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.