Where is inflation going to come from – A comment from Silverdollar
Doc and address a comment made by Silverdollar last week. The comment is below but the general focus is on where actual/sustainable inflation will come from. There are a number of factors that really make you scratch your head.
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Here’s the comment…
“Can’t really understand where price inflation would come from. Vehicle sales are falling along with prices, both new and used. Household debt is already high. Crude has moderated and fallen to mid-forties. Wages aren’t climbing steeply. Competition in groceries is supposedly dropping prices. Retailers can’t keep their doors open. Housing is healthy, but formation of households isn’t happening. 40% of 25-35 young people are living with parents because debt and crappy jobs don’t give them the income to strike out on their own. Can somebody enlighten me on the subject?”
Metals Remain Quiet In Tight Ranges
Peter Hug – Thursday March 30, 2017
http://www.kitco.com/commentaries/2017-03-30/Metals-Remain-Quiet-In-Tight-Ranges.html
Great point about Silver from Goldfinger today:
@Goldfinger – “You don’t see this very often, both the 50-week and 200-week averages at exactly the same level to the penny despite much different trajectories:
http://cdn.ceo.ca/1cdqnp8-Silver_Weekly_3.30.2017.png
Also what if I told the dollar index would be back above 100, yields would be higher, and stocks would be rallying 7 days in a row, how would silver be performing this week? Well it’s still up 2% for the week despite all that.
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I agree with Goldfingers point that overall Silver has done just fine.
There really seems more pessimism in the Metals space than one would expect with Silver barely even budging on the greenback strength and stocks surging. Silver has just completed an inverse head and shoulders pattern if you look a that the chart included here, and is poised to move higher for mid-longer term.
Would be great if we could get silver well over the 50 WMA for long enough that the 20 WMA has time to catch up and even cross over. That is a heck of a tall order on this go around.
Agreed that it would be bullish to see more upwards momentum in the 50 Week MA. It will be a Golden Cross when/if it moves up through the 200 Week MA, so that is typically a bullish indicator.
If the 50 Week MA moves up through the 20 or 18 Week MAs, then that would be short term bearish. I’d prefer not to see that. Let’s watch for the 50 Week MA to move up through the 200 Week MA instead. 🙂
Nevermind, I just re-read your statement and had initially misunderstood. You were talking about Silver staying above “the 50 Week MA long enough for that the 20 WMA has time to catch up and even cross over.” I’m on the same page now.
Yes, that would be be short to medium very bullish if that played out, but right now the metals have just been holding steady with a mild upside bias. Nothing has started to really “break out” or “break down” at this point.
We’ll see how it goes….
That is a good point by Goldfinger. Silver is holding up very nicely although still not breaking out. It is great to see the metals not getting hit (at all in silver’s case) with the US equities moving up with the USD. I still think people are distracted. This will all change… especially as we progress through this spring and summer.
Thanks for pointing this comment out Ex.
Always glad to share ideas, and if the 50 Week MA in Silver crosses up through the 200 Week MA in Silver, as a “Golden Cross” that is stronger than most resource investors (or the miners) are factoring in.
Yes, if seasonality is a guide, then the Summer Doldrums may drift down in a sideways trading channel, but we may still get a Spring Fling before that process begins….
Americas Silver Corporation Reports Fourth Quarter and Year-End 2016 Financial Results
by @businesswire on March 30, 2017
“The Company had a stronger year in 2016, generating increased cash flow in the second half of the year due to higher silver and base metal prices, and our ongoing focus on cost management,” said Darren Blasutti, President and CEO. “We expect to continue to create positive operating cash flow until the San Rafael Project begins commercial production, which is expected to increase the Company’s revenue and cash flow while significantly decreasing operating costs in late 2017 and beyond. San Rafael, coupled with our acquisition of the San Felipe Project and strategic partnership with Glencore, will drive accretive future growth for our shareholders.”
“The fully-funded San Rafael Project continues to progress on time and budget for commercial production in late Q3, 2017 following its formal construction commencement in October 2016. San Rafael is expected to be the Company’s key cash flow generator for 2018 and beyond, targeted to produce free cash flow of approximately $30 million annually at current spot prices with an unlevered IRR of +100%.”
https://ceo.ca/@businesswire/americas-silver-corporation-reports-fourth-quarter-financial-results
Hi Shad :
I was going through Alexco’s and SilverWheatons SPA.
Alexco’s IRR is 89% pre-tax and 75% after tax.
I’m trying to get my arms around as to what exactly is IRR.
The definition says the return that causes the beginning value and intermediate cash flows to the ending value is the internal rate of return.
What are they talking about? The return of profits less construction and operating costs over the life of the mine? Am I close?
Think about a discounted cashflow analysis. It is the required rate of return or discount factor which causes NPV = 0.
Hi Johnk,
Yes, you’re on the right track sir. Basically the Internal Rate of Return is one metric companies us in projecting the growth rate of a project, and for evaluating the economics and payback of the project where you can zero out the Net Present Value. Its really more of an estimate or target a company generates as a way of gauging how quick a project will grow in revenues and pay back the capital investment costs to get in the black and move into the next phase of profits.
The higher the projected IRR percentage, then the better; as it means the project will grow in a more robust way. Another metric I look for is the time-line for payback. So those 2 concepts of IRR and Payback Period are how fast will this project grow to payback the initial costs associated with it.
In general I like to see an IRR of 20-40% or better, and a payback period in under 3 years. The point Alexco was making was just how robust their project is with such a high IRR. Very impressive for Alexco, and much of that is due to how much infrastructure they already have in place and the high grade nature of their ore bodies. Simply put, they’ll go into hyper growth mode and pay it back quickly, so it totally makes sense for them to move this project forward. 🙂
great breakdown…..and thoughts. on the particular company…….EX…….thanks
Gold down since then. Well done Jim.
I got more of the impression from Jim that Gold has been pretty solid the last few weeks all things considered (dollar strength, markets rising, Fed raising rates, etc…), and he expects it to continue to be strong. One day doesn’t make a market.
+1 & lol 😉
I was watching the congressional hearing on Russian involvement in the 2016 election.
Question: How can we tell fake news from true news?
Answer: If it’s published in the New York Times or Washington Post, it’s not fake news.
I think I hurt myself, laughing so hard. I guess propaganda is not considered Fake News.
MSN…….has lost control of the news…….even Fox , which reports to be better, has some real retards running around.
If Trump had a pet turtle like “Tweety Bird” MSN would be calling him too slow to govern, they constantly harangue him, nothing is off limits in their criticism of this President.
Tweety would be having a field day if he was still here……..lol
Come on now… we’re supposed to be draining the swamp, not filling it.
gld still hanging above the 10 day ema, which is good. SLV staying at or above the 3 day ema. SLV has worked off extremely overbought 5 day RSI a bit. Certainly enough to allow for a huge gap up tomorrow. Maybe I am dreaming though.
It’s touch and go as usual in the metals.
$xjy:gld ratio daily chart hanging onto the declining 50 DMA. large black candle today, which bodes well for gold in the very near term.
Just as I suspected, $CDW put in a huge red doji today. The correlations are so real.
GCC looks almost guaranteed to break lower based on the weekly chart.
First hope would be for a huge reversal tomorrow. It isn’t going to happen.
Next hope would be for the lower weekly bollinger to trigger a reversal once hit.
Last hope would be the lower weekly bollinger on the monthly to get hit (around $18). That is my target for now.
AP1000 design completes UK regulatory assessment
30 March 2017
“Regulators have concluded that Westinghouse’s AP1000 nuclear reactor design is suitable for construction in the UK. The Office for Nuclear Regulation (ONR), the Environment Agency and Natural Resources Wales – which undertake the Generic Design Assessment (GDA) of new reactor designs – are “satisfied that the reactor meets expectations on safety, security and environmental protection at this stage of the regulatory process”.
Cory:
Thanks for the discussion. I suppose Doc’s idea of a cheaper dollar would make imports higher and increase the cost of foreign travel for Americans. However, since we don’t import that much oil anymore and with few consumers overly endowed with spare savings, still can’t see a lot of inflation. Maybe the next bailout should put the money directly into the consumers hands and help them out of their debt dilemma.
Thanks for your comment that got us talking about it!
I see lots of inflation. My newspaper was $28 a month last year and now is $40 a month. My Comcast bill keeps soaring and I just paid $3 for a pomegranate. The appraisal district just raised my home value by 8%
I see inflation in many consumer goods that we use day after day. Unfortunately that is not the way economists measure the stat. And I live in Vancouver so that hurts the wallet 🙁
Assessed valuation of real estate in a joke…….values are what someone will pay you and not an assumption of a single appraiser …..Even when they appraise at a 1/3 valuation, it is still to high, since they adjust the RATE to what every the ring leaders say….
ever…..not every
The adjusters give the mortgage companies and the real estate companies the numbers they request. There is little honest appraising going on these days.
ditto………….correct……..spot on……they participate in the scam……
Anyone ever wonder why there is a…. National Association of Realtors…….
Agreed Bonzo Barzini.
The stock market continues to crush commodities. After getting an absolute beating on the weekly chart, the gcc:$indu ratio can’t even manage a meager pop. The montly chart is literally a straight line down for the last 6 years, and there is absolutely nothing that says the trend isn’t set to continue for years.
Well, yeah, given we’ve been in a brutal commodities bear for six years, and a stellar general markets bull, GCC:$INDU has bee straight down for six years.
The general markets are now in the second longest bull market in US market history, shorter only than the 1920s boom, if I remember correctly. How long do you think this can continue? A blowoff phase in the general markets could push the ratio to a greater extreme, but that such an extreme move can continue for years more seems highly unlikely.
Where’s the risk-adjusted money in betting that an extreme will become even more extreme? Far better in such extremes to catch the trend reversal early and bet on reversion to the mean. My current guess, the reversal comes this fall.
Cory, and Doc, Silverdollar is right but all three of you have forgotten that the biggest factor that will cause deflation is artificial Intelligence. It is now making huge inroads in destroying jobs for all classes of people, and for every job that is lost six other jobs disappear because there is no one spending that salary. DT
We are in a hell of a mess…..
I agree with you DT, AI continues to take over more jobs. That also helps keep costs low and people out of jobs.
What are we to do? AI makes products cheaper, faster and with less headaches than employees.
Good to hear from you DT! We will have another beer next time I am in Toronto.
More than anything else, REAL intelligence is needed.
That would be a unique new ingredient.
Epstein metals TA:
EX, what is your take on Metalla Royalty and Streaming Co. SYL C.MTA, or EXCFF on the pinks or are you interested. DT
Just to clarify something Cory mentioned. He stated how banks are required to keep 10% of their deposits as reserves. That is a common belief that I see which really is not true. Real small banks have little or no reserve requirements. But most importantly for the rest of the banks, that 10% reserve requirement applies only to certain types of deposit accounts such as those in checking and NOW accounts. Money in certificate of deposits (CD), money market deposit accounts (MMDA), and most savings accounts have no reserve requirement. This is why many banks have way less than 10% in reserves when compared to all of their deposits. BB&T for example has about $167.5 billion in deposits but only has about $3.5 billion total in vault cash and on deposit with the Federal Reserve. So how can they have less than 3% of their deposits in reserves? It is because the majority of the deposits at BB&T, just like most banks, are in accounts that are not subject to reserve requirements.
Doc,
thanks for putting a little meat-on-the-bone of the inflation/deflation debate. I’m wondering if you and Cory could discuss China’s development strategy of “One Belt One Road” and how that will alter inflation over the next 30-40 years. It’s projected scale will be equivalent to about 30 Marshall plans.
thanks in advance
On CNBC today, noted strategist Tom Lee said: “I think energy in some ways is making a generational bottom…” This is a slow process, but the following chart seems to confirm this thesis.
John Browne of Euro Pacific Capital strikes a balanced tone on the healthcare debate in the following article.
“I have never been a fan of socialized anything. But in the modern world of instantly diffused outrage and the increasing frustration with a health care system that is clearly dysfunctional, Republicans should recognize the political reality and seize the initiative. A soberly devised plan could vastly streamline health care delivery, minimize waste, control costs, provide basic care for all, and perhaps even deal a harsh blow to tort lawyers. Moderate Democrats would jump on board in droves and President Trump and the Republican Congress could emerge as winners.
Observers should not count President Trump as down. He has a reputation for coming back. He may recognize a political winner when he sees it and look to ditch the ideological baggage of his own party. Trump was not put into office by card carrying conservatives but by middle class populists who would support anything that makes their lives less anxious.
I believe that private enterprise always delivers higher quality and lower prices than government. This is true for goods and services and it also would be true for health care if the markets were allowed to function freely (which they have not). But voters today do not perceive health care as a good or a service, but as a right. Conservatives can argue this point, but they will lose the emotional battle, which is where this fight will occur.”
http://www.europac.com/commentaries/case_socialized_medicine
John Browne’s comment may be correct, but that’s because Trump always was a New York Liberal. He is now showing his true colors by attacking the right wing of the Republican party that voted against his Obamacare light bill.
The US, in my opinion, needs to de-socialize medical care and demand all healthcare providers publish charges for services. (Instead of billing different amounts for the same service to different people, depending on who is paying. That one act alone would drastically reduce costs by encouraging competition, which is now absent.
The Ryan bill was terrible. Ryan and Priebus give liberal advice, being Rhinos.
Steele:
Thanks for posting…..I saw this article and agree with most of the pragmatic thought that is eventually his solution.
What so many ideologues forget is that we pay for healthcare one way or another. Either we have a healthy, producing population or we have a large number of sick, who continue to consume the wealth produced by the healthy.
Preventive care is the least expensive and everybody should have it. It helps keep the pie from being eaten by too many expensive sick people. The society will reap what it sows; many fail to think about the end results of no care……….
China Factory Index Rises To Highest In 5 Years.
By KELVIN CHAN – Associated Press – 35 minutes ago
HONG KONG (AP) — China’s factory activity ticked up again last month to its highest level in five years, according to an official survey released Friday, in a fresh sign that the world’s No. 2 economy is picking up steam.
The index based on a survey of purchasing managers climbed for a second straight month in March to 51.8, its strongest level since April 2012, from 51.6 in the previous month.
The PMI is conducted by the Chinese Federation of Logistics and Purchasing and is based on a 100-point scale, with numbers above 50 indicating expansion.
The report, released by the government’s statistics office, found that production and new orders expanded at a faster pace in China’s key manufacturing sector, which is a major part of the broader economy employing many millions of workers. The report’s employment sub-index rose to 50, indicating that factories stopped shedding staff.
Meanwhile, the official non-manufacturing PMI rebounded, rising to 55.1 last month from 54.2, indicating strength in China’s service sector.
Hemke filed an official complaint against JPMorgan as they stopped (acquired) 2689 contracts or 13.445 million oz of silver even though the limits mandated by law is a maximum of 1500 contracts( 7.5 million oz). Chris Powell wonders if JPMorgan is sidestepping the legality with the bank acting as proxy for either the USA government or the Chinese government. Remember it has been mine contention that China lent silver to the uSA to engage in their nefarious activities of controlling the precious metal prices.
I agree, CFS. And there are some important things that need to be addressed regarding healthcare. (1) There should be a way to use alternative healthcare including stem cell and natural healing elements for preventative disease. (2) Make the healthcare system not-for-profit, like it was before Nixon messed it up.
The majority of US hospitals ARE not-for-profit.
Doctors are not and have a lock on the system.
Of course preventative care makes sense.
But competition is the way to reduce price.
Let prices not be hidden.
Let insurance companies compete across state lines.
Nigel Farage on LBC on Brexit trigger Day:
https://www.youtube.com/watch?v=urrGmC_RzMg
Jim Wilie:
Clinton corruption.
Uranium deal, etc.
Old news……good for review jmho
Anyone hear? That Hilly and staff, kept their security clearance after leaving office…..
Well, hope is still alive in the metals, at least at the moment. Would be awesome if silver rose far enough and for long enough for the 20 WMA to join the party along with the 50 and 200 WMA. It’s a tall order.
Dow:gold ratio could go either way. The monthly chart has rallied almost back to the declining 200 WMA and there looks to be a cup and handle continuation pattern possibly in play.
I look at GCC instead of the CRB. Admittedly the CRB looks a bit better, especially vs the Dow, but GCC needs to get its act together. Next month is going to be extremely important. GCC cannot afford to fall out of bed. It may be weak initially in April, but it needs to close April within the range its been in over the last 8 months.
My goodness the miners have lead boots on. They are waiting for something big, but right now it looks like it won’t be good for them. April is going to be interesting to see if they can hold it together.
The dow needs to break decisively above its 10 day EMA or it is in danger of stalling out. The problem is you don’t want it just riding the 50 DMA here as it portends a move lower. I think the most likely move is a gradual move lower to the 20 WMA over the next month or two.
Go figure, Silver Standard got a one day extension with Golden Arrow to make a decision on their option agreement. Just doesn’t make sense.
Well AXU finally giving up some of the amazing relative strength it has had lately on its earnings announcement. Is it headed back to the 100 WMA like AG and EXK?
The weekly $gold candle llooks like it is going to end up a gravestone doji, which portends weakness next week at a minimum.
Silver has a long way to go……….silver stealers. net…..
‘I’m Impressed by Gold and Silver Right Now’ – Jim Wyckoff
Mar 29, 2017
Guest(s): Jim Wyckoff Market Analyst and Columnist
http://www.kitco.com/news/video/show/Technically-Speaking/1560/2017-03-29/Im-Impressed-by-Gold-and-Silver-Right-Now—Jim-Wyckoff