"The best place to be is in commodities"

[drillinto]

Bespoke’s Asset Class Performance Matrix
Jun 23, 2017

Outside of the US, the Chinese equity market (ASHR) is the only area of the world that saw nice gains this week at +2.85% following the announcement that they will be included in the MSCI EM indices. Brazil (EWZ), Australia (EWA), Spain (EWP), and the UK (EWU) all saw declines of more than 1%.

https://www.bespokepremium.com/think-big-blog/bespokes-asset-class-performance-matrix-62317/

 

[drillinto]

Miners to tighten their belts for the remainder of the year – BMI

http://www.miningweekly.com/article...en-belts-for-remainder-of-the-year-2017-06-27

 

[drillinto]

Recent report on Mustang Resources Ltd.

http://www.mustangresources.com.au/irm/PDF/2518_0/BakerYoungStockbrokersOctober2017Report

 

[drillinto]

How African oligarchs steal from their countries

An investigation by the African Investigative Publishing Collective in partnership
with Africa Uncensored and ZAM.

https://www.zammagazine.com/images/pdf/documents/African_Oligarchs.pdf

 

[drillinto]

Author: Alan Brochstein, CFA. 14 JAN 2018

​

Friends,

Large inflows into two exchange-traded funds (ETFs) reflect substantial interest in the cannabis sector. We have written extensively about the first to begin trading, Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ), which has seen assets swell to C$633mm as of Friday after its debut in early April. Perhaps even more impressive has been the quick increase in the assets of ETFMG Alternative Harvest ETF (MJX), which rose from just $6mm going into its debut the last week of the year to $339m as of Thursday. Ironically, while there isn't a single name particularly leveraged to California legalizing, the driver of investor interest was likely related to the historic event. We suspect that many of the buyers of MJX had no idea what they were buying.

As we described last week, these ETFs are distorting the market in Canada. We pointed to three names in particular that were benefitting from the inflows, and they were among the worst performers of the week. For those who are investing in cannabis stocks, we believe it will be increasingly important to stay on top of developments at these funds. Beyond paying attention to inflows and outflows and being aware of the names that are particularly heavily weighted relative to the size of their shares outstanding or, better, their float, investors should be aware of the quarterly rebalancing dates.

This week, two more ETFs in Canada filed preliminary prospectuses, including Horizons. Their second fund, the Horizons Junior Marijuana Growers Index ETF, which will trade on the NEO Exchange with the symbol "HMJR", will be focused on smaller companies ($50-500mm market cap) and, unlike HMMJ, it will include companies with operations in the United States (primarily cultivation, production and/or distribution). The fund will invest up to 20% of its assets outside of North America. A fourth fund, The Marijuana Fund, is planned by Evolve. "SEED" will be actively managed and is expected to include both Canadian and U.S. companies. The preliminary prospectus was light on details.

While we were critical of HMMJ initially, we note that it has improved, with better diversification and less reliance upon names that aren't particularly leveraged to cannabis. MJX, on the other hand, is exceptionally poorly constructed. It may also face an issue with its custodian, as it converted its failed Latin American Real Estate fund, allowing it to at least temporarily bypass what has been a challenge for competitors in getting a custodian on board. We recall highlighting BNY Mellon signing on to be the custodian for First Trust in late May only to see them drop the fund two days after we published. For now, expect ETFs to be focused primarily on Canadian companies, as federal illegality scares off the trustees.

 

[drillinto]

Goldman touts best commodity investing environment in a decade
by MYRA P. SAEFONG

https://www.marketwatch.com/story/g...nvironment-in-a-decade-2018-02-01?siteid=nbch

 

[rederob]

Goldman touts best commodity investing environment in a decade, by MYRA P. SAEFONG
https://www.marketwatch.com/story/g...nvironment-in-a-decade-2018-02-01?siteid=nbch

Goldman might have been a wee bit early, but they got their principal themes right.
Heading into 2109 their oil price forecast is now overly optimistic, but otherwise all is on track and even in better shape across the metals complexes.
I found these links the other day, and the information on offer provides an excellent starting point to reviewing equities which fit you investing preferences:
– Lithium stocks on the ASX: The Ultimate Guide
– Cobalt stocks on the ASX: The Ultimate Guide
– Graphite stocks on the ASX: The Ultimate Guide
– Nickel stocks on the ASX: The Ultimate Guide
– Vanadium stocks on the ASX: The Ultimate Guide
– Uranium stocks on the ASX: The Ultimate Guide
– High Purity Alumina stocks on the ASX: The Ultimate Guide
– Tin stocks on the ASX: The Ultimate Guide
– Oil and gas stocks on the ASX: The Ultimate Guide

 

[rederob]

Asymmetric markets become the norm when major global surprises kick in, as covid has.
Stimulus responses to economic woes benefit infrastructure spend, and this usually benefits metal prices.
To begin, there is likely to be a tendency to a weaker US dollar which adds to metals prices over and above increased demand.
For a number of Oz miners who price in US dollars, this is not the best outcome as it diminishes profits. However, the trend has been for metal price rises to more than compensate.
Here's the latest state of play:


According to the RBA, over the past year, the index has increased by 19.7 per cent in SDR terms, led by higher iron ore prices. The index has increased by 11.4 per cent in Australian dollar terms.
As can be seen from the above chart, we are a fair way off the previous peak, so our bigger miners should continue to do ok until this bull run wanes. That's suggests a 2-year time frame, as beyond that and the ramped up supply of metal crashes the price curve.

 

[rederob]

Looking at nickel first, recent price increases are not based on shortage as LME warehouses are bountiful:







Meanwhile copper prices look driven by supply constraints as LME warehouses are at their lowest levels in many years:

Over the past fortnight, copper is up by around 15%:


As the USA will be pouring trillions into their proposed recovery over coming years, the USD is likely to continue to weaken and sustain metals prices over the medium term.

 

[Dona Ferentes]

Just looking at the options to get exposure to commodities, both hard and soft (and the underlying prics, not commpanies that have exposure to sectors), and it seems the options are few and far between.

For ETFs, all that is available, locally listed, in AUD, are the Gold, Silver and assorted PM offerings.
The more comprehensive ETF offering, QCB, was withdrawn in Nov 2020 - not enough uptake??

 

[rederob]

Last week investors sold off Treasuries at a faster rate than the Fed (and banks) were buying, fearing higher real interest rates would accelerate capital losses. One outcome was a rapid depreciation of the AUD against the greenback. The other big one related to various commodity prices being hit hard, especially precious metals.
There's only so much selling that can be done, and when it's over capital will be looking for a better home. After the GFC, that was in commodities and precious metals (despite a massive price increase some years earlier on the back of the mining boom).
I see history repeating. Except that this time it seems more in conjunction with already tight commodity markets.

 

[rederob]

A really good read on the present commodity boom is here.
My favourite chart from the article is this one, showing how early we are in the cycle:



By way of the previous bull market in commodities, the RBA has us here:


So, plenty more lead in the pencil.

 

[over9k]

Remember your economics though:



This makes china export-led. Without the ability to export (shipping lane security, tariffs, whatever), then you need to look at who is producing stuff closer to/actually able to get to the end consumer.

BHP & RIO have actually partnered in a massive copper mine in the U.S for example: https://www.smh.com.au/business/com...he-land-faces-fresh-blow-20210302-p576zy.html

Just obviously having the usual native title problems etc.

 

[rederob]

Remember your economics though:

View attachment 120816

This makes china export-led. Without the ability to export (shipping lane security, tariffs, whatever), then you need to look at who is producing stuff closer to/actually able to get to the end consumer.

BHP & RIO have actually partnered in a massive copper mine in the U.S for example: https://www.smh.com.au/business/com...he-land-faces-fresh-blow-20210302-p576zy.html

Just obviously having the usual native title problems etc.

Can you please explain your last post?

Just an FYI: Europe and Asia are one land mass, and China sends massive cargoes to Europe by train. Europe is already a larger trading partner than the USA, while China's belt & Road initiative is increasing it's market penetration elsewhere, especially Africa.

On topic proper, as nations come out of the pandemic mode, they will gear up their industrial output in conjunction with stimulus spending, and that boost should carry well into 2022.

 

[over9k]

Young people do all the consuming - no young people means nobody to sell to.

Europe's had as much of a baby bust as china/asia has. Only india & the 'states have demographic profiles worth noting.

 

[rederob]

Young people do all the consuming - no young people means nobody to sell to.

Europe's had as much of a baby bust as china/asia has. Only india & the 'states have demographic profiles worth noting.

It varies nation to nation, but baby boomers in the USA for example have more than twice the spending power of millennials. So your thinking needs decent data to back it.

On topic proper, the RBA index continues to rise for commodity prices:



The very high probability of inflation in coming years is likely to push this trend as high as the index reached post GFC.

 

[over9k]

For anyone reading: Spending power is not the same as who actually spends the money. This guy doesn't have a clue what he's talking about as he wouldn't be pointing to "data" if he did.

I'm blocking this moron and you'd do well to do the same.

 

[rederob]

@over9k said "Spending power is not the same as who actually spends the money."
His evidence was based on his opinion.
I referenced America, so this link shows, by way of example, that people aged 45-54 years spend almost twice as much as people under 25 years. So it proves that you do not necessarily need a young population to derive spending power (or consumption).
With specific reference to China @over9k is absolutely mistaken.
Boston Consulting Group estimated that the share of total consumption by the young generation (ie aged 18-35 years) is projected to reach 69% by 2021, versus 31% by those older. And that the spending growth pattern will increase for those younger.
But that's not necessarily the point. China already enjoys the highest PPP of any nation, and it's the spending of the nation as a whole that counts, irrespective of which age sector is responsible.
So consumption (via spending) will be exceptionally strong in nations with high PPP and large populations, and continue to drive this commodity cycle.
Understanding the difference between facts and opinions provides a better basis for analysis.

 

[rederob]

The commodity price index continues to surge:



It has actually been held back by our stronger dollar - a trend I expect will continue throughout this year.
The linked article does not pick up on gold prices as they have been subdued, although relatively high. Diversified miners with gold will be the big winners should gold reclaim in its previous record high over the coming year. The $20/oz bounce overnight is another step in the right direction.

 

[rederob]

Post-pandemic recovery across the base metals sector has been consistent: