DETROIT (ResourceInvestor.com) -- A syndrome can be defined as a set of concurrent actions that usually form an identifiable pattern.

The small investor in natural resources typically has a higher percentage of his net worth at risk in any particular investment than the professionals, who buy and sell those investments. The professional salesmen of stocks, bonds, mutual funds, hedge funds, annuities and the like were not much interested as a group in promoting commodities other than gold and silver to non-professional money managers prior to the 21st century.

Commodity, foreign currency, and the rapidly expanding category of, basically, interest-rate futures now known as derivatives were considered too complicated to explain to non-professionals, because although they were used to attempt to manage risk, i.e., to reduce the risk to the investor of volatility in the cost of the underlying basis, this was considered to be the provenance of “sophisticated” large users and lenders of money and commodities who were capable of accommodating the risk of loss.

Last week, I wrote about the warning signals given out openly by U.S. Government scientifically oriented specialists in natural resources more than 30 years ago pointing out that the total of American domestic production and importation from friendly foreign suppliers of strategic materials would, by the year 2000, with regard to demand, be in deficit threatening a long term or permanent run up in the prices and availability of natural resources.

I criticized America’s domestic automakers for mostly failing to heed the warning. But, in fact, domestic American industry while seeking out and employing sophisticated expertise in hedging both American and foreign currency to manage the risk of volatility mostly of revenues from and capital needed by their foreign subsidiaries, which were always secondary in importance to their domestic operations, failed to create risk management departments to look after their long term needs for strategic materials.

I also criticize American domestic automakers and their suppliers for failing to take into account the rapid “learning curve” displayed by first Japanese and then Korean and Indian businessmen. The worst case of neglect and myopia goes hands down to the American textile, small appliance and OEM automotive industry and their domestic supply base.

In the year 2000, I attended a meeting at the General Motors Technical Center in Warren, Michigan, then the location of GM’s Worldwide Purchasing Group where it was stated that for the foreseeable future, China would be a market into which American cars could be sold and from which low cost parts and assemblies could be sourced. No thought whatsoever was given to wherefrom Chinese manufacturers would get their raw materials.

In 2003, I was invited to the same place to meet with a management team from China’s First Automotive Works. FAW was looking for an American manufacturer’s representative organization to sell and service its Chinese made automotive components.

I presented the case for my representing them at GM [NYSE:GM] and Ford [NYSE:F] in the Detroit area. They politely informed me that they wanted representation for the whole of the North American continent, and that my company wasn’t large enough. I was surprised that my contacts at GM who had invited me to the meeting didn’t understand the scope of FAW’s plans for the North American market. I shouldn’t have been surprised. GM had at that meeting exactly one employee, an American who flew in from China with the FAW delegation, who spoke, read and wrote Chinese. The Chinese delegation of six men including the no. 2 man at FAW had three members who were fluent in English.

At about the time of the meeting described above a new GM Vice President for Worldwide Purchasing took over and began to plan and implement a “China Price” strategy that I have written about here before. That strategy proved fatal to a large number of OEM automotive suppliers and handed to the Chinese business community an advantage over the domestic American automakers that has enabled the Chinese OEM automotive industry and its commodity based, e.g., steel, supplier community to advance rapidly to the point where a Chinese company has announced that it will introduce a low priced automobile with a long term warranty into the U.S. domestic market possibly next year!

The first version of the car was shown at an auto show in the U.S. earlier this year. It was generally panned by the automotive press, but the Chinese businessmen whose car it was were smiling and taking notes as the flaws were addressed by reporters and cynical American carmaker executives. They’ll be back.

Chinese companies in the meantime are purposefully and rapidly shedding themselves of their original strategic alliances with foreign OEM automotive manufacturers with a view to first take back and then take over the domestic Chinese OEM automotive market while making forays into the global market.

The Chinese government has financially encouraged Chinese businesses to develop and strengthen domestic supplies of strategic materials and energy while doing their utmost to exclude foreign investors from being ale to control those same suppliers by restricting the control that foreign stockholders can exercise, and by delaying or restricting the terms of promised IPOs.

At the same time the actions of Chinese diplomats and “independent” businessmen around the globe make it obvious that the Chinese government has developed and implemented a strategic global plan to guarantee Chinese access to and, where possible, ownership of strategic raw materials. The purpose of this plan is to make China independent of foreign influence on its domestic economy. An obvious result of the Chinese national strategic plan is to make GM’s strategy for selling into, manufacturing in, and buying low priced goods from China for export ineffective as soon as possible.

Japanese and Korean car makers learned over a 20 to 30 year period that they had to find out what vehicles Americans wanted to buy in order to be able to make them and sell them in the U.S. They have made some mistakes and produced large SUVs and large pickup trucks the markets for which may not survive the run up in fuel prices or a prolonged American recession. But at the same time they have learned to make niche vehicles, such as hybrids and small cheap SUVs that keep their product lines looking fresh and cool. They also have always made small fuel efficient vehicles for the European and Asian markets where crowed roads and high fuel costs prevail. These small cars and trucks may well be the future for the American market.

The Chinese have carefully watched both their fellow Asians and the Europeans and Americans struggle for the massive American market. Now the time may well have come that cars designed originally for the Chinese domestic market will fit a rapidly expanding segment of the American market. In Detroit they say that GM and Ford fear Toyota; Toyota fears Hyundai; and Hyundai fears Chevy. No one any longer fears GM or Ford except their leveraged suppliers.

So, what has this to do with investing in natural resources? The answers will be provided over the next few weeks as I explain how I think American small investors can benefit from China’s global strategy to become self-sufficient in strategic natural resources to guarantee an uninterrupted supply of raw materials for, first, their domestic economy and second, for their industries that can thereby achieve economies of scale and become competitive through export of finished consumer goods.

Next time you, as I do, buy inexpensive clothing, small appliances and entertainment electronics including such high tech American developed technological marvels as the latest LCD or plasma flat screen high definition television receivers at Wal-Mart, Sears, Costco, BestBuy, Circuit City or any of their national or local competitors keep in mind that you are investing the Chinese global strategy. The profits made by Chinese companies are heavily skewed towards reinvestment and securing raw material and energy supplies. I do not believe that a Chinese company that loses money can pay its officers 50 to 1000 times more than its average workers are paid. I also do not believe that Chinese executives who miss their profit and productivity targets by miles are retained or have the confidence of their boards of directors.

China has a national plan to be economically independent, secure in its supplies of strategic raw materials and energy, and the economic engine of, for now, Asia.

America has no such plan. One might even ask if we are today economically independent. We certainly have not secured our supplies of strategic raw materials and energy against interruption due to foreign unrest, weather catastrophes or political setbacks.

Americans seem to believe that the economic world is becoming flat. In fact it is tilting in favor of the East.

The Chinese navy, air force and army are no match for those of the United States. They know that well. The cold war, however, is not over. Phase 1 ended when the Soviet Union collapsed economically from the burden of trying to catch up with the military power of the U.S. while bringing the living standards of the U.S.S.R. up. The Soviet standard of living was declining and alcoholism had become rampant at the end. The Chinese observed the collapse of the Soviet economy, and decided that they would learn from Russian mistakes and not repeat them. They also have observed carefully the economies of West Europe and the United States, and are trying to mesh what they consider to be the best aspects of both into modern Chinese socialism.

Having said all of the above I will, next week, discuss “China in Africa,” a working model for the 21st century of how to achieve economic value primarily for China’s domestic economy while becoming the most successful economic imperialists in the history of communism.

I propose that when you are done reading “China in Africa” next week you will find that there are natural resource investment opportunities for the small guy and gal that the Chinese are actually creating and helping to secure in Africa, and, better yet, that you can invest in these companies by purchasing shares or bonds of existing companies that are operating in not only the U.S. and Canada but also in the U.K., the Netherlands and France. Otherwise you would be looking at placing your money under the control of operations in Zimbabwe, Nigeria, Ivory Coast, Gabon and Mozambique.

Those who ignore China’s global plan for securing strategic materials are going to be affected by it anyway, so we may as well look at the opportunities. Isn’t globalization non-American style interesting? I call the current economic conflict between China and the United States “The Gold War.”

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