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What CNBC Isn't Telling You About This Popular Commodity

By Matt Badiali, editor, S&A Resource Report
Saturday, September 11, 2010

This week, I shared an important chart with readers of my S&A Resource Report advisory.
This chart can help you make a lot of money in the next few years. One look will tell you a great deal about the potential of a certain commodity we need to invest in right now.
For the moment, we'll call it "Commodity X."
As you can see, this commodity has gone unloved and ignored by the market for a long time...
The perfect time to buy a commodity is after it has suffered years of neglect... when most producers of that commodity have quit the business out of disgust... when years of low prices have set the stage for a big pop higher. These left-for-dead investments can make for hundreds of percent gains in a short time.
The chart of Commodity X shows this kind of asset... one most folks wouldn't guess if you gave them 10 tries.
You see, in most people's eyes, the price of Commodity X has skyrocketed. This has left many talking heads on CNBC claiming it is overvalued and due for a fall. They say it can't sustain its current price, which is near its highest level in more than 20 years.
But as you can see, this commodity is still way off its previous highs. It's why legendary investor Jim Rogers is always saying he'd rather buy this commodity than gold.
So what is Commodity X? Natural gas? As I've mentioned several times in DailyWealth, a North American supply glut has depressed the price of this clean fuel. Corn? You don't hear much about corn these days. Uranium? Coffee? Orange juice?
No... Commodity X has been in the headlines nearly every day in the past month.
Commodity X is silver.
As you can see from the chart above, silver enjoyed a huge bull market in the 1970s. During those years, inflation was running rampant. The government had dumped the gold standard and was trying to pay for the Vietnam War and Lyndon Johnson's Great Society boondoggle. Folks were fleeing the dollar and rushing into hard assets like gold and silver.
Silver's big run culminated in 1980 when the two Hunt brothers cornered the silver market and drove the price up to $100 per ounce in today's dollars.
You know the story after that... Paul Volker famously raised interest rates and smashed inflation. This ushered in two decades of a bull market in stocks and bonds... and a bear market in hard assets like gold and silver. Silver lay on the investment battlefield like a dying soldier... foundering at less than $8 an ounce (again, in today's dollars) for much of the 1990s.
Fast forward to today and the current bull market in precious metals. Silver has enjoyed a nearly 300% rally from its bear-market lows. We have potential paper-currency disasters on the horizon for both the U.S. and Europe. The 3 billion-plus people in Asia are growing a little bit wealthier everyday... and they have long held an affinity for gold and silver.
While silver might be overbought right now, a long-term perspective says it has lots of room to run should folks continue flocking to "hard money" like they did in the 1970s. If you haven't taken your position yet, it's not too late.
Good investing,
Matt Badiali

Further Reading:

"However you decide to own it," Porter told his readers earlier this year, "make sure you buy some silver now." He's predicting silver will hit $125 an ounce by the time this rally peaks. If he's even half right, a just-launched silver investment could be the safest way to make over 1,000% in silver. Check out how to get maximum upside here: The Safest Way to Make Over 1,000% in Silver.
One of Casey Research's best precious-metals analysts says you're taking less risk buying silver at current rally prices than if you own none at all. But to get as low a price as possible and ensure maximum gains, check out the quick 2010 Silver Buying Guide he just shared with DailyWealth readers.

Market Notes


While gold gets most of the "commodity press" these days, another yellow commodity is racking up huge gains as well.
This week's chart shows the past three years of trading in corn, which just broke out to a new high.
Here's the bull case for corn and other agricultural products: The massive populations of Asian countries like China and India are growing wealthier every year. This growing wealth means they'll buy more cars, more refrigerators, and eat more food... which will boost the price of products like corn, soybeans, and wheat (and thus "ag plays" like fertilizer producer Mosaic).
As you can see from this week's chart, the bull case is a profitable one right now. After suffering a huge fall during the 2008 credit crisis, the price of corn traded in a long sideways pattern from 2009 to mid 2010. But in the past few months, corn has staged a big rally... and just hit its highest level in almost two years. The trend is up in agriculture.

Corn just broke out to a new high

Stat of the week


Percentage year-over-year increase in China's crude oil imports in August, according to newly released government statistics. China is now the world's largest car market.

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