Watch Your Bank

Boxers are trained to keep their eyes wide open while they are being smashed in the face by someone like Muhammad Ali or Sonny Liston. As you might imagine, this is not easy to do.

The benefits of keeping our eyes open, however, are huge.

Suppose your bank closed while you had $125,000 there. The FDIC will only insure $100,000, so your business loses $25,000. Man, that’d hurt.

With our eyes wide open, the first thing we notice is that we need to manage balances so that we are not vulnerable to loss.

The second step is to have a look at your bank at http://www.veribanc.com. There’s access to free bank ratings at http://www.thestreet.com, after you get the home page find the Portfolio & Tools bar and click on it. At the drop down, go down the list to Banks & Thrifts Screener. For starters, type in the first word like Alerus or State or Gate, look for state to choose North Dakota, then click on search. Move over to the underlined bank with its rating, click on it and see a report as of June, 2008.

The third step is to move money in excess of $100,000 to a Treasury-only money market fund. Treasury-only money funds are not insured by the FDIC, but Treasury-only funds hold the direct short term borrowings of the U.S. government; therefore you are guaranteed by the U.S. to get your money back, which is even better than FDIC insurance.

Two Treasury-only money market funds you can look into are American Century Capital Preservation Fund (CPFXX) or Weiss Treasury Only Money Market Fund (WEOXX) or Fidelity U.S. Treasury Money Market (FDLXX). Check with your own broker, chances are they’ll have a U.S. Treasury only short term money market fund.

You should know that the FDIC’s reserve is only about 0.62 per cent. The FDIC has about $52.8 Billion in reserve to cover Trillions of U.S. dollar bank deposits. Therefore, consider carefully the notion of putting cash into T-bill funds like those listed above.

Lanthanum Miners

Wouldn’t it be great to cruise down the interstate highway system at 75 mph with absolutely no engine noise and no tail pipe?

That day is coming. Toyota’s Prius, probably the top selling car in the world right now, uses a combination of engine and electricity. But engineers are working feverishly to make it electricity only.

Former Intel chief Andy Grove has a sense of need for markets and the ability to push for it. He even has a name for his effort: “strategic inflection point.” Grove is bullish on electric cars.

There is a catch, however, and it may be possible to capitalize on this catch.

Turns out there’s only one place in the world with a supply of the rare earth metal known as lanthanum (La). Lanthanum is a necessary component of nickel-metal-hydride (NiMH) batteries. China is the only country that has found mine veins with lanthanum. And China is hoarding its production. Only Toyota and Honda have contracts for lanthanum going forward.

All commodity-consuming companies buy future mine production with forward contracts. We must assume Toyota and Honda have purchased the lanthanum they need for the next two years or longer, based on current production levels. However, battery-operated cars are selling like hotcakes, so maybe there won’t be enough to satisfy demand by, say, 2010.

China has reduced its exports of rare earth metals to a total below that of the current demand by Japan alone, according to J. Lifton.

Toyota and Honda are hoping to meet the demand for battery-operated cars going out to 2015. There doesn’t appear to be hope for GM, Ford or Chrysler to participate because of the small supply of lanthanum that is already locked up by Japan.
Here are six potential sources of lanthanum outside China that may be profitable sources in the future:
In Australia, look to miners Lynas Corporation, Bloomberg.com symbols (LYC:AU) and Arafura Resources Limited (ARU:AU). There are two miners in Canada that may produce lanthanum, they are Great Western Minerals Group (GWG:CN) and Avalon Ventures (AVL:CN). These tiny miners have been participating in the commodities boom as you will see on a three year chart, so be careful. Go to http://www.bloomberg.com and type in the symbols above to examine a graph of these stocks not traded in the U.S.

In the U.S. look for lanthanum production from Chevron Mining (CVX).

Chevron is a huge integrated energy company, so there is a chance that even with a significant lanthanum production, the share price may be unaffected. Another U.S. miner may produce lanthanum, but it is the privately held Thorium Energy, Inc.

Four of these lanthanum miners are penny stocks. Most careful investors will not buy a stock selling for under $10 per share. Let that be a warning.

If you do want to invest in the possibility of lanthanum production and would like to make money available to these miners to help it happen, consider dividing up your investment by 5 or 6. So, for example, if you’d like to risk $5,000, buy $1,250 worth of each stock.

Or you could graph all five on bloomberg.com to see which has performed the best to that which has performed most poorly and adjust your investments accordingly. To buy the Aussie and Canuckian shares, you may have to ask for the international desk at your broker.