Markets are closed in Beijing, the workday is over, and there no official reports in local media of an actual trade deal, that is because, as we explained on Thursday night, the language of the deal will never be made public and there would be no signing event between President Trump and President Xi. One may ask if there is even a "deal"?
As the WSJ writes this morning, China indicated that a near-term trade agreement with the U.S. has yet to be completed despite President Trump’s signoff, highlighting the unpredictability of a negotiation process that has rattled global markets and businesses.
Trump on Thursday approved a so-called phase-one trade pact that will scale back existing tariffs on Chinese imports and eliminate new levies scheduled to take effect on Sunday, in exchange for a written pledge from Beijing to buy tens of billions of dollars worth of U.S. farm products, among other concessions.
While Mr. Trump was “upbeat and enthusiastic about this breakthrough,” in the words of Michael Pillsbury, an adviser to the president during the trade talks, the mood in Beijing has been decidedly more sober.
As noted above, none of China’s state-owned media outlets or economic agencies involved in the trade negotiations made any public statement on Friday about the deal which according to Trump was finalized.
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DAILY BUSINESS REPORT - Financial Updates, International Markets and Business News
December 12, 2019
Hashrate Domination: China Controls Two-Thirds Of The World's Crypto Network's Processing Power
A new report from Reuters, citing CoinShares, indicates that China's Bitcoin miners now control a whopping 66% of the world's crypto network's processing power. This could be bad news for US miners as it signals China is quickly advancing.
Also known as "hashrate," it's the speed at which a computer is performing an operation in Bitcoin code to unlock coins, China has been steadily gaining hashrate share this year.
In June, China's Bitcoin miners controlled 60% of the global hashrate, and now the figure is up to 66% in December.
Chris Bendkisen, head of research at CoinShares, believes the rapid increase in the Chinese share of hashrate could be due to the deployment of advanced mining technology.
"This is beneficial to the Chinese mining industry," said Bendiksen. "If you are the first to increase your proportion of the hashrate, and you can do that before your competitors, that's generally good."
Mining crypto has become more difficult over the last several years as profitability sags. The overall Bitcoin hashrate has risen 80% since June, which in recent times, has created stronger profitability for miners who have access to cheap energy.
With China controlling more and more of the world's Bitcoin hashrate, some worry that the US could be falling behind the crypto curve, as Beijing is making a state effort to be a leader in blockchain.
Xiao Wunan, an executive vice-chairman of the China-backed Asia Pacific Exchange and Co-operation Foundation (APECF), recently told CNBC that Beijing's crypto initiatives are strategically important to the communist party.
Read the entire article
Also known as "hashrate," it's the speed at which a computer is performing an operation in Bitcoin code to unlock coins, China has been steadily gaining hashrate share this year.
In June, China's Bitcoin miners controlled 60% of the global hashrate, and now the figure is up to 66% in December.
Chris Bendkisen, head of research at CoinShares, believes the rapid increase in the Chinese share of hashrate could be due to the deployment of advanced mining technology.
"This is beneficial to the Chinese mining industry," said Bendiksen. "If you are the first to increase your proportion of the hashrate, and you can do that before your competitors, that's generally good."
Mining crypto has become more difficult over the last several years as profitability sags. The overall Bitcoin hashrate has risen 80% since June, which in recent times, has created stronger profitability for miners who have access to cheap energy.
With China controlling more and more of the world's Bitcoin hashrate, some worry that the US could be falling behind the crypto curve, as Beijing is making a state effort to be a leader in blockchain.
Xiao Wunan, an executive vice-chairman of the China-backed Asia Pacific Exchange and Co-operation Foundation (APECF), recently told CNBC that Beijing's crypto initiatives are strategically important to the communist party.
Read the entire article
December 11, 2019
Aramco Stock Soars Limit Up In Debut After Saudis Force Locals To Buy
Is Jamie Dimon about to get the old bonesaw for leaving $180BN on the table?
Saudi Arabia's oil company Aramco soared 10% limit up on its first day of trading, reaching a valuation of $1.88 trillion, higher than any other publicly traded company in the world. This means that after pricing its IPO at $1.7 trillion, Jamie Dimon left about $180 billion on the table, which will hardly impress the Crown Prince.
The record valuation reflects an oversubscribed book of mostly local investors who bought shares on the Saudi Tadawul stock exchange after they were forced by Riyadh to pump the stock.
Aramco only sold a tiny 1.5% sliver in the company, meaning that the kingdom and Public Investment Fund of Saudi Arabia (PIF) could easily manipulate the price with such a small fraction of the stock public. Aramco listed on the Tadawul exchange because of other international exchanges and their investors found it hard to value the oil company near the $2 trillion levels.
"They have had to launch the IPO on their own stock exchange as the valuation was unlikely to be achieved elsewhere," said John Colley, associate dean at Warwick Business School in the U.K, who spoke with Reuters.
Read the entire article
Saudi Arabia's oil company Aramco soared 10% limit up on its first day of trading, reaching a valuation of $1.88 trillion, higher than any other publicly traded company in the world. This means that after pricing its IPO at $1.7 trillion, Jamie Dimon left about $180 billion on the table, which will hardly impress the Crown Prince.
The record valuation reflects an oversubscribed book of mostly local investors who bought shares on the Saudi Tadawul stock exchange after they were forced by Riyadh to pump the stock.
Aramco only sold a tiny 1.5% sliver in the company, meaning that the kingdom and Public Investment Fund of Saudi Arabia (PIF) could easily manipulate the price with such a small fraction of the stock public. Aramco listed on the Tadawul exchange because of other international exchanges and their investors found it hard to value the oil company near the $2 trillion levels.
"They have had to launch the IPO on their own stock exchange as the valuation was unlikely to be achieved elsewhere," said John Colley, associate dean at Warwick Business School in the U.K, who spoke with Reuters.
Read the entire article
December 10, 2019
Small Business Optimism Surges As Plans To Raise Worker Compensation Soar Most In 30 Years
After stagnating for much of the past year following its 2018 all time highs, small business optimism posted the largest month-over-month gain in 19 months, since May 2018, rising 2.3 points to 104.7 in November, up from 102.4, and beating the consensus estimate of 103.0.
The "exceptional" Optimism Index reading was bolstered by seven of the 10 Index components advancing, led by a 10-point improvement in earnings.
Owners reporting it is a good time to expand increased by 6 points and those expecting better business conditions increased by 3 points. The NFIB Uncertainty Index fell 6 points in November to 72, adding to the 4-point drop in October and the lowest reading since May 2018.
In other words, US small business were swept by the same euphoria they felt when Trump was first elected.
“This historic run may defy the expectations of many, but it comes as no surprise to small business owners who understand what a supportive tax and regulatory environment can do for their companies,” said NFIB Chief Economist William Dunkelberg, who added what will come as music to Trump's ears: “As the two-year anniversary of the Tax Cuts and Jobs Act’s passage approaches this month, small businesses, the world’s third largest economy, are using those savings to power the American economy.”
Earnings, or the frequency that owners report positive profit trends, rose 10 points, 1 point below the record set in May 2018, to a net 2 percent reporting quarter on quarter profit improvements.
Read the entire article
The "exceptional" Optimism Index reading was bolstered by seven of the 10 Index components advancing, led by a 10-point improvement in earnings.
Owners reporting it is a good time to expand increased by 6 points and those expecting better business conditions increased by 3 points. The NFIB Uncertainty Index fell 6 points in November to 72, adding to the 4-point drop in October and the lowest reading since May 2018.
In other words, US small business were swept by the same euphoria they felt when Trump was first elected.
“This historic run may defy the expectations of many, but it comes as no surprise to small business owners who understand what a supportive tax and regulatory environment can do for their companies,” said NFIB Chief Economist William Dunkelberg, who added what will come as music to Trump's ears: “As the two-year anniversary of the Tax Cuts and Jobs Act’s passage approaches this month, small businesses, the world’s third largest economy, are using those savings to power the American economy.”
Earnings, or the frequency that owners report positive profit trends, rose 10 points, 1 point below the record set in May 2018, to a net 2 percent reporting quarter on quarter profit improvements.
Read the entire article
December 9, 2019
The Next Pearl Harbour? China's Gold-Backed Crypto Currency Will Blindside US Dollar
Indeed, this weekend marks the 78th anniversary of the attack on Pearl Harbor in Hawaii, which opened the door for the United States to enter World War II. Turn on your TV and you will see military mavens rambling on, pontificating about ‘the defense of the realm’, all the while completely aloof and unaware of the American empire’s real Achilles heel.
Recent, financial pundit and TV host Max Keiser outlined such a scenario, and warned that the US will be blind-sided the day that China introduces its gold-backed crypto currency – an absolute game changer which would create a “catastrophic trapdoor opening underneath the US economy,” said Keiser.
Not surprisingly, very few mainstream financial pundits in the West are willing to admit that China possesses gold reserves in excess of 20,000 tons, and by introducing a gold-backed cryptocurrency, it has the ability to “kill the US dollar deader than a door nail …. a new Pearl Harbor-type event and it’s coming in the next six to nine months.”
Read the entire article
Recent, financial pundit and TV host Max Keiser outlined such a scenario, and warned that the US will be blind-sided the day that China introduces its gold-backed crypto currency – an absolute game changer which would create a “catastrophic trapdoor opening underneath the US economy,” said Keiser.
Not surprisingly, very few mainstream financial pundits in the West are willing to admit that China possesses gold reserves in excess of 20,000 tons, and by introducing a gold-backed cryptocurrency, it has the ability to “kill the US dollar deader than a door nail …. a new Pearl Harbor-type event and it’s coming in the next six to nine months.”
Read the entire article
December 6, 2019
Shale's Debt-Fueled Drilling Boom Is Coming To An End
The financial struggles of the U.S. shale industry are becoming increasingly hard to ignore, but drillers in Appalachia are in particularly bad shape.
The Permian has recently seen job losses, and for the first time since 2016, the hottest shale basin in the world has seen job growth lag the broader Texas economy. The industry is cutting back amid heightened financial scrutiny from investors, as debt-fueled drilling has become increasingly hard to justify.
But E&P companies focused almost exclusively on gas, such as those in the Marcellus and Utica shales, are in even worse shape. An IEEFA analysis found that seven of the largest producers in Appalachia burned through about a half billion dollars in the third quarter.
Gas production continues to rise, but profits remain elusive. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said.
Of the seven companies analyzed, five had negative cash flow, including Antero Resources, Chesapeake Energy, EQT, Range Resources, and Southwestern Energy. Only Cabot Oil & Gas and Gulfport Energy had positive cash flow in the third quarter.
The sector was weighed down but a sharp drop in natural gas prices, with Henry Hub off by 18 percent compared to a year earlier. But the losses are highly problematic. After all, we are more than a decade into the shale revolution and the industry is still not really able to post positive cash flow. Worse, these are not the laggards; these are the largest producers in the region.
The outlook is not encouraging. The gas glut is expected to stick around for a few years. Bank of America Merrill Lynch has repeatedly warned that unless there is an unusually frigid winter, which could lead to higher-than-expected demand, the gas market is headed for trouble. “A mild winter across the northern hemisphere or a worsening macro backdrop could be catastrophic for gas prices in all regions,” Bank of America said in a note in October.
The problem for Appalachian drillers is that Permian producers are not really interested in all of the gas they are producing. That makes them unresponsive to price signals. Gas prices in the Permian have plunged close to zero, and have at times turned negative, but gas production in Texas really hinges on the industry’s interest in oil. This dynamic means that the gas glut becomes entrenched longer than it otherwise might. It’s a grim reality plaguing the gas-focused producers in Appalachia.
With capital markets growing less friendly, the only response for drillers is to cut back. IEEFA notes that drilling permits in Pennsylvania in October fell by half from the same month a year earlier. The number of rigs sidelined and the number of workers cut from payrolls also continues to pile up.
NEVER MISS THE
Read the entire article
The Permian has recently seen job losses, and for the first time since 2016, the hottest shale basin in the world has seen job growth lag the broader Texas economy. The industry is cutting back amid heightened financial scrutiny from investors, as debt-fueled drilling has become increasingly hard to justify.
But E&P companies focused almost exclusively on gas, such as those in the Marcellus and Utica shales, are in even worse shape. An IEEFA analysis found that seven of the largest producers in Appalachia burned through about a half billion dollars in the third quarter.
Gas production continues to rise, but profits remain elusive. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said.
Of the seven companies analyzed, five had negative cash flow, including Antero Resources, Chesapeake Energy, EQT, Range Resources, and Southwestern Energy. Only Cabot Oil & Gas and Gulfport Energy had positive cash flow in the third quarter.
The sector was weighed down but a sharp drop in natural gas prices, with Henry Hub off by 18 percent compared to a year earlier. But the losses are highly problematic. After all, we are more than a decade into the shale revolution and the industry is still not really able to post positive cash flow. Worse, these are not the laggards; these are the largest producers in the region.
The outlook is not encouraging. The gas glut is expected to stick around for a few years. Bank of America Merrill Lynch has repeatedly warned that unless there is an unusually frigid winter, which could lead to higher-than-expected demand, the gas market is headed for trouble. “A mild winter across the northern hemisphere or a worsening macro backdrop could be catastrophic for gas prices in all regions,” Bank of America said in a note in October.
The problem for Appalachian drillers is that Permian producers are not really interested in all of the gas they are producing. That makes them unresponsive to price signals. Gas prices in the Permian have plunged close to zero, and have at times turned negative, but gas production in Texas really hinges on the industry’s interest in oil. This dynamic means that the gas glut becomes entrenched longer than it otherwise might. It’s a grim reality plaguing the gas-focused producers in Appalachia.
With capital markets growing less friendly, the only response for drillers is to cut back. IEEFA notes that drilling permits in Pennsylvania in October fell by half from the same month a year earlier. The number of rigs sidelined and the number of workers cut from payrolls also continues to pile up.
NEVER MISS THE
Read the entire article
December 5, 2019
China Set To Make History With Record Number Of Bond Defaults In 2019
While China is bracing for what may be a historic D-Day event on December 9, when the "unprecedented" default of state-owned, commodity-trading conglomerate Tewoo with $38 billion in assets may take place, it has already been a banner year for Chinese bankruptcies.
According to Bloomberg data, China is set to hit another dismal milestone in 2019 when a record amount of onshore bonds are set to default, confirming that something is indeed cracking in China's financial system and "testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt."
After a brief lull in the third quarter, a burst of at least 15 new defaults since the start of November have sent the year’s total to 120.4 billion yuan ($17.1 billion), and set to eclipse the 121.9 billion yuan annual record in 2018.
The good news is that this number still represents a tiny fraction of China’s $4.4 trillion onshore corporate bond market; the bad news is that the rapidly rising number is approaching a tipping point that could unleash a default cascade, and in the process fueling concerns of potential contagion as investors struggle to gauge which companies have Beijing’s support. As Bloomberg notes, policy makers have been walking a tightrope as they try to roll back the implicit guarantees that have long distorted Chinese debt markets, without dragging down an economy already weakened by the trade war and tepid global growth.
"The authorities have found it hard to rescue all the companies," said Wang Ying, a Shanghai-based analyst at Fitch Ratings, perhaps envisioning at least two banks that have experienced depositor runs in the month of November in the aftermath of an unprecedented succession of bank failures earlier in the year.
It's not just banks however: this year’s debt woes have spread to a broad array of industries, from property developers and steelmakers to new-energy firms and software makers. The types of borrowers facing repayment difficulties has also expanded from private companies and local state-run firms to business arms of universities, an obscure and loosely regulated corner of China’s corporate world.
China's two latest defaults involved just such a company; on Monday Peking University Founder Group shocked investors after failing to repay a 2 billion yuan bond. The same day, Tunghsu Optoelectronic Technology, a maker of photoelectric display components, also failed to deliver early repayment on both interest and principal for a 1.7 billion yuan note.
Read the entire article
According to Bloomberg data, China is set to hit another dismal milestone in 2019 when a record amount of onshore bonds are set to default, confirming that something is indeed cracking in China's financial system and "testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt."
After a brief lull in the third quarter, a burst of at least 15 new defaults since the start of November have sent the year’s total to 120.4 billion yuan ($17.1 billion), and set to eclipse the 121.9 billion yuan annual record in 2018.
The good news is that this number still represents a tiny fraction of China’s $4.4 trillion onshore corporate bond market; the bad news is that the rapidly rising number is approaching a tipping point that could unleash a default cascade, and in the process fueling concerns of potential contagion as investors struggle to gauge which companies have Beijing’s support. As Bloomberg notes, policy makers have been walking a tightrope as they try to roll back the implicit guarantees that have long distorted Chinese debt markets, without dragging down an economy already weakened by the trade war and tepid global growth.
"The authorities have found it hard to rescue all the companies," said Wang Ying, a Shanghai-based analyst at Fitch Ratings, perhaps envisioning at least two banks that have experienced depositor runs in the month of November in the aftermath of an unprecedented succession of bank failures earlier in the year.
It's not just banks however: this year’s debt woes have spread to a broad array of industries, from property developers and steelmakers to new-energy firms and software makers. The types of borrowers facing repayment difficulties has also expanded from private companies and local state-run firms to business arms of universities, an obscure and loosely regulated corner of China’s corporate world.
China's two latest defaults involved just such a company; on Monday Peking University Founder Group shocked investors after failing to repay a 2 billion yuan bond. The same day, Tunghsu Optoelectronic Technology, a maker of photoelectric display components, also failed to deliver early repayment on both interest and principal for a 1.7 billion yuan note.
Read the entire article
December 4, 2019
Russian Gas Mega-Pipeline To China Goes Online As Putin & Xi Hail Closer Ties
Late Monday Chinese President Xi Jinping and Russia's Vladimir Putin jointly launched the major unprecedented cooperative project that had been years in the making called the 'Power of Siberia' gas pipeline.
The China-Russia east-route pipeline is now providing China with Russian natural gas, which according to Chinese state media is expected to reach 5 billion cubic meters in 2020 and increase to 38 billion cubic meters annually from 2024.
Crucially, S&P Global Platts estimates that total sales through the pipeline is projected to meet nearly 10% of China's entire gas supply by 2022, ensuring vital energy security as Beijing continues to feel the pressure and uncertainty of the trade war with Washington.
The ceremony to officially bring the pipeline online was held as a video call between Xi and Putin was underway. Xi told Putin: "The East-route natural gas pipeline is a landmark project of China-Russia energy cooperation and a paradigm of deep convergence of both countries' interests and win-win cooperation."
The deal had been cemented in May 2014 when Russian gas giant Gazprom signed a 30-year contract with China National Petroleum Corp, after which the pipeline agreements were signed with both leaders present in Shanghai in later 2014.
Gazprom CEO Alexei Miller announced to both leaders that the pipeline had been opened via video link. "Gas is flowing to the gas transmission system of the People's Republic of China," he said.
A 30-year deal was signed by Putin and Xi in 2014, and while a final figure has not been announced, it is believed to be worth more than $400 billion. — CNN
Gazprom will oversee operation of the mammoth pipeline which runs more than 8,100 kilometers (5,000 miles) across the two countries.
Read the entire article
The China-Russia east-route pipeline is now providing China with Russian natural gas, which according to Chinese state media is expected to reach 5 billion cubic meters in 2020 and increase to 38 billion cubic meters annually from 2024.
Crucially, S&P Global Platts estimates that total sales through the pipeline is projected to meet nearly 10% of China's entire gas supply by 2022, ensuring vital energy security as Beijing continues to feel the pressure and uncertainty of the trade war with Washington.
The ceremony to officially bring the pipeline online was held as a video call between Xi and Putin was underway. Xi told Putin: "The East-route natural gas pipeline is a landmark project of China-Russia energy cooperation and a paradigm of deep convergence of both countries' interests and win-win cooperation."
The deal had been cemented in May 2014 when Russian gas giant Gazprom signed a 30-year contract with China National Petroleum Corp, after which the pipeline agreements were signed with both leaders present in Shanghai in later 2014.
Gazprom CEO Alexei Miller announced to both leaders that the pipeline had been opened via video link. "Gas is flowing to the gas transmission system of the People's Republic of China," he said.
A 30-year deal was signed by Putin and Xi in 2014, and while a final figure has not been announced, it is believed to be worth more than $400 billion. — CNN
Gazprom will oversee operation of the mammoth pipeline which runs more than 8,100 kilometers (5,000 miles) across the two countries.
Read the entire article
December 3, 2019
The Problem With "Green" Monetary Policy
As an alarming new United Nations report shows, climate change is probably the biggest challenge of our time. But should central banks also be worrying about the issue? If so, what should they be doing about it?
Central-bank representatives who do decide to make public speeches about climate change cannot deny the scale and scope of the problem; to do so would be to risk their own credibility. But the same is true when central bankers feel obliged to discuss the distribution of income and wealth, rising crime rates, or any other newsworthy topic. The more that central banks’ communications strategy focuses on trying to make themselves “popular” in the public’s eyes, the greater the temptation to address topics outside their primary remit.
Beyond communicating with the public, the question, of course, is whether central banks should try to account for environmental considerations when shaping monetary policy. Obviously, climate change and corresponding government policies in response to it can have powerful effects on economic development. These consequences are reflected in all kinds of variables – growth, inflation, employment levels – that will in turn affect central-bank forecasts and influence monetary-policy decisions.
Likewise, natural disasters and other environmental events – actual or potential – can pose implicit risks to entire classes of financial assets. Regulators and supervisors charged with assessing risk and associated capital needs must take this environmental dimension into account. At a minimum, the high uncertainty stemming from these risks implies a huge challenge for assessing the stability of the financial system and corresponding macroprudential measures. And these risk factors are also increasingly relevant for monetary-policy decisions, such as when central banks should buy bonds or (in some cases) equities.
But the growing public demand that central banks contribute more actively to the fight against climate change leads to a different dimension. In theory, central banks could introduce preferential interest rates for “green” activities – thus driving up the prices of “green bonds” – while adopting a more negative attitude toward noxious assets, such as those tied to fossil fuels. And yet, assessing whether and to what extent an asset is environmentally harmful or helpful would be extremely difficult.
Putting aside these more technical issues, the broader question remains: Should central banks assume responsibility for implementing policies to combat climate change? A number of prominent central bankers have already argued that they should. And current proposals for extending central banks’ mandate have come on top of growing concerns about income distribution and other issues tangentially related to monetary policy.
One is reminded of an ironic comment by the great Chicago School economist Jacob Viner.
Read the entire article
Central-bank representatives who do decide to make public speeches about climate change cannot deny the scale and scope of the problem; to do so would be to risk their own credibility. But the same is true when central bankers feel obliged to discuss the distribution of income and wealth, rising crime rates, or any other newsworthy topic. The more that central banks’ communications strategy focuses on trying to make themselves “popular” in the public’s eyes, the greater the temptation to address topics outside their primary remit.
Beyond communicating with the public, the question, of course, is whether central banks should try to account for environmental considerations when shaping monetary policy. Obviously, climate change and corresponding government policies in response to it can have powerful effects on economic development. These consequences are reflected in all kinds of variables – growth, inflation, employment levels – that will in turn affect central-bank forecasts and influence monetary-policy decisions.
Likewise, natural disasters and other environmental events – actual or potential – can pose implicit risks to entire classes of financial assets. Regulators and supervisors charged with assessing risk and associated capital needs must take this environmental dimension into account. At a minimum, the high uncertainty stemming from these risks implies a huge challenge for assessing the stability of the financial system and corresponding macroprudential measures. And these risk factors are also increasingly relevant for monetary-policy decisions, such as when central banks should buy bonds or (in some cases) equities.
But the growing public demand that central banks contribute more actively to the fight against climate change leads to a different dimension. In theory, central banks could introduce preferential interest rates for “green” activities – thus driving up the prices of “green bonds” – while adopting a more negative attitude toward noxious assets, such as those tied to fossil fuels. And yet, assessing whether and to what extent an asset is environmentally harmful or helpful would be extremely difficult.
Putting aside these more technical issues, the broader question remains: Should central banks assume responsibility for implementing policies to combat climate change? A number of prominent central bankers have already argued that they should. And current proposals for extending central banks’ mandate have come on top of growing concerns about income distribution and other issues tangentially related to monetary policy.
One is reminded of an ironic comment by the great Chicago School economist Jacob Viner.
Read the entire article
December 2, 2019
How Inflation, Prudence, And Fundamentals Are Setting Up Gold To Soar
International Man: Governments around the world, including the United States, are printing trillions of currency units. This will continue to significantly devalue these paper currencies and create inflation.
Doug Casey recently said:
With all the money that’s been created by governments and central banks, the chances are excellent we’re going to have a gigantic bull market. Maybe the last one, since I expect the world is going back to using gold as money—at which point we’ll have a stable gold price.
In the meantime, I think mining stocks could go absolutely insane. The prices will have no relation to fundamentals, because everybody will want to own them.
How do you think the situation is going to play out for gold and precious metals?
Dave Forest: Inflation is a given. I see it every day in commodities, although many mainstream investors don’t recognize it. Yet.
In the 2000s, investors were over the moon when gold broke above $1,000 per ounce and copper passed $1.50 per pound. During the previous commodities bear market, those levels were unthinkable.
But now, $1,000 gold is peanuts. Hardcore bullion investors were distraught in 2016 when gold “plunged” close to $1,000. That’s seen as a depressed and unsustainable price.
Same with copper. That sector’s been in the doldrums, because the price fell below $2.50 per pound. If you’d told a copper miner in 1999 they’d have $2.50 copper, they would have popped the champagne! Today, it’s seen as scraping the bottom of the barrel.
The thing is, back in the “old” days, you could mine and process an ounce of gold for $100. Today, production costs are more like $600 per ounce. Closer to $1,000 per ounce if you add in sustaining and expansion capital.
That’s the real reason metals, including gold, have to go higher. The gold price isn’t arbitrary. The price must exceed production costs—or mines will shut down and supply will run out.
Read the entire article
Doug Casey recently said:
With all the money that’s been created by governments and central banks, the chances are excellent we’re going to have a gigantic bull market. Maybe the last one, since I expect the world is going back to using gold as money—at which point we’ll have a stable gold price.
In the meantime, I think mining stocks could go absolutely insane. The prices will have no relation to fundamentals, because everybody will want to own them.
How do you think the situation is going to play out for gold and precious metals?
Dave Forest: Inflation is a given. I see it every day in commodities, although many mainstream investors don’t recognize it. Yet.
In the 2000s, investors were over the moon when gold broke above $1,000 per ounce and copper passed $1.50 per pound. During the previous commodities bear market, those levels were unthinkable.
But now, $1,000 gold is peanuts. Hardcore bullion investors were distraught in 2016 when gold “plunged” close to $1,000. That’s seen as a depressed and unsustainable price.
Same with copper. That sector’s been in the doldrums, because the price fell below $2.50 per pound. If you’d told a copper miner in 1999 they’d have $2.50 copper, they would have popped the champagne! Today, it’s seen as scraping the bottom of the barrel.
The thing is, back in the “old” days, you could mine and process an ounce of gold for $100. Today, production costs are more like $600 per ounce. Closer to $1,000 per ounce if you add in sustaining and expansion capital.
That’s the real reason metals, including gold, have to go higher. The gold price isn’t arbitrary. The price must exceed production costs—or mines will shut down and supply will run out.
Read the entire article
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