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Is Lithium the new gold? (Also discussing T-TIPS, platinum and other hedges.)


I agree that the US dollar is doomed and that the US economy has been on crack since 1984. There was nonetheless "something" behind the 1998 technology bubble, um computers and the internet... But as for the 2008 bubble and the current 2011 bubble... um how about massive bank fraud and the will to believe... But nobody will continue the delusion once the USA people are paying the same price as everyone else for gasoline, meaning double.

But... I do not agree with the "buy gold and hold" crowd. Two reasons.

1. The gold bugs and silver bugs always say, "be sure to buy REAL gold and silver..." But this is verboten for US citizens because of the double tax on direct ownership of gold, silver and platinum, including most ETFs.

2. Gold and silver tanked in 2008 along with everything else.

Gold and silver do not protect you from recession! Recession is the time to buy them! I would especially ignore people who promote palladium and rhodium. They are 60% dependant on catalytic converters and their long-term charts are bowl-shaped, for crying out loud.

I did buy some SLW silver processing at a bargain last week. I also bought some under-priced platinum last week. Platinum is somewhat dependant on the oil-burning industry, and also has more production problems than gold or silver. But Platinum is also money and jewelry. On balance, if gold were low and platinum were low, I would certainly buy gold. But last week, it was only platinum that was low. For gold: wait for the next recession.

PGM - up

PLG - up

CCJ - up

Please note that PGM is an ETN that becomes worthless if by chance Barclay's Bank collapses. So if your idea is to protect your money for Armageddon, an ETN won't work. My other platinum picks are mining stocks, not direct metal, which in addition to the market, have their political and productivity ups-and-downs. Non-US citizens might want to look at ZKB-family Swiss-regulated ETFs for serious long-term ownership of platinum, gold and silver.

I.e., with my value-priced silver and platinum, if the economy gets worse, I have bought half way down. If the economy gets better, I am sitting pretty. And if the US dollar suddenly dips 25% or so, I will be slightly less miserable than most people, I suppose.

So what might be even better to prepare for "stagflation"?

1. China. China is the coming supereconomy and wisely has a government policy of under-valuing its currency. I am not sure if it is easy to make conservative, stable returns in Chinese stocks, but I will be experimenting.

2. US Treasury T-TIPS. Running a 14-20 year ladder gives about 4.5% if inflation stays at the incredibly low average rate of 3%. Or around 10% if staglation returns. All equally guaranteed as FDIC. The only reported downside to T-TIPS is you pay taxes on unrealized appreciation. Is that so bad? Well I haven't done the math, but tend to assume I just as soon pay my taxes sooner as later.

3. Lithium. Long-term risk: something else might be invented for batteries.

Meanwhile however, Lithium is currently at a relative low-to-medium price over 1 year. Compared to silver and gold stocks which lately only vary from high to super-high. According to the documentary "World Without Oil," we don't have nearly enough lithium to power the coming demand for battery powered vehicles, laptops and cell phones. According to my Chinese in-laws, most Chinese already drive battery-powered motorbikes. Sure you can make batteries without lithium. Sure you can make jewelry without silver. But anyone who can afford it, will want the best.

I.e., whether the economy goes up or down, seems to me everyone will be swallowing lithium, one way or the other. Lithium might not be a super-long term investment like gold or silver. But it is attractively priced right now. Nothing but upside for the next five years.

Lithium-related stocks I bought last Monday, starting with most-undervalued in relation to price history.

New, super-cheap and speculative:

LHMAF - Mitsubishi-backed Canadian company with new brine process recently bought Argentina brine deposit, but not yet in production. No trade volume.

GALXF - Australian company that recently bought a Chinese mine. Just made the first shipment last week. Prices went up about 3% and then down about 1%.

WLCDF - New USA mine, recently bought "the largest lithium tantalum deposit in the world," but has no production yet. Price went down this week.

P.S. Saturday, March 26. The above are "penny stocks."

These will tend to go up and right back down.

Until, I believe, regular lithium output is established.

GALXF "seems" to be just starting such output.

I thought the price would take off like a rocket.

Instead, the price went up a bit, then more or less held in midair the entire week,

in spite of substantial trading volume. Then went down slightly.

I have NO IDEA what is going to happen next!

Well-established major lithium producers:

LIT - up

OROCF - up

CLQMF - up

SQM - up (Fellow forum member AlbertaSunwapta suspects, but is not sure, that SQM may have the lowest production costs.)

FMC - up

ROC - up

Rating: 2.8/5 (13 votes)


AlbertaSunwapta - 3 years ago
Don't quote me on that. I'm a "know nothing" in terms of SQM. :-)

Potash (POT) though I understand, currently owns about 30%+ of SQM.

Read this...

I see krystofo mentions Western Lithium above. I'd once looked into buying Western Uranium (WUC) prior to its spin off of WLC. If one were to look back at the old propaganda, I'm sure they could find many glorious comments on it's potential. It may be worth looking into further for further accumulation.

Also I'm no chemist but note that WLCDF has lithium tantalum. Isn't tantalum important in capacitor construction? So, if some super capacitor comes into existence to replace batteries, maybe tantalum will play a role. (I believe Marty Whitman's Third Avenue once invested in a couple capacitor makers so that might be a place to start for information on capacitor companies. I seem to recall shortages in this field too.)

And just a loosely related (and equally uneducated) comment. I note that Britain is taxing the oil companies in its latest budget. Apparently really hurt NEXEN, etc. I could see this being the start of a trend. Tax the dirty oil companies like they tax the tobacco companies. Global warming provides a great excuse. So if oil's going to go up and drag lithium with it - why not just buy the oil? Punitive oil company taxes may be why.

Dan Dellegrotti
Dan Dellegrotti - 3 years ago
If the dollar tanks 25%, everything denominated in dollars goes up.
AlbertaSunwapta - 3 years ago
I'd say much of the US markets 'apparent' recovery has been due to a decline in the dollar. (i.e. During the Berkshire Hathaway panic in the 2009 credit crisis, I'd picked up a couple BRK/a's within a day or so of it's March bottom - yet throughout '09 saw little benefit due to the change in FX. That was typical experience of many foreign buyers of US equities.)
Paleface premium member - 3 years ago
Thank you for the helpful comments, Albert and Dan. I am new to international investing. I have been asking elswhere whether investing in a foreign stock automatically includes investing in its foreign currency value? Now finally I seem to be getting some answers: you seem to be saying "yes."

Please note: I have edited my post above, to clarify that LHMAF, GALXF and WLCDF are high-risk, albeit intriguing, "penny stocks." Nonetheless GALXF "claims" to be just starting production, and therefore I believe "may" be poised for a take off.

Also I said above that GALXF went up somewhat--then seemed to hover for days in spite of substantial trading--then went down slightly. This seems to fit the description of a possibly positive plateau as described in a recent edition of Investor's Business Daily. The article said that institutional investors may purposely be buying-in slowly, to prevent an overly rapid rise, but that eventually the stock may be destined to take off.

Of course this is the first time I have watched a stock day-by-day. I have no idea what is going to happen. Just in case GALXF does take off, I am noting this observation for future reference.

(Hmmm. I just checked the price before posting this message. GALXF is now up again slightly from 1.31 to 1.33. After all of this week's substantial trading--and all of the surge in anti-nuclear and pro-lithium sentiment--I do believe that if GALXF was going to go down, it would have done so. So I am not sure whether it might shoot up substantially, but I feel reassured that it will not go down substantially. But I am just a beginner at this sort of daily stock-watching. We shall see.)

Dan Dellegrotti
Dan Dellegrotti - 3 years ago
You could always look at where U.S. companies earn their money. You dont always have to invest in places you dont know, with laws you dont understand, and cultural norms you arent familiar with. Those are all risks.

If I can invest in a U.S. company who earns have their income in another currency, half my investment is technically international. Most people forget this fact.

Good luck.
Paleface premium member - 3 years ago
Thank you Dan. Hmmm... GALXF is an Australian company that recently bought a Chinese lithium mine. So I suppose that qualifies as value in Chinese currency, as well as in lithium. Any way they just started production. The price is now up from 1.30 to 1.50, and still has a long way to go to where it was before investors got bored waiting for production. Then for the second time it dropped 3%, and who knows, maybe another 3%. But thanks to comments here helping me with my research, I am now confident this is a real company. So instead of my normal 1% of portfolio, I have put in 3%, with the intent of reducing by 1% per year, until back down to 1% for probably 5 years or so.

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