Vince Lanci: The Inflation Parallels Between Now And The 70s
Summary
Transcript
Is it the seventies, is it the forties? Is it the os? I think we have a handle on that. Now. We’re also going to discuss. Well, Fred Hickey’s tech investor report is out, and I have some excerpts from that to share with you without giving away too much on the man’s original work about the miners that he has in his portfolio. So let’s get started with that and we’ll do the markets first. The dollar is up ten at 105.19. The ten year bond is 446, down three basis points. The S and P 500 is 5179, up a handle.
The VIX is 1357, essentially unchanged. Gold is 20 315, down ten and change near the lows of the night. I have a comment about that. Silver is 27.29, down $0.13. That’s not much. Copper is down 2.5 cents at 454. WTI is down $0.39. Natural gas, which has been my thing on my radar and these conversations for the last two weeks, is now above that channel. Been working there for a while, so you should look for interest on the buy side now. Dips should be bought. Approaching that channel. You want to buy rallies, that’s up to you.
Bitcoin 63, 822, up 1%. Ethereum 3088 up 25. So those markets are stabilizing because the grayscale has finally has some inflows going back into it. And for better or worse, the Hong Kong ETF has launched platinum. Palladium are mixed. There’s a battle there now. Palladium is now above. Had a big day yesterday at 974, down $4. Today platinum is 952, up $0.50. So there’s a. It’s on everyone’s radar now. Anyone who trades metals seriously on the physical side is looking at those going, I see this. What is my opinion and opinions are creating trades. Grains are down 12.31 and soy down $0.03.
Corn is 454 down low over a penny. And wheat is 644 spot eight down two cent. Okay, front page. There’s yesterday’s stories. There’s the Yellen story that we discussed in video yesterday. And for the founders, we’re going to put this out later on today. But the Goldman raised their price target on Cameco. I think I got it right this time. Despite the poor earnings. And the synopsis is the short version is they don’t think the problem is systemic. Think it’s a one time thing. There may be a problem with the company, but the industry is going to drag it higher.
The wave is just going to, they raised their target. That should tell you something. And last week on the weekend we did macro storm coming for gold. And a lot of people appreciated that. All right, the main event, Fred Hickey on miners. So we’re going to discuss, we’re going to throw some quotes out there. Fred Hickey discussing miners in context of gold. And I’m going to discuss something that, having read what he wrote, reminded me of this analog. There’s a struggle. People are like, what are the miners like now? I’m trying to figure it out myself.
All right, so here we go. Everyone who is a regular on this show knows that he has a newsletter called the High Tech Strategist, published since 1987. And the title is the Silicon Valley emperor’s new Gen AI. Close. And the gist of that is AI is a bubble. Im really simplifying. Its a very well written piece. Obviously hes been doing it. He knows what hes doing. After he goes through a very long, detailed commentary on the technology marketplace, he then goes into his mining portfolio with a couple of comments about gold beforehand. When I read this, lucky enough to get a copy, excuse me, I had been accumulating information.
What are the mining stocks like? I’m getting more familiar with miners in terms of price action. There’s no parallel, meaning their valuations are lower than they’ve ever been before. So it’s not the seventies. The seventies miners rallied before their costs went up. Now their costs are up and theyre not rallied. Its not like the Os. Theyre even cheaper than the OS. But there are other similarities for the forties, the seventies and the OS that matters. So im going to share one parallel that I see and thats the bigger picture. Parallel and share a little bit of what Fred sees and hits.
Okay, so the overlap for gold and mining stocks currently has a mixed historical parallel. This is my writing part of the situation. The zeitgeist and monetary policy situation is much like the 1970s. The other part, the market dynamics are very much like the OS. Maybe the valuations aren’t, but the market dynamics are. And that’s what Fred points out so quickly. I’ll give you the policy parallel, the ideological backdrop, and monetary policy that is a result of that ideology is extremely similar to the 1970s. Now, excerpts from the above below, the picture’s below paper confirm this. Now this is a paper called the anguish of central banking.
I’ll show you what that picture looks like. Now, I read that it seems kind of a, a self serving statement, how anguished we are. But this paper is a lecture from none other than Arthur Burns, who presided over the monetary slop that was the seventies. And he was doing many things in this lecture. But one of the things he did do very well, I think, was point out the problems that made him compromise his principles. And I’m going to read those to you. These are paraphrases or quotes of his words in 1979. And when I say them, you’ll go, oh my God.
All right. Philosophical and political changes in the US post depression and World War Two caused the inflationary environment. Okay? You could just substitute post great financial crisis for that. There was a desire for more interventionist government policy. This is him in 1979 talking about the previous eight years, which became reflexively embedded in societal expectations. I’ll add a little color to that. The desire for more intervention. As policy was people were struggling and the government was increasing its social safety net. And with the welfare state, which became reflexively embedded in societal expectations, meaning people became more accustomed to handouts and less interested in working.
Well, check this out. Well intentioned environmental policies added to the inflation. I kid you not. He said that in 1979, about the seventies. It’s like he wrote it yesterday. Entitlements diminish. The work ethic of the labor force speaks for itself. That’s what’s, that’s. We’re not even there yet. But we’re getting there. But again, he could have said that yesterday. Demograph. This one’s a good one, too. Demographic changes in the workforce made it difficult to understand what the appropriate level of full employment was. Now to break that down a little bit, demographic changes. Back then it was women entering the workforce, okay? Now it’s immigrants coming in.
Okay? So the Fed had a hard time figuring out what was truly full employment and what wasn’t. All right? Big deal. Really messes with your metrics on monetary policy. And here’s the kicker. This is, I’m basically quoting him this, quoting this. Ultimately, central banks cannot stop politically driven inflation. They have the tools, but not the will. So the key phrase is politically driven inflation. The inflation is politically driven. They want the inflation. If not the inflation, they want the things that give them inflation. I want this, therefore I’m going to pay for it. And we’re the ones paying for it.
All right, so much more of that. I’m going to go through this, go through that and write a more detailed. I kind of glossed over it when I wrote on this years ago, a couple of years ago, but I’m going to break it down much more detailed. And I think you’ll be, it’s kind of jaw dropping. But back to Fred Hickey. As a segue to those ideological reasons, here’s Mister Hickey citing his reason for the gold bull market. There are several factors driving today’s gold bull market, including a loss of faith in central bankers worldwide following their coordinated money printing central currency debasement programs in recent years to fund massive government deficit spending.
That phrase is everything that happened above, right. Us actions to weaponize the dollar. We did that. Then to the global reserve currency against their enemies. We did that too. The collapse of investing alternatives, real estate, stocks in China, and the revival of inflation. Okay, back to the parallels. That was his, that’s his preamble before he starts talking about gold. Back to the parallels as far as valuations now, if we are in the seventies, psychologically, with this whole banking mentality and this ideological thing, what are miners priced as now? And it’s not the forties, it’s not the seventies, okay? At least as far was, as far as I know, the seventies.
The miners kicked because their cost of production was lower, number one. Number two, there weren’t a lot of alternatives to miners, right? The O’s, I think, are where the alternatives start to come in and squeeze miners out. But there is a similarity that he notices. In the early two thousands, western investors extremely narrow focus mag seven on a relatively small number of tech stocks kept their attention away from precious metals and especially from the precious metals mining stocks, which led to a 17 fold increase in silver and gold and silver mining stocks. This is 100% true.
Now, there’s a section here where he says, away from precious metals and especially from precious metals mining stocks. See this here, United States people are not investing in precious metals outside of you or me. The ETF flows tell you that gold is not because of us buying. It’s not because everyone else is buying, okay? Us investors are not putting their money into metals and if they’re not putting their money into metals now, theyre not putting their money into mining stocks as well. So hes saying the parallel is you had a market that was rallying on a very extremely narrow breadth, the Nifty 50 in the older days, the tech stocks, the.com boom and the OS, and call it the AI or the mag seven now that led to a 17 fold increase in gold and silver mining stocks.
So here he goes into a I’ll say a little more. The rapid rise in the price of gold to record levels is expanding miners profit margins dramatically, though most of that impact won’t be seen until they report Q two results. In July and August, there was about a $100 positive impact from higher average realized gold prices in Q one. But the average price in April, with two more months to go in Q two, is around 2600. 260, I wish, 260 higher than in Q one. He discusses that part in much more detail, really in the technological area, because what hes talking about is the tech bubble is too high compared to the mining stock.
So thats one side of it. And then he goes on, as youll see below. Conference call comments from Newmont and Agnaco Eagle last week to the biggest gold miners indicate that the cost inflation they had experiencing is now stabilizing, which is also very positive for their margins. I threw a couple of charts in there. As the chart below shows, gold equities have rarely been this cheap in the past 40 years. Who said that? The FT said that the FT, which is still good but mainstream, said that he said. Ill also add that theyre about to report blowout margins, free cash flows and earnings results in coming quarters, assuming the gold price remains near where it is today.
And then he goes into his report. So without further delay, here are updates for several of my biggest minor positions that reported results last month. Alamos set up for a Q two earnings leap, Barrick production results in trouble and Maui results and trouble in Maui. Two things. Newmont, that’s an obvious one. Agnico Eagle, the company with a proper mindset. West Dome Q one production magsilver production results. Silverquest Metal Silver crest metals production results. And we have a little bit more of that. We’re not going to give away the show there because the man, Ernst, is living off of that, but we’ll give you a little more insight synopsis of it.
It’s phenomenal. I’m looking to learn more about miners. This is, I have the big picture down. Maybe I’m wrong, but at least I think I’m right. But we have to find out more about the miners now. And this has been very helpful in the news. Citigroup describes the consumer behavior as a two tiered market, people that are spending, the people that aren’t us. Aviation safety regulators have opened their second investigation into Boeing this year. Were there any survivors? On the whistleblower side, global trade growth is set to more than double this year as inflation eases and a booming economy helps drive activity.
That would mean inflation is coming back. We’ll figure that out later. Geopolitics Israel went into Rafa airstrikes, possibly on the ground, and Hamas pushed back, saying, we tried to agree. It’s like a late to the party agreement thing. So it’s a debate as to what’s going to go on there, but I have plenty of details on that here. And finishing up the data today is consumer credit at 03:00 p.m. And more speakers today. Thats right. So again, this week is not a big data week, but its a big speaker week. We also have bmos, capital markets, global commodities metals brief, which is a very good recap, very dry, very good recap.
And ill have some more excerpts from Fred Hickeys report. Nothing too revealing, though. Im Vince. Have a great day. Thanks for watching this mornings markets and metals update with Vince Lancy, brought to you each day by mile Franklin Precious metals, where this week’s special is 1oz gold australian kangaroos for only $59 over spot. Gold australian kangaroos are one of the coins coming from one of the six sovereign mints. And with the gold price pulling back recently, you can get your australian kangaroos at only $59 over spot by emailing arcadiailesfranklin.com or calling 833-326-4653 please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only.
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