Industrials Conference: Strategy Sector Views + Analyst Stock Picks
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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities
The Age of Disorder
Thanks to a subscriber for this report by Jim Reid from Deutsche bank. Here is a section:
Hog Disease in Germany Means a Boost for Battered U.S. Farmers
This article by Michael Hirtzer for Bloomberg may be of interest to subscribers. Here is a section:
The U.S. hog market had crashed in March, first as restaurants in the U.S. closed to slow the spread of the coronavirus and then as workers at meat plants started catching Covid-19. Absent employees and companies taking safety precautions forced pork plants to shut down, resulting in a nearly 40% reduction in output of the meat by early May.
Hog farmers left without a market euthanized animals and adjusted feed rations to slow the rate of weight gain in herds. While there is no official count of how many hogs were culled, CoBank estimated as many as 7 million. Now, months after plants reopened, pork plants were bidding up prices to buy hogs from farmers, even before the news out of Germany.
“We had all of that liquidation taking place and no one ever quantified that,” Dan Norcini, independent hog trader in Idaho, said by phone. “I’m starting to wonder if the impact of the liquidation is being felt and then the German news came, and it was like a one-two punch.”
EU Considers Legal Action Over U.K. Plan for Brexit Breach
This article by Alberto Nardelli for Bloomberg may be of interest to subscribers. Here is a section:
The EU may have a case to seek legal remedies under the Brexit Withdrawal Agreement even before controversial provisions in the U.K. internal-market bill are passed by Parliament, and would have a clear justification once the bill becomes law, according to the bloc’s preliminary analysis of the U.K. legislation.
Johnson is facing a backlash from the EU and from within his own ruling Conservative Party after his government said it is ready to break its commitments to the EU over the Irish border. With negotiations over a trade deal already deadlocked over state aid rules and fishing quotas, the controversy is fueling concern there may be no agreement by the year-end deadline, triggering tariffs between the U.K. and the world’s biggest single market.
“A no-deal is becoming more likely every day,” Manfred Weber, head of the main center-right group in the European Parliament, said Thursday in an interview with Germany’s DLF radio. “We have the feeling that Britain wants a hard Brexit for ideological reasons and as Europeans we need to prepare for the worst.”
Desert Mountain Energy Announces Significant Helium Percentages in Two New Wells In Arizona
This press release may be of interest to subscribers. Here is a section:
Based on normal accepted industry operation procedures, the company at this time and prior to further engineering and flow testing, would entertain a possible daily flow rate of between 4,100 and 5,600 MCFGPD based on aggregated production from both wells. The Company has compared these wells to the closest established and documented helium production located approximately 35 miles NE in the Pinta Dome Field. Note: Desert Mountain Energy’s wells have been completed in members of the Pennsylvanian-aged Formations which are lower in depth than the helium productive Permian-aged Coconino Formation found at Pinta Dome (AZOGCC archives). Production comparisons with a number of wells from the prolific Pinta Dome Field, specifically the Kerr-McGee Barfoot State#1, clearly shows that large artificial formation stimulation was not required to exceed the original projected calculated reserves by over 500%, over a 13-year production life (Olukoga 2016, AZOGCC Barfoot #1 well files).
Margin trumps ounces as gold miners shine despite COVID-19
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Gold glitters, but other raw materials sparkle too
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China Can Easily Cut Off More of Australia's Commodities Exports
This article from Bloomberg may be of interest to subscribers. Here is a section:
Iron Ore
While the state-linked Global Times earlier this year raised the possibility that Australian iron ore supply could be targeted, it’s likely to be low on the list of possibilities. The country dominates China’s iron ore supply, accounting for more than 60% of its imports, with next-biggest supplier Brazil making up less than 20% so far this year.
In fact, the trade is booming, with China importing a record amount of Australian iron ore in July. Still, investors will keep a close eye on any sign of tensions spilling over as even small moves to restrict the movement of Australia’s most valuable commodity -- worth about A$100 billion this fiscal year -- would send a powerful signal.
LNG
Australia has accounted for just less than half of China’s liquefied natural gas imports this year. The proportion has grown in recent years as new Australian projects came online, including two in Queensland in which Chinese oil majors are partners.
Those partnerships, along with long-term contracts that obligate Chinese buyers to purchase millions of tons of LNG a year from Australia well into the 2030s, make the trade flow a
more complicated candidate for disruption.
Bridgewater's Risk-Parity Shift Jolts a $400 Billion Quant Trade
This article by Justina Lee for Bloomberg may be of interest to subscribers. Here is a section:
“It is pretty obvious that with interest rates near zero and being held stable by central banks, bonds can provide neither returns nor risk reduction,” a team led by Co-Chief Investment Officer Bob Prince wrote in the July report.
Bridgewater’s famous All Weather portfolio has therefore been moving into gold and inflation-linked bonds, diversifying the countries it invests in and finding more stocks with stable cash flow.
The idea is to replicate the long-term positive returns typically generated by bonds while finding alternative ways to hedge a downturn in stocks, especially if higher inflation upends low-yielding nominal debt.
Risky Business
Bridgewater’s conviction that ultra-low yields are a game-changer for risk parity will resonate with many on Wall Street, who have also been fretting over the fate of traditional portfolios that allocate 60% to stocks and 40% to bonds.
According to the firm, about 80% of local-currency government bonds have been trading below 1%, which limits the room for such notes to rise in value during a bout of risk aversion since investors can simply hoard cash instead. That, combined with the potential for losses if yields jump from record lows, means that the world of government debt is potentially losing its function as a safety valve in portfolios.
Email of the day on uranium pricing
Your ticker UXA1 COMB Comdty has not refreshed for a few days. Could you please look into this? Thanks