Polishing the Crystal Ball

Recently, I had the chance to speak at the New Orleans Investment Conference in front of almost 1,000 attendees. It was really exciting to see so many eager investors wanting to learn more about opportunities in resources, and to offer them what I could. There were investors from all over the world and from all different walks of life — it was really inspiring. As I was walking through one of the exhibit halls one morning, a man gently tugged on my jacket and asked, “Are you Kevin Kerr?” I turned to the man and said, “Um, yes I am.” He began to rattle off about 50 questions and then suddenly stopped and said, very matter of fact, “Do you have a crystal ball or psychic powers?” I wasn’t sure what to say, except, politely, “Nope, I can’t claim any supernatural powers.” I think he was serious, though. He scribbled a lot of notes, and then went on his way.

Remember, we were at a financial conference, not a Star Trek convention, so his comments were a bit surprising…LOL! Actually, I often get the question of just how exactly I am able to so often pick markets that are going to be hot and then get out when the time is right (though I can’t pick ’em all the time, mind you). The answer is simple, and you don’t need a crystal ball…of course, if you have one, that may help.

Making of a Maniac Trader

When I first met Greg and Addison, they weren’t sure what to make of me. I mean, after all, my trading style and personality were somewhat different from anything they had encountered before. As I took over Resource Trader Alert, I remember trading in markets they had never heard of before, and after being long and making profits on things as exotic as cattle, I would turn right around and get short and grab profits that way, too. It was so fast paced it was almost insane, and thus the “Maniac Trader” was born.

As time went on, I think they began to see there was a simple method to my madness, and after a couple of years, the trading profits spoke for themselves.

It’s very important for a resource trader to remain nimble and to never marry a position. It’s also important to constantly look for opportunity where others won’t venture.

In today’s wild frontier of resource trading, an individual needs to be fearless, see opportunity and then snatch it. The most important element to a successful resource trader is to be forward thinking. After all, commodities futures are about the future. So what does the future hold?

No Crystal Ball, Just Vision

As traders, so many opportunities are right under our noses and we don’t even know it, because we get bogged down in the day-to-day grind and the minor fluctuations in the market. This is unfortunate. If we are able to step back and see the bigger picture, we can see unpolished gems just waiting to be picked up and hidden away in our portfolio.

Sure, we have all heard that China is a powerhouse and that the commodities boom is largely due to Chinese demand for all types of commodities: corn, sugar, oil, gold, etc. If an investor digs deeper, more treasure can be discovered.

For example, if we reverse our view and look at it from the Chinese standpoint, we see things very differently as investors. For example, while we know interest in copper and gold and silver is exponentially rising worldwide, some of the less talked-about or hardly known minerals are, too. One such mineral is called tungsten.

Tungsten and Cheek

You may’ve never heard of it before — good, that probably means that most others haven’t, either. So what is it? Well, honestly, I had only heard of it once before, and then I was asked to help research a story I was writing with a colleague and I learned more about it. Tungsten is used in a wide array of items, from light bulbs to bullets and everything in between. The metal is used in light filaments and by the military to make armor-piercing bullets, but the biggest use is as cemented carbides, which are also called “hard metals.”

This type of metal is vital because of the extremely high melting point that makes it useful for things like drill bits, where hardness and ability to withstand high heat and friction is key. In the oil and mining industries, this is a must.

Now, the bad news is that tungsten is a metal that’s all but monopolized by China. After all, China produces about 85% of the world’s supply

In short, tungsten is a metal crucial to everyday life that most of us don’t even know about. According to the International Tungsten Industry Association, Tungsten’s increasing uses and the growing economic demand for the metal has helped prices climb more than 300% in almost 10 years to average $254.50 per metric ton. Wow! It’s showing no signs of slowing, either. Tungsten is just one resource that is easily overlooked by investors; there are many others.

Quenching the Thirst for Investors

Another question I often get when I speak at conferences is what are the commodities of the future? Forget about oil for a minute, what will resource traders be trading in 10 years? My answer is always the same: They will trade whatever the current demand is for. One commodity that is gaining momentum is water. H2O is by far the most in-demand resource, and yet there is no futures market, per se, in which to trade it. Part of this is due to finding a vehicle to represent worldwide markets in an efficient manner. I fully expect that in the next five years we will have a very viable water-type futures and options contract as global water supply dries up and becomes a much more precious commodity.

What does all of this mean to us as investors right here and now? Simple: We need to begin to dig a little deeper and look for the markets that are under the radar, as corn and orange juice were this year and in the end, they delivered stellar profits to their investors. In 2007, the scenario will play out again, only this time it looks like it will be a bull run for the metals, especially silver, and for unleaded gasoline, among other things, as we head into summer.

The best opportunities will be in markets almost nobody is talking about right now. No crystal ball needed, just hard work and guts. That’s the resource trader’s mantra. Join us!

Yours for resource profits,
Kevin Kerr, editor, Resource Trader Alert
November 24, 2006