A friend took issue with yesterday's post about platinum being overvalued. Here's his argument:
There has been a major shift in light vehicle emissions catalysts over the last few years from platinum to palladium. Partly this was economic; Pa is cheaper than Pl. Also the emissions fiasco at Volkswagen and the changes in emission testing that it engendered is causing Europe to shift autos from diesel to gasoline. Diesel uses more Pl and vice versa.
But this has overshot. Pl is only about 25% more expensive than Pa now. Many of the new generation of catalysts have a Pa/Pl ratio of 7 : 1. But world supplies of Pa/Pl are only 1.2 : 1. So the arb is now the other way; it favors Pl.
I don't know what to make of this, although my friend is really smart investor. Does anyone reading this blog have any ideas? Comment below.