Central Banker Speak

From the HRA Journal Issue 233,
May 25, 2015

We near the end of May with most major indices again at or near record territory.  Traders have pushed back their estimates of the first Fed rate increase.  This came in the face of slightly stronger US economic readings and slightly weaker ones just about everywhere else. 

Visibility:

From the HRA Journal Issue 235,
June 28, 2015

Greece is obviously a big deal in Greece but I still think the damage is containable and largely contained already.  I don’t expect markets to be happy if Grexit happens in the next week or two but I’m not convinced its crash material either.  Indeed, unless some markets trade substantially worse in coming days it should be clear even to the Syzira caucus that they badly overplayed their hand. 

 

Selectivity:

From the HRA Journal Issue 234,
June 9, 2015

Summer’s here.  That global warming thing sucks for most of the planet but its done wonders for the weather in the Pacific Northwest and Canada’s west coast. You can see the impact of longer sunnier days already in the local markets which are seeing lighter volumes and in calls to brokers during the trading day.  The background noise sounds suspiciously like a patio full of drinkers rather than an office.  Probably just a line problem.

 

 

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But Aren't Commodities Dead?

No. Metals are basic necessities of modern life and the per capita use of metals rises with income levels. In the past decade several of the world's most populous countries underwent accelerated growth. While countries like China, India and Brazil are currently being impacted by recessionary forces, the changes that spurred their stronger growth are not cyclical. These secular changes occur as per capita income reaches levels that require increased infrastructure spending by government and allow for discretionary spending on things like housing. All advanced economies have gone through these high growth secular periods in the past. The difference is that never in history have so many people in the world been entering the "lower middle class" at the same time. The impact on resource use from this massive change is just beginning to be felt. Remember too that there are several other high population countries like Malaysia, Turkey, Indonesia and Pakistan that are just entering this growth phase now. Collectively, these countries have a population roughly equal to China.

Historically, these sorts of Quality of Life cycles last a full generation or more. We are a bit over 10 years into this one. There will be cyclical slowdowns within the secular trend and individual metals will underperform or outperform depending on their particular supply/demand balance. The mining sector, which we have decades of experience in, will have to struggle just to keep up many times during this trend. Economies turn much faster than metals production. In short, there are more bull runs ahead for various metals and they will start much sooner than most people think. Metals producers and explorers will go from pariahs to market darlings and the change will happen fast when it comes. It has many times before. Buying low and selling high means seeking out the right companies before the market does. HRA can help you do just that.

Latest HRA Media

Eric Coffin Video Presentation "More of What's Working" from the Metals Investor Forum                         May 30, 2015

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