Comment of the Day
Video commentary for February 8th 2022
Email of the day on gold shares
Eoin. I've been appreciating your daily commentary and your review of the charts. You've several times mentioned that gold stocks are "cheap," and I don't disagree. Within the gold ecosystem, however, which do you think have the most promise, i.e., the biggest bargains?
My view - Thank you for your kind words and this question which may be of interest to subscribers. The NYSE Arca Gold BUGS Index / gold ratio has been ranging below 0.2 since 2013. It is currently mid-range but the current reading is still below the nadir posted in 2000. Relative to the price of gold, miners are cheap.
Email of the day on the treasury general account
You have put a chart of the TGA balance and projections in the comment of the day. I am sure I am not alone in wondering where this information comes from. Is it speculation by the Daily Shot or has the Treasury announced that this is their intention? How certain can we be that the projection is reasonably accurate? Have such projections been made before and, if so, have they held true? I am confused as I have never heard of such projections before. Best regards and keep up the good work.
My view - Thank you for this question which may be of interest to the Collective. The Treasury General Account (TGA) at the Federal Reserve was irrelevant until before the global financial crisis. Since then, it has been growing as the role of government spending in the economy increases.
Iron Ore Smashes $150 After Beijing Eases Steel’s Green Targets
This article from Bloomberg may be of interest to subscribers. Here is a section:
China offered its huge steel industry five extra years of rising carbon emissions, sending iron ore soaring
as investors saw the move as a renewed focus on propping up the economy.
Steelmaking accounts for about 15% of China’s carbon emissions. On Monday, the government set 2030 as the new deadline for peak-emissions for the sector, against an earlier target of 2025. That adds to signs that Beijing is recalibrating its climate strategy in light of last year’s commodity price spikes, and priming the economy for a more powerful, carbon-intensive stimulus.
“This is a big adjustment to the timetable, which gives more room for the steel sector to reach peak emissions in an orderly way,” said Xu Xiangchun, an analyst with researcher Mysteel. A rush to meet carbon goals could lead to “unbearable economic costs”, he said.
The policy pivot is another sign that Beijing is changing the trajectory of its decarbonization plans to ensure industrial changes don’t result in damaging inflation or shortages. President Xi Jinping said last month that climate targets shouldn’t compromise supplies of commodities that “ensure the normal life of the masses.”
Iron ore surged past $150 a ton, with expectations rising for more infrastructure to soften China’s economic slowdown. More construction activity tends to means higher steel output, which in turn raises iron ore demand but means more greenhouse gases.
My view - Xi Jinping announced a change of emphasis ahead of the Lunar New Year Holiday in saying carbon reduction would need to take a backseat to ensuring living standards are protected. Today, there was also news that the State investment fund is buying stocks to support prices and that curbs of property market loans are being removed. That’s all supportive of the view China is actively putting a floor under asset prices.
The Chart Seminar 2022
With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022.
Please drop sarah@fullertreacymoney.com a line if you would be interested in attending an event next year, as well as your preferred location.
At present I am looking at a late May date for a London seminar and I am open to other times and locations subject to demand.
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