Tue, 22/01/2013 - 20:30
Many of you who prefer owning physical assets are already heavily invested in gold and silver. You are looking for diversification but would like to stay in hard assets and even more specifically, metals. Fortunately, there is a new, valuable asset class that you can physically own in your own name (trust or LLC), that you can touch and see, take delivery of, or store off-shore in allocated, segregated fashion, reselling directly into the industrial market when you liquidate or when the stockpile is sold in its entirety at full maturity value.
This asset class is the rare and strategic metals that are now used in 80% of all products today. To see a video on what the world would look like without these metals, please click here
The world is fast becoming more, rather than less, dependent on these rare, strategic, technical metals. Because of this, many of these metals continued to increase in value even during the recent worldwide economic turbulence. While past performance is not necessarily a guide to future returns, a series of events are unfolding that bode very well for anyone participating in a stockpile of rare and strategic metals.
Furthermore this relatively new, hard asset class has some other advantages.
There is currently no clear reporting obligation. Unlike precious metals, which are are subject to various tax, treasury and anti-money-laundering controls, rare and strategic tech metals are much less sensitive. These are not financial assets that sit in an account. They are physical things that you own. You can even own them anonymously if you wish, as the companies acquiring and storing them are private. You can even own pure silver or gold this way in industrial granulate form, which means that they aren’t classed as either bullion or precious metals.
Americans can hold these physical metals in an offshore Nevis LLC nestled inside a self-directed IRA in a completely IRS-compliant structure. The same also applies to self-directed retirement plans in other countries.
Investing in tech metals also provides a currency diversification in that you can easily pay in one currency and cash out in another. Sales proceeds can be sent to almost any bank account, anywhere in the world.
What metals are we talking about? They may not be household names but they are used in an incredibly wide range of domestic items including kitchen appliances and cutlery, TVs, flat screens and iPads, cell and smart phones, automobiles and even the new efficient solar panels. In addition, these tech metals can be found in medicines, ointments, creams, and water purification systems, as well as in jet engines and other commercial aviation applications. The world of today simply wouldn’t exist without these metals of tomorrow. In fact, in a recent article (2011), National Geographic referred to them as “The Secret Ingredient of Almost Everything”.
These metals include such rare, critical technical metals as rhenium, indium, gallium, hafnium, tantalum, tellurium and bismuth. Other strategic industrial metals include molybdenum, chromium, tungsten, cobalt and zirconium. These metals are all limited in supply or vulnerable to supply interruption, they’re all under increasing demand and are fundamental to the strategic plans of countries and companies! To see a video about some of the metals and their usages, please click here
Current events impacting rare and strategic metal supply and demand ratios
In 2012, there have been two more significant events that highlight the importance of these metals to the world and also the trend towards a continuing problem of supply meeting demand in this sector, potentially further driving up the values of these metals in the years to come.
Early in the year, the USA, Japan and the EU issued a formal World Trade Organization (WTO) complaint against China regarding Chinese reductions in exports of rare, strategic, industrial and tech metals, like the ones we mentioned previously.
These countries need these metals to initiate and complete their strategic economic plans over the next few years. Over the past two years, China has reduced exports of these metals by around 40%.
These countries and their manufacturing sectors, and military have small or no stockpiles of these crucial materials to meet their strategic needs over the next three to five years, let alone over the next 10 to 20 years.
Most tech metal experts who have studied this WTO complaint feel that China will not comply because the Chinese will argue that the USA, Japan and the EU need these materials for high-tech military applications, which invalidates the WTO complaint.
They further believe that if the WTO orders China to increase exports of these raw materials so that these countries can meet their strategic economic goals, China will simply refuse, as they really need most of these materials to fuel their own economic strategic plans.
Unfortunately for the USA, Japan and the EU, the WTO has no teeth, with the only enforcement of WTO decisions coming in the form of a series of ‘ping-pong’ embargos, batted back and forth between the relevant parties in a bid to get China to comply. Given China’s traditional table tennis prowess it’s not difficult to see how this particular ‘game’ may play out!
The second significant event that occurred in September of 2012 came out of Beijing in an AP, and CNN news report that China was consolidating its domestic metals market by closing all of the independent, smaller mines and refineries and smelters. China is doing this so that the Central Committee can exercise complete control over the sector, giving it the ability to control pricing, and eliminate the existing metals black market. This move is expected to cause another, immediate 20% reduction in exports.
This is bad news for the USA, Japan, Korea, Taiwan, the EU, Sony, LG, Toshiba, Panasonic, Samsung, BMW, the US Military Industrial Complex, and all other manufacturing sectors that need these metals now. The metals that China does release to them will cost more, and they may have to locate their production facilities in China, to gain access to the metals.
China’s demands are by no means outrageous. The government simply wants the country to receive the true market value for these metals given the emergence of so many new applications over the past 10 years.
This is good news if you are a participant in a stockpile of these metals outside of China as you will reap the benefits of these increased values in the coming years.
Furthermore, demand will continue to rise for the products that use these metals as over one billion people are emerging from poverty in places like China, and India and South America, and moving into lower and middle class societies. They too, will soon demand all of those domestics products previously mentioned that we in the West take for granted.
In true price-inelastic form, the products that contain these metals will not go up significantly in price, stunting demand, because such small trace amounts of these metals are used in each product, that it does not affect the price of the end product. Most of the tech gadgets have actually dropped in price, while the values of the rare metals have been going up.
You might wonder, what happens to the demand in the west if the economy falters? Well, whether you buy a cheap Chinese cell phone, or a real iPhone, a luxury car like a Mercedes Benz or a bargain priced Korean or Chinese vehicle, whether you buy your medicine from a private doctor or get it from a public clinic, the outcome is pretty much the same – expensive and inexpensive products, premium and budget brands all use roughly the same rare metals and in the same quantities too.
To illustrate in numbers the expected increase in demand for some of the aforementioned metals, a February 2012 Metal Report from Deutsche Rohstoffagentur shows that production levels for indium are already not meeting demand, and will increase from 580 metric tons in 2010 to over 1,800 metric tons by 2030. Gallium production will need to increase from 180 metric tons to 600 metric tons to meet increased demand. Tantalum production will need to increase from 600 metric tons to 1400 metric tons to meet demand.
Realistically, production will not be able to increase to the necessary levels to meet this expected demand, so solutions like increased recycling and more efficient use of the metals will need to be initiated. These solutions, and especially recycling, will only further increase the values of the metals.
A "turnkey" provider of rare and strategic tech metals
Schweizeische Metallhandel AG based in Germany and Switzerland, with partner Swissmetal Inc (SMI), which has resale offices in Panama and Italy, is currently the only ¨turnkey¨ provider of rare and strategic tech metals in the world, providing physical ownership within allocated, segregated accounts stored at private duty free vaults in Zurich, Switzerland and Panama City, Panama.
Haines and Maassen (HM) our metals trading partner, which has been operating in this sector since 1948, selected metals for a new program to be held in what they metaphorically refer to as ¨baskets¨. The chosen metals are those that are expected to have the best chance of increasing in value now, and in the future, the idea being that this would provide German citizens with a new asset class they could exchange their devaluing paper currency for, providing them with a hedge against inflation and the current worldwide economic malaise.
This program was, and is, an overwhelming success, with clients now located in countries all around the world, including an ever increasing number from the USA, looking to participate in the Key Industry, Tech Metal, Construction and Engineering, and Military rare and strategic metal stockpiles.
To see a interview that was aired on German National TV, Deutche Welle with one of the founding partners, please click here
Since the program began in 2009, the metals baskets have averaged a 16.5% increase in value overall, per year.
The media campaign for the original German company has been quite extensive, employing both television and print, whereas the approach to promoting this program in the United States, for example, is done through sponsored investment conferences and symposiums primarily in the US, Canada, and Central and South America, and through news releases like the one you are now reading.
The metal bundles, referred to as ¨baskets¨ are steadily increasing their value in the face of some very volatile financial markets and widespread economic instability. As you know, the last few months (and years actually) have been very rough times for global financial markets. As SMI regularly tells their website visitors and clients alike, our wealth preservation strategy is firstly, a safe, secure and private defensive mechanism for rough times, with the metals baskets holding and/or increasing their value very well in that regard. Once your assets are safe, it is enjoyable to also consider the significant potential for profit as well.
If you find this to be as intriguing an opportunity as we do, and believe that it is worth a closer look, then please use the link below to get more details about how SMI’s programs can work for you as a private individual or institutional investor.
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