Platinum's Insanity Is Ending
Platinum has been one of the strongest assets this cycle rising to astronomical levels of about $1400 an ounce. Over the past few months researchers have been leaking advances in automobile catalytic converter technology which consumes about 40% of the world's platinum output. (Discretionary consumer goods consumes another large chunk of its output.) Recently Mazda announced an even larger breakthrough with up to a 90% reduction in required platinum content for catalytic converters. As with other announcements, expect this to be rolled into production within the next year.
Now what? How many hedge funds are left holding the bag with major investments in platinum? A consistent problem with Wall Street has been its inability to foresee innovation and technology thrusts that ultimately invalidate their cursory understanding of an existing business model as we discussed with Apple and Google. In other words economic substitution and innovation are constants. Or simply put, don't invest in what you don't understand or be willing to time markets when your thesis has been invalidated. And more importantly, be able to recognize when this shift takes place. I wrote the same thing about uranium and thorium substitution in nuclear reactors some time ago. The granddaddy of this concept is petroleum. Alternative energy and green innovation is happening at a feverish pace never before seen. It will pay off in a huge way. One of the biggest business coups in the last decade was GE's recent divestiture (at a ridiculously high price.) of its plastics business to Saudi Arabia. Petroleum based plastics are going the way of the dodo bird.
One more thing as I think about it. People are talking about bottled water plastic containers creating a massive amount of waste. The issue isn't to quit drinking water or to worry about recycling waste, it is to do away with it with efficient biodegradable packaging. Do you think any entrepreneurs recognize this problem with plastic water bottles? Just a thought. Ultimately, what if your biodegradable packaging and waste was then broken down and used to fuel your home in a home-based system capable of generating power from said waste? Hmmm.....
Now what? How many hedge funds are left holding the bag with major investments in platinum? A consistent problem with Wall Street has been its inability to foresee innovation and technology thrusts that ultimately invalidate their cursory understanding of an existing business model as we discussed with Apple and Google. In other words economic substitution and innovation are constants. Or simply put, don't invest in what you don't understand or be willing to time markets when your thesis has been invalidated. And more importantly, be able to recognize when this shift takes place. I wrote the same thing about uranium and thorium substitution in nuclear reactors some time ago. The granddaddy of this concept is petroleum. Alternative energy and green innovation is happening at a feverish pace never before seen. It will pay off in a huge way. One of the biggest business coups in the last decade was GE's recent divestiture (at a ridiculously high price.) of its plastics business to Saudi Arabia. Petroleum based plastics are going the way of the dodo bird.
One more thing as I think about it. People are talking about bottled water plastic containers creating a massive amount of waste. The issue isn't to quit drinking water or to worry about recycling waste, it is to do away with it with efficient biodegradable packaging. Do you think any entrepreneurs recognize this problem with plastic water bottles? Just a thought. Ultimately, what if your biodegradable packaging and waste was then broken down and used to fuel your home in a home-based system capable of generating power from said waste? Hmmm.....
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