Weekend Show – Metals Focused Fund Managers Share Different Portfolio Management Strategies They Are Employing
Welcome to this week’s KE Report Weekend Show! On this Weekend’s Show we are focusing on the resource sector by first chatting with 2 fund managers detailing how they are managing their fund’s portfolio, followed by a dive into the energy sector.
Please keep in touch with Shad and I through email. We love hearing what you think of our guests and the companies we featured throughout the week. Our email addresses are Fleck@kereport.com and Shad@kereport.com.
- Segment 1 – Matt Geiger, Managing Partner at MJG Capital joins us to first recap his portfolio strategy this year, which has been less transactions. We discuss his outlook for gold, silver and base metal stocks. A couple trends we have seen recently in the sector include larger financings (for select companies) and Yukon being a popular jurisdiction.
- Segment 2 – Tavi Costa, Portfolio Manager at Crescat Capital is up next with a very different portfolio strategy. We focus on Crescat’s Precious Metals SMA Fund where the team has completed 90 investments in the last 2 year. This strategy is focused on small cap, early stage exploration companies that are high risk and high reward. We also discuss how Crescat balances out risk and reward when making investments.
- Segment 3 and 4 – Dan Steffens, President of The Energy Prospectus Group wraps up the show by shifting our focus to the energy sector. We quickly recap the the marco landscape then move to the oil and gas stocks. Dan shares a number of companies ranging from large cap sector leaders down to small scale production, many with near term growth plans.
- Dan has provided all of you with a special $100 discount when signing up for the Energy Prospectus Group. Enter “CF100” when signing up. Click here to visit the Energy Prospectus Group
Exclusive Company Interviews This Week
- Metalla Royalty & Streaming – Acquisition Of A Silver Focused Royalty Portfolio From First Majestic Silver
- Aztec Minerals – Drill Results Continue To Expand The California Zone At The Cervantes Project, Mexico
- FPX Nickel – $12 Million Investment From A New Corporate Strategic Investor
- Rupert Resources – A Dive Into The Ikkari PEA and What Comes Next
- Heliostar Metals – A Major Acquisition Of A Gold Portfolio In Mexico
- Kodiak Copper – A New Gold-Silver Discovery, Beyer Zone, On The MPD Project
- Silver X Mining – Comprehensive Update On Production Growth, Revenue Growth, and Resources Growth
- Awale Resources – New Targets On The Odienné Project and An Update On The Colossal Gold Acquisition
- Calibre Mining – Exploration Focus Fueling Development And Grade-Driven Production Growth
- Fathom Nickel – Comprehensive Company Update At The Gochager Lake And Albert Lake Projects
- Electric Royalties – Forecasting Cash-Flow Positive Next Year, Updates On The Royalty Portfolio
Is Gold Getting Ready to Break Out Over $2100
Avi Gilburt outlines what he is looking to see in the gold and silver market to suggest the next larger-degree rally has begun, after a consolidation of over two years.
https://www.youtube.com/watch?v=EaiPskOM8qE
Sentiment Speaks: Gold And Silver May Be The Outperforming Assets For 2023 by Avi Gilburt
Thanks for sharing that Buzz. That is interesting as Avi G. has not been bullish the metals for many years, and a short-term pullback, before a more medium-term to longer-term move higher in the sector makes sense after the big moves we’ve seen in the metals and mining stocks over the last few months.
Hi Ex, When I think of investing in The Yukon the first thing that comes to mind is how expensive it is to mine in a jurisdiction like that. Just getting food and shelter for a mining crew boggles my imagination and then finding competent people who are willing to work in a remote area and keep them there requires huge amounts of capital. Then there are the treaties with natives and power requirements and transportation accessibility, the list goes on and on not to mention a myriad of unforeseen snafus every company faces in that environment. Any deposit worth mining would have to be at least about 2 to 3 times larger and very high grade than one close to the Canadian or American border. This sort of investing requires a long -term horizon and is more suitable for investors with a buy and hold strategy, which is probably what most people prefer. DT
Hi DT. Yes, agreed, it is expensive to work in the Yukon in the more remote areas for sure, like where Fireweed Metals is working that Matt Geiger touched on, and yes there are many First Nations groups to coordinate with in that area where one needs that social license to operate. To your point many of the more remote deposits found need to be larger than usual, like Western Copper & Gold’s Casino project, Banyan Gold’s growing deposit, or Snowline Gold’s new discovery.
However, there are some companies operating closer to infrastructure that has been in place for some time — like Alexco’s prior operations which are now owned and operated by Hecla, or their neighbors Metallic Minerals, because those are road accessible, with power, and infrastructure at Keno Hill. Nearby Victoria Gold also has fairly good infrastructure and has now embarked on gold production, and to some degree ATAC resources operating nearby those aforementioned deposits has some infrastructure to a point, but I believe still uses heli-assisted work, and seasonal camps.
It is very much the same way in much of the Golden Triangle though, or even parts of popular mining area plays in the Abitibi Greenstone belt or in the cobalt camps of Ontario or the many projects exploring in Newfoundland.
Mining companies need to go where the minerals are, an preferably where less people are, and that often means remote areas on mountain tops, in deserts with no water, in jungles with thick vegetation and rainy season, etc… It’s a tough business, with plenty of potential challenges (jurisdictional taxes, social license, environmental, power, water, labor, etc…) to deal with, simply to extract resources from the ground. We live in a complicated world now though, so that is par for the course…
My Father was a branch manager for a large Canadian food company in Whitehorse during the 1970’s and he had no end of problems with the kind of things you mention above. Some of the big mining camps he catered to closed down because they just couldn’t make a go of it up there.
Market intervention and deregulation of Central Banking also forces long term investing as miners can be capped, suppressed or artificially controlled making small windows of opportunities. That must be balanced against “other costs” inflicted on markets like petroleum prices, labor, currency exchange or other unforeseen items like tariffs. political terrorism, weather, etc.. Sometimes investing in anything appears not profitable. However, the ability to develop a mine with long term profits has to play in the formula and control much of one’s decision. Difficult game we choose to play.
I agree Lakedweller2……………..risk analysis implies being seriously engaged in paying constant attention to a myriad of factors, and their interplay. Like any game, when the puck moves, you have to pay attention to where you think it is going, and act accordingly……………….but every once in a while I find I a gem out there, that is in the nobrainer category, and I go seriously overweight……………until the chart momentum tells me it’s time to take a bit of the table………Chart work trumps all other tools as it removes the emotion of a story !
Look at SGD……………chart is breaking out, it tells me all shareholders are happy owning…….time to just join the party and own a bit…………this doesn’t always have to be rocket science !!
………nice to hear Tavi share share his approach to risk management…….he is a good man !
Good thoughts LarryC, and yes, SGD Snowline Gold has been on quite a tear all year long, bucking the trend in the sector by making new bonanza-grade gold discoveries. It has been nice to see a little life in some of the exploration stocks, and good news finally starting to get a bid in the sector.
Yes, it was great having Tavi on the show again, and always interesting to get his insights on how he manages the portfolio of ~60 stocks at Crescat Capital, and where they see an edge in to investing in the junior exploration stocks.
Thanks to all the KE Report guest contributors for another great week of daily editorials, company interviews with management, and another solid weekend show with Matt & Tavi & Dan.
Also thanks to all the listeners of the podcast and radio show, and those members of the KER crew that post and participate here on the blog, sharing insights with our community. Ever Upward!
Larry:
I am not good on the technicals but I like to know what those that are good, have to say. I don’t trust the market makers (whoever they may be) as I believe they have the ability to influence computers (another JPM gold trader convicted of spoofing trades this week).
But I do own Snowline and have picked up some Tectonic over the last month which has some historic drill results which could be indicative of some good potential.
What also is possibly a game changer is the development of the aerial surveys as they have moved to drones. The increased sophistication just might take a little risk off the “drill scenario” if in fact they can improve target accuracy. That could change the ballgame some in catching cheap prices earlier.
It is continually impressive to see the strength that Silver has had since bottoming at $17.40 in early September and really leading the PM sector higher over the last 3 months. As mentioned previously a number of times, that was a big bell ringing, and eventually in mid to late September most of the gold and silver producers and larger developers got the memo and followed Silver higher, even when Gold was still struggling to bottom.
That was the “non-confirmation” bottom we wanted to see where Gold didn’t technically finish bottoming until that intra-day spike low at $1618 on Nov 4th, but Silver and PM mining stocks didn’t fall out of bed, held onto their gains, and kept clawing their way higher since September.
I asked over a dozen of our guests about this phenomenon, and while some were quite encouraged by this action, many still thought it was up to Gold to lead the move higher, and they were sadly mistaken.
Those same people also weren’t that excited when Silver cleared $19 so quickly after just plumbing recent lows in the mid-$17s, nor did it seem to matter much to them when Silver closed both daily and weekly above the key $21.41 level of resistance (prior support that was tested multiple times the last 2 years). They kept saying, until Silver can clear $22 there was nothing to get excited about. Well in the 2nd week of November Silver did clear $22, but that wasn’t good enough for them. Now silver needed to clear $22 and hold it for a few days or for a weekly close.
Well, it was crystal clear last week when Silver was way over $22 most of the week and even cleared $23 closing last week at $23.25 that it had, (once again), met the requirements of many PM analysts and technicians to be bullish. However, even this week when talking with folks, many still shrugged it off as “that’s nice but my junior gold stocks haven’t really moved much on this move…” and we need to see Gold go higher. What??
The point was Silver was leading… and HAS been leading the charge higher in the PM sector for the last 3 months, and broken through resistance level after resistance level. That is much more germane for the trading action in the PM mining stocks than what Gold did. Clearly, the major and mid-tier producers, the smaller producers, and the larger developers WERE also responding for the last 3 months to the upside. Heck, the mining ETFs went up 40%, and many individual stocks are up much more than that up 50%-100% off their September lows, at a time when most were bracing for lower lows and further pain from tax loss selling. The junior penny dreadful explorers are typically the last to move in the food chain, but they will, and many have actually exploded higher recently.
It is just crazy to see all the reactions (or lack of reactions) about this recent leg higher on many mining stock websites and forums, on Twitter, in comments on YouTube videos, and in talking every week with dozens of company executive teams, fund managers, newsletter writers, etc…. It is really like everyone has blanket amnesia, that it is almost always the big boy producers and royalty companies that start moving first when metals prices take off, and then the smaller producers, because they can immediately monetize the higher commodity prices (and not to mention lately the lower energy prices are helping out).
Then the developers start to move next in the risk profile, because their project economics are immediately helped by the higher metals prices. Then eventually investors interest goes down the risk / reward food chain to the riskiest plays – the exploration stocks and people start factoring in blue-sky upside for the drill plays growing their resources.
It’s like that every time, so one would think people would position their portfolios accordingly during bottoming periods. If you know the producers, royalty companies, and developers are going to move first, before the vast majority of explorers, then why in the world are people not positioned in the silver and gold producers and royalty companies and larger developers? Sadly, but not surprisingly, many are still myopically judging the health of the PM sector through their narrow universe of penny dreadful explorers that are not yet moving, despite all the other signals being in place. There have been a few higher quality exploration stocks lately that are starting to spring to life though with outsized moves, so buying is starting to filter down in the sector, but it’s just amazing that people are not positioned correctly in the first horses to leave the gate when they had plenty of time to get positioned.
In addition, it is also like many have blanket amnesia about the mining stocks tracking Silver much more closely than Gold, and that during bullish sector phases, Silver outperforms Gold, as evidenced by the gold:silver ratio coming down sub-80 again lately. This is what blows my mind with people that just only have tunnel-vision on gold and gold stocks, when it is almost always the silver stocks that outperform the gold stocks on big rips higher, and eventually it is silver coming from far oversold, to outperforming gold that produces the best investing runs in this sector. If people are bullish on the PM sector, then they should be rooting for Silver to outperform Gold like we’ve been seeing the last 3 months, and if they are bullish on gold stocks, then they are nuts not to own the silver silver stocks which repeatedly and consistently will outperform during bullish periods, (just like they outperform to the downside during bearish periods).
Well, for those doubters when Silver bounced from $17.40 up to $20 in September, that then were unmoved when Silver got back close to key $21.41 resistance in October, but finally blasted through it in November, and then also got above $22 psychological resistance in both mid and late November…. It should now be abundantly clear after Silver closed last week above $23 at $23.25, and then even higher to end this week at $23.72, that the PMs have put in their bottom back in September.
Those waiting on the sidelines and cowering in cash the last few months chose poorly. Those claiming back in September we were going to see $14 Silver or $1450 or $1375 Gold were way too bearish and were suffering from recency bias. No trend lasts forever, and no… this was not going to be repeat of 2013 all over again….
The most glaring contrarian buying signals came from our most vocal posters that were advocating for everyone “to Sell Everything And Go To Cash” during the lows in September… (along with those that claimed that was the “right” strategy) at the exact wrong time. That uber-bearishness in sentiment that was so pervasive all over the place, and yet was not tethered to any logical fundamental, technical, or quantitative thesis, but rather… tied to emotions and gut feelings, was a huge bell ringing from the ding-dongs for those that had the ears to hear it, or eyes to see it.
As mentioned repeatedly at that time, that was not the time to be selling everything and going into Cash, but rather, that was the time to be deploying one’s Cash, and buying fantastic risk/reward setups and silly valuations in the resource stocks. Anyone looking logically and unemotionally at the valuations in the metals and miners, or breadth indicators like the BPGDM in single digits, or the Daily Sentiment indicator for gold and silver being in single digits, or companies valued only for their cash in the bank or at ridiculous enterprise values, knew that those conditions would not persist. The logical resolution from deeply oversold levels that make no sense, and terrible breadth and sentiment readings, is a big move higher as things start get rerated up once again.
The reality is, once again, like so many times before, most investors are really not cut out to buy when valuations are low, and prefer getting in once big double-digit or triple-digit moves and short squeezes have pushed things much higher, so that they feel comfortable finally putting a toe in the water. The reality is that most investors do not buy low, and sell high; but rather they prefer to cry low, and buy high. Rinse and repeat…
As for the Silver chart for the last few months, it has been a thing of beauty.
Just look at that move from $17.40 in early September to the weekly close yesterday on Dec 9th at $23.72.
Gotta love it! 😉
Speaking of the (BPGDM) Gold Miners Bullish Percentage Index up above as key tell a few months back, here is a good chart of the BPGDM that a contributor @thesunshinekid over at ceo.ca posted recently:
I had brought up the quick reversal in Silver, the bad market breadth in the mining stocks, and the BPGDM as another signal worth noting in late September, when many were still saying to sell, sell, sell.
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@Excelsior – Sep 24, 2022
“It was also encouraging the last 2 weeks to see Silver bounce off $17.40 and then springboard back up into the mid-$19s again, but it lost $19 support already to close this week at $18.91.”
“There is a lot of bearishness out there, and sentiment is getting about as bad as it was in 2015 again, so that is actually a contrarian bullish signal. The BPGDM chart going down to a reading of 7 is also a contrarian bullish signal, as the market breadth in the gold stocks is fugly. There are other readings of gold stocks below their 200 day moving averages, or making new 52 week lows that are now so bearish, that they look contrarily bullish. Still, the markets can stay oversold and irrational longer than many can stay solvent, so these conditions could still deteriorate further. The BPGDM could go to 0 and stay there for a month like it did a few years ago, so it isn’t a great timing tool, but at these low levels, it is definitely showing we are closer to at turn than we are a whole leg lower. So while we could still see things sell off further, scaling into positions into this weakness is a solid approach for those that like to catch tradable rallies.”
It is very confusing as one day last week Summa was up 15% and Impact down 12%. On the other hand, Surge Battery that I have held for only about 5 weeks is up over 100% while Emerita has been trashed completely over the last 11 months when it is largely a known brown fields. Then Magna Mining is up 30-50% over a short period of time and is somewhat similar to Emerita. Sometimes I feel fundamentals are not relevant when bank solvency is at issue.
One of the problems that we face, and it is huge in The Western World with their control of the media, is we aren’t told the importance of commodities like oil, natural gas, or precious metal. These subjects are taboo because they are seen as something that was part of an industrial polluting society. Guess what if you can’t get oil, natural gas, or enriched uranium, because your government thinks wind and solar are the primary energy sources for the economy, and they no longer produce these necessities of life, we will find ourselves living in The Middle Ages. America imports 50% of its enriched uranium from Russia. When the sun doesn’t shine and the wind doesn’t blow, you have nothing to back up an emergency situation, which happens on a continual basis and every winter. DT
Great points on the necessity of raw materials, and how mining is taboo or shunned by many politicians, main stream media outlets, and air-headed celebrities that think they have the moral high ground with regards to extractive industries vs climate change. It lacks all logic and common sense, but it doesn’t stop them from running fear-porn campaigns on the dangers of pulling metals and minerals out of the ground (always focusing on the worst-case scenarios).
The irony and what they fail to realize is that everything they are using to communicate and shun the big bad mining companies (cars, laptops, smart phones, tvs, airplanes, microphones, cameras, etc…) is all thanks to mining providing the raw materials to manufacturing in the first place.
For the building blocks of modern human society –> If it’s not grown, then it’s mined.
Where do these idiots think all these products they use in daily life (appliances, computers, vehicles, electronic gadgets, batteries, electricity, etc..) come from anyway? Companies need to be able to profitably pull the metals and minerals out of the ground, or it’s game over, and back to the dark ages (or worse).
As for Oil, Nat Gas, and Uranium; they aren’t going away anytime soon, and are not being completely replaced with solar or wind or hydro anytime soon. The US imports about 80%-90% of it’s Uranium from Russia or ex-Russian satellite countries like Kazakhstan and Kirgizstan. Nuclear power is still about 18%-20% of the overall US energy mix, and about 15% and growing on a global basis.
The U308 and UF6 and enriched uranium fuel supplies have been mopped up over the last few years in the spot markets or from carry traders, and the underfeeding from enrichers is simply not there like it was in the prior decade as a secondary source of supply feed.
As a result, utility companies are going to need to see the light soon (which they are) and start setting up longer term contracting agreements with the Uranium mining companies at higher prices than where spot prices have been or are today, (more like $60+), to ensure the yellowcake is available for processing and enriching for the whole fuel cycle. This will be a continued boon to the more advanced prior producers or near-production U stocks… especially the ones operating in the US and Canada.
The Uranium Bull Market And The Coming Of The Second Atomic Age
The Oregon Group
“Uranium is at the start of a 10-year bull market, according to our new report. The Oregon Group forecasts the uranium market will be positively impacted by a large net increase in global nuclear reactors, which require uranium as fuel.”
“As the uranium sector has gained pace, we’ve hit up our industry contacts and combined their latest knowledge with our own insight to bring you this uranium report. Whether you’re new to uranium, or you’re looking for new ideas on getting positioned, there’s something in there for you…”
Some key metrics from that report on global nuclear reactors:
> Total global nuclear reactors in operation currently: 437
Total global nuclear reactors currently under construction: 59
Total global nuclear reactors planned: 100
Total global nuclear reactors proposed: 334
Javier Blas @JavierBlas 8:24 AM · Dec 7, 2022 – Twitter
“US *total* crude oil inventories (both commercial and the Strategic Petroleum Reserve) have fallen to a 36-year low, dropping below the previous bottom set in 2001.”
More Biden Oil And Gas Restrictions Are On The Horizon
By Felicity Bradstock – OilPrice.com – Dec 10, 2022
“Despite pleading with oil and gas companies to boost their output in recent months, to tackle global shortages and rising prices, President Biden is once again hitting the industry hard by proposing a greater emissions reduction in operations…”
https://oilprice.com/Energy/Crude-Oil/More-Biden-Oil-And-Gas-Restrictions-Are-On-The-Horizon.html
Makes me wonder if the next Fed meeting might have some admissions about serious economic issues that everyone knows exist. They will still have to pick a scapegoat, but they are good at that.
As for the Fed meeting this next week, I’d anticipate more of the same with tough talk on fighting inflation, but on slowing down the rate of the hikes so that they don’t hurt the economic growth too much or hike too much (even though it’s a bit late for that, and they’ve already overdone it lately, but it’s not entirely obvious yet due to the lagging effects). We’ll get the 50 basis point hike, and then look forward to Q1 of 2023 where we may see 1 or 2 more 25 basis point hikes.
However, as Craig Hemke outlined on Thursday’s interview, they’ve done a lot of talking in the past only to reverse course throwing off most of the main stream financial media lemmings.
– Bernanke famously tried to talk down concerns of the housing market bubble in 2006, and 2007, only for it to implode in 2008.
– The Fed goons tried to talk tough about raising interest rates in 2018, and almost everyone on Wall Street believed them that they’d take it to 5%, only before the original Powell pivot, where they paused for 6 months, and then started cutting rates in 2019, fueling the next leg of the PM bull market higher.
– The Fedsters tried to quell concerns about rising inflation, by labeling it is just “transitory” for a few months back in Feb/Mar of 2021, because they didn’t want investors fleeing the bond market before they’d geared up their tapering program.
– In late 2021 they downplayed over and over again inflation trending higher, and that they’d need to speed up their tapering plan, and persisted with that silliness into early 2022. Finally they admitted that inflation was not transitory, and was continuing to ratchet higher, and they decided to escalate their tapering process to get it done by March of this year. (something the bobbleheads on financial media assured us wouldn’t happen as that was not what the Fed had been messaging).
– Then when thinking analysts pointed out how insanely far behind the curve the Fed was (once again), and that they’d need to be much more aggressive than just 25 basis point rate hikes, they tried to quell the market nerves again by messaging that larger hikes were not on the table. Of course, we know how that worked out and they eventually jumped from 25 basis point hikes to 50 basis point hikes “surprising” everyone, and then of course amped up the tightening even further to 75 basis point hikes, something that no probability of happening this year, if you took these banksters at their word earlier in the year. It got so bad with their disinformation campaign, that they had to leak the news to the Wall Street Journal on the last 2 rate hikes to prepare the markets for doing something different than they had messaged.
– They’ve explicitly stated they wanted to hurt demand by impacting the wealth effect of housing and the stocks markets, (which is one thing they actually kept their word on and mission accomplished), but now they are still playing with the idea of a soft landing or not hiking too much to hurt the economy. You can’t make this garbage up, but it’s the world we are living in.
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So to Craig’s point, and it is a good one…. The Fed will talk tough until early next year, giving everyone the impression they’ll keep hiking until they get the Fed funds rate higher than inflation. However, when the economic chickens come home to roost next year, and the ongoing recession worsens, and the cracks in the labor markets widen, and manufacturing stays under pressure like it has the last 8 months in a row, and the housing market keeps imploding to where people and politicians get worried, then they’ll finally need to concede that they’ve reached their terminal rate.
This is the point where their rhetoric will shift to another “Powell Pause” and they’ll suggest that they need time to see how their policies are taking root (shivering their knees under the table as they realize they are out of ammo unable to hike rates any further, and crossing their fingers and hoping to the gods of banking that inflation keeps coming down). If the recession does worsen though by mid-2023, and if the markets and economy stay under pressure, then “out of nowhere” the Fed will concede that maybe they need to intervene again and either start doing QE again (even though they’ll swear it is not QE but for liquidity like what they did from 2019-2021… even though it obviously is QE), or they’ll be forced to cut rates by later in 2023.
Clueless financial media outlets will be so “surprised” once again… and make ridiculous claims like nobody could have seen this coming… just like they did with the housing market, with inflation, with upping the pace of tapering, and with the historic aggressive upsizing of the rate hike amounts this year. Anyone with 2 brain cells to rub together could have spotted all of those trends playing out far in advance, and many commentators here did call them long before the sheeple woke up to the game that has been played with them trying to jawbone the markets into submission.
This is a very bullish set up for the PM sector and should be a nice tailwind for Gold, Silver, and PM mining stocks in mid 2023 and into 2024.
For those that missed Craig Hemke’s interview on Thursday, it is worth reviewing as it relates to this discussion, and how we are likely seeing a similar analog to what happened around Fedspectations in late 2018, and the reality that set in by mid 2019.
Up, Up, and Away
Jeffrey Gundlach – DoubleLine Capital – Dec 8, 2022 #VIDEO
“In his webcast “Up, Up and Away,” titled in reference to the 375-basis point hike in the target federal funds rate (0:06), DoubleLine CEO and Chief Investment Officer Jeffrey Gundlach surveys a raft of data points, finding, among other signs, the U.S. economy within months of recession; headline inflation continuing to recede; peaking interest rates; and interesting risk-reward opportunities in fixed income, especially in mortgage-backed securities. The webcast was recorded Dec. 6, 2022.”
“Early in the webcast, Mr. Gundlach reviews (2:09) the four episodes of quantitative easing (QE), including the $4.7 trillion QE in 2020-2022 “financing the most outrageous budget deficit in U.S. history.” He notes that equities (4:03), as represented by the S&P 500 Index, which “seem to follow the shape of the Fed’s balance sheet,” have rolled over against a backdrop of balance-sheet shrinkage, albeit at a slow pace. While market prices imply a federal funds terminal rate of 5% (6:02), he doubts the Fed will make it to that level. “I think the data is weakening too rapidly.”
Housing ‘Super Bubble’ Is Popping, Here’s How To Survive The ‘True Recession’ In 2023 – Ted Oakley
Kitco News w/ David Lin – Dec 8, 2022
“Ted Oakley, Founder and Managing Partner at Oxbow Advisors, discusses the FOMC’s upcoming meeting, labor markets, how to select good companies to invest in, a potential housing market downturn, and the upcoming recession in 2023. He spoke with David Lin, Anchor and Producer at Kitco News. ”
Here’s an article covering the disconnect between market expectations (mostly through Fed funds futures bets) on a rate cut in the latter part of next year vs. the Fed’s rhetoric about continuing to hike rates well into next year and keeping them high without cutting them back to keep fighting inflation.
It does illustrate the tug-o-war in market expectations of what will actually play out versus the lipservice from the banksters about what the Fedspectations should be. There are many assumptions being made by all parties involved in this discussion, including some media bias on expected outcomes from Bloomberg. One thing is for sure — 2023 is going to be a wildly turbulent year.
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Fed’s Message That Rates Will Stay on Hold for ‘Some Time’ Clashes With 2023 Rate-Cut Bets
Craig Torres and Liz Capo McCormick – Bloomberg – Sun, December 11, 2022
“After the fastest tightening of monetary policy since the 1980s, the central bank looks set on Wednesday to increase its benchmark rate by 50 basis points in a downshift after four straight 75 basis-point moves to curb inflation.”
“Such a move — widely flagged by officials — would lift rates to a 4.25% to 4.5% target range, the highest level since 2007. They’re also likely to signal another 50 basis points of tightening next year, according to economists surveyed by Bloomberg, and an expectation that once they reach that peak, they’ll stay on hold through all of 2023.”
“Financial markets agree on the near-term vision, but see a rapid retreat from peak rates later next year. That clash could be because investors expect price pressures to ease faster than the Fed, which worries inflation will prove sticky after getting burned by a bad call it would be transitory. It could also reflect bets that rising unemployment will become a more weighty Fed concern.”
“The Fed has been pushing the message that the policy rate is likely to remain at its peak rate for a while,” said Conrad DeQuadros, senior economic adviser at Brean Capital LLC. “That is the part of the message that the market has consistently not gotten….”
“Financial markets ‘are simply pricing in a normal business cycle,’ said Scott Thiel, chief fixed income strategist at BlackRock Inc, the world’s largest asset manager. A competing view says supply constraints will be an inflationary force for months and maybe years as redrawn supply lines and geopolitics affect critical inputs from chips and workforce talent to oil and other commodities.”
“Swaps traders currently bet the funds rate will crest just under 5% in the May-June period, with a full quarter point reduction coming through by around November and the policy rate ending next year at about 4.5%.”
“The futures curve is a manifestation of the success or failure of the FOMC’s communication policy,” said John Roberts, the Fed Board’s former chief macro modeler who know now runs a blog and consults with investment managers, referring to the Federal Open Market Committee.
“It’s also not only the timing for the start of cuts but just how much money market traders see coming that is beyond the historic norms. The over 200 basis points of upcoming Fed rate reductions now priced-into futures markets is the most ahead of any policy easing cycle back through 1989, according to Citigroup Inc.”
https://finance.yahoo.com/news/fed-message-rates-stay-hold-150000945.html
Not surprisingly, the discussion was all centered on just inflation expectations in that article, and there was little mention of the real 800 lb gorilla in the room with the Fed — Recession. To view all decisions merely through the lens of inflation, and not counterbalancing that with all the data points coming in showing the economic slowdown and malaise is only going to get worse moving into next year, is a one-sided debate.
If the housing market, manufacturing market, labor market, and stock market continue to get slammed next year, it will create a public outcry and market tantrum that eventually gets the Fed to abandon their best laid plans of keeping rates high for all of next year and into the following year. The Fed is always overly optimistic on the ability to get their plans executed, and repeatedly have to bail and reverse course before they initially plan to in messaging. Remember when “They weren’t even thinking about… thinking about raising rates until 2023?”
These banksters have a rich history of messaging one thing, and then when push comes to shove, having to take a much different track (as noted above in a prior post with multiple glaring examples like being dead wrong about the housing bubble in 2007-2007 right before the implosion in 2008, or about inflation being just transitory or the amount inflation would increase and stick, or having to escalate their tapering program and get it wrapped up way ahead of the initial schedule, or the amount of the rate hikes they need to do to catch up being way larger then initially messaged, and on… and on…) If the Fed is forced to inevitably intervene again later next year, they sure won’t be messaging about it ahead of time, and will do what they always do and wait until it is a crisis before admitting they have to reverse course. (just like the Bank of England and Bank of Japan had to do just a few months ago when the rubber hit the road and the market risks became too great).
As for the obsession with inflation, sure, the year over year inflation comps should start trending down moving forward, and we’ve likely seen peak inflation earlier this late summer. However, if the terminal Fed funds rate is projected to go up to 4.75%-5%, but if inflation stays in the 5.5%-7% range we’ll still have negative real rates, and to Axel Merk’s point last on last weekend’s show, the issue may be inflation will still also be quite volatile and bounce around a lot, creating false moves in both directions and more fear, uncertainty, and doubt in the markets.
Regardless, to pen an article like Bloomberg did, keeping the sole discussion about Fed policy only tethered around inflation, and not discussing the potential ramifications of the ongoing slowdown into a worse recession next year, is a glass-half-full take on it, but it is not the only factor that will shape Fed policy moving into 2023.
The Fed say’s Lake did it, he jinxed us. Now the whole investment industry will be talking about The Fed jinx for the next 6 months. “Did you see that The Reserve Board finally met the dilemma by thinking up a new and ingenious scheme, it’s called The Lake Jinx!” LOL! DT😜👍🐱🚀🐱👓
Gareth Soloway Reveals 2023’s Best Asset
Kitco News w/ David Lin – Dec 9, 2022
“In this Outlook 2023 Live event hosted David Lin, Gareth will share his thoughts on what investors can expect in the crypto markets, equity markets, and economy in 2023. He’ll also share his key price support and resistance levels for Gold, Silver, Bitcoin and Ethereum, and more.”
Wow Ex. Thx. For posting Gareth…He nailed it!!
Sure thing Ann. Good to see you posting here on the KER again!
Yeah, Gareth S. has nailed a number of markets (famously in his bearish Bitcoin call during peak mania a year ago, which he took a lot of heat for in the cryptoverse, but was dead on), and the pullback in general equities since the end of last year, and some of his short to medium-term calls on precious metals and base metals over the last 2 years. Nobody gets every call correct, but he’s been far more accurate than many technicians have been.
Cheers!
Most think they will drag things out until around May, then pivot. But I am not sure if the rest of the world is going to continue to support the US false narrative. Looks like oil is going off the Petro dollar which leaves the US blowing smoke at home. Germany and the Ukraine are looking at a cold winter and China is working deals with the Saudis. Russia working on the gold based exchange along with the Brics and China. Credit Suisse is bust with derivatives as well as all the western central banking participants. Even the BIS is waving flags. The paper metals markets are sucking wind and running out of physical.
How much longer can The Fed sit on the barrel of dynamite with the burning fuse getting closer.
I bet the Fed hike’s by 25 basis points in Q1 (maybe 2 x 25 basis point hikes in early Feb and Mar), then pauses for Q2 and most of Q3, and then intervenes through more QE or a rate cut by Q4 of next year as things will have hit a fever pitch of concern by Q3 forcing their hand.
That should be a constructive backdrop for the PMs, but we’ll see how it goes. Whatever happens, it should be another turbulent year with the yield curve having been inverted for some time now, and many signs pointing to a recession already well underway and getting worse by the middle of next year.
Yes. Recession blues. More people out of work. Probably dropped from roles and the all time great unemployment rate continues. Not sure I can support many more relatives that don’t exist in government stats.
The power of those dictating policy to Powell is Dollar based.
They maintain it, switch to another basis, or lose power.
China’s Xi calls for oil trade in yuan at Gulf summit in Riyadh
https://www.reuters.com/world/saudi-arabia-gathers-chinas-xi-with-arab-leaders-new-era-ties-2022-12-09/
China & Saudi Arabia, massive realignment.
https://www.youtube.com/watch?v=aMeVqy9cFLI
Saudi Arabia – China Ties: Several Investment Agreements, MoUs Signed During President Xi’s Visit
December 9, 2022 – China Briefing
On December 8, Chinese President Xi Jinping and King Salman bin Abdulaziz Al Saud signed a “comprehensive strategic partnership agreement” at Al Yamamah Palace where Crown Prince Mohammed bin Salman hosted a lavish reception. The same day, state media – Saudi Press Agency (SPA) – reported that China and Saudi Arabia had signed 34 investment agreements on the previous day within the framework of President Xi’s visit. The agreements cover “several sectors in the fields of green energy, green hydrogen, photovoltaic energy, information technology, cloud services, transportation, logistics, medical industries, housing and construction factories”. The SPA did not elaborate on details.
“Besides these 34 agreements, Saudi state media stated that China and Saudi Arabia were set to sign deals valued at around US$30 billion on December 8. A deal over Huawei Technologies will bring cloud computing, data centers, and high-tech complexes in Saudi cities, as reported in Al Jazeera, which attributed it to Saudi officials.”
https://www.china-briefing.com/news/saudi-arabia-china-relations-xi-jinping-visit/
Harry St. John Philby (Kim’s father) and Saudi Oil
https://www.aramcoexpats.com/articles/the-king-s-man-before-oil-part-i/
The MBS of his day: “When Ibn Saud scaled the walls of Riyadh in 1902, it began his celebrated passage to becoming King of Saudi Arabia.”
Hi Ex, check your e-mail in box. Cheers DT
Hi DT. I just checked it and replied back to you. Thanks for the heads up buddy!
‘Be Careful What You Wish For’
Jesse Felder – The Felder Report – 12/10/2022
Gold’s Tailwinds Becoming Stronger into Fed Week
David Erfle – The Junior Miner Junky – Friday December 9, 2022
“After December began with an explosive move to the upside, Gold Futures are currently consolidating in a short-term consolidation triangle between the double top at $1825, down to the $1,780 floor that has been this week’s range low. This also aligns to the trendline support that began with the November 3rd swing low. Yet, the Silver price continues to bullishly show relative strength to gold, following a 16% gain in November.”
“Last week, the closely watched gold/silver ratio printed a weekly close below 80. A sustained move below this key level is needed to bring more bulls and momentum traders back into this tiny sector. Along with the silver price climbing well above the key $22 level, bullish sentiment has been building in the metal as the market continues to see record physical demand for 2022.”
“As gold prices pulled back to support at $1780 after a better-than-expected ISM service sector activity report for November to begin the week, weakness is being bought in the safe-haven metal while equities are showing signs of topping. With investors sensing the main threat next year being slow or negative economic growth, replacing inflation as their worst fear, a quiet flight to safety is taking place as traders attempt to front run the likely coming recession.”
https://mailchi.mp/5574deb57abd/david-erfle-weekly-gold-miner-sector-op-ed-1601454
Crypto.com CEO Has History Of Red Flags Including Bankruptcy And Quick Exits
Rohan Goswami & MacKenzie Sigalos – Friday, Dec 9 2022
– Before founding Crypto.com, Kris Marszalek was involved in multiple ventures that ended in collapse, including one where suppliers claimed they were unable to access their earnings.
– Over a decade ago, Marszalek and his business partner were paid millions of dollars by their manufacturing company, months before it entered bankruptcy.
– In a tweet thread published ahead of this story, Marszalek wrote “startups are hard,” and “you will fail over and over again.”
“The crypto markets have been in freefall for much of the year, with high-profile names spiraling into bankruptcy. When FTX failed last month just after founder Sam Bankman-Fried said the crypto exchange’s assets were fine, trust across the industry evaporated.”
“While no evidence has emerged of wrongdoing at Crypto.com, Marszalek’s business history is replete with red flags. Following the collapse of a prior company in 2009, a judge called Marszalek’s testimony unreliable. His business activities before 2016 — the year he founded what would become Crypto.com — involved a multimillion-dollar settlement over claims of defective products, corporate bankruptcy and an e-commerce company that failed shortly after a blowout marketing campaign left sellers unable to access their money.”
“Court records, public filings and offshore database leaks reveal a businessman who moved from industry to industry, rebooting quickly when a venture would fail. He started in manufacturing, producing data storage products for white label sale, then moved into e-commerce, and finally into crypto.”
Yeah sure…. Kris Marszalek sounds like the kind of guy with a track record of keeping peoples funds safe…right? If something were to go wrong with Crypto.com, it sure would be a surprise…. 😉
You can’t make this crap up. Why would anyone want to take on the 3rd party risk of a crypto exchange like Crypto.com with a dubious business flunkie at the helm, especially in light of about a half dozen other exchanges also going belly up over the last few years? Why not just hold the crypto in cold storage on a digital wallet and cut out the 3rd party risk completely? People that claim decentralization is a key benefit of the cryptoverse, are nullifying all of that when they go onto a centralized exchange that exposes them to plenty of types of 3rd party risks. That’s totally nuts!
Here’s another crypto-debacle that is still unfolding in then NFT space, that doesn’t instill much confidence in many of these hot “digital assets.”
________________________________________________________________________________________________
Kevin Hart, Jimmy Fallon, Madonna Named in Class-Action Suit Alleging Bored Ape Yacht Club NFT Fraud ‘Scheme’
Shirley Halperin – Variety – December 11, 2022
“A class-action lawsuit contends that stakeholders in Yuga Labs, the parent company of NFT series Bored Ape Yacht Club and its affiliated digital products, engaged in a conspiracy with celebrities to defraud potential investors.”
“In the complaint, filed Dec. 8 in federal district court in L.A., Yuga partners — including veteran music manager Guy Oseary — are named among the 37 defendants, who include Kevin Hart, Gwyneth Paltrow, Madonna, Justin Bieber, Serena Williams, Jimmy Fallon, Paris Hilton, Snoop Dogg, The Weeknd, Post Malone and NBA star Steph Curry. Also named is Amy Wu, who recently exited troubled cyptocurrency exchange FTX and served as a consultant and board member of the ApeDAO.”
“Plaintiffs Adonis Real and Adam Titcher claim that in promoting or endorsing the Bored Ape community through social media and other mediums, these entertainers and athletes caused the value of non-fungible tokens (NFTs) to balloon to “artificially inflated and distorted prices” and engaged in misleading promotions that did not disclose alleged financial compensation. The two also allege that the “scheme” involved MoonPay, which facilitated transfers of ownership to the celebrities named, some of whom were backers of the service. One such investor named is Fallon, whose on-air name-check of MoonPay as ‘the PayPal of crypto’ on a Nov. 11, 2021.”
https://www.yahoo.com/entertainment/kevin-hart-jimmy-fallon-madonna-122608327.html
How can anyone investing with the “Bored Ape” community or “MoonPay” take themselves seriously, or be surprised when the investment landscape in these digital assets implodes?
🦍🦧🚀🤷♂️
Hi Ex, Being sold out is part of understanding the market, big investors and small investors who believe in the new economic era and count themselves as millionaires or billionaires to be, will find themselves surrounded by others fighting to sell and no one thinking to buy. DT😢
Yes DT – It has been quite the stampede indeed, out of cryptos over the last year.
All of the HODLer’s (Hold On for Dear Life) maximalists became (RFDL) Run For Dear Life realists.
Their impermeable strong “Diamond Hands” became the proverbial “Butter Fingers.”
https://i.etsystatic.com/13491859/r/il/024c71/2904435612/il_1588xN.2904435612_iv6z.jpg
Their cocky retort to many in Precious Metals space was to “Have Fun Staying Poor.” Ironically, many of the crypto herd that bought much higher, ended up embodying the slogan they so willingly threw at others or wore in catchy sweatshirts like this.
https://images.mysimplyshirt.com/2021/03/bitcoin-have-fun-staying-poor-crypto-2021-shirt-sweater.jpg
>> I’m sure we’ll see another wave of headstrong euphoria rise out of these crypto incineration ashes once again though… as crypto, in one form or fashion is here to stay. Maybe this next time, they’ll dial back the hubris a bit.
These are not the type of drill results most companies want to report:
Possibly good copper grades.
Haha! Good one Lakedweller2.
I think I last posted this Brixton Metals chart in June. It consists of two (unbelievably) superimposed modified Schiff pitchforks and now a breakout (times 2 I guess)…
https://stockcharts.com/h-sc/ui?s=BBB.V&p=W&yr=5&mn=11&dy=0&id=p13832601804&a=748708237
The fork that provided the low in July now implies a move to .48…
https://stockcharts.com/h-sc/ui?s=BBB.V&p=W&yr=5&mn=0&dy=0&id=p55311965423&a=1061026861
Here it is with another pertinent fork:
https://stockcharts.com/h-sc/ui?s=BBB.V&p=W&yr=5&mn=0&dy=0&id=p55311965423&a=1308461434
Silver’s weekly RSI broke out to an 18 month high…
https://stockcharts.com/h-sc/ui?s=%24SILVER&p=W&yr=5&mn=0&dy=0&id=p60269845847&a=1199723462
It is going to be Monday and that is not good. I am heading into week of 3 of range bound downward movement. I hope some one has a better algo.
Honest question for Craig, as I don’t know. He said the Plunge Protection Team was tied to the Exchange Stabilization Fund. I always thought they were the Council of Economic Advisors to the President. Just looking where to put them as the ESF can’t be audited like The Fed. But I think the Council of Economic Advisors would only have a budget to get them to DC and back to where ever they came from like Wall Street. Just wondering
I don’t know about it being tied to the ESF but the Working Group on Financial Markets (PPT) is anti market shit courtesy of that FDR loving RINO Ronald Reagan.
I am leaning more towards the metals and miners beginning a 1.5 to 2 year bubble phase imminently.
The miners have based out for 7 years. To me, this looks very similar to how TSLA based out for about 7 years (~2013-2020) before it went up 25x+ in the span of 1.5 years. (Check out the movement of TSLA’s 50 and 100 WMAs and the number of crosses over that 7 year period–silver and the mining stocks MAs look eerily similar.) Even the dip in TSLA before that epic ran began is very similar to the dip the mining stocks suffered this year. While the metals and miners could continue to run higher (just like TSLA) after 1.5 years, you can bet I will be selling a significant chunk of my mining position into a crescendo around Jan. 2024.
all that being said, the next 3-4 weeks are critical IMO. I think if the metals and miners fail to make a significantly higher high during that window, the odds increase significantly that we will be basing out for another 6-9 months (although the absolute lows are almost certainly behind us).
For the first time in years, Avi Gilburt has turned positive on gold & silver. Calling for short-term pullback, probably to coincide with conventional selloff, then off to the races for 2023.