TWINS

Remember TWINS, Danny DeVito and Arnold Schwarzenegger? 

Danny and Arnold are unlikely twins. Danny is very SHORT, and very funny, and Arnold is BIG, very big, and both are connected by lineage, and indeed, their hearts.

Semiconductors and platinum group metals are also twins and have a lot in common with Danny and Arnold! Well, both are SHORT and both are BIG!  

The shortages in semiconductors has now been telegraphed by Ford, leading to a reduction of vehicle output in the first quarter of up to a remarkable 20%. Now that shortage is BIG. Demand for semiconductors is critical in the production of an automobile, and the demand is inelastic. No chip, No car! It's that simple.

Platinum group metals are now all trading in deficit, and there is significant potential for shortages for these elements, essential in all internal combustion engine cars and trucks and so many other uses throughout industry. And any such shortfall is also BIG. It, too, would disrupt auto production and so many other aspects of our civilian and military economy. Demand for the PGMs is inelastic since there are no substitutes in their various uses. These tend to be a very small cost in the overall profile of a given product, but one that is critical. Just like in chips, No platinum, or palladium, or rhodium, or iridium or ruthenium, No product.

The world and the market has now been introduced to this theme of BIG SHORTAGES, tho to date, the conversation has been around semiconductors. But WAIT! Not really true. How about the GameStop episode and the issue of shorts? Or Bitcoin and the theme of the 21 million coin limited supply?

We are moving into an era where there will be significant growth, given the massive influx of cash around the world, coupled with the magnificence of technology, and indeed the magnificence of the human spirit that moves it all forward. And in this environment, commodities will be in heavy demand as will components like chips.

Barron's published an excellent piece this weekend on platinum and various ways to be long this theme of big demand and potential shortages, including Sibanye Stillwater, the world's largest platinum group metal producer and a company that I am long and know well. 

The story line of a sequel to Danny and Arnold's movie is being written now.