HardAssetsInvestor

Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, I’m Mike Norman. Welcome to HardAssetsInvestor.com’s interview series. We’re here for the second half of my interview with Kevin Kerr of Global Commodities Alert.

Kevin, thanks again for being here. In our last interview, I think we concluded with you had a bullish outlook on oil, but you suggested a way to play it via options. Why don’t you go over that again?

Kevin Kerr, editor, Global Commodities Alert (Kerr): Let’s be clear, too: This is a longer-term player; we’re not going to see oil tomorrow – hopefully – not pop back up to 95 or something like that. I think it’s unrealistic, with the employment situation the way it is and the economy around the globe.

But longer term, I firmly believe that oil will continue to march higher based on the problems that we had that got oil higher in the first place.

We had supply problems, we got political strife. We got growing demand when those regions start to fire up again like in India and China; there is real demand there, and here in the U.S. Plus, people are not doing anything right now to move into newer biofuels like Mr. Obama has talked about, and certainly investors are not putting their money into alternative fuels when crude is at 35 bucks.

Norman: Right; the same old behavior comes back to a certain degree. I have to admit that I do see, not just people changing their behavior, but there’s a desire for these nonoil alternative fuels. You see companies … that’s part of their identity now … wanting to go this green direction.

Kerr: I think we’re slowly moving in that direction; I agree with you there. There has been some change, but not the real dramatic fundamental changes that we need. Again, I’m talking bigger … like infrastructure, building more refineries.

People talk about the Balkan oil fields. Yeah, but we need infrastructure to get that stuff out of there, we may be drilling, and this is when we need to do it, not when oil is at 85, 100 bucks. We need to be having this conversation now. Heck, most of these people weren’t even talking about this when it was 100 bucks, so that scares me.

Norman: I think the other point … it’s a big one … is that you have OPEC – the cartel which produces 45% of the world’s oil supply – that has announced a series of production cuts, and they have at some level the ability to bring production down far enough to support prices, and I think we’re starting to see that. We haven’t really dropped much below the current levels in oil, and it might at least, if nothing else, signify some stability now.

Kerr: Yeah, I think they’re taking it seriously. Again, it’s a finite period of time … it was 50 years … or whatever they had of production. They want to get the highest price they can for their oil; they don’t have any interest in seeing oil drift down to $15 or $20 for any sustained period of time. At the end of the day, they can't control the oil prices. They will cut supplies and they will start to impact in our economy. And as people get their jobs back, as we start to grow again, demand is going to pick up; that’s the bottom line.

Norman: All right. You alluded a little bit to government policy in Obama’s alternative energy and fuels. But let’s talk about policy around the globe, specifically fiscal, and efforts to restimulate. What’s interesting to me are the actions now being taken in China; very, very aggressive stimulus as a percentage of their GDP – much higher than what we’re doing here right now. How’s that going to affect commodity markets; for example, what about industrial metals, base metals?

Kerr: I think it’s a huge sector to look at right now. China has got a vested interest in keeping their people happy. They have billions of people, and a lot of these people have experienced a better quality of life. And now basically with the economy shutting down, they could have political strife. They could have major riots and they don’t have any interest in that. So they are doing everything they can, pulling out all the stops.

They just announced another stimulus package, and we’re starting to see a base metal like copper really starting to move up faster based on that idea, that they’re going to be doing infrastructure, they’re going to building – they need these base metals. I think more than the precious metals … forget about that for a minute … look at the base metals – including silver to some extent – as being front-runners in this recovery in that region.