Lately I’ve devoted an inordinate amount of my time into the thousand year old practice of trying to turn lead into gold. It’s the same pursuit that got many a budding chemist started. Why I even heard that an atomic chemist actually pulled it off about 27 years ago using a process called "transmutation" at a cost of about 20 times what the small amount of gold produced was worth and with the accompanying problem that the precious metal was too radioactive to be handled.
How did I get into this madness you might ask? A little over two years ago after listening to the advice of a financial advisor I decided to try to turn copper into gold. If you listen to financial experts long enough you will soon learn that gold itself even in its current favorable environment is a lousy long term investment. The price of an ounce has barely doubled in the past 25 years while most equity markets have quadrupled in value.
In early 2005 I invested in a company called Phelps Dodge which was considered the major American player in the copper business. What resulted for me was nearly two years of 11 % annual dividends and tremendous growth. The amount I invested in Phelps Dodge is worth 3.28 times what I spent just 26 months ago or what investors would like to call a 150 % annualized return.
What I heard recently was that LEAD is the new “copper” and is expected to be for the next several years.
Here’s a few of the reasons:
1. Because of the global warming issue countries are turning away from coal fired plants to produce energy and moving toward nuclear energy…lots of lead will be needed for protection.
2. As the huge populous economies of India and China are expanding so are their middle classes. People who used to ride bicycles are purchasing motorbikes and automobiles which need BATTERIES as well as the hybrid vehicles which are now available.
3. There are “spot” shortages in the industry. One of the largest mines producing lead in the world is shut down for the next 2 years while it is being “modernized”.
4. At the moment there is not enough lead to meet demand and the price is rising.
I have posted the above picture as my desktop background while pondering how to do this investment. It is a picture of a mine in which lead is being extracted.
The thing about lead is that there aren’t lead mines per se. Most lead is a byproduct of mining for something else, mainly zinc, silver or gold but it exists side by side with other metals in most ore as well. The world’s largest producer is a company called BHP Billiton, Ltd which is located in Australia and has various metal mines around the world. BHP, Ltd is currently attempting to merge with one of its biggest competitors a London based Australian company called Rio Tinto and there is a report as I write this that the merger is going to be accomplished.
Not even aware of the merger talk I was considering purchasing some Rio Tinto this past Tuesday and my main hesitation was that it was selling for nearly $290 a share (maybe a little too big for my blood). While I was thinking about it the merger talk started and it jumped $ 36 a share..(nice stuff for a day trader but not my cup of tea).
Anyway, I plan to watch BHP for the next few days and if it drops in price like the dominant company in a merger usually does I may purchase some.
About 4:45 PM relief came anyway in the form of a really nasty 90 minute long severe thunderstorm. After about an hour of flashing and banging and periodic downpours I decided to check AccuWeather again. Believe it or not there was no acknowledgement of any sort that the storm was occurring. I looked at my local weather radar and the storm seemed to be centered right over where we live!
