Comment of the Day
6th February 2023
Feb 7
Video commentary for February 6th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: geopolitical tensions weigh on stocks and further support inflationary pressures with bond yields popping on the upside. Dollar strong, gold eases, oil finds support at lower side of short-term range.
Newmont offers to buy Australia's biggest miner amid gold merger spree
This article from the Financial Post may be of interest. Here is a section:
Yamana’s outgoing executive chair Peter Marrone told The Financial Post last month that he expects a wave of gold mergers as executives and investors seek to maintain margins amid higher production costs and declining grades of the metal.
Resource industries are on the front lines of the climate challenge, whether it be coping directly with extreme weather, or indirectly through rising costs associated with adjustment and policies such as carbon taxes. Gold miners face an additional layer of difficultly because their deposits are yielding less ore that’s dense with gold. Lower grade mines can still be profitable, but only if extraction costs are lowered.
Aside from the sale of Yamana, which has properties and mines in Canada, Brazil, Chile and Argentina, there have been at least eight notable combinations since 2018, when Barrick Gold Corp. (TSX:ABX, NYSE:GOLD) and Randgold Resources Ltd. announced an $18-billion, zero-premium, all-share merger.
Eoin Treacy's view
Finding new large-scale mining projects is a fraught with difficulty. That leaves little option for major miners than to pay up for competitors. Newcrest has tried to focus on tier-one assets, led by the Cadia mine in New South Wales. The low cost of production at that mine has funded international expansion. No doubt, Newmont views the security of production as a sound investment.
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Big Ideas 2023
This report from ARK Invest may be of interest. Here is a section:
AI Should Increase Knowledge Worker Productivity Dramatically
According to ARK’s research, AI should increase the productivity of knowledge workers more than 4-fold by 2030. At 100% adoption, AI spend of $41 trillion could increase labor productivity by -$200 trillion, dwarfing the $32 trillion in knowledge worker salaries and rivaling current projections for global GDP in 2030. If vendors were to capture 10% of value by their products, AI software could generate up to $14 trillion in revenue and $90 trillion in enterprise value in 2030.
Eoin Treacy's view
ARK is big on big on ideas. They don’t typically pay too much attention on where the money is going to come from to fund all that growth. The investment in the computing power necessary to achieve the heady goals of artificial intelligence and all it promises does not happen on its own. It requires sustained access to capital and cashflows to make it worth the cost of foregoing other potential opportunities. Microsoft is attempting to fill that void with its investment in OpenAI.
This section continues in the Subscriber's Area.
Eoin's personal portfolio: profit taken on precious metal trading position February 2nd 2023
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
This section continues in the Subscriber's Area.
What the War in Ukraine Says About Deterring China
This article by Max Hastings for Bloomberg may be of interest. Here is a section:
Leaders go to war because they believe they can win, as did Putin in Ukraine. It is entirely feasible to reinforce both Taiwanese and US capabilities in the region, to a point at which Beijing must doubt its ability to prevail in the necessary amphibious assault, a perilous and difficult undertaking.
The Ukraine experience has rewritten in lights a towering lesson of history: To deter aggression, there is no substitute for credible armed forces. We in the UK and the rest of the West are supremely fortunate that America still possesses these, despite the caveats about the Navy’s vulnerabilities in the Pacific.
Yet more important even than weapons is will. Many people, sometimes including myself, have doubted and continue to doubt whether, if China does invade Taiwan, the US and its allies will undertake military action in response. This is a reprise of the 1950 Korean uncertainty, with one important difference: 73 years ago, there was nothing in South Korea of material value to the West; its armies fought instead to defend a principle. In modern Taiwan, by contrast, advanced semiconductors represent an industry of towering importance both to China and ourselves.
Eoin Treacy's view
The USA downed a Chinese balloon over the weekend after allowing it to traverse the entire continent. That speaks to a great deal of indecision about the right way to deal with an airspace incursion and not least because it is so unexpected.
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© 2023 Eoin Treacy
548 Market Street PMB 72296, San Francisco, CA 94104
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