Gold, Frankincense and Myrrh
Christmas is a season for many things... and it's also a time for commodities. No, I don't mean the jewelry you'll inevitably buy your sweetheart. I'm talking the old-time commodities: gold, frankincense and myrrh.
Those were the gifts of the Magi to baby Jesus. In one form or another, these commodities or their replacements are still highly sought-after more than 2,000 years later.
Gold is the commodity that everyone knows. And yet it's also misunderstood. The three wise men didn't give Jesus gold so he could bling it up. Gold represents eternity - it lasts forever.
Nowadays, gold seems to have lost some of its luster. It's having its worst year since 1981. On the other hand, I don't believe it can get much cheaper. In fact, I had one-to-one chats with some mining industry CEOs last week, and what they said really stuck with me.
I'll give you two examples.
- Yale Simpson, co-chairman of Exeter Resource Corp. (AMEX: XRA), told me that he thinks gold miners are at their best values - on a risk-adjusted basis - in the past 10 years right now.
- And David Smith, chief financial officer of Agnico Eagle Mines Ltd. (NYSE: AEM), told me: "Frankly, if you aren't buying now, when are you buying?"
These guys aren't impartial sources, but both of them are smart cookies who know what they're talking about. The smart miners are already shopping for values in gold and silver because they know these low prices won't last. We'd all be wise to follow their example.
Frankincense is a tree resin with a woody, fruity smell. When burned, it gives off a sweet-smelling white smoke. In biblical times it was used in religious rituals. And it's still used in modern Catholic masses. In its heyday, frankincense was as valuable as gold. It came from the region around the fabled lost city of Ubar.
Scientists rediscovered Ubar two decades ago, using satellite imagery. Changing weather patterns caused the land of Ubar to dry up. The city was built over a limestone cavern, and when that cavern emptied of water, the earth literally swallowed up Ubar.
(Ubar was located in what is today Oman. Oman is now better known for another important commodity, oil. Interestingly enough, satellite imagery - the same technology that found lost Ubar - is now revolutionizing how we look for new oil deposits.)
Frankincense was also used for medicinal purposes, and is still used that way in Asia. In a way, frankincense was an early biopharmaceutical - very expensive and highly sought-after for health reasons.
Myrrh is a bitter-smelling, flammable resin from a gum tree native to Arabia. In biblical times, it was used both as a perfume and to anoint the shrouds of the dead. Its flammability made myrrh popular in religious ceremonies. It was often converted into oil.
The sky-high price of myrrh was its own worst enemy. The ancient people of Judea and Egypt discovered that flammable, oily bitumen, which floated up in big chunks from the bottom of the Dead Sea, could also be burned in religious ceremonies. Bitumen was quickly substituted for myrrh.
We now know bitumen as oil sands. That's the stuff that Canada is digging up, refining and shipping around the world.
I'm thinking that if Jesus were born today, one of the three wise men might be hauling a barrel of bitumen.
The three wise men gave Jesus gold, frankincense and myrrh because they honored a king. Gold has endured as a commodity. And while you may not be investing in frankincense and myrrh, their modern-day descendants, biopharma and bitumen (oil), are great investments for the long haul.
No matter what investments you stuff in your stocking this holiday season, have a Merry Christmas. And remember that some of the most timeless investments are some of the smartest.
All the best,