Energy and Metals Outlook for 2010

Brian Hicks

Written By Brian Hicks

Posted July 28, 2010

With a monumental strain on the global financial system that lead to unparalleled governmental intervention and stimulus, we found ourselves knee-deep in a chaotic, directionless market.

We were met with unbridled volatility and strain that may impact the financial markets for at least another year.

And they are likely to be met with even more chaos moving forward.

But despite all of this turmoil, we still found a way to not only beat the market — but outperform it significantly.

As the Dow gained a measly 5% between January 2010 and the beginning of July 2010, Pure Asset Trader readers racked up an average gain of 28%, which included 24 closed winners and just one loser.

That follows the 40 winners and just three losers racked up in 2009.

But we’re not here to gloat. We’re simply assessing what Pure Asset Trader has done for readers, believing it’s best to grade our recommendations, whether the results are flattering or not.

Notable first half 2010 winners include Hudson Resources (147% gain), Brigham Exploration (50%), Canada Lithium (75%), Lithium One (45%), Basic Earth Sciences (55%), and Entree Gold (30%).

But the rest of the year is likely to be even more impressive…

And today, I give you two sectors to invest in now.

Buy more natural gas stocks

We already called the $4 bottom of natural gas — watching it soar above $5 just weeks later. And we’re still buying, believing it could run to $8 before all is said and done.

You see, summer is the weakest time of the year for natural gas consumption. This sets up a trade for natural gas stocks — buy in June-August, sell in December-January, when North American heating demand should have natural gas trading at its year highs.

Last summer, natural gas stocks suffered. But like clockwork, September 2009 saw natural gas experience a large seasonal jump in prices.

In fact natural gas prices roughly doubled from $2.50 to $5 by January 2010. This occurred even though the market fundamentals for gas were poor.

This was a good 4-month trading rally. Easy money in the bank, as Wealth Daily Publisher Brian Hicks calls it.

Even President Obama is bullish on natural gas:

The time has come, once and for all, for this nation to fully embrace a clean energy future,” Obama said. “That means [making] everything from our homes and businesses to our cars and trucks more energy efficient. It means tapping into our natural gas reserves, and moving ahead with our plan to expand our nation’s fleet of nuclear power plants. And it means rolling back billions of dollars in tax breaks to oil companies so we can prioritize investments in clean energy research and development.

Sure, we’ve all heard that supply is out-pacing demand… That our ability to horizontally drill for shale gas has made the supply picture seem unlimited… And that the short-term outlook is bleak…

But that’s herd mentality thinking of fools… Buy natural gas now, and hold.

Load up on rare earth — and this coming IPO

As we’ve reported in Wealth Daily and Energy and Capital… there’s a very real, coming boom in rare earth.

China currently holds 97% of the rare earth market, and is tightening its grip again with plans to cut exports by 72%.

And as we’ve said in the past, if we don’t find more rare earth supply:

Electronics could start disappearing from shelves… Products that depend on these materials would see prices skyrocket, possibly bankrupting the very companies that depend on these sales… Green technologies would suffer… And strategic and defense weaponry (guided missiles, for example) wouldn’t be produced as quickly.

The impact on electric batteries and motors would be crippling. Toyota’s Prius depends on 2.2 lbs. of neodymium in the hybrid’s electric motor and 22-33 lbs. of lanthanum in the car’s battery pack.

And there are still plans to double production of the Prius from one million to two million units. But it’ll never happen without rare earth supply. The President can call for a million electric cars all he wants, but they all depend on available rare earth supply.

It’s the same story with wind power; turbines use massive amounts of rare earth. Right now, all of those rare earth materials are coming from just one place: China.

All of this demand will no doubt send prices for rare earth metals soaring — especially given the idea that global demand for rare earth will increase six percent a year between now and 2014 (from about 124,000 metric tons to about 180,000 metric tons).

Sure, we have possible deposits in Idaho, Wyoming, and Alaska, giving us hope that U.S. rare earth production will get us by.

And we can always get a little help from Greenland, Canada, and Australia…

But the clock is ticking. Developing new mines can take years.

And it’s not as if the crisis is a ways off… It’s already here.

It’s why you want to be in stocks like Hudson Resources (HUD.V), Lynas (LYSCF.PK), and the coming IPO from Molycorp, a company described as the only rare earth minerals producer in the Western Hemisphere.

Its Mountain Pass mine (for which it has plans to reopen and expand) is one of the world’s largest rare earth mines outside China.

Other than rare earth and natural gas, the Pure Asset Trader team is also looking to buy silver stocks in coming weeks. We’ll keep you updated with our picks and a new report coming out sometime in the next few weeks, so keep an eye on your inbox.

Meantime, make sure you’re on board for these and other near-term buying opportunities.

That is… if you’re interested in watching us close another year of sizable winners.

Stay Ahead of the Curve,

Ian L. Cooper
Energy and Capital

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