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The Commodity Investor Q&A

With Matt Badiali, editor, S&A Resource Report
Wednesday, October 8, 2008

Q: I sold most of my energy stocks months ago to preserve my capital. With share prices so far down, are there any good places for my cash? – L.M.
A: What if I told you that you could own one quarter of the reserves of the world's biggest public oil companies. How much would you pay?
Would you buy them for nine times earnings? I would... and we can, right now.
ExxonMobil's worldwide oil reserves make up 25% of the total reserves of the 20 largest oil companies. That's essentially all the reserves in publicly held companies.
ExxonMobil owns about 20% of all the natural gas reserves held by public companies. The company also produces 29% of all the oil pumped by public companies.
Among the public oil companies, ExxonMobil is the only stock that really matters. And you can buy it for less than 10 times earnings and earn a 2% dividend on your investment...
In the recent Oil and Gas Journal's annual rankings issue, ExxonMobil was first in all but four of the 12 categories. The company dominates the industry, and these rankings show just how big the lead has become.
The world still needs oil and gas. We still own cars. We still fly in airplanes. We still buy goods shipped from China and Mexico (just maybe less than we did a few months ago).
The truth is, anything that moves runs on oil. It's not going away in the near future. ExxonMobil's stock price may fluctuate with the market, but it's going to be around for a long, long time. And thanks to the market turmoil, the world's greatest public oil company is exceptionally cheap.
Q: We all know there's been a recent pullback in gold and silver, but it looks as though platinum has corrected the most. Is platinum a better buying opportunity? – R.R.
A: Since 1994, an ounce of platinum has cost about 1.7 times more than an ounce of gold. Today, platinum is only 1.2 times the price of gold. As you can see from the chart below, platinum and gold haven't been this close in price in 10 years.
Platinum Is at a Tiny Premium to Gold
Platinum at a Tiny Premium to Gold
As the government turns on the presses to create the $700 billion in bailout money (along with the other couple hundred billion in "assistance"), you'll see gold and the other precious metals make a strong comeback.
There is no doubt in my mind that this is a fantastic opportunity to own precious metals. The paper dollar is about to lose an awful lot of value. And the price of platinum has plenty of room to rise.
You can buy platinum futures through the E-Tracs UBS Long Platinum Fund (NYSEARCA: PTM). But PTM is tiny, illiquid, and I believe vulnerable if the credit crisis worsens.
You could also buy platinum mining stocks. But that's taking on too much risk for the average investor. Mining stocks are extremely volatile and tend to fall with the markets. They don't always move in the same direction as bullion, so avoid them right now.
My favorite way to own platinum is through bullion coins, platinum eagles. But according to my dealers, they simply can't find any. The U.S. Mint decided to ration the supply of platinum coins, and bars are nearly impossible to get as well.
Supply is low. And demand is growing. Prices are about to rise.
Good investing,

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Earnings today... Monsanto.
Market Watch
Symbol Price
S&P 500 1223.75 +0.1% +10.9%
Oil 37.80 -1.1% +0.8%
Gold 136.50 -1.9% +20.7%
Silver 28.08 -4.9% +57.6%
US-Dollar 79.65 +0.6% +5.2%
Euro 1.33 -0.3% -10.5%
Volatility 17.99 -0.2% -18.6%
Gold Stocks 576.48 -2.5% +25.0%
10-Year Yield 3.16 +7.5% -8.4%

World ETFs
Symbol Price
USA 122.83 +0.1% +10.8%
Canada 30.41 -0.5% +17.1%
Russia 22.00 +0.1% +18.9%
India 38.15 +0.6% +22.5%
Israel 16.92 +1.0% +11.2%
Japan 10.56 -1.2% +6.6%
Singapore 13.66 -0.4% +18.6%
Taiwan 14.87 -0.3% +19.0%
S. Korea 57.35 +0.3% +21.8%
S. Africa 71.15 -1.5% +28.2%
China 43.99 +0.3% -1.5%
Lat.America 52.69 -1.0% +8.5%

Sector ETFs
Symbol Price
Oil Service 134.90 -2.1% +18.0%
Big Pharma 64.04 +0.1% -2.8%
Internet 72.89 +0.4% +27.4%
Semis 16.25 +0.4% +26.6%
Utilities 30.98 -0.7% +0.2%
Defense 18.55 +0.4% +8.7%
Nanotech 10.16 +0.8% +1.6%
Alt. Energy 10.20 -0.4% -4.6%
Water 18.77 +0.8% +14.5%
Insurance 16.14 +0.4% +19.6%
Biotech 20.65 +0.4% +27.3%
Retail 19.65 +0.3% +27.0%
Software 24.83 +0.7% +24.3%
Big Tech 53.88 +0.1% +22.7%
Construction 13.30 +0.8% +16.2%
Media 13.75 +0.2% +23.7%
Consumer Svcs 67.43 +0.1% +23.1%
Financials 54.95 -0.1% +7.0%
Health Care 63.89 0.0% +1.3%
Industrials 63.79 +0.4% +19.8%
Basic Mat 74.54 -0.1% +27.5%
Real Estate 55.53 +0.3% +24.4%
Transportation 91.65 +0.3% +25.1%
Telecom 22.69 +0.2% +14.6%