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KRO Weekly Summary: August 11 to August 17, 2019


KRO Weekly Summary: August 11 to August 17, 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.
During the past week gold made it over $1,500 and closed above it a few days as the general equity markets suffered some sharp down days when it became apparent that China was ignoring Trump's realization that imposing a 10% tariff on a very broad range of consumer goods on September 1 would not overly endear the President to his Base. China saw through Trump's tariff delay until December 15 and quite rightfully laughed at it. Trump's unilateral declaration that China is a currency manipulator has also been dismissed as a joke because no other nation nor the multi-lateral institutions agree with him, leaving Trump stuck listening to a mocking variation of the Cope theme song, "Whatcha Gonna Do Now Boy". Although the US economy is still humming along with inflation below 2%, China and much of the rest of the world are feeling the stresses of a downturn. About $15 trillion in government debt now has a negative yield, which means that if you buy a government bond today, the principal you get back at maturity plus interest (treasuries do not pay interest, they trade at a discount to the maturity value) will be less than you paid today. In other words, investors are willing to pay governments to store their money. Why would they do that? It is because investors are worried about a global economic downturn which will deflate the monetary value of all other asset classes. US government debt in the form of treasury bills is not yet negative yielding, but demand for the longer term treasury bills has flattened the yield curve.
The yield curve above does not tell us much other than that if you are a retiree you will get the same yield for a long term deposit as a short term deposit. Trump's desire to see short term rates lowered by the Federal Reserve is a bit of a double-edged sword because a good chunk of his Base consists of retirees who do not want their savings deposit yields drop back to near zero as was the case during the early recovery years of the 2008 financial crisis. Some cynics think that Tump's desire for lower interest rates has more to do with refinancing his empire's debt load as cheaply as possible; in the current climate banks are now going to lend more money to Trump's base. What really has economists worried is a chart that plots the spread between long and short term rates. In the case below I use 10 yr treasury and 3 month treasury yields to calculate the difference (percentage points) which is plotted on the left axis as a green line (the prime rate and CPI inflation rate are plotted as percentages on the right axis). When the spread goes negative the short term yield is higher than the long term yield. During the last 40 years the declining spread trend has culminated in recessions when the spread goes negative (1981, 1989, 2001, 2007). Trump's base is not going to want to hear that Making America Great Again through a trade war with China (for that matter with everybody else too) is a sacrifice they must endure. The next shift in Trump's narrative will be what I call the "descending submarine" strategy where one imagines the United States as the biggest most powerful submarine in the world to which all other weaker, less robust submarines are tethered, and this submarine choosing to go deep where the pressure will put enormous stress on the US submarine but destroy all the rest which get pulled into these dangerous depths. The US submarine will then ascend back to the surface and begin the reconstruction of the world on its unilateral terms, sort of what happened after World War II though the Soviet Union emerged as a counter-balance. It is unclear how a US induced global recession in the current context will play out, whether it may in fact destroy the United States as the hegemon. The inversion of the yield curve and acceptance of negative yielding debt in Europe reflects the view that a difficult time will come, Trump will be purged from the equation, and some form of the status quo of globalized free trade will re-emerge. The rise in the price of gold reflects a much more pessimistic outlook and it is serving as safe haven from extreme uncertainty, not a mere global economic downturn. Gold producers have responded well to the higher gold price because it reflects itself on the bottom-line. Optionality gold juniors have had only a muted response. And exploration juniors are now tracking the seasonal anxiety that comes with results flow in the last 4 months of the year. But we are seeing a rise in traded value of the TSXV resource listings, not yet indicative of a bull market, but the trend in the split between resource and non-resource listings is heading toward a crossover. For now that is more driven by deflation of the cannabis bubble than exuberance for resource juniors. Most likely we need gold pushing through $1,600 and a narrative as to why gold's uptrend is unstoppable become a broad talking point. Still a tough market for the resource juniors, but there is finally reason to be optimistic that an enduring turnaround is underway.
Aug 14, 2019 - Tracker - Tracker: In Memory of Julia Lane, Vice-President of Exploration for Atac
Atac Resources Ltd announced on August 8, 2019 that on Tuesday August 6 a small airplane with one passenger making a routine flight from the Rackla airstrip to Mayo crashed with no survivors. The Cessna, which has a dozen passenger seats, went down north of Mayo Lake not far from the Mayo airport. The pilot, Shawn Kitchen, had 4 years of flying experience with Alkan Air. An investigation into the cause of the crash is underway. We (participants in the Yukon Mining Alliance Tour) had flown in a s...
Aug 14, 2019 - Tracker - Tracker: Sun Metals disclosure policy spawns confusion about the evolving geometry of the 421 Zone
Sun Metals Corp published assays for the first 3 holes into the 421 Zone of the Stardust project on August 13, 2019 which confirm that the high grades of the 421 Zone persist down-dip and are also present 50 metres to the south. The stock traded 4.1 million shares, touching $0.58 before closing down $0.02 a $0.48. The market's confusion is due to two reasons. The first is that the news release does not tell us what management thinks is happening with the geometry of the zone. The second is that ...
Aug 13, 2019 - Blog - KMW Blog Aug 13, 2019: Investing News Network: Priscila Barrera interviews John Kaiser at Sprott Conference
Aug 14, 2019 - Blog - KMW Blog August 14, 2019: Discovery Watch August 14, 2019 with Jim Goddard and John Kaiser
Atac Resources Ltd (ATC-V) Uravan Minerals Inc (UVN-V) Sun Metals Corp (SUNM-V)
Aug 15, 2019 - Blog - KRO Weekly Summary: August 4 to August 10, 2019
 
 

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