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Yola Edwards

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Pool your resources

Yola Edwards

Third world economies, such as China and India, have been experiencing super growth rate economic expansions over the past few years, which in turn are transitioning their citizens from low income to middle income earners, fueling robust consumer demand and spending.

China's statistics bureau Commissioner Li Deshui said that he was cautiously optimistic about China's 2006 outlook and that an average GDP of 10 per cent could be sustainable for many years. Even if we consider a somewhat lower GDP of 8 per cent over the next decade, as suggested in 2005 by leading economist and director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, Yu Yongding, China's GDP would quadruple from 2006 to 2010.

In 2005, the Chinese economy grew at a rate of 9.9 per cent for a gross domestic product (GDP) of 18.2 trillion Yuan or $1.8 trillion (U.S.), with purchasing power parity (PPP) of $8.2-trillion, elevating it to the world's fourth largest economy. By comparison, the U.S. economy is the world's largest measuring $12.8-trillion in 2005 with $12.5-trillion in PPP. India's PPP is expected to eclipse the $4-trillion mark in 2006, which will make it equal to or surpass that of Japan.

Third world economies appear to be expanding at or above the super growth rate level considered to be seven per cent or more per capita growth per year, or alternatively a doubling of economic output per person every decade. In 2005 The Economist magazine published a statistics table outlining the economic growth of 20 Third World countries and five high income economies. All 20 of the Third World countries showed economic growth that exceeded their population growth.

The rise in civilization and prosperity has resulted in world economies demanding more and more of the world's resources from cement to steel to titanium and graphite. Thus it seems plausible that if one needed to grow an inheritance by investing in the market one would give serious consideration to the resource sector, especially in light of the recent decline in commodity prices. Additionally, future demand stresses placed on natural resources will likely see First World countries accelerate their progress in creating alternative energy sources, and transform currently non-economically viable natural resources into profitable ventures through reinvention or retooling of current technology which may also serve to limit the environmental impact.

Titanium may turn out to be the metal of choice for the 21st century. It is the earth's fourth most abundant metal, but is tricky to process, however as technology improves, the metal is appearing everywhere. Titanium is considered a wonder metal. The light super strong material is twice as strong as steel, but half the weight. It is corrosion-resistant, non-toxic, biologically inert, non-magnetic, biocompatible, and durable in extreme environments, making it an excellent material for a variety of non-traditional applications. It's used in aerospace, the automotive industry, and the medical and dental fields as prosthetics - titanium is completely inert to human body fluids, making it ideal for medical replacement structures such as hip and knee implants. Dental implants and pacemakers are also made with it. However, 93% of titanium's use is in the oxide form found in the pigment industry in paints as well as in paper, plastics, inks, golf clubs, sunscreen, coatings on glasses, cosmetics, and skin care products. It also has cancer-fighting properties.

Titanium producers cite the growing Chinese demand as "fueling a resource deficit for the first time in years."

As such, Titanium Metals Corporation (known as "Timet") should be a consideration. Timet is an integrated producer of titanium sponge, melted, and mill products and is the only integrated producer with major titanium production facilities in both the United States and Europe.

Since vaulting to an all time high of US$47.63 in May, the stock's share price value has been cut in half. The stock's rapid decline subsided by mid July and has been trading virtually sideways since. During the same period however, the moving average convergence/divergence oscillator (MACD) has been diverging positively as it trends higher and is currently on a preliminary buy signal at an extremely oversold level, representing an opportunity at current prices as viewed on a technical analysis basis.

It appears that the second corrective wave is ending and a third advancing one is ahead. Based on the pattern at hand it is likely that a rally to $55 at a minimum is ahead with a possibility that the stock may rally to a high of about $67 over the next year.

Although oil prices have also declined recently it appears that market forces will undoubtedly push them higher to surpass the 2006 highs. Thus considerable pressure is being put on governments to promote alternative energy sources, curb pollution and fight price inflation.

Consider then Altair Nanotechnologies Inc., a speculative play in this sector. Altair is organized into two divisions: Life Sciences and Performance Materials. The Life Sciences Division is pursuing market applications in pharmaceuticals, drug delivery, dental materials, cosmetics, and other medical markets, while the Performance Materials Division is seeking market applications in advanced materials for paints and coatings, titanium metal manufacturing, catalysts, water treatment, and alternative energy. Many of the product technology initiatives that the company has been working on in past years are now coming to the commercialization stage. In 2005 the company announced it had achieved a breakthrough in battery materials "which will enable a new generation of rechargeable battery to be introduced into the marketplace, as well as create new markets for rechargeable batteries. These new materials allow rechargeable batteries to be manufactured that have three times the power of existing lithium ion batteries at the same price and with recharge times measured in a few minutes rather than hours." Also, the longer-lasting, faster-charging batteries could be produced at no additional cost. On September 28 Altair with their electric vehicle partners, Boshart Engineering and Phoenix Motorcars successfully launched a full size, all-electric SUV at the California Air Resources Board Zero Emission Vehicle (ZEV) Technology Symposium, in Sacramento, California.

Technically the share price has traced out a 2-1/2 year ascending triangle, which is nearing completion. Although a daily chart suggests the stock is short-term overbought, the weekly chart indicates it is emerging from a long-term oversold point and the MACD is issuing a preliminary buy. The technical pattern suggests a target of approximately $8 over the next year.

Finally, consider gold and diamonds, a girl's best friends. Pele Mountain Resources, a speculative stock traded on the TSX Venture Exchange is, as its ticker symbol suggests, a GEM, and an undiscovered one at that. The mining exploration and development company which concentrates its efforts in northern Ontario is debt free and holds a diverse portfolio of gold, diamond, base metal, and uranium projects. In addition to its gold and diamond Highland project in Wawa, 100-per cent owned by Pele Gold Corporation, a wholly-owned subsidiary of the Company, Pele boasts strategic partners such as Goldcorp which has earned a 50 per cent interest in the company's Festival Diamond Project, located north of Wawa, where commercial size and gem quality diamonds have been recovered from previous bulk sampling. Other strategic partners include Wallbridge Mining, Trigon Exploration, East West Resources and Maple Minerals (a division of Mega Uranium).

Technically the share price is tremendously oversold. The recent decline appears to be abating and the weekly MACD is also in oversold territory. Although the MACD hasn't given a buy signal as yet, indicating that more base building at current levels may be needed, investors should consider adding it to their portfolios at current levels as the stock is in a heavy support zone. The daily MACD is diverging positively suggesting a recover is just ahead, with a rally to about 32 cents as the first target. A weekly close above 42 cents would signal a possible target of 70 cents, attainable over the ensuing year.

With a theoretical $25,000 inheritance, investors might consider investing $20,000 into Timet and the remaining $5,000 split between Altair Nanotechnologies and Pele Mountain Resources. Aggressive investors may consider increasing their exposure to Pele Mountain Resources.


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Yola Edwards is a contributing writer and technical analyst for Bell Globemedia Interactive, providing options and technical analysis research on a variety of North American equities.

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