How the Ukraine issue could impact countries around the world
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Add grains to the list of today’s high flyers also!
Ukraine is the breadbasket of Europe/West Asia. Lots of amber waves of grains in that part of the world.
I can understand why Chris would say that a resolution of the crisis in the Ukraine would typically cause a ‘give back’ in the metals.
The observation I would make is that when gold was in a bear phase, there were instances in which it failed to rally during moments of crisis. So the fact that it is rising today on the fear trade, is another example of how the tone has changed.
If you are bullish gold, then you need to see it perform on a day like today and it becomes one more piece of evidence that we are beginning to have the wind to our back, instead of in our face.
The second observation is with regard to Chris’ remark that the gold stocks might not perform as well as the metal….
they did lead the charge and they are leveraged to the metal. So to the extent they fail to out-perform any ongoing gains in the metal, it would be a caution flag for me.
But I suspect that the miners will do just fine in an environment of rising metals prices and there is a very good fundamental reason for that. As the metals go higher, their margins are increasing and their ability to lock in some forward sales and self-fund development and exploration projects without undue shareholder dilution, increases.
The bear market in the miners was so severe, that there are many people in disbelief of the rally (even among those who are normally friendly to the sector). This demonstrates how negative sentiments remains toward the metals and miners and from a contrary perspective is a longer-term positive.
The Ukrainian issue is just the latest handy excuse for the mainstream media to explain the recovery in the PM market after the malicious/fraudulent take downs of last year. The charts are repairing themselves and the East is ready to pounce on any further artificial take-downs. One can argue that this is short covering. But there was a whole lot of naked short put upon the market last year–and now they’re covering their butts.
So of course they’ll be a lot of buying that buys the same nothingness that was sold in the first place, because deliveries require something tangible–and you can’t give what you ain’t got.
You are right Chris. WW2 started after the deleveraging of the Great Depression and the failing of 8,000 banks in the US in 1933, the devaluation of the US dollar in 1933-34 and a further stock market crash in 1937.
Therefore one might surmise that most of the world had very little financial leverage at the start of WW2 and we were ready for another up cycle in credit anyway.
Thw idea that WW2 got the world out of the Great Depression is kind of nonsense. Maybe it helped the US make bumper profits selling equipment and food to UK, Europe, Russia, etc but what about those places where the money came from? The UK is still bankrupt because oF WW2, though we don’t act like it. We act like we are still a big world player, maybe because we can pretend that there is still some legacy wealth left fromthe Imperial days and it’s not quite all gone, just yet; nearly though.
Maybe WW2 fuelled some technological progress but the arms race without a war would have likely done the same thing; witness the 1960s and 70s.
And then what about all the capital destruction of WW2? it was huge. Ten the destruciotn of human life and all of those potentially productive young people.
The war stimulus idea is the broken window fallacy of economics on a huge scale. Governments like it because it oincreases their powers, hugely. Period. Apart from that, WW2 was good for nobody.
BETTER PICTURE OF YOU CORY.
You could also include oil up $2.