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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities

    The Three Big Issues and the 1930s Analogue

    This article by Ray Dalio may be of interest to subscribers. Here is a section:

    Since then, we have had a mirror-like symmetrical reversal (a dis/deflationary blow-off). Look at the current inflation rates at the current cyclical peaks (i.e. not much inflation despite the world economy and financial markets being near a peak and despite all the central banks’ money printing) and imagine what they will be at the next cyclical lows. That is because there are strong deflationary forces at work as productive capacity has increased greatly. These forces are creating the need for extremely loose monetary policies that are forcing central banks to drive interest rates to such low levels and will lead to enormous deficits that are monetized, which is creating the blow-off in bonds that is the reciprocal of the 1980-82 blow-off in gold. The charts below show the 30-year T-bond returns from that 1980-82 period until now, which highlight the blow-off in bonds.

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    U.S. Glut in Natural-Gas Supply Goes Global

    This article by Ryan Dezember for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Earlier this month Freeport LNG Development LP’s export terminal in a beach town south of Houston began buying and liquefying gas with the expectation of sending out its maiden cargo in September. The Freeport facility, the fifth to begin operating in the lower 48 states since the first opened in early 2016, should help push gas consumption from LNG exporters to a new high. Last week, a record nine LNG vessels left the U.S. carrying cargoes, according to Jefferies Financial Group Inc.

    In July, LNG exporters consumed an average of about 6 billion cubic feet of gas per day, according to the U.S. Energy Information Administration. That is the most yet and is equal to roughly 7% of total U.S. gas production. Analysts expect demand from LNG facilities to absorb about 12% of total production by next summer as additional facilities start up and existing terminals boost their capacity.

    But if those projects are delayed because of low prices overseas or if existing LNG plants slow down or take advantage of the lull to perform extended maintenance, then the domestic gas market could be swamped, sending prices even lower.

    “If that demand goes away even for a couple months, it becomes a real problem for the balance of the market,” said Welles Fitzpatrick, an analyst with SunTrust Robinson Humphrey.

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    Gold Climbs To A More Than 6-year High; Silver At Highest In Over 2 Years

    This note from MarketWatch may be of interest.

    Gold and silver futures rose on Tuesday (http://www.marketwatch.com/story/gold-higher-but-silver-sets-the-pace-2019-08- 7), with gold settling at a level not seen since 2013, and silver scoring its highest finish in more than two years. Prices for the precious metals got a boost from losses in the U.S. stock market, a drop in Treasury bond yields and a weaker dollar--all of which helped lift the metals' investment appeal. December gold climbed by $14.60, or 1%, to settle at $1,551.80 on Comex. That was the highest most-active contract settlement since April 2013, according to FactSet data. September silver added 51.2 cents, or 2.9%, to end at $18.153 an ounce, the highest since April 2017

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    Powell Says Economy in Favorable Place, Faces Significant Risks

    This article by Craig Torres and Rich Miller for Bloomberg may be of interest to subscribers. Here is a section:

    “Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said in the text of his remarks Friday to central bankers gathered at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. “We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.”

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    Panic Stations

    This report by Charles Gave for GaveKal may be of interest to subscribers. Here is a section:

    Cass Freight Index Report July 2019

    Thanks to a subscriber for this report which may be of interest. Here is a section:

    We acknowledge that: all of these negative percentages are against extremely tough comparisons; and the Cass Shipments Index has gone negative before without being followed by a negative GDP. However, weakness in demand is now being seen across many modes of transportation, both domestically and internationally.

    Although the initial Q2 ’19 GDP was positive, it was not as positive upon dissection, and we see a growing risk that GDP will go negative by year’s end.

    The weakness in spot market pricing for many transportation services, especially trucking, is consistent with the negative Cass Shipments Index and, along with airfreight and railroad volume data, strengthens our concerns about the economy and the risk of ongoing trade policy disputes. Weakness in commodity prices, and the decline in interest rates, have joined the chorus of signals calling for an economic contraction.

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    Email of the day - on gold miners versus royalty streamers:

    Gold: What's the difference between ROYALTY COS., and GOLD MINERS? Please explain.

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    Breakout in Gold

    Thanks to Dr. David Brown for this commentary which I am sure will be of interest to the Collective.

    Revealed: how Monsanto's 'intelligence center' targeted journalists and activists

    This article from The Guardian may be of interest to subscribers. Here is a section:

    The documents, mostly from 2015 to 2017, were disclosed as part of an ongoing court battle on the health hazards of the company’s Roundup weedkiller. They show:

    Monsanto planned a series of “actions” to attack a book authored byGillam prior to its release, including writing “talking points” for “third parties” to criticize the book and directing “industry and farmer customers” on how to post negative reviews.

    Monsanto paid Google to promote search results for “Monsanto Glyphosate Carey Gillam” that criticized her work. Monsanto PR staff also internally discussed placing sustained pressure on Reuters, saying they “continue to push back on [Gillam’s] editors very strongly every chance we get”, and that they were hoping “she gets reassigned”.

    Monsanto “fusion center” officials wrote a lengthy report about singer Neil Young’s anti-Monsanto advocacy, monitoring his impact on social media, and at one point considering “legal action”. The fusion center also monitored US Right to Know (USRTK), a not-for-profit, producing weekly reports on the organization’s online activity.

    Monsanto officials were repeatedly worried about the release of documents on their financial relationships with scientists that could support the allegations they were “covering up unflattering research”.

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