James Dines: One Thing Baffles Us

Written by James Dines
Posted August 10, 2019

Publisher's Note: As great as the rise in gold prices has been, the commodities sector as a whole is in a strange place.

Read on for an excerpt from The Dines Letter discussing what is going on.

Call it like you see it,

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Nick Hodge

The important thing is not to stop questioning.
                                            —Albert Einstein

We’ve struggled to comprehend one thing about the stock market. Perhaps a TDLer could enlighten us.

This fact is clear: We follow a broad variety of metals, and virtually every single one is in a downtrend, despite a historic economic boom and record-low unemployment.

Here’s a mysterious example. Cobalt, crucial for electric-car batteries, has been plunging tdl cobalt chart(see chart to the right). Electric cars are purportedly the wave of the future; indeed, China’s automobile market — the planet’s largest — is going entirely electric. And cobalt is so crucial in accomplishing that goal that China has been hoarding it, taking some off the market in large quantities. Logically, the resulting decrease in availability should have buoyed cobalt’s price. Production in an unstable nation, Congo, is yet another reason for prices to rise. Still, cobalt’s price is crashing. Huh?

The mystery deepens when we ponder on our cobalt “Sell” signal that flashed when everybody was hysterically optimistic on it! We even recall doubting our own “Sell” signal, based on cobalt’s seemingly assured rarity; we based our “Sell” on charts and Mass Psychology.

Copper is another metal vital for a wide range of things, and there is a menacing shortage, with no new major copper mines expected to come on stream until at least 2022. Yet the auto industry has a “What, me worry?” attitude about the shortfall in the copper supply. Copper, like cobalt, is stuck at stinking low prices around $2.50-$3.00.

There are exceptions: Iron ore is rising, but that’s from an accelerated reduction in supply due to a tragic accident. Also, the precious metals are up, even rare rhodium. But they’re primarily monetary metals (gold, silver, platinum, and palladium), rather than commercial. So we still struggle to comprehend why so many other metals (aluminum, copper, lead, nickel, tin, and zinc) are in downtrends. How could there be a historic economic boom without significant demand for those metals with which to build?

We agonize about stocks possibly anticipating a deep economic decline, perhaps involving a war (tariff or shooting). Or even a reaction to a political event, such as America’s presidential election in November 2020. What could happen that might decimate the world’s commerce?

A debt crash is a possibility — the world today is a house of cards. Japan, for example, backs its yen with U.S. dollars. But what if the dollar itself had a problem — or links with all other “trusted” currencies? The yen would surely crash.

The world is in debt to the hilt, cheap debt with historically low interest rates — and in a crisis, soaring interest rates would make new debt very expensive. Is business really as good as everybody says? We can only wonder, and hope.

Are metals markets being manipulated by unseen hands to create future monopolies? That should eventually force prices higher. The fact that the financial mass media outlets don’t seem to cover lagging metals intrigues us even further, as the Mass Psychology might be concealing something. Or is the very cheapness of metals simply paving the way for the biggest commodity boom in history?

While we’re grateful we have led you to the few metals that have been rising, we are concerned that some kind of debt or currency storm might be gathering. We wish the media would bring some good minds together to discuss how to lead us all from endarkenment to an enlightenment. We ourselves are struggling with it, to be reported on in a future TDL.

We wish we could just ignore the precarious. And we hope our TDLers have some precious-metals assets. Just in case. Years ago, it was children who didn’t know the value of their currency, now it’s nations.

James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline, and The New York Times, among others.

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