Course Correction

From the HRA Journal Issue 295,
November 5, 2018

Wall St put in a correction as I expected it would. We've seen a recent bounce which has the street calmed down, though I'm not convinced yet we've seen the end of the downside.

Because of the political uncertainties, I decided to move the fuller comments on base metals back by one more issue. I'm not sure the outcome of the US midterms will change anything, but we may see a more conciliatory tome on trade after November 7th.

 

Oops, He Did It Again

From the HRA Journal Issue 293,
September 19, 2018

Sigh. After a promising second half of August, resource stocks have managed to go nowhere, or worse, since the start of September. Some of this was due to lab slowdowns.

Most of the action in August centered on drill plays that had released a hot drill hole or two.

 

 

Not A Good Look

From the HRA Journal Issue 296,
November 24, 2018

As I expected, Wall St went lower, though only slightly lower so far. I won't be surprised to see more lower lows before the current correction ends, though some near term catalysts discussed in the editorial will be the determining factor.

The gold price hasn't done anything much this month but is, arguably better set up now for gains than it's been for at least a few months.

 

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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.

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