Category Archives: Investment

DNY59/iStock via Getty ImagesThe editorial on inflation in the Wall Street Journal on August 14 seemed to me to be “spot on.” I don’t find myself saying this very often, so I felt I needed to follow up on this feeling. The opening paragraph: “The financial press is cheering that Wednesday’s inflation report makes an interest rate cut next month a fait accompli. Go, Jay, go. Yet while cooling inflation shows that the Federal Reserve’s monetary policy medicine is working, Chairman Jerome Powell’s caution to date has been warranted.” The year-over-year rate of inflation in July, according to the Labor Department’s consumer price index (CPI), was 2.9 percent. This is the lowest inflation has been since March 2021. Consumer Price Index__Year-over-year change (Labor Department) But, the editorial issues this warning. “Markets seem to think inflation is whipped, and the Fed should start worrying about being late to cut rates. But, Mr. Powell was right to postpone easing policy earlier in the year, as inflation readings ticked up. Cutting rates in September might make sense, though inflation still isn’t dead, and prudence is advised.” Prudence is advised. Yes, sir. The Fed, not only wants to get inflation down around its target rate of 2.0 percent, but the Fed wants to create an environment of trust, trust that it will maintain a monetary policy that will be consistent with a 2.0 percent annual rate of inflation, month after month after month. The Fed must create a market atmosphere that “believes” that the inflation rate will be maintained at 2.00 percent…and that the Fed is not going to go off here…or, go off there…chasing some other “goal.” The Federal Reserve was able to do this after the Great Recession. Note that in the early part of the above chart, the inflation rate in the U.S., according to the CPI, was right around 2.0 percent during the decade following the Great Recession. Following the battle against inflation in the 1970s that ended with a major financial tightening around 1980-81, the Federal Reserve, under the leadership of Paul Volcker, convinced investors and others that it would not tolerate a rising inflation rate and would fight any effort to raise consumer prices at a rate higher than 2.0 percent. Alan Greenspan, who followed Mr. Volcker as the Fed Chair, also conveyed this message to market participants. And, Ben Bernanke followed suit. Thus, we see during the decade of the 2010s, inflation posting numbers that were acceptable to the Federal Reserve so that the Fed could focus on other things, like keeping the economy moving ahead. Hence, the longest economic expansion in post-World War II history. It should be noted that the U.S. economy was changing during this period of time, becoming much more driven by information technology and by the innovation that surrounded the new environment. For one, as I have written about many times, business advancements tended to be more of a continuous process based upon “time pacing” than upon completed “new” generations of change. That is, rather than waiting for an entirely new model change, businesses were bringing innovations to market every two or three years, regardless of whether the changes represented a full model change. Competition was driving this. Given the new technologies coming to market, firms could focus on this strategy and, as a consequence, if firms didn’t keep up, they fell behind. And, we are seeing this business strategy playing out in the world of artificial intelligence. In the world of AI, it is so important for the “new” to be brought to market just as soon as it can to keep up with or drive the competition. Sometimes, in the world of AI, it seems as if we hear of “new” things being made available quarterly, if not sooner. Innovation is almost continuous. And, this is one reason why Federal Reserve Chairman Ben Bernanke sought to modify the way the Fed did business. Periods of “quantitative easing” became the Fed’s way to help underwrite this new era of innovation and investment. It seemed to have worked. Then the Covid-19 pandemic hit. The Federal Reserve reacted. After three rounds of quantitative easing through 2016, the Federal Reserve, with Jerome Powell as the Chairman, began a fourth round of quantitative easing in early 2020 and expanded the Fed’s holding of securities enormously. Inflationary numbers rose dramatically as the economic and financial world saw all the focus on maintaining inflation give way to keeping the U.S. economy from falling into a major downturn. As can be seen in the above chart, “core” CPI inflation topped out at over 9.0 percent in 2023. Quantitative tightening followed, and as reported the inflation rate dropped, reaching the 2.9 percent reported for July. The really interesting thing, however, is that the economy continued to “chug” along during this period. Yes, there was a recession, the shortest one on record…two months in February and March 2022. But, for the most part, the movement of innovation and information continued on in a very persistent way during this period of time. I was just amazed at all the new ideas and innovations that were developed during this time period. My work in venture capital and angel finance during this time kept on going…money was available…companies were formed…innovation carried on. And, that is what we are seeing on the other side of the 2022 recession. Even though the Federal Reserve has been conducting a period of quantitative tightening for 27 months now, the U.S. economy keeps on, innovation and investment continue, and the economy grows. But, the Federal Reserve continues on its efforts. Although there have been mounting pressures on the Federal Reserve to lower its policy rate of interest, the Fed has not moved. To me, “trust” is the key element that is behind this Fed stance. The “new” economy is working. Innovation and change is almost continuous. Money is available to finance this innovation and change. As the Wall Street Journal article closes… “The economy doesn’t show signs of an imminent recession. Best for the Fed to use the running room it now has to keep reducing its $7.2 trillion balance sheet and stay on a path to normalize monetary policy.” In the past, the Fed has always moved on too easily to another stance, once people feel that its past work has been done. The Federal Reserve is regaining the “trust” the market had in the Fed during the 2010s, but work still needs to be done to cement this “trust.” To support this, the federal government could, at this time, also move to regain some “trust” over the way it manages its budget, but that seems a long way off. Continue reading →

Inflation refers to the general rise in the price of goods and services. The U.S. Federal Reserve aims to keep the consumer price index (CPI) measure of inflation growing at an annual rate of 2%, and the central bank will adjust the federal funds rate (overnight interest rates) when it deviates too far from that target.The CPI hit a 40-year high of 8% in 2022, triggering one of the most aggressive campaigns to hike interest rates in the history of the Fed. The rate of inflation has cooled considerably since then, so the central bank appears set to reverse that policy.That means interest rates may be cut for the first time since March 2020. If history is any guide, that could trigger a big move in the benchmark S&P 500 (SNPINDEX: ^GSPC) stock market index — but the direction might surprise you.The Fed could cut interest rates three times before the end of 2024The U.S. government injected trillions of dollars’ worth of stimulus into the economy during 2020 and 2021 to counteract the negative economic effects of the COVID-19 pandemic. At the same time, the Fed slashed interest rates to a historic low of 0% to 0.25%, and it injected trillions of dollars into the financial system through quantitative easing (QE) by buying government and agency bonds.Loose monetary policy and drastic increases in money supply tend to be inflationary, but disruptions to global supply chains also drove prices higher. Factories and shippers were periodically shutting down all over the world to stop the spread of COVID-19, which led to shortages of everything from televisions to cars.So, a cocktail of factors sent the CPI surging during 2022, which triggered the flurry of rate hikes that followed. The federal funds rate ultimately settled at 5.25% to 5.50% after the Fed’s last rate hike in August 2023. That’s a long way from the pandemic low point.But here’s the good news: It’s working. The CPI ended 2023 at 4.1%, and it came in at an annualized rate of 3% in June 2024, which is the most recent reading. In other words, inflation is closing in on the Fed’s 2% target.That’s why most experts are expecting imminent rate cuts. According to the CME Group’s FedWatch tool, the Fed is likely to cut rates three times by the end of 2024 (once each in September, November, and December).The stock market doesn’t always respond well to rate cutsConventional wisdom suggests rate cuts are great for the stock market. They reduce the yield on risk-free assets like cash and Treasury bonds, which pushes investors into growth assets like stocks and real estate.However, if we examine the chart below, which overlays the federal funds rate with the S&P 500 going all the way back to 2000, we can see that falling interest rates often foreshadow a decline in the stock market.^SPX ChartTo be clear, the prevailing trend is always up for the S&P 500, so long-term investors shouldn’t be swayed by the potential for imminent weakness. Plus, there were some overriding themes in the past that make this correlation a little murky. In other words, we have to look at why the Fed was cutting rates during the periods depicted in the above chart:During the early 2000s, the dot-com tech bubble burst, which triggered a recession in the economy. The S&P 500 fell by 9.1% in 2000, 11.9% in 2001, and 22.1% in 2002.During the late 2000s, the global financial crisis forced a decisive intervention by the Fed, which included rapid rate cuts and the introduction of QE for the first time. The S&P 500 plunged 37% in 2008.Finally, the sharp fall in rates in 2020 was triggered by the pandemic. The S&P 500 suffered a peak-to-trough decline of 31.8% in 2020, but it actually ended the year in positive territory thanks to all of the stimulus I mentioned earlier.Therefore, we can’t exactly say that the stock market fell because the Fed cut rates. Rather, it likely fell on each of those occasions because of what else was happening in the underlying economy.Image source: Getty Images.Will this time be different?There are no signs of an impending crisis for the U.S. economy right now, nor of a garden-variety recession. But there are some signs of weakness. The unemployment rate, for example, has ticked higher to 4.3% (from 3.7% in January), and a softening jobs market can be a precursor for weak consumer spending in the near future.Since the CPI is almost back to the Fed’s target, it probably isn’t appropriate to maintain a restrictive policy stance. Plus, interest rate moves tend to have a lagged effect on the economy, so it’s possible we haven’t even seen the full effect of the Fed’s past hikes just yet.By the same token, any rate cuts at the end of this year probably won’t feed through to the economic data until sometime in 2025. That means the sooner the Fed starts cutting, the higher the probability the U.S. economy will avoid any unnecessary deterioration down the road.The stock market trades based on corporate earnings, and it’s very hard for companies to deliver growth in a slowing economy. If Wall Street starts to reduce earnings forecasts, that will almost certainly lead to a down period for stocks. In that scenario, the S&P 500 could be falling while the Fed is cutting rates at the same time.The Fed typically cuts rates when it observes weakness in the economy, which can be a signal that the S&P 500 is heading lower in the short term. But imminent rate cuts aren’t a reason to sell stocks — as I mentioned earlier, they often recover over the long term, so any weakness might actually be a buying opportunity.Don’t miss this second chance at a potentially lucrative opportunityEver feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $19,172!*Apple: if you invested $1,000 when we doubled down in 2008, you’d have $41,859!*Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $349,472!*Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.See 3 “Double Down” stocks »*Stock Advisor returns as of August 12, 2024Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.Interest Rates Are About to Do Something They Haven’t Done Since March 2020, and It Could Trigger a Big Move in the Stock Market was originally published by The Motley Fool Continue reading →

Kutay TanirBy James Knightley Consumer resilience continues The initial wave of today’s US data was quite a bit firmer than expected with retail sales rising 1% month-on-month versus the 0.4% consensus with the control group, which excludes some of the volatile items, seeing sales rise 0.3% MoM versus expectations of a 0.1% gain. There were some downward revisions to the history, but this is still a firmer-than-anticipated outcome. The headline figure was boosted by a 3.6% MoM jump in vehicle sales, but there was also decent strength in electronics (+1.6%), building materials (+0.9%), food & beverage (+0.9%) and health/personal care (+0.8%). These gains more than offset weakness in miscellaneous stores (-2.5%), sporting goods (-0.7%), department stores (-0.2%) and clothing (-0.1%). We had been thinking the risks were skewed to the downside on the basis that the June control groups gain of 0.9% was vulnerable to a correction after hot and humid weather across the US boosted traffic at shopping malls. This resilience in consumer spending gives enough excuse to push the market to increasingly favour a 25bp Fed interest rate cut over a 50bp move in September. US retail sales levels Source: Macrobond, ING Jobless claims show lay-offs remain low Meanwhile, jobless claims surprisingly moderated to 227k from 234k (consensus 235k) with continuing claims dipping to 1864k from 1871k (consensus 1870k). This is the second consecutive slowing in initial jobless claims and is the lowest number since the first week of July. As such it reinforces the message that the rise in the unemployment rate is being caused by increased labour supply exceeding labour demand rather than job lay-offs, which again points to a greater chance of a 25bp cut than a 50bp move that we had penciled-in in the wake of the jobs report. Weekly initial jobless claims Source: Macrobond, ING Industrial production remains subdued Rounding out the main US numbers, we have industrial production falling 0.6% MoM with June’s growth rate revised down to +0.3% from an initially reported +0.6% gain. Hours worked in the sector are the best guide for output growth and the fact they fell 0.6% indicated downside risk to the consensus forecast of a 0.3% decline. Hurricane Beryl played a major part of this as it disrupted the Gulf Coast. The ISM manufacturing index remains in contraction territory and weak orders levels point to a sector that will continue to struggle. Nonetheless, the US economy is dominated by services these days and that remains in a stronger position, for now. MoM change in industrial output and the hours worked in the sector Source: Macrobond, INGContent Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user’s means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Original Post Continue reading →

Because of Silver, you get these improved performance characteristics:1. 600-mile range (about double the average range on today’s market)2. Full charge in 9 minutes3. Lighter weight4. Lifespan of 20 years

Samsung’s development of solid-state battery technology is poised to significantly impact the electric vehicle (EV) market. These batteries, which incorporate a silver-carbon (Ag-C) composite layer for the anode, offer several key advancements over traditional lithium-ion batteries.

Key Features and Benefits

Range and Lifespan: Samsung’s solid-state batteries promise an impressive 600-mile range on a single charge and a lifespan of 20 years.
Charging Time: These batteries can charge in just nine minutes, addressing one of the major hurdles in EV adoption.
Energy Density: With an energy density of 500 Wh/kg, these batteries are nearly twice as dense as current mainstream EV batteries, allowing for longer travel distances in a smaller, lighter package.
Safety: The use of a solid electrolyte instead of a liquid one reduces the risk of fires, making these batteries safer than traditional options

Impact on the Silver Market

The introduction of Samsung’s solid-state batteries could have a substantial impact on the silver market. It is estimated that each battery cell may require up to 5 grams of silver, leading to a potential demand of 1 kg of silver per vehicle for a 100 kWh capacity battery pack. If 20% of the global car production (approximately 16 million vehicles) adopts this technology, the annual silver demand could reach 16,000 metric tons.

Silver Academy Modest Fundraiser (Only 2 per year) Continue reading →

KanawatTH/iStock via Getty ImagesAfter a lively start for the month of August, gold still has several technical and fundamental advantages in its favor on an intermediate-term (six-to-12-month basis). That said, the near-term outlook suggests headwinds will persist in the next several weeks, making it difficult for gold prices to mount a sustained rally. But as I’ll explain here, the big picture outlook remains favorable for higher gold prices starting in fall. Let’s begin this analysis by taking a look at gold’s technical backdrop. Despite the multiple headwinds that gold has faced this summer—ranging from unfavorable sentiment for speculators to competition from cryptos—the precious metal managed to hold its own while refusing to bow to broad commodity market selling pressure. But after treading water for over three months, gold has just made an attempt at breaking free from its trading range on safety-related demand. In my previous article in mid-June, I observed regarding the SPDR Gold Shares ETF (GLD): …there’s a good chance GLD will manage to continue treading water near current levels before the rising 90-day moving average (the next most important trend line in my technical tool kit) catches up and presumably incites some new buying interest from technically-oriented traders. That’s pretty much what happened, as the chart below shows GLD maintaining a mostly lateral trend until the 90-day line came into play later that month, pushing gold higher. BigCharts As you can see, however, gold still hasn’t managed to take flight in a sustained fashion, and I believe the reason for that is due to a lack of decisive commitment to either a bullish or a bearish market stance. That is, there appears to be no clear consensus in the sentiment data among retail participants as to which direction gold is headed in the near-term outlook. Shown below is the most recent gold sentiment indicator from the DailyFX website, which reveals that as of this writing, 52% of retail traders are net long gold. That’s very close to a neutral position for the metal, and such positioning is often followed by lateral trading ranges due to the market’s indecisiveness. DailyFX If this same principle holds true again, we should expect to see gold making only minimal upside progress at best; at worst, a sideways trend can be expected (or perhaps even minor weakness). However, I don’t anticipate gold to show a conspicuous degree of weakness going forward, due to the tremendous geopolitical and global economic uncertainties that are keeping safety-related demand for the metal very much alive. Indeed, every time in recent months the bears have attempted to control the gold trend, resurgent safety demand has allowed the bulls to quickly regain control of the market and push prices back up. I don’t expect this dynamic to change anytime soon, and I suspect the 90-day moving average will also continue to serve as a strong supporting benchmark for the gold price. From a fundamental perspective, global gold demand remains “firm” according to the latest insights from the World Gold Council (WGC). The organization’s Gold Demand Trends for the second quarter of 2024 was released a couple of weeks ago, and it revealed that while there was a decline in retail bar and coin investment from western countries—along with lower jewelry sales—continued strength in central bank demand kept the total demand for gold trending higher. In fact, gold demand reached its highest Q2 level on record, according to WGC, as shown in the graph below. World Gold Council The WGC observed that, “Central bank net gold buying was 6% higher y/y at 183 [tons], driven by the need for portfolio protection and diversification.” Additionally, demand for bars, coins and ETFs was said to be “robust” in the East, despite declines in the West, while Western ETF investment flows have “started to return so far in Q3.” The persistence of investment flows and central bank demand cannot be understated, as both factors are key reasons the metal has been able to maintain its longer-term upward trajectory since 2022 when the buying intensified. For the remainder of 2024, WGC sees revived Western investment flows balancing out weaker consumer demand. Meanwhile, central banks in emerging markets continue to support the gold bull market, particularly in Kazakhstan, Oman, Kyrgyzstan and Poland—mainly for political reasons, as several nations not currently allied with the U.S. are trying to diversify away from the dollar. So, while I expect gold to continue facing headwinds from mixed investor sentiment in the near term, you may be asking, “What, then, could serve as the catalyst for gold’s next meaningful move higher?” My answer to that question is the growing expectation that the Federal Reserve will lower its benchmark interest rate by at least 25-basis points in September. Falling rates are one of gold’s most important directional catalysts, and the commencement of declining rates has historically been followed by a converse reaction (i.e. rising prices) on gold’s part. And while some analysts argue that gold’s current price has already discounted a loose rate policy on the Fed’s part, I would disagree with this assessment as the Fed has consistently remained opaque in stating its rate cut intentions. While Fed Chairman Powell recently told reporters that while “a reduction in our policy rate could be on the table at the September meeting,” he hasn’t fully confirmed it. Thus, a rate cut on September 18 would likely carry enough of a relief factor that investors would almost certainly pivot more decisively toward owning gold once the Fed has confirmed its rate intentions. All told, while the current investor sentiment backdrop suggests gold will continue to struggle to rally in a sustained fashion in the near term, ongoing institutional demand should keep the big-picture bullish case for gold fully intact. What’s more, the long-awaited commencement of a more dovish interest rate policy—likely starting next month—should provide a stimulus for higher prices this fall. For now, I continue to assign a “hold” rating on gold for investment purposes. Continue reading →

Jonathan KitchenIntroduction Earlier today, the Bureau of Labor Statistics released the Consumer Price Index for the month of July. The report indicated that inflation rose at 0.2% in the month of July, and 2.9% on a year-over-year basis. When removing the volatile elements of food and energy, core inflation also rose at 0.2% in the month of July and 3.2% on a year-over-year basis. The weight of the inflation report has been somewhat subdued by the softening labor market, but the overall disinflationary trend is supportive of an introductory rate cut this fall. Bureau of Labor Statistics Bureau of Labor Statistics While July’s month-over-month change in core inflation is hotter than June’s, it matches May’s changes. The last three months combined are clearly the softest three inflationary reads of the past year, and when annualized, come out to just 1.6%. Even adding the hotter April read and annualizing the last four months brings us slightly over 2%. The economy is beginning to string together several months of tame inflation data pointing to a 2% trend, despite the current year-over-year trends being higher. Bureau of Labor Statistics Bureau of Labor Statistics Indicators Leading Up to the Inflation Report In advance of the report, economists and investors were optimistic that the disinflationary story would continue its trend. One of the largest inputs to consumer inflation is wages. After year-over-year wage growth flirted with 6% in early 2022, average hourly earnings have steadily declined to 3.6% on a year-over-year basis, a trend that is closely matching the disinflationary trend. Bureau of Labor Statistics Another source of price inflation is consumer credit. After the stimulus packages of 2020 and 2021, consumer loans grew at 10-12% year over year through 2022. As interest rates have risen, consumer loan demand has fallen, and after two quarters of contraction, the rate of consumer lending growth was still tame at 2% in the second quarter. Federal Reserve Goods Deflation Continues to Help Durable goods deflation continues to help push core inflation towards the 2% target. In July, the month-to-month change in durable goods pricing was negative for the 14th consecutive month. On a year-over-year basis, durable goods prices declined by 4.1%, which was the same as last month and continues to be the lowest point of this business cycle. Bureau of Labor Statistics Bureau of Labor Statistics Progress on Services, But Elevated Pricing Remains For the first time since April 2022, year-over-year services inflation fell to under 5% at 4.9%. While year-over-year services inflation has declined in fourteen of the last seventeen months, it remains elevated. By comparison, service sector inflation in July 2017, 2018, and 2019 was 2.4%, 3.1%, and 2.8% respectively on a year-over-year basis. July’s monthly service sector inflationary change was the third lowest in the past twelve months, so there is hope that disinflation will continue in services. Bureau of Labor Statistics Bureau of Labor Statistics The leading issue within the service sector remains housing. During July, housing inflation rose by 0.35% which represented the higher threshold of monthly changes over the last twelve months. At 4.3% year over year, housing inflation seems poised to stall as supply constraints continue to dominate the industry. Rent changes also fell in line with housing. As the prospect of rate cuts looms large, the Fed is going to need to accept the goods and services pricing dichotomy to effectively move towards a neutral rate. Bureau of Labor Statistics Bureau of Labor Statistics Bureau of Labor Statistics Bureau of Labor Statistics Conclusion The debate seems to have shifted from whether to cut to debating over how much the Federal Reserve should cut in its meeting next month. I continue to be skeptical of the possibility of a soft landing, and while economic metrics are softening, we need to keep in mind that we got here via overaggressive monetary easing. I would not want to risk a re-firing of inflation and the threat of stagflation by having over-accommodating monetary policy. Thus, I believe a 25-basis point cut is more warranted, with additional cuts to follow if future economic trends support them. Continue reading →

Rapidly increasing industrial and military demand for silver is depleting global inventories, and the rate may well accelerate quickly.

Silver demand has outstripped supply for three straight years and the Silver Institute projects another market deficit this year.

In 2023, the silver market charted a structural deficit of 184.3 million ounces. The projection is for an even larger supply shortfall this year in the neighborhood of 215 million ounces. This would be the second-largest silver market deficit ever recorded.

According to an article published by the Jerusalem Post, surging demand coupled with declining mine output “could have far-reaching implications for markets, investors, and industries reliant on the precious metal.”

“As the clock ticks towards 2025, the global market braces for the profound impact of industrial and military silver demand on inventories. Stakeholders across sectors must navigate this evolving landscape with strategic foresight and innovation to mitigate the looming supply crunch.” 

Rapidly rising industrial demand, specifically in the solar energy sector, is driving the growing market deficits.

Industrial demand for silver set a record of 654.4 million ounces in 2023 and it is expected to hit new highs this year. According to The Silver Institute, ongoing structural gains from green economy applications underpinned this surge in silver demand.

“Higher than expected photovoltaic (PV) capacity additions and faster adoption of new-generation solar cells raised global electrical & electronics demand by a substantial 20 percent. At the same time, other green-related applications, including power grid construction and automotive electrification, also contributed to the gains.”

According to a research paper by scientists at UNSW, solar manufacturers will likely require over 20 percent of the current annual silver supply by 2027.

By 2050, solar panel production will use approximately 85–98 percent of the current global silver reserves.

Demand for silver is also growing in the tech sector due to its conductivity and reflectivity.

Meanwhile, militaries around the world are using more silver. According to the Jerusalem Post, “Silver’s use in advanced defense systems, including weaponry, communication devices, and surveillance equipment, is crucial due to its superior electrical conductivity and resistance to corrosion.”

Even as demand increases, silver mines are producing less silver and there are fewer discoveries of new deposits. According to the Jerusalem Post, “The exploration of new silver deposits is becoming increasingly difficult and costly.”

“As high-quality ores become scarcer, mining companies face challenges in maintaining production levels.” 

SBC Global Research projects that “without substantial investment in new mining projects or recycling initiatives, the silver market may face a notable supply-demand imbalance by mid-decade, potentially driving up prices and intensifying competition for this essential metal.” 

The Post highlighted three market implications of this silver supply crunch. 

Price volatility
Investment opportunities
Supply chain strain

Silver isn’t currently priced for this dynamic.

In fact, silver is significantly undervalued compared to gold. The current gold-silver ratio is just over 88-1. That means it takes over 88 ounces of silver to buy an ounce of gold.

To put that into perspective, the average in the modern era has been between 40:1 and 60:1. Historically, the ratio has always returned to that mean. And when it does, it does it with a vengeance. The ratio fell to 30-1 in 2011 and below 20-1 in 1979.

Given the current silver price, the silver-gold ratio, and the supply and demand dynamics, silver appears to be on sale. Continue reading →

(Bloomberg) — A bid to break up Alphabet Inc.’s Google is one of the options being considered by the Justice Department after a landmark court ruling found that the company monopolized the online search market, according to people with knowledge of the deliberations.Most Read from BloombergThe move would be Washington’s first push to dismantle a company for illegal monopolization since unsuccessful efforts to break up Microsoft Corp. two decades ago. Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people, who asked not to be identified discussing private conversations.Alphabet shares were down 3.8% at 10:13 a.m. in New York, the most since Aug. 5, when a federal judge ruled the company has an illegal monopoly in the search market.Regardless, the government will likely seek a ban on the type of exclusive contracts that were at the center of its case against Google. If the Justice Department pushes ahead with a breakup plan, the most likely units for divestment are the Android operating system and Google’s web browser Chrome, said the people. Officials are also looking at trying to force a possible sale of AdWords, the platform the company uses to sell text advertising, one of the people said.The Justice Department discussions have intensified in the wake of Judge Amit Mehta’s Aug. 5 ruling that Google illegally monopolized the markets of online search and search text ads. Google has said it will appeal that decision, but Mehta has ordered both sides to begin plans for the second phase of the case, which will involve the government’s proposals for restoring competition, including a possible breakup request.What’s at Stake in Google Antitrust Ruling: QuickTakeA Google spokesman declined to comment on the possible remedy. A Justice Department spokeswoman also declined to comment.The US plan will need to be accepted by Mehta, who would direct the company to comply. A forced breakup of Google would be the biggest of a US company since AT&T was dismantled in the 1980s.Justice Department attorneys, who have been consulting with companies affected by Google’s practices, have raised concerns in their discussions that the company’s search dominance gives it advantages in developing artificial intelligence technology, the people said. As part of a remedy, the government might seek to stop the company from forcing websites to allow their content to be used for some of Google’s AI products in order to appear in search results.BreakupDivesting the Android operating system, used on about 2.5 billion devices worldwide, is one of the remedies that’s been most frequently discussed by Justice Department attorneys, according to the people. In his decision, Mehta found that Google requires device makers to sign agreements to gain access to its apps like Gmail and the Google Play Store.Those agreements also require that Google’s search widget and Chrome browser be installed on devices in such a way they can’t be deleted, effectively preventing other search engines from competing, he found.Mehta’s decision follows a verdict by a California jury in December that found the company monopolized Android app distribution. A judge in that case hasn’t yet decided on relief. The Federal Trade Commission, which also enforces antitrust laws, filed a brief in that case this week and said in a statement that Google shouldn’t be allowed “to reap the rewards of illegal monopolization.”Google paid as much as $26 billion to companies to make its search engine the default on devices and in web browsers, with $20 billion of that going to Apple Inc.Mehta’s ruling also found Google monopolized the advertisements that appear at the top of a search results page to draw users to websites, known as search text ads. Those are sold via Google Ads, which was rebranded from AdWords in 2018 and offers marketers a way to run ads against certain search keywords related to their business. About two-thirds of Google’s total revenue comes from search ads, amounting to more than $100 billion in 2020, according to testimony from last year’s trial.If the Justice Department doesn’t call for Google to sell off AdWords, it could ask for interoperability requirements that would make it work seamlessly on other search engines, the people said.Data AccessAnother option would require Google to divest or license its data to rivals, such as Microsoft’s Bing or DuckDuckGo. Mehta’s ruling found that Google’s contracts ensure not only that its search engine gets the most user data – 16 times as much as its next closest competitor — but that data stream also keeps its rivals from improving their search results and competing effectively.Europe’s recently enacted digital gatekeeper rules imposed a similar requirement that Google make available some of its data to third-party search engines. The company has said publicly that sharing data can pose user privacy concerns, so it only makes available information on searches that meet certain thresholds.Requiring monopolists to allow rivals to have some access to technology has been a remedy in previous cases. In the Justice Department’s first case against AT&T in 1956, the company was required to provide royalty-free licenses to its patents.In the antitrust case against Microsoft, the settlement required the Redmond, Washington, tech giant to make some of its so-called application programming interfaces, or APIs, available to third-parties for free. APIs are used to ensure that software programs can effectively communicate and exchange data with each other.AI ProductsFor years, websites have allowed Google’s web crawler access to ensure they appear in the company’s search results. But more recently some of that data has been used to help Google develop its AI.Last fall, Google created a tool to allow websites to block scraping for AI, after companies complained. But that opt-out doesn’t apply to everything. In May, Google announced that some searches will now come with “AI Overviews,” narrative responses that spare people the task of clicking through various links. The AI-powered panel appears underneath queries, presenting summarized information drawn from Google search results from across the web.Google doesn’t allow website publishers to opt-out of appearing in AI Overviews, since those are a “feature” of search, not a separate product. Websites can block Google from using snippets, but that applies to both search and the AI Overviews.While AI Overviews only appear on a fraction of searches, the feature’s roll-out has been rocky after some excerpts offered embarrassing suggestions, like advising people to eat rocks or to put glue on pizza.(Updates with shares trending lower in the third paragraph.)Most Read from Bloomberg Businessweek©2024 Bloomberg L.P. Continue reading →

Investors love patterns. Whether charting technical indicators or dissecting an earnings report, finding themes that repeat can offer investors a sense of predictability amid chaotic markets.The most reliable patterns in finance tend to be based on the calendar year.Seasonality, as it’s called, refers to predictable and recurring changes in markets that tend to happen at the same time every year. And though markets have steadied after last week’s abrupt sell-off, stock market bears looking at seasonal patterns will be encouraged by this history ahead of this year’s election.Ryan Detrick, chief market strategist at Carson Group, recently joined Yahoo Finance’s Stocks in Translation podcast to break down some of these patterns for investors. Though Detrick has long been an advocate for understanding the forces of seasonality at work in the markets, he cautioned: “We would never blindly just invest in seasonality.”Still, investors have nearly a century of solid data from the S&P 500 (^GSPC) to analyze market trends.For example, consumer spending usually increases during the holiday season. Back-to-school shopping boosts retail sales in late August and early September. And summer vacations or holidays can slow down overall market activity and lower trading volumes.All of this creates observable patterns in the market that influence prices of stocks, bonds, commodities, and even cryptocurrencies. This data allows returns from each day of the year to be analyzed to find the average loss or gain, and those results can be combined to create a seasonality map for the year.The chart shows that stocks tend to go up each year, but average annual gains are interrupted by a big downturn from September into October. This data reflects the numerous market crashes that have occurred in September and October, including Black Monday in October 1987 and Black Tuesday in October 1929.Toward the end of October, things tend to turn around, on average, and stocks often rise into year-end, capped off by the much-vaunted Santa Claus Rally.But August is also no picnic for investors, either.”Historically, when August is down, it tends to really be down more than any other month,” Detrick said, citing significant events such as Iraq’s invasion of Kuwait in 1990, the Asian Contagion in 1997, and the downgrade of US debt by S&P in 2011.As the S&P 500’s seasonality map shows, not much happens in August — on average.But we can see the effects of a pickup in volatility by studying the seasonality of the VIX (^VIX), which offers a different set of seasonal clues for investors to decipher.The chart below was created by averaging the monthly closing VIX levels from 1990 — the beginning of the index’s calculations — through 2023. It shows that volatility typically bottoms in July, then picks up in August, crescendos in October, and then trails off into year-end.But seasonality isn’t just about monthly patterns.The four-year US election and presidential cycle provides a unique lens through which to view market behavior.Each of the four years has its own characteristics and tendencies, and the fourth year of the cycle averages a 7% gain in the S&P 500, Detrick noted.But seasonality also has plenty of limitations, not the least of which is a somewhat limited data set, and Detrick reminds investors that what matters in the current environment is uncertainty — about the election, the Fed, the US economy, and more.”It’s important to remember that scary headlines and pullbacks are normal in most years,” Detrick said.And while seasonality can give us clues about how the market got here, and where it could be headed next, it’s not a crystal ball, just a tool.”We’ve gotten through this before,” Detrick said. “Investors need to remember that we’re going to get through this again.”On Yahoo Finance’s podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub. Watch on your preferred streaming service, or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.Click here for the latest stock market news and in-depth analysis, including events that move stocksRead the latest financial and business news from Yahoo Finance Continue reading →

WASHINGTON (AP) — Wholesale price increases in the United States eased in July, suggesting that inflation pressures are further cooling as the Federal Reserve moves closer to cutting interest rates, likely beginning next month.The Labor Department reported Tuesday that its producer price index — which tracks inflation before it reaches consumers — rose 0.1% from June to July and 2.2% from a year earlier.Excluding food and energy prices, which tend to fluctuate from month to month, so-called core wholesale prices were unchanged from June and up 2.4% from July 2023. The increases were milder than forecasters had expected and were nearly consistent with the Fed’s 2% inflation target.The producer price index can provide an early sign of where consumer inflation is headed. Economists also watch it because some of its components, notably healthcare and financial services, flow into the Fed’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.On Wednesday, the Labor Department will release the most well-known inflation measure, the consumer price index. Forecasters have estimated that consumer prices rose 0.2% from June to July, after actually falling 0.1% the previous month, and 3% from July 2023, according to a survey by the data firm FactSet.Inflation has plummeted since peaking at a four-decade high in mid-2022. But as Americans prepare to vote in the November presidential election, many remain unhappy with consumer prices, which are nearly 19% higher than were before the inflationary surge began in the spring of 2021. Many have assigned blame to President Joe Biden, though it’s unclear whether they will hold Vice President Kamala Harris responsible as she seeks the presidency.In its fight against high inflation, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, taking it to a 23-year high. From 9.1% in June 2022, year-over-year consumer price inflation has eased to 3%.The U.S. jobs report for July, which was much weaker than expected, reinforced the widespread expectation that the Fed’s policymakers will begin cutting rates when they meet in mid-September to try to support the economy. The jobs report showed that the unemployment rate rose for a fourth straight month to 4.3%, still healthy by historical standards but the highest level since October 2021.Over time, a succession of rate cuts by the Fed would likely lead to lower borrowing costs across the economy — for mortgages, auto loans and credit cards as well as business borrowing and could also boost stock prices.. Continue reading →

WASHINGTON (Reuters) – U.S. producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services, indicating that inflation continued to moderate.The producer price index for final demand gained 0.1% last month after rising by an unrevised 0.2% in June, the Labor Department’s Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had forecast the PPI gaining 0.2%.In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.Slowing inflation and a cooling labor market have led financial markets to anticipate that the Federal Reserve will start its easing cycle in September. With the U.S. central bank now increasingly concerned about labor market weakness, after the unemployment rate surged to near a three-year high of 4.3% in July, a rate cut of 50 basis points cannot be ruled out.The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for a year, having raised it by 525 basis points in 2022 and 2023.(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama) Continue reading →

Excerpt from this week’s: Technical Scoop: Ambivalent Jobs, Raised Rates, Precious Gain

Source: www.stockcharts.com

For the second week in a row, gold prices rose, albeit a small 0.2%. This came in the face of the Japanese meltdown that spilled over into North American markets. However, for the rest of the precious metals market it wasn’t such a positive week. Silver fell 2.8%, platinum remains moribund, down 3.9% this past week, and as for the near precious metals, palladium did catch a bid up 1.6% but copper remains in a hole, losing 2.7% this past week. The gold stocks didn’t fare much better with the Gold Bugs Index (HUI) down 2.1% and the TSX Gold Index (TGD) off 3.0%. Gold is being buoyed by thoughts of a Fed rate cut. The potential for an economic slowdown, even a recession, also bolstered gold. Gold has become the number one metal of choice as a safe haven particularly in Asia. Gold is up 19.4% thus far in 2024, outpacing both the S&P 500 and the tech-laden NASDAQ. Yet gold remains undervalued and under-owned, particularly in North America. Asians are much more likely to purchase gold. Gold also responded to a lower 10-year treasury note on Friday as the metal was up some $10.

The pattern that gold is forming is taking on the look of a possible ascending triangle. A breakout to new highs above $2,525 could target up to almost $2,700. The main reason to own gold is as a safe haven in times of geopolitical uncertainty and a low interest rate environment, and as a hedge against currency depreciation. Gold, the metal, is preferred over gold stocks which, while leveraged to the price of gold, have liability. Witness the recent collapse of Victoria Gold when its heap leach pad failed and the contamination spread into local waters, killing fish and threatening drinking supplies. 

Source: www.stockcharts.com

Silver continues to underperform gold. Silver fell this past week by 2.8% but remains up 14.5% for 2024. However, gold is up 19.4% in 2024. We’re also up 32% from the October 2023 low. But gold is up almost 36% from a comparable low. Gold has made ongoing new all-time highs while silver is almost 45% under its all-time high. It all seems odd in the face of huge demand for silver and ongoing supply problems. The structural deficit has been going on for four years, yet silver remains repressed. We did find support above $26, a level we considered quite important to hold if we are to move higher. Support ranges from $26 to $26.50. The low so far is $26.50. But there is considerable to work to be done if silver is to resume a leadership role. A move first above $30 would be important, but silver needs to break above $31.30 to suggest new highs above the May high of $32.75. The gold/silver ratio remains in favour of gold, even if the ratio is overall falling, albeit slowly

Source: www.stockcharts.com

It was not an overly pleasant week for the gold stocks. With the Japanese meltdown spilling over into North America, gold stocks were hit as hard as any other stock. On the week, the TSX Gold Index (TGD) fell 3.0% while the Gold Bugs Index (HUI) dropped 2.1%. As we have often noted, when the stocks suffer a cold the gold stocks get pneumonia, even if the best-performing asset is gold itself. The drop this past week pushed the TGD down to its 50-day MA, but so far it has held. What is needed is upside follow-through this coming week. Regaining 350 would be positive, but we need to regain back above 365 to suggest new highs ahead. However, what is needed is that if any further downside develops it would be important to hold 330. A drop under that level could swiftly send us to 310 or even 300. The 200-day MA is currently at 295. So far, this has the look of a classic ABC-type correction from that July high of 367. The TGD fell just over 10% from the July high. 10%-plus corrections are not unusual for the TGD, even in a bull market. We are reminded that during the 2009–2011 bull run, the TGD had six corrections of 10% or more, including at least one where the index fell 25%. But the TGD rose over 200% from the October 2008 low to the September 2011 high. So far, the TGD is up over 50% from the February 2024 low. However, the index is still down roughly 25% from that 2011 high. That’s 13 years and counting since the last major high. We’ve often cited how cheap the gold stocks are in relation to gold. That hasn’t changed. We’ve never seen such a long period when the gold stocks have remained undervalued vis-à-vis gold itself.

Read the full report here: Technical Scoop: Ambivalent Jobs, Raised Rates, Precious Gain

Disclaimer

David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualised market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers.  The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security.  Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary.  David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks.  David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated.   Performance is not guaranteed, values change frequently, and past performance may not be repeated. Continue reading →