Market Buzz – Long-Term Favourites Continue to Pay Off

The TSX Composite started the week off above the 12,000 level for the first time since September, 2008, but sovereign debt worries and a late week decline in metal prices did not allow Toronto’s main index to hold that level. For the week, the TSX ended down 65.84 to close at 11,947.98.

The decline in the TSX base metals sector followed strong gains earlier in the week, which added to the solid rally from the previous five day session.

The Loonie had run up strongly to above the $0.99 level early Friday after Statistics Canada said consumer prices rose 1.6 per cent last month, following a 1.9 per cent increase the previous month. Economists had been expecting prices to rise at an annualized rate of 1.4 per cent.

Among other factors, including strong commodity prices and the powering Canadian Dollar’s steady run towards parity with the U.S. dollar this year, is the expectation that the Bank of Canada will raise interest rates, likely as soon as this summer. The inflation numbers give further credence to this expectation as core inflation, which excludes volatile items such as energy and food, was higher than most forecasts. It rose one percentage point to 2 per cent; the first time it has been above the closely watched target of 2 per cent since December 2008.

Two long-time favourites from our Canadian Small-Cap Universe (www.keystocks.com) rewarded us once again with their monthly distributions this past week.

The first came from K-Bro Linen Income Fund (KBL.UN:TSX), which announced on Thursday that it will pay another cash distribution of 9.167 cents per unit of the Fund for the period from March 1, 2010, to March 31, 2010, to be paid on April 15, 2010, to holders of record of Units on March 31, 2010.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. The company provides a comprehensive range of general linen and operating room linen processing, management, and distribution services to large healthcare institutions, hotels, and other commercial accounts. Not the sexiest story on the street, but the strong unit appreciation and solid yield has provided our clients with an approximate 100 per cent return over the past 17 months – not bad for a company that cleans dirty laundry.

The second company, The Boyd Group Income Fund (BYD.UN:TSX), announced on Wednesday that it declared a cash distribution for the month of March 2010 of 2.5 cents per trust unit. The distribution will be payable on April 28, 2010, to unitholders of record at the close of business on March 31, 2010.

Boyd has jumped over 150 per cent over the past 16 months for our clients.

The Boyd Group Inc. is the largest operator of collision repair centres in Canada and among the largest in North America. The company operates locations in four Western Canadian Provinces under the trade name Boyd Autobody & Glass, as well as in seven U.S. states under the trade name Gerber Collision & Glass. The company also operates Gerber National Glass Services, an auto glass repair and replacement referral business with approximately 3,000 affiliated service providers throughout the United States.

Please note, the company will release its fiscal 2009 fourth quarter financial results on Friday, March 26, 2010 before markets open.

KeyStone will release a full update along with our updated rating on the stock next Friday afternoon to clients only.

Looniversity – Corporate Bling!

A simple question — If a company reports earnings of one million dollars, does their bank account swell by the same amount? Not necessarily. Why not, you ask? Well, in the wild and wacky world of public companies, financial statements are based on accrual accounting, which, in an effort to best reflect the financial health of a company, takes into account non-cash items such as depreciation. Sometimes, however, it can be valuable to strip off all the “accounting noise” and look at how much “actual cash” a company is generating. The statement of cash flow provides us with this information.

What is Cash Flow?

Cash flow is the constant flow of money in and out of a company. The outflow of cash is the money paid every month to pay salaries, suppliers, and creditors. The inflow is the money received from customers, lenders, and investors. All companies provide the cash flow statements as part of their financial statements, but cash flow can also be calculated as net income plus depreciation and other non-cash items.

Why is a look at the cash flow statement important? A company not generating the same amount of cash as competitors is bound to lose out when times get rough (can anyone say now?). Even a profitable company (by accounting standards) can go under if there isn’t enough cash on hand to pay bills. Unlike reported earnings, a company can do little to manipulate their cash situation. Unless tainted by outright fraud (which is apparently a consideration), this statement tells the whole story: either the company has the cash or it doesn’t.

Put it to Us?

Q. Lately, I have begun frequenting several stock-related chat forums on the Internet to help pick up little tidbits on the stocks I own. My broker recently warned me about “bashers” on the forums. Can you give me a run down on these characters?

– M Benoit; Winnipeg, Manitoba

A. The advent of the Internet has created a plethora of investment-related chat rooms and forums – enter the basher. A basher is a person who lurks in the shadows of investment chat rooms spreading calculated and, almost always, unfounded confidence-shaking news about a stock. The basher’s purpose is to instigate a sell-off that will in turn drive the stock price down, either for his or her own benefit or that of his or her employer.

So, how do you handle them?

First off, simply ignore them because they want and feed off attention. If they aren’t getting any, they’ll likely slink away and attempt to prey on more receptive victims. Secondly, do your due diligence. The phrase, “knowledge is power” is no more true than in this instance. Try to post a number of well-researched messages that confound the premise of a basher’s arguments.

Finally, try NOT to take your financial advice from those posting on a blog, bulletin board, or chat forum – your financial future far too important.

KeyStone’s Latest Reports Section

• Healthcare/Hospitality Service Trust Posts Sold 2009, Total Return Approaching 100%, Yield Remains Solid at 7% – Rating Updated (Flash Update)
  
• Reiterate our SELL HALF Recommendation, HOLD Remaining Position for our Top 2009 Canadian Wireless Software Pick After Shares Jump over 260% (Flash Update)
  
• IP Company Post Solid Q3, Solid Fundamentals, Strong Cash Position & Yields 4.17%, But 50% Share Gains Prompt Near-Term Rating Change (Flash Update)
  
• Canadian Infrastructure Stock Posts Strong 2009, Shares up Over 71%, But Strong Cash Position & Relative Fundamental (PE of 10) Allow Us to Maintain BUY Rating Long term (Flash Update)
  
• Canada’s Largest Facilities Maintenance Company Posts Strong 2009 Results, 25% Gain Prompts Near-term Ratings Change, Long-term Remains the Same (Flash Update)
  

In this issue:

O Canada
The Threat to Muddle Through
Back to 1971
The fault, dear Brutus, is not in our stars
GDP = C + I + G + Net Exports
An Optimistic New Venture, San Diego, and New York

 

If the Chinese allowed the renminbi to rise, would that make the USA better off? That is the contention of a cabal of critics from Senators to Nobel laureates. Paul Krugman wants to see a 25% tariff on Chinese goods. Today we examine that idea, and look at the real problems that we face. If only it were so easy. The numbers just don’t add up. The fault, dear Brutus…

O Canada

But first, and quickly, and in keeping with the spirit of the recent Olympics in Canada, I want to let my Canadian readers know that I am excited to announce a new Canadian partner, Nicola Wealth Management, based in Vancouver. Why Nicola Wealth Management? I have spent some time getting to know them and have come to have a great deal of trust in and respect for John Nicola (President) and his team. In my opinion, they are one of the premier wealth management firms in Canada. Further, they are as committed to helping you find high-quality investments, including absolute-return strategies, as I am.

If you are from Canada, get started now by going to www.accreditedinvestor.ws and signing up, and I will make sure one of the team at Nicola Wealth Management will call and qualify you to receive our Accredited Investor Communications.

And of course, if you are in the US, Latin America, Europe, or South Africa, and if you are an accredited investor (basically a net worth of $1 million or more), you can go to that link and I will have one of my partners in those areas contact you about the various absolute-return strategy funds that are available to you. (In this regard, I am president of and a registered representative of Millennium Wave Securities, LLC, member FINRA.)

The Threat to Muddle Through

I have pretty well laid out over the past decade that I think the US will Muddle Through what promises to be a period of below-trend growth and a long-term secular bear market. It will not be pleasant or fun – there will be a lot of pain – but we will get through the coming crisis (note: I think the Big One is still in our future). That is what we do in a more or less free-market world. But, as I wrote 7 years ago and have written since, there is one caveat that turns me from a Muddle Through-er into a real doom and gloom type, and that is the threat of protectionism and trade wars. As in Smoot-Hawley, which made the Depression into something much worse than it should have been.

Yet that is the prescription that Paul Krugman is advocating. In a commentary in Sunday’s New York Times (“ Taking on China“), he called for an across the board 25% tariff on Chinese goods:

“In 1971 the United States dealt with a similar but much less severe problem of foreign undervaluation by imposing a temporary 10 percent surcharge on imports, which was removed a few months later after Germany, Japan and other nations raised the dollar value of their currencies. At this point, it’s hard to see China changing its policies unless faced with the threat of similar action – except that this time the surcharge would have to be much larger, say 25 percent.”

Krugman doesn’t think the Chinese can really retaliate by dumping their hoard of dollars. He points out:

“It’s true that if China dumped its U.S. assets the value of the dollar would fall against other major currencies, such as the euro. But that would be a good thing for the United States, since it would make our goods more competitive and reduce our trade deficit. On the other hand, it would be a bad thing for China, which would suffer large losses on its dollar holdings. In short, right now America has China over a barrel, not the other way around.”

I probably shouldn’t take on a Nobel Laureate who got his prize for his work on trade, but this truly scares me. People pay attention to this nonsense, including the five Senators, led by Schumer of New York, who want to start the process of targeting China.

First, the Chinese have got to be wondering what they have to do to make these guys happy. In 2005 they were demanding a 30% revaluation of the Chinese yuan. And over the next three years the yuan actually rose by 22% at a gradual and sustained pace. Then the credit crisis hit, and China again pegged their currency. From their standpoint, what else were they to do? Force their country into a recession to appease our politicians?

They responded by a massive forcing of loans to their businesses and governments and huge infrastructure projects. Kind of like our stimulus, except they got a lot more infrastructure to show for their money. It remains to be seen how wise that policy was, and how large the bad (non-performing) loans will be that came from that push – just as there are those (your humble analyst included) who do not think the way we went about the stimulus plan in the US was the wisest allocation of capital.

But the reality is that the Chinese will do what is in their best interest. I wrote in 2005 that the yuan would rise slowly over time. The political posturing of Schumer, et al., was counterproductive then, and it still is now.

My prediction? The Chinese will begin to allow the yuan to rise again sometime this year, just as they did three years ago, because it will be to their advantage. A stronger yuan will act as a buffer to inflation, which they may face due to the massive stimulus they created. They are going to need some help in that area. But it will be 5-7% a year, so as not to create a shock to their export economy. Not 25% at one time. And at some point they will allow the yuan to float against the dollar. They know they will have to get the currency status they want. As an aside, are we going to put a tariff on every country that pegs their currency to the dollar? That is a whole lot of countries.

Back to 1971

By the way, let’s go back to the 1971 that Krugman mentions. The Japanese yen was around 350 to the dollar. They revalued by 10%. Oh goody, salvation for the US. The yen is now at 90, and the Japanese are still producing massive trade surpluses, about half the size of Chinese surpluses, with less than one-tenth of the people. That is an almost 75% devaluation, and yet the world keeps buying Japanese products.

Why? Because they make good stuff we all want. The Chinese could raise the value of the yuan by 25% over the next year and they would still run a surplus, because like the Japanese, they make good stuff we want at prices we like. Would their surplus still be as high? No. Because a 25% increase in prices would mean that we could afford less of what they sell. But of course it would also give them wider profit margins, which would help hold their trade surplus up.

And it would also introduce inflationary increases in our imports and higher prices for lower-income families. Yes, a 25% tariff is such a smart idea that it took a Nobel laureate to think it up.

What Krugman argues is that we should pay more for Chinese goods, so that we will buy less of their goods. As if we wouldn’t buy the same goods from Vietnam or Brazil or Pakistan, if those goods were cheaper than Chinese goods. For the life of me, I can’t see how substituting goods from foreign countries other than China helps our trade deficit.

Are we going to start targeting the currencies of every nation that runs a surplus with us? What about Europe? And Great Britain? Their currencies are dropping against the dollar, in the case of England rather precipitously. Are they pursuing mercantilist policies, Senator Schumer [in reference to his recent scandalous press conference]? What happens when the euro goes to parity against the dollar (and it will!) because the Europeans are having trouble getting their act together? Are we going to demand they force the euro to rise? Tell the ECB to raise rates and shove the whole euro area into an even worse recession?

Do you think Japanese businessmen believe the yen is too strong, and we should make the dollar stronger against the yen? What are we going to do in three years when the yen is at 150 on its way to 300 because Japan is getting ready to hit the wall, due to their massive government deficits? Accuse the Japanese of mercantilism and try and force them to revalue the yen?

Maybe Canada should put a 25% tariff on US goods, because their dollar has risen by almost 40% against ours in the last few years. That would teach us a lesson. It would also destroy trade and a very good relationship.

It is a dicey damn world we live in. We are coming to the end of the debt super cycle, as I have written elsewhere in this letter. It is a very perilous time. Things are going to be hard enough. We have a huge problem with deleveraging and controlling our fiscal deficits, not just in the US but in the entire developed world. Starting trade wars is the absolutely worst possible thing to do. For the US to even suggest that such a policy is reasonable is the worst possible kind of message. Where are the adults in the administration?

The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings.

Let’s look at the actual trade deficit. This past month it rose to $40 billion, but that is down from the $70 billion it was only a few years ago. Over half that deficit is oil and energy. The Chinese “deficit” fell to a four-year low.

Trade deficits actually matter in a deleveraging cycle. Let’s go back to the Outside the Box I sent you a few weeks ago from Rob Parenteau and review.

“… if we divide the economy into three sectors – the domestic private (households and firms), government, and foreign sectors – the following identity must hold true:

Domestic Private Sector Financial Balance + Fiscal Balance + Foreign Financial Balance = 0

“Note that it is impossible for all three sectors to net save – that is, to run a financial surplus – at the same time. All three sectors could run a financial balance, but they cannot all accomplish a financial surplus and accumulate financial assets at the same time – some sector has to be issuing liabilities.”

As Rob noted, this is an “identity” equation. It is always true for all nations. In order for the US or any nation to be able to see both its government and private sectors reduce their leverage or deficits, the country must run a trade surplus.

Let’s look at the implication of that equation. Most everyone in the US (other than Paul Krugman and his fellow uber-Keynesians) think that reducing the federal deficit would be a good thing. And the private sector is busy reducing its leverage and “deficits” as well. But if we really want to reduce the government and private deficits at the same time, we have to be able to run a trade surplus.

Those numbers must ALWAYS add up to zero. The US trade deficit is due to a lack of savings in the US. No one is forcing us to buy goods from abroad. If we saved more and bought less we would have a trade surplus. It’s really that simple.

Another implication. And a rather sobering one.  For the US to continue to run such massive government fiscal deficits, either the private sector is going to have to massively increase its savings or we will have to reduce the trade deficit by buying less goods and energy, or some combination of the two. There is no other option. And if the savings of the private sector are funneled into government debt, then that crowds out private investment. And it is private investment that produces jobs.

GDP = C + I + G + Net Exports

The above equation is another identity equation. It says that Gross Domestic Product is equal to total Consumption (consumer and business) plus Investments plus Government Spending plus Net Exports (which in the case of the US is a deficit and in the case of Germany or China is a surplus).

We are going to examine this in great detail in the coming weeks, as there are serious implications for the economy contained within these simple terms.

But for our purposes today, if you play with the above equation a little you find that savings is equal to investments. But if the government “dis-saves” or runs a deficit, that means that savings have to go to cover the government deficit, which means there is less for investment. And it is investment that produces jobs.

Krugman and the Keynesians are right in this regard. If consumption falls, as it does in recession, then a corresponding increase in “G” helps offset that drop. But Keynes assumed that in good times government would run surpluses. It seems that we forgot that part.

What Greece is learning, as will all nations, is that you cannot increase “G” in an unlimited fashion. There is an end to the ability of governments to get investors to lend them money. That level is different for different countries, but the work of Rogoff and Reinhart (which we have looked at extensively in previous letters) clearly shows that at some point, and generally rather dramatically, markets lose confidence in the government’s ability to pay, and the game stops.

Let’s assume (and here I put on my optimist hat) that the US decides that reducing our deficit over time is a good thing. Fiscal conservatives get into Congress and we reduce the deficit by (say) $200 billion a year for five years, with a growth in revenues, so that the budget deficit is less than the growth in nominal GDP.

The first identity equation says that to do so we must either increase savings or reduce the trade deficit or some combination. If we use all our savings to cover the government deficit, then we have nothing left for private investment. And yes, it is not quite that simple, as we could use already accumulated savings, but over the medium run, large government deficits will crowd out private investment, the engine of job growth.

As we will see in a few weeks, reducing “G” (government deficits) in the short run is a hit to GDP. There is no question about that. But in the medium run (we no longer have the luxury of the long run) running massive deficits, as we are now, will mean that we, too, will become Greece. As will much of Europe and Japan if deficits are not brought under control.

It is not a question of pain or no pain. We are going to have the pain. The question is whether we take it in small doses or all at once. Slow growth, or a depression?

Part of that process that we MUST address is getting the trade deficit down, as we need that money for handling the deleveraging process.

A rational energy policy that gets us off foreign oil as quickly as possible must be enacted. Senator Schumer, if you are so worried about deficits, why not demand that we drill for oil offshore on the continental shelf, where we know there are massive deposits? And why not aggressively encourage the use of natural gas in the medium term for transportation? Nuclear energy?

And why are we not aggressively doing as many open-trade agreements as we can? Columbia and Korea have been done, and it would open up those markets for our exporting businesses. Yes, they get a shot at us, but I will bet on the home team. Our exports are growing every month. It seems, Senator, that you oppose all those policies. But simple accounting demands that we reduce the trade deficit, and tariffs are the worst possible way to try to do so, and won’t work. And the possibility of a trade war and the real damage to our export sector? I really get alarmed.

Instead of bashing China over their currency valuations, let’s challenge them where it would make a difference, on opening up their markets to our products and businesses more than they already do. Seriously, if we did impose a tariff on Chinese goods, US consumers would just switch to goods from other countries. It would be meaningless. But if we could sell more to them?

If we are going to put our fiscal house in order in the US, we are going to have to get a handle on our trade deficit. The operative word is “our.” Not Chinese deficits. They are not responsible for what we choose to buy.

When we look into our economic mirror, we must confess, “We have met the enemy, and he is us.” We can’t borrow our way out of a debt crisis, Paul. At some point, we just have to get on with it.

One last thought. The whole world cannot run a trade surplus. Someone must actually consume. Germany and Japan are also running huge surpluses. Many of the problems in the peripheral European countries are because they are running trade deficits. Would not the rational extension of Krugman’s and Schumer’s ideas mean that we also target Germany and Japan? The world is out of balance, and getting it back will not be easy, and certainly not easier if we all pursue beggar-thy-neighbor policies.

An Optimistic New Venture, San Diego, and New York

Let me express my thanks to ProFunds, Rydex/SGI, Trust Company of America, and Ceros for sponsoring the CMG Advisor Forum that I hosted along with good friend Steve Blumenthal of CMG. There was a good crowd (about 70) of advisors and brokers from all over the country, and we finished the day at my house for Texas BBQ. If you are an advisor or a broker (or an investor) and want to see the outstanding platform of traders Steve has assembled, then go to http://www.cmgfunds.net/public/mauldin_questionnaire.asp and they will get in touch with you.

Just for the record, I am helping to start a new software company. I will write about this later, but I think there is a large opportunity in new-media and mobile software, and I have persuaded an experienced executive in the industry to start a new venture with me. I will be providing the money and nothing much else, as what I know about software is limited. But I am convinced after a lot of research and discussion that there is an opportunity.

And that is how recovery happens. Someone sees an opportunity and takes a chance. Some of them work out. Most of them don’t. Believe me, I know. Yet, if all goes well we could create a dozen jobs this year. Not a lot, I know, but it all adds up.

And what I saw in Cincinnati simply amazed me. A whole new mega-health-care business will be born in the next few years. I will give you more on that later.

The world is not ending. It is changing and adapting.

I will be in San Diego twice in April, once for my conference, which is now sold out, and again for Rob Arnott’s annual conference. In between I will be in New York for a speech and an appearance/interview with Steve Forbes, which should be fun.

I will be a panelist in the inaugural “America: Boom or Bankruptcy?” summit to be held in Dallas on March 26. There will be five of us, presenting problems (plenty of those!) and possible solutions. This promises to be a no-holds-barred, full-throttle event. It should be a ton of fun. Details at www.fedfriday.com.

Once again, it is time to hit the send button. It is late and there is a lot to do tomorrow. I have it blocked off as a day with my youngest son, ending with the Mavericks playing the Celtics. The Mavs are starting to look decent as we move into the playoffs. But then so are many other teams. We will see. Have a great week.

Your excited about new ventures analyst,

John Mauldin
John@FrontLineThoughts.com

Copyright 2010 John Mauldin. All Rights Reserved

Investing in Molybdenum (Moly) Stocks

9 Moly Stocks to Make your Portfolio Pop

Before the global economic meltdown, molybdenum was one of the best-performing base metals.

Prices soared over 1,700% in five years between 2000 and 2005.

A little over a year ago, molybdenum prices were still trading at a steady high of about $35 per pound. But as the financial crisis softened demand for molybdenum, prices have been discounted to nearly $15 per pound.

Nevertheless, analysts worldwide believe that this minor metal is headed for a strong rebound.

That’s because molybdenum is no ordinary metal…

Molybdenum — or moly for short — has the sixth-highest melting point of any element and is one of the least corrosive metals. This makes it a key component in high-strength steel alloys.

According to the International Molybdenum Association, nearly 80% of the moly demand comes from the manufacturing of tools, high-speed steel, stainless steel, and low-alloy steel.

These high-strength steels are required for extreme conditions and used in such applications as offshore drilling rigs, power plants, ships, turbine engines, tools, hospital equipment, and desalination plants.

But molybdenum’s uses don’t stop there. The metal plays an important role in environmental protection since it is included in nuclear reactors and oil and gas pipelines to prevent leaks, and as a catalyst in oil refining to reduce sulfur in fuels.

Molybdenum is also valued as a specialty high-performance lubricant and a component in flame retardants, fertilizers, and even vitamin supplements.

This metal’s versatility is truly unmatched.

Investing in Molybdenum

Molybdenum could again be one of the most profitable metals to invest in over the next several months.

Why? Because Global molybdenum demand is expected to continue increasing by an average 5% per year for at least the next two decades.

Demand will exceed supply for the seventh straight year this year. And the market is expected to remain in deficit for at least the next three decades.

With demand so quickly outstripping supply, the price of molybdenum will likely go higher.

Keep in mind, there are limited ways to invest in molybdenum. Publicly-available molybdenum futures just began trading on the London Metals Exchange.

The easiest and most profitable way to invest in the metal is moly stocks.

Here’s a short list of a few moly stocks to check out:

Adanac Molybdenum (TSX: AUA)
Adanac is a Canadian-based junior exploration and development company that owns the Ruby Creek molybdenum project in Northern British Columbia. The Ruby Creek deposit contains over 660 million pounds of molybdenum reserves and resources. The company has advanced the project through feasibility studies, a production decision and has ordered equipment, completed permitting for construction, constructed a road to the site and secured $80 million in bridge financing.

Amerigo Resources (TSX-V: ARG)
Through its wholly-owned subsidiary, Amerigo produces copper and molybdenum concentrates from tailings from Codelco’s El Teniente mine, the world’s largest underground copper mine. The company is treating all the fresh tailings from El Teniente’s present production and has the right to treat the higher grade tailings from a 200 million tonne in situ tailings impoundment known as Colihues. In 2008, the company produced close to 35 million pounds of copper and approximately 769,000 pounds of molybdenum.

Avanti Mining (TSX-V: AVT)
Avanti Mining is a Canadian-based junior firm that is focused on the development of the Kitsault molybdenum project, a former producing mine with established infrastructure, located near coastal British Columbia. A NI 43-101 compliant Prefeasibility Study completed in December, 2009 calculated proven & probable reserves of 215.3 million tonnes grading 0.085% Mo, with a 15-year mine life, producing 368 million pounds of molybdenum.

Creston Moly (TSX-V: CMS)
Creston is another Canadian junior company focused on the exploration and development of the Creston molybdenum project, located in the State of Sonora in Mexico. The project boasts excellent infrastructure with close proximity to power, roads, and railway; a semi-desert climate allows for year round development. The Main Zone of the deposit contains 250 million pounds of molybdenum and 159 million pounds of copper in a proven and probable mineral reserve of 146,705,000 tonnes grading 0.077% Mo and 0.049% Cu.

General Moly (AMEX: GMO)
General Moly is a U.S.-based mineral company engaged in the exploration, development and mining of molybdenum. The company has two main molybdenum assets, its 80% interest in the Mt. Hope project and the Liberty project. Both are located in central Nevada. Once production commences at Mt. Hope and Liberty, General Moly is expected to become the world’s largest primary moly producer.

Mercator Minerals (TSX: ML)
Mercator Minerals is a diversified natural resource company engaged in the exploration, development and mining of base and precious metals deposits. Mercator embarked on a two-phase expansion of its Mineral Park operations to a 50,000 ton per day copper and molybdenum milling operation which is expected to increase total Mineral Park average annual production over the first ten years of a 25-year mine life to 56 million pounds of copper, 10 million pounds of molybdenum and .6 million ounces of silver. Mercator’s Mineral Park Mine expansion is one of the largest, furthest advanced copper-molybdenum expansion projects in North America.

Northern Dynasty Minerals (AMEX: NAK)
Northern Dynasty is a mineral exploration and development company based in Vancouver. Its principal asset is the Pebble copper-gold-molybdenum deposit in southwest Alaska and 186 square miles of associated resource lands. The Pebble deposit is remarkable for both its size and composition. Current estimates indicate a total resource of 5.94 billion tonnes measured and indicated containing 55 billion lb copper, 66.9 million oz gold and 3.3 billion lb molybdenum; and 4.84 billion tonnes inferred, containing 25.6 billion lb copper, 40.4 million oz gold and 2.3 billion lb molybdenum. Quantities of silver, palladium, and rhenium also occur in the deposit.

Roca Mines (TSX-V: ROK)
ROCA Mines is focused on the outstanding mineral exploration and development potential located within British Columbia. Roca’s management team has proven experience in adding shareholder value through strategic acquisition, exploration, and development of mineral projects. Roca’s primary asset is the MAX Molybdenum Mine, the first new, primary molybdenum mine in Canada and British Columbia’s first new metal mine in over a decade.

Thompson Creek Metals (TSX: TCM)
Thompson Creek is one of the largest publicly traded, pure molybdenum producers in the world. The company owns the Thompson Creek molybdenum mine and mill in Idaho, a metallurgical roasting facility in Pennsylvania and a 75% share of the Endako mine, mill, and roasting facility in northern British Columbia.

 

In less than two weeks I will be bringing you my latest molybdenum idea. Trading at just over a dollar, this company has recently completed a series of drill tests in final preparation before tapping into their giant moly resource.

And with a major investor relations firm retained to handle what promises to be a record-setting influx of new ownership, this stock could easily see gains approaching the 1200% mark within the next 24 months. Double- and triple-digit gains could be in sight within as little as eight weeks.

I’ll have the full details for you as soon as I’ve wrapped up my research. Meantime, if you haven’t read my latest silver research write-up, please do so here. I’ve uncovered four ways to profit from the metal, and they’re just starting to heat up. By the way, my portfolio includes several silver plays… all part of the 100% winning track record of the Hard Money Millionaire.

Until next week…

Luke Burgess
Editor, Wealth Daily
Investment Director, Hard Money Millionaire

Sign up for the FREE Wealth Daily Newletter HERE.

Economy’s Excess Capacity Reins In Prices

Latest Data Give Fed Room to Maintain Rock-Bottom Interest Rates; Initial Jobless Claims Decline for Third Straight Week

The vast economic slack left over from the recession continues to keep inflation in check, leaving companies and workers with little leeway to ask for price or wage increases.

Consumer prices were flat in February—and even with volatile food and energy removed from the equation, the needle barely moved: Prices ticked up a scant 0.1%, the Labor Department said Thursday. Over the past year, prices have increased 2.1%, or 1.3% omitting food and energy, the smallest rise in six years.

Behind these numbers stands a huge excess—of workers, factory space and homes. Until more of the nation’s productive capacity comes into use and starts pulling workers off the unemployment line, the sellers of everything from golf clubs to paving machines have little ability to raise prices. The problem is exacerbated by continued tightness in credit, which makes it harder to rev up economic growth through bank lending to soak up the economy’s lingering slack.

“Everybody’s talking about inflation, but we’re not seeing anything yet, at least not in any major or consistent way,” said Dyke Messinger, chief executive of Power Curbers Inc. of Salisbury, N.C., which makes equipment that lays curbs and sidewalks. Power Curbers’ business is off some 65% from pre-recession levels, Mr. Messinger said. The firm hasn’t raised prices in three years and still relies on discounting to make sales.

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