A Quiet Movement on the Horizon in the Base Metals Markets A Quiet Movement on the Horizon in the Base Metals Markets

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Could the slumbering giant of the stock market be stirring from its decade-long sleep, ready to unleash a storm of market-beating performance?

Welcome, dear Reader.

Cast your mind back to 1957 when the idea of constructing an β€œall-aluminum house of the future” seemed groundbreaking. Investing in aluminum then seemed like a sure ticket to success.

However, history took its own path, and neither the aluminum house marvels nor aluminum investments paved the way to fortunes.

Alcoa Aluminum Company commissioned 24 β€˜Carefree’ homes in the late 1950s, showcasing the wonders of aluminum. Each home was equipped with aluminum nails and fasteners to flaunt its low-maintenance appeal.

Yet, with a hefty $60,000 price tag per home, double the initial estimate, the ambitious project came to a grinding halt after only 24 houses were built.

Fast forward to today, and the Minnesota Carefree home, one of the Alcoa showcase houses, is on the market for a staggering $925,000.

If this price appreciation reflects the true value of the home, it signifies a 67-year growth from $60,000 to $925,000, equivalent to an annual return of approximately 4.2%. In contrast, aluminum prices rose at a meager 2.2% per year over the same period.

Alcoa’s stock performance tells a somber tale too – an annualized return of -1.6% over the last three decades. However, could there be a change in the wind for Alcoa?

Signs Point to an Upcoming Rally in Aluminum

Aluminum and other commodities share a common trait – their prices are far from stable, often exhibiting unpredictable fluctuations. While this volatility scares off many investors, these very fluctuations can lead to rapid gains in the market.

Commodities usually shine brightest when the stock market falters. Case in point: in the early 2000s, the CRB Commodity Price Index surged by 300%, eclipsing the modest gains of the S&P 500 Index.

Recent events suggest history may be preparing to rhyme with the past. Over the last four months, the CRB Index leaped by 15%, outpacing the stock market considerably. Notable performers include gold and crude oil, boasting over 20% growth during this period.

Further indicators support a bullish trend. Inventory levels for aluminum, nickel, and copper at the London Metals Exchange have plummeted over 15% below their three-year averages. Aluminum and nickel inventories are even more strikingly down, over 40% below the five-year averages.

Moreover, increasing demand is palpable. In a rare occurrence, aluminum futures prices moved into β€œbackwardation” on the LME, signaling immediate buyer demand.

More interestingly, Alcoa’s stock surged by 50% in the past four months, hinting at a possible aluminum market revival.

Rising Demand for Lithium Sparks Interest

While aluminum demand grows, another metal – lithium – is in high demand, fueling the batteries powering our digital age.

With global demand projected to skyrocket 15 times by 2040 compared to 2020 levels, the need for lithium is urgent.

A substantial lithium deposit recently unearthed in Nevada could hold enough of the metal to last a century at current rates, potentially valued at a trillion dollars.

With only one company on the cusp of extracting this lithium trove, a fortune could be in the making.

Curious for more insights? Discover the whole story and unravel the mystery company waiting to capitalize on this lithium boon.

Warm Regards,

Eric Fry

Editor, Smart Money

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