HardAssetsInvestor

Written by Drew Voros  |

March 01, 2012

Leeb: $6/Gal. Gas Coming Even Without Iran Conflict, Silver Headed To $100/Oz.

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Money manager says that oil is headed much higher with or without a military conflict involving Iran and that China continues to be main driver of silver.

Dr. Stephen Leeb, chairman and chief investment officer of Leeb Capital Management, has been managing big-cap growth portfolios since 1999. Leeb, the author of several financial books including the just released “Red Alert: How China's Growing Prosperity Threatens the American Way of Life,” is a frequent market commentator in the media and recently has been making bullish calls for silver and oil, the two commodities he sees with the most upside for 2012. HAI Managing Editor Drew Voros recently caught up with Leeb to discuss his views on commodities.

Hard Assets Investor: As you may recall, we spoke last summer and you were talking about $100/oz. silver at the time. Do you still believe that?

Stephen Leeb: I think it’s going at least that high. You could probably replay much of what I said last summer. The two most critical commodities are silver and copper. Those are most central to building a renewable-energy economy. I should also include rare earths because you can’t make windmills without them. China is taking care of securing those commodities. For example, they’re mining copper in Afghanistan while we’re fighting a war there.

China’s plans for ramping up silver are awe inspiring. Three or four years ago, China was a no-show in the solar industry. What they’ve done since then is basically dominate the industry. They don’t care whether they’ve made money. If you look at any of the Chinese solar companies, they’re in the toilet as far as the stock market goes. But their revenue production and their very low solar costs make them very competitive now with other sources of electricity. They’re very competitive now with other sources of electricity.

If you look at the revenue growth of these companies, it’s been spectacular. They won’t go out of business. The real solar-company subsidies are from the Chinese government. And they’re doing the same thing in desalinization.

China stepped in with Israeli technology and started desalinating and getting fresh water, which is obviously a major problem for China, and obviously another one of those resources which is critical for everything you’re doing. What they’re doing now is selling their fresh water for 50 cents on the dollar. In other words, they’re willing to tolerate major losses to move up a learning curve.

HAI: You seem to think that silver is pretty independent of gold right now.

Leeb: No, I think silver is probably acting as much as a monetary metal as an industrial metal. Silver is being driven by both monetary and industrial factors right now. There’s always a correlation between gold and silver, to some extent. I think it’s a little bit stronger now than usual.

HAI: In regard to last spring’s silver correction, some people are talking about how momentum traders entered the silver market in April and took advantage of the thin trading volume. Do you give any credence to that helping push down the price rather than just the basic fundamentals?

Leeb: This is a very complex world with a lot of different motives, a lot of reasons that people want to own or short silver, see it up, see it down. You could ascribe anything you want. The bottom line is I think the Chinese want to accumulate as much silver as they can. It wouldn’t surprise me at all that they could have been the short-seller. Everyone looks at JP Morgan and sees some sort of broad-based conspiracy. It just might be the Chinese wanting everybody out of silver so they can buy it cheaper. Who knows?