OUR WEALTH DAILY

Copper in massive demand supply future The Canadian metals mining firm,   Teck Resources Ltd. ( TECK ) , predicts that copper demand for EV battery production will jump 750% this decade – from 210,000 tons in 2020 to 1.8 million tons. Alongside that surge, Teck predicts copper demand for EV charging stations will soar more than 1,000% by 2030. All else being equal, therefore, copper prices should trend higher for several years. But all else is not equal… The copper supply is under extreme geological pressure; ore grades at the world’s major copper mines are declining. Australian-U.K. resources company  BHP Group ( BHP )  estimates that declining grades will remove around two million tons/year of global copper mine supply by 2030. That’s no small matter. As ore grades decline, copper supplies do not merely become less plentiful; they also become more expensive to extract. Consider this back-of-envelope analysis from Manhattan Institute Senior Fellow, Mark P. Mills… For eve...

  In fact, in 2022, the S&P 500 buyback index outperformed the S&P 500 index. Just think about that. Without the extra demand coming from companies for their own shares, it’s likely that the market could have looked much worse last year. But all this buyback activity can propel stock prices higher, especially if other factors are involved. Greater buyback announcements, buyback trade execution, and retail and institutional demand can all contribute to higher share prices. And when you throw in the fact that we are in Stage 1 of the Fed’s pivot, there’s reason to believe this early year rally has legs. That’s why we think that 2023 will be an even bigger buyback year – and set another record. And one way to take advantage of this trend is through the  PKW Invesco Buyback Achievers ETF . It’s an exchange-traded fund that tracks the 100 stocks with the highest buyback ratios.

Buybacks is a sign of a lazy company The energy sector has been flexing its buyback muscle, too. So far this year, the biggest buyback announcement came from Chevron. Its $75 billion figure made up more than half of the total buybacks announced for January. (Even without them, January’s buyback total stood at $57 billion, the fourth-largest total for January ever.) After a banner year in 2022, Chevron, the second-largest fuel company in America, announced $75 billion in anticipated share buybacks for 2023. This is interesting because not only did the White House decry Chevron’s buyback size, but the government had already decided to dissuade American companies from stock buybacks.

 We still need OIL until 2060 It’s not cheap to drill for wells. This Goldman Sachs chart notes that rising inflation, rising wages, and rising materials costs are pushing up the cost of production.   Most wells have a payoff period that can last decades.  Yet, various agencies have called for these wells to be “sunsetted” before they reach their payoff period. What’s the point of the investment, then… other than to provide short-term political cover? Instead of expansion, they’re focused on shareholder returns. They’re buying back stock. They’re hiking dividends. And they’re paying off debt.  Naturally, this has created an unprecedented lack of investment in the energy markets. Last year, Goldman Sachs shined a spotlight on this problem in an alarming report.    “In upstream oil and gas, the industry at the peak was spending $900 billion per annum, which troughed at $300 billion in 2020, so a two-thirds reduction in apex. … We have exhausted all of the spa...

  Gold works in a recession One of the best ways to trace a market in a recession is to look at the S&P 500. This is a good indication of how companies, over a number of different sectors, are performing. Below are the results from 8 different recessions that have occurred since the US Dollar was taken off of the gold standard. Conclusion 1. Notice that the length of the crash doesn't make a difference. In 75% of all market recessions, the value of gold has increased significantly. Therefore, it can be assumed that holding gold during a recession is a good idea.

 Extreme Greed The price action indicates a market which does not believe the Federal Reserve. It is an identifier that extreme greed is taking place. Source:  https://twitter.com/LanceRoberts/status/1622562862173388801 We are at a seminal moment in financial history.   Similar levels of greed predicted the crash of 1929. They predicted the tremendous stock and bond losses in three periods in the inflationary 60’s and 70’s. This indicator reached similar levels prior to the housing collapse in 2007. Our equity markets would then drop 50% thereafter. 

Ease in before we know the water is lovely We do not have to go back very far in history to find a time when the Federal Reserve was raising interest rates and tightening financial conditions while stocks were also rising. As seen in the chart below, there was Fed hiking during the 2003-2007 bull market and again during the 2009-2020 bull market. Stocks and the economy performed very well in these periods, and ‘don’t fight the Fed’ didn’t play out. Source: Federal Reserve Bank of St. Louis  2 In the current environment, I’m seeing that many investors are preferring to wait until the Fed hits the pause button on rate hikes before turning bullish again. But to assume that stocks will only start to climb once the Federal Reserve cuts rates or pauses hikes is to assume that stocks move concurrently with economic news and Fed policy, which we know historically has not been the case.

 Layoffs will increase to match 2018 levels which should be another 400,000 How bad are the layoffs? Tech  has been hit hard by layoffs. Are these layoffs a leading indicator of greater economic problems, or a natural reset after unsustainable healthy growth?  We're not going to be able to answer that question definitively, but we're going to dig into jobs numbers to contextualize what's going on. To start, we updated the data behind our  article on the Great Resignation .

"cost of an employee per hour spent working" (including the cost of worker benefits) is growing at a slower pace than previous highs. Year-over-year growth for the fourth quarter of 2022 was only around 1%, below the Fed's inflation target, this data is called the Employment Cost Index ("ECI"), and it reveals insight about the path of inflation. As Scott said... The ECI also has tracked widely followed headline inflation numbers, as Scott showed by comparing this measure with the Consumer Price Index ("CPI") and core personal consumption expenditures ("PCE") price index, the Fed's preferred inflation gauge... As he noted... Both of these charts are pointing to a noticeable trend shift in labor costs. Granted, they're not imploding, but the pace of gains is slowing. And as we can see, that change tracks closely with the different inflation gauges. Consequently, they're easing as well. However, this measure would still need to fall ...

  What bear market? Imagine focusing your attention on arbitrary factors like the economy or corporate earnings, instead of the market itself? Look the returns of each of the US Sectors since the Bull Market started last June: Consumer Discretionary stocks are up over 30% Industrials are up 25% Financials and Technology stocks are each up over 20% What bear market?

F orecasting record worldwide crude oil demand The International Energy Agency (IEA) is forecasting record worldwide crude oil demand in 2023 as China reopens its economy to international travel. The IEA is forecasting that crude oil demand will rise 1.9 million barrels a day and reach a record of 101.7 million barrels a day. OPEC and its allies, including Russia, boosted their output by 4.7 million barrels a day in 2022, but then abruptly cut back their production in October. New global crude oil production is forecasted to rise by 1 million barrels per day from increased output from Brazil, Canada, Guyana, Norway and the U.S. As a result, the IEA is forecasting very tight crude oil supplies, so higher crude oil prices are anticipated in 2023. So, essentially, the most certain economic event will be that crude oil prices will be rising in the upcoming months due to growing global demand – and the fact that the Biden Administration will no longer be releasing up to 1 million barrels pe...

Soft Landings We may have been encouraged by Chair Powell’s relative optimism that a recession can be narrowly avoided. But he’s been talking soft landing the entire time, we just never believed him until now. Too much of a good thing? Or too good to be true? Fun fact: According to this morning’s BLS report, the US economy  lost  2.5 million jobs in January. It’s only the seasonal adjustments that get us to the gain of 517,000 that’s making headlines.   The unadjusted job losses are the smallest percentage decline for the month of January since 1984. But that could be for all kinds of reasons, like warmer than normal weather and employers holding on to seasonal workers for a little longer than normal.   TLDR: The job market may not be as tight as the adjusted data suggests.   Why so surprised? That bottom row, information, has been making all the headlines and souring sentiment. But Big Tech is bigger in our minds than it is in reality. Job losses at the likes o...