Gold: 32 trading days and counting
Thanks to a subscriber for this report which highlights increasing speculative interest in gold and growing competition to become the biggest bull. Here is a section:
David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities
Industrial Metals & Precious Metals
Thanks to a subscriber for this report from Eight Capital which may be of interest. Here is a section on battery related resources:
Email of the day on the Rand and governance:
Hello Eoin, First of all I would just like to say I have no problem with the way you have organised your video commentaries. I find them very perceptive and thought provoking. I would hazard a guess that 95% of your subscribers are of the same opinion.
On your comments on South Africa, having spent the past 16 years here, I would advise investors not to hold their breath as regards the new president Cyril Ramaphosa instituting much in the way of improved governance here. Corruption in this country is all pervasive and is now penetrating certain personnel in the judiciary. I know this from various contacts I have with regards to the Rhino poaching problem. The Zuma faction still wields huge influence within the ANC. The black economic empowerment policy has led to totally unsuitable and unqualified people being placed in key positions both in government and in the private sector. Given the current state of the world economy, I would indeed be surprised if the ZAR is not the currency to lose most in value among the emerging markets over the next year.
Lego: The Toy of Smart Investors
This report by Victoria Dobrynskaya and Julia Kishilova may be of interest to subscribers and answers the question why Lego prices have been the subject of asset price inflation.
It is posted without further comment but here is a section:
We study a new alternative investment asset - LEGO sets. A huge secondary market for LEGO sets with tens of thousands of transactions per day has developed since the turn of the century. We find that LEGO investments outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015. Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have a unit exposure to the size factor, suggesting that this asset performs similarly to small stocks. A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the LEGO toy an attractive alternative investment with a good diversification potential.
Billionaire Zell Buys Gold for First Time in Bet on Tight Supply
This article by Luzi Ann Javier for Bloomberg may be of interest to subscribers. Here is a section:
For the first time in my life, I bought gold because it is a good hedge,” Sam Zell, the founder of Equity Group Investments, said in a Bloomberg TV interview. “Supply is shrinking and that is going to have a positive impact on the price.”
Spending on new mines began to dry up after prices of the metal tumbled from a record in 2011, clouding the outlook for production. With gold still down by almost a third from its peak, the biggest miners are just looking at buying their competitors in a bid to bolster their output pipeline.“The amount of capital being put into new gold mines is a most nonexistent,” Zell said. “All of the money is being used to buy up rivals.”
Palladium Reaches Another Record as JPMorgan Sees More Upside
This article by Rupert Rowling and Marvin G. Perez for Bloomberg may be of interest to subscribers. Here is a section:
Palladium rose as much as 5.4 percent to $1,439.29 an ounce. It traded at $1,394.97 by 1:39 p.m. in New York. At the Comex exchange, palladium for March delivery climbed 2.3 percent.
Investors are shrugging off signs of automotive weakness in key markets, with annual car sales in Europe falling for the first time since 2013. China also declined last year and sales in the U.S. barely rose.
The metal will remain in a supply deficit for an eighth straight year, according to Metals Focus Ltd. Palladium’s status as a byproduct of mines in South Africa and Russia means output levels aren’t adjustable to meet short-term demand, despite the surging price.
“Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank analysts including Daniel Briesemann said in a note. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”
Gold hits an all-time high in 72 currencies
Thanks to a subscriber for this article which leads with a sensational headline that stretches the truth somewhat. However, there is no doubt gold is firming in an increasing number of currencies. Here is a section:
Using the dollar gold price, as most of us do, has disguised what is actually quite a powerful bull market. If my memory serves me right, we saw the same phenomenon - a stealth rally in minor currencies - ahead of the last major gold bull run (in dollars) in the late 1990’s. Arguably this may be a very good leading indicator.
Faulty yardsticks also takes us onto wealth management. Measuring our net worth in local currencies, we might be rather pleased with ourselves - smug even. However we chose to ignore the fact that the yardstick is not a constant … it is shrinking and sometimes really quite fast. It’s the natural corrosive effect of inflation. Knowing this, governments give us a gauge for yardstick shrinkage to use such as RPI or CPI, to reassure you that the shrinkage is minimal… and then lie about it.
There are alternatives.
In the US, the Chapwood Index is highly regarded as it reflects the true cost-of-living increase. Plainly and simply, the Index shows that incomes can’t keep up with expenses, and it explains why people increasingly have to turn to the government for entitlements to bail them out. The basis of the Index is fully open to scrutiny and if correct suggests Americans have been losing roughly 10% of their wealth each year since 2014. Half of it gone. This compares with the official government figure of 1.9%. Ronald Reagan called inflation “the thief in the night” and it is built for times just as this. It gives the appearance of being wealthy (maintaining high nominal values) while eroding your actual position - which manifests itself in far higher costs on the other side.
Interestingly, gold has seen an average year-on-year gain of about 10% compounded since 2000 - off-setting those real losses - which reaffirms in our mind that it continues as a reliable yardstick against which to measure costs or indeed wealth. In short, gold has maintained what economists call “purchasing power parity” for millennia. So not only is it an excellent yardstick - its actually quite a useful thing to own - especially if you fear wealth erosion. If you haven’t already read this, you must - see :Jastram’s Golden Constant
Many crises invariably start with stealth inflation and then follows currency weakness - so gold gets expensive and then it blows out significantly higher in your local currency. Then you realise that the lifeboat has sailed … the choo-choo train has left the station.
Canada's Canopy Growth shares jump 11% on deal to develop industrial hemp farms in New York
This article by Thomas Franck for CNBC may be of interest to subscribers. Here is a section:
Canopy Growth has been granted a license by New York state to process and produce hemp with the help of efforts by Gov. Andrew Cuomo and U.S. Sen. Charles Schumer.
Canopy Growth hopes to establish large-scale production capabilities focused on hemp extraction and product manufacturing within the United States. Depending on board approval of a specific site, Canopy plans to invest between $100 million and $150 million in its New York operations, "capable of producing tons of hemp" on an annual basis.
The company is currently evaluating a number of sites in the Southern Tier of New York, which will become one of its first extraction and processing facilities outside Canada. Management hopes to announce the specific location within 100 days.
Newmont's Goldcorp Gamble May Need "Drastic Surgery" to Pay Off
This article by Danielle Bochove, Caleb Mutua and Marvin G. Perez for Bloomberg may be of interest to subscribers. Here is a section:
The cost to create the world’s largest gold company: A 17 percent premium for a $10 billion all-shares acquisition that faces some big-time challenges down the line.
Newmont Mining Corp.’s deal for Goldcorp Inc. stands in stark contrast to the recent zero-premium merger between Barrick Gold Corp. and Randgold Resources. The key question: Why? In October, Goldcorp shares fell to their lowest since 2002 after the miner reported lower output and higher costs than expected.
Since then the stock improved only marginally before today. The merged company will have the world’s largest production and reserve base, and the kind of liquidity and diversified assets required to attract institutional investors. At the same time, "Newmont has some difficult times ahead with drastic surgery needed at Goldcorp,” according to John Ing, an analyst at Maison Placements Canada.
"In the short term and medium term, the deal is not good for Newmont," Ing said in an interview with Bloomberg News on Monday.
Outlook for 2019: The Game Has Changed
Thanks to a subscriber for this report from KKR which may be of interest to subscribes. Here is a section: