From The Maven Letter: 26 October 2023
It’s rough out there. Gold has held its recent gains, trading today around $1980 per oz., but gold stocks still can’t attract investor interest. Investors just don’t see enough risk on the horizon to start positioning for it.
In the meantime, the 10-year yield bested 5% on Monday for the first time since global economic strengthen fueled by the rise of China dimmed interest in Treasuries enough that yields briefly reached 5% back in 2006.
Today it’s not such a simple story. Economic strength is playing a role in pushing yields higher – investors continue to favour stocks to bonds – but structure oversupply is the bigger factor.
That the pool of buyers for US Treasuries is shrinking while America’s need to issue debt keeps rising is a slow change. And feel free to opine against this statement but I think it will be very difficult to wean America off its reliance on debt: it’s unlikely Congress can materially cut spending or raise taxes. Republicans will hold firm against tax increases, Democrats will hold firm against cuts to entitlements, military spending is unlikely to go down, and
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From Evergreen Investing: September 2023
The term “paradigm shift” was first coined by American philosopher Thomas Kuhn in his 1962 book The Structure of Scientific Revolutions. It describes fundamental change in the basic concepts of something and in the resulting practices of how that thing works or can be done.
The box above, taken from good old Investopedia, sums up how paradigm shifts play out for investors. New ways of thinking or doing that totally revamp old orders erase some investments while sending others soaring.
Streaming services annihilated CDs/music stores and necessitated huge changes for cable TV operators but made Spotify and others into huge successes. Online shopping took a huge bite out of the market for brick and mortar stores, while Amazon soared.
Those are smaller paradigm shifts, which make for good simple examples.
The green transition is not small. For better analogues of scale and timing/duration of impact, we need to look to past big paradigm shifts.
The two I will lean on today are the rise of the internet and the rise of China. There are other examples, to be sure, such as the invention of the automobile, cryptocurrencies, antibiotics, and the Great Recession (which shifted many
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From The Silver Stock Investor | October 2023
In my book The Great Silver Bull, I examine how silver has behaved in previous bull markets.
I outlined in this month’s intro how there are a number of forces acting right now that contribute to silver’s volatility and weakness.
With this in mind let’s review and analyze silver’s two previous bull markets to glean some clues on how it’s acted, and what may still lie ahead.
I think the single best analog we have for a silver bull market was its dramatic run in the 1970s. It quite clearly ran from 1971 until 1980. There were a few impressive rallies that took place in the 80s and 90s, but they were relatively short lived, and I wouldn’t consider them to be true bull markets.
Then in 2001 silver embarked on a major bull run which peaked in 2011. Few people agree on whether that was a self-contained bull market or part of something larger. I’m in the latter camp. I think that was simply the first half of a secular bull. In my view the period between 2011 and late 2015, when silver bottomed near $14
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From The Maven Letter: 11 October 2023
Metals markets are boring boring boring. A few stocks are doing well but all others are sideways at best, sliding if worse. And there’s no reason to think this will change soon.
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Metals move when shortages come to the fore. Many metals will move into shortage over the next few years but they are not there yet
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Metals move when speculators jump in ahead of shortages. This isn’t happening because (1) investors use this tactic when they see global growth ahead and growth is uncertain and (2) speculators have all kinds of other options (AI, biotech, etc)
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November and December are rarely good months for metals. That goes for all metals, but especially for gold. As the chart below shows, the last metals bull market reduced the weak seasonality of the end of the year but if you look just at the last 5 years or look across 30 years (so the last bull market is diluted) the pattern is the same: gold slides into the end of the year
Of course, seasonality is only the undercurrent. Overtones matter
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From The Silver Stock Investor | September 2023
In my last few issues I discussed the technologies involved in solar panels, and how they not only need silver, but require increasing amounts of the precious metal. I also examined that increasing demand and why it looks primed to continue climbing unabated for years, if not decades.
In this article I’m going to take a stab at whether we’re going to have enough silver to meet the growing demands being forecast.
First let’s start with what we know.
Back in 2014 industrial demand was 43.6% of total demand. By 2020, that had reached 50%. This year it’s forecast by The Silver Institute to maintain that level of about 50%. Unless investment demand surprises dramatically to the upside, I think that industrial demand will come in a bit higher than the Institute forecasts, probably around 52% or 53%, mainly due to blistering growth in solar panel production.
In fact, Metals Focus, which performs the research for The Silver Institute, has been adjusting its outlook for industrial silver demand in recent updates. In a report from early August, Metals Focus used the headline: “Silver industrial prospects bright as
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From Evergreen Investing: August 2023
The green transition is a paradigm shift. This matters to us at Evergreen Investing because paradigm shifts create major investment opportunities and new ways of operating that replace longstanding setups.
This shift is changing how the world moves, builds, eats, lives, and works. And big change like this requires big support, in particular from governments that mandate and then support the transition. Big changes also require new inputs, whether that’s materials or energy or technology or people.
Put it together and the green transition sits at the intersection of politics, money, and resources. It is happening because of political mandates; it demands immense investment; and it requires all kinds of new materials, energies, and technologies.
And this complex transition is happening in a world that is pivoting to deglobalization as it recovers from two big financial setbacks and navigates big new fractures in international relations.
This month, we want to explain how deglobalization is impacting the green transition. Long story short: it’s enhancing the investment opportunity for anyone who understands that politics and trade go hand in hand.
What & Why of Deglobalization
Deglobalization is a move towards lessening dependence and integration between nations and
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The first question about a conference is always “How was the sentiment?”
The answer: terrible.
Companies were disappointed that not much money showed up. By ‘money’, I mean funds with cash to invest.
Funds run the gamut from small family offices to big resource-oriented private equity groups…and the list of funds at Beaver Creek was clearly down this year. The funds that did come were almost all fully allocated, which means all their mining-focused money is already invested.
Why would funds without capital to invest come to a mining conference? Two reasons:
- To find new, better investments
- To decide what holdings to sell should they manage (1)
The second point means companies were anxious going into meetings with funds that owned their stock because they knew they needed to convince each fund to hold. That’s the goal every time a pubco meets with an investor but the pressure this time was particularly amped up.
Left and right I heard companies bemoaning how the market used any news – good or bad – as an opportunity to sell. The junior metals space is notoriously illiquid (many stocks trade very low volumes) so when news sparks trading, investors who
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From The Silver Stock Investor | August 2023
Last month my article delved into how solar panels work, why they need silver, and why they are going to need a whole lot more of it for years and decades to come.
Naturally, silver’s properties as the most reflective element, and the most conductive for heat and electricity, make it uniquely suited for solar panels.
In this article, I’m going to look at some recent research that shows how I’ve reached my conclusions about the insatiable demand for silver from solar.
The International Energy Agency’s recently published annual report on global energy investment is eye-opening. They add up how much is spent, by whom and on what. And last year, there was about $2.8 trillion of investments into the energy sector, of which $1.7 trillion went to clean energy.
That’s the most…ever.
This is largely being driven by policy. Governments around the world are setting low emissions targets in a bid to shore up energy security and move to renewable and cleaner fuels. That means really big money is being funneled into solar, amongst other technologies.
But here’s where it gets exceptionally interesting…for silver.
2023 is
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From Evergreen Investing: July 2023
We spent the first six issues of Evergreen Investing explaining the six sectors we want our portfolios exposed to for the huge investment opportunity of the green transition: nuclear energy, metals, carbon credits, waste management, agri-food, and green infrastructure. And we named what holdings we bought for that exposure and why.
This month I want to underline why we have such confidence the green transition is a huge investment opportunity. It boils down to three things: certainty, scale, and needs.
Certainty: Governments around the world have committed to the green transition. I’ll run through some of the many pledges made and laws enacted that mean green is the path forward…and the much bigger promises that have been made but not yet legislated that will multiply green investments ahead.
Scale: there’s been some green progress to date, to be sure, but the lion’s share of this massive transition is still to come. This transition is changing how we eat, move, build, and power our world. That is creating entirely new industries, technologies, and investment flows, all of which spell opportunity for investors.
Needs: change on a massive scale has big needs. That big needs often
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From Evergreen Investing: June 2023
Meaningful progress towards net zero must include how we deal with waste and recycling as an integral part of the narrative.
The old adage that “one man’s trash is another man’s treasure” is becoming more relevant than ever. That’s because, thankfully, we are increasingly finding ways to recycle, reuse and repurpose through innovation and technology, and to manage the waste we still produce in ways that minimize its impact.
Still, there remains plenty of room for improvement.
According to The World Bank, we now generate 2.01 billion tonnes of municipal solid waste every year on a global scale. As much as one third of that is not managed in an environmentally friendly way. Despite only representing 16% of the world population, developed countries are responsible for about 34% of total waste.
As global living standards improve, consumption rises along with them. That means worldwide waste is forecast to reach 3.4 billion tonnes by 2050, more than doubling the pace of population growth.
That is an issue as we run out of places to store waste. The pollution and greenhouse gas emissions (GHG) created are equally concerning.
On average every human
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