The government had dumped the gold standard and was trying to pay for the Vietnam War and Lyndon Johnson's Great Society boondoggle. Folks were fleeing the dollar and rushing into hard assets like gold and silver.
Silver's big run culminated in 1980 when the two Hunt brothers cornered the silver market and drove the price up to $100 per ounce in today's dollars.
You know the story after that... Paul Volker famously raised interest rates and smashed inflation. This ushered in two decades of a bull market in stocks and bonds... and a bear market in hard assets like gold and silver. Silver lay on the investment battlefield like a dying soldier... foundering at less than $8 an ounce (again, in today's dollars) for much of the 1990s.
Fast forward to today and the current bull market in precious metals. Silver has enjoyed a nearly 300% rally from its bear-market lows. We have potential paper-currency disasters on the horizon for both the U.S. and Europe. The 3 billion-plus people in Asia are growing a little bit wealthier everyday... and they have long held an affinity for gold and silver.
While silver might be overbought right now, a long-term perspective says it has lots of room to run should folks continue flocking to "hard money" like they did in the 1970s. If you haven't taken your position yet, it's not too late.
Good investing,
Matt Badiali
P.S. I recommend new silver investors start with basic "junk silver" or the big silver fund (SLV). Then, to make spectacular triple-digit gains from this bull market, silver stocks are a must. In my most recent S&A Resource Report, I shared my top silver stock to buy right now. This stock is on the verge of a major breakout, so I encourage you to get in immediately. You can learn more about the S&A Resource Report and another precious metal idea here.
The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.
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