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KRO Weekly Summary: June 2 to June 8, 2019


KRO Weekly Summary: June 2 to June 8, 2019
The KRO Summary lists all Trackers and Blogs published during the designated weekly or monthly period so that so readers can easily catch up on what they may have missed. We no longer notify KRO members by email about new material except in special circumstances. When a Tracker is posted at KRO we notify members through the KaiserResearchOnline Slack Workspace. If you are an active KRO member and not registered on Slack, please let us know and we will send the invite. We will email the link to the KRO Summary to all KRO members when it is published. We will also Tweet the link so that Twitter followers can catch up at their leisure. The title links to the Tracker or Blog, the charts in the Discovery Watch Blog link to the YuoTube audio segment for that company, and the Tracker charts link to the free Corporate Profile. On occasion we may include commentary on the state of the market.
The big news last week was that job creation during May came in at only 75,000 jobs, half the average this year, suggesting a cooling of the US economy that was already being predicted by the inverting US treasury yield curve. The talk is now of a rate cut for July which has propped up senior equity markets and provided some support for gold but undermined demand expectations for raw materials. Markets were unnerved last week by Trump's declaration of a 5% per month escalating tariff against Mexico if it did not help him deliver on his 2016 promise to stop illegal immigration. The invasion of Mexico by refugees fleeing the gangsterism of Central America which rests on the business of supplying America's narcotics demand has resulted in record numbers of asylum seekers at the American border. Mexico, which has been as successful in dealing with its drug cartels as America has been in curbing narcotics demand, would rather not have this refugee problem whose solution would be very difficult to measure. Even Republicans stood up to warn that this Mexico tariff policy was going to be a disaster for US businesses. Fortunately the Americans and Mexicans had already worked behind closed doors earlier this year on how to deal with this mutually undesirable refugee problem, which enabled both sides at the end of the week to back off from what looked like another winner-take-all showdown. Gold thus sold off as another fake crisis has been averted. The "immigration" problem is a bogus one that people who have the least exposure to immigrants fret the most about. Their real issue is the hollowing out of America's industrial base that began with the neoliberal Reagan-Thatcher comeback in the eighties which escalated in 2001 when China's economic growth hit the upside tipping point. The long term graphic above depicts total manufacturing jobs and the monthly changes as well as the unemployment rate. Since 2010 manufacturing jobs have started to increase as a natural rebalancing where manufacturers realized that basing their operations in China was not entirely a free lunch paid for by American workers. Trump's battle with China is now accelerating a shift away from supply chain reliance on China based production. Trump's thug approach to negotiation may thrill his base, but that base understands MAGA as meaning a promise of good jobs whose pay increases the standard of living of workers. The most interesting media article last week was the Washington Post's As Walmart turns to robots, it's the human workers who feel like machines. This is not what the Trump base has in mind (and for that matter neither most of the anti-Trump base), but it is what capitalism has in mind. A Mexican standoff has been averted for now, but no resolution is in sight for the Chinese standoff. What intrigued me about the WP article was not the despair of the Walmart workers over becoming robot cleanup workers, but the customers messing with the robots. The Walmart consumer is who we need to monitor for signs of where things are headed. Walmart will be the first place that American consumers experience the consequences of a trade war with China. It is probably fair to say that nobody who shops at Walmart owns shares of Walmart.
Much of my time last week was spent reconstructing my rare earth database which I let lapse a couple years after Rare Earth Mania 1.0 collapsed. On the KRO home page you will find a link to the new KRO Rare Earth Resource Center. It is tagged "Rare Earth Mania 2.0" with a question mark because REM 2.0 is not yet underway, as you can tell from the long term basket price chart above. A rare earth deposit has a relative distribution of the individual rare earths expressed as percentage. This is not the same as grade which is also expressed as a percentage. If you achieved 100% of each rare earth present in a deposit from a block of rock, normalized it so that the total weight is a kilogram, calculated the value of each rare earth present in that kilogram, and added it all up, that is the theoretical basket price for that deposit. In economic studies you base it on the recoverable portion of each rare earth present; some may not be recovered at all because their relative percentage is so low and the cost of extraction higher than the payable value. But I have created these charts so that I can track the basket price over time. I also provide the rock value of that theoretical basket which is its basket value multiplied by grade (and by 1000 to make it per tonne). This allows us to compare deposits in terms of rock value and how it varies over time. The market activity list includes a couple juniors that do not own a deposit but claim to be in the business of processing rare earth concentrates. At the moment Lynas is the only publicly traded rare earth producer and it does have the highest grade deposit. The next stage requires some deeper research into what it takes in terms of rare earth price increases to put the other deposits into the money. All this efort may prove to be a waste of time because Rare Earth Mania 2.0 never happens; the way I look at, if I end up eating this effort as a sacrifice, it will be because the world has avoided a much bigger problem that the China-USA showdown could create.
Jun 3, 2019 - Blog - SDLRC: Brooke Clements highlights technical diamond articles for June 2019
Jun 3, 2019 - Blog - KRO Weekly Summary: May 26 to June 1, 2019
Jun 6, 2019 - Blog - KMW Blog June 6, 2019: Discovery Watch June 6, 2019 with Jim Goddard and John Kaiser
Verde Agritech Plc (NPK-T) InZinc Mining Ltd (IZN-V) Midas Gold Corp (MAX-T)
 
 

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