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StrikePoint Gold – Exploring High-Grade Gold & Silver Projects in BC’s ‘Prolific’ Golden Triangle

Source: Maurice Jackson for Streetwise Reports   08/18/2021

Joining us is Shawn Khunkhun, CEO of StrikePoint Gold. We discuss the value proposition…

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Source: Maurice Jackson for Streetwise Reports   08/18/2021

Joining us is Shawn Khunkhun, CEO of StrikePoint Gold. We discuss the value proposition of the Willoughby gold project and Porter silver project, both located in British Columbia's prolific Golden Triangle. This is the most comprehensive interview to date on StrikePoint Gold, which is currently undertaking an exploration program on some very compelling projects. Find out why Eric Sprott, Crescat Capital, and Sprott Global are shareholders in StrikePoint Gold.

Maurice Jackson: Joining us for conversation is Shawn Khunkhun, the CEO of StrikePoint Gold Inc. (SKP:TSX.V; STKXF:OTCQB)TC: STKXF). Glad to have you on the program to share the opportunity before us at StrikePoint Gold. Before we delve into company specifics, Mr. Khunkhun, please introduce us to StrikePoint Gold and the opportunity the company presents to shareholders.

Shawn Khunkhun: StrikePoint is an exploration company advancing high-grade properties in safe jurisdictions. I repurposed the company back in 2016; the gold price had been cutting out and majors were not exploring, nor developing. And the thinking was we could buy projects for pennies on the dollar. We could advance them. And in the future, we could move those projects along to the majors that are looking to secure development pipelines.

Maurice Jackson: You have a reputation for having astute business acumen and great use of optionality on how you establish the company. Looking at the map, StrikePoint Gold has its property bank situated in the prolific Golden Triangle. Get us acquainted with the region and some of your neighbors.

 

Shawn Khunkhun: Okay. So, near the Triangle is an area where exploration has been going on for over 100 years. It's produced some of the richest gold mines in the world. If you look at the Premier mine that Ascot is currently holding, that was one of the richest modern mines in the modern era, in terms of several ounces, in terms of grade.

Eskay Creek is a strong gold and silver mine. The Golden Triangle is known for large deposits, high-grade deposits, and is one of the hottest mineral exploration hubs on the planet. It's a flurry of activity with the discovery of Pretivm’s Brucejack, and we’re seeing large companies like Newmont and Newcrest come into the area.  Noteworthy of mention, there is also tremendous infrastructure throughout the Triangle.

Maurice Jackson: Let's go onsite and find out more. Sir, take us to the flagship Willoughby project and introduce us to the value proposition before us.

Shawn Khunkhun: The Willoughby project is a spectacular world-class discovery that was originally explored in the 1989 to 1996 time period. There were about 120 drill holes, and there were some robust grades of 20-gram gold over 20 meters thickness that were discovered. During that time the Bre-X scandal happened and you also had the gold price heading down to just under $200 an ounce in 1999. So it was a very, very difficult time for the mineral resource industry. 

We acquired the property in 2018. There's a lot of grade on the project and we are excited about the opportunity before us. We are trying to connect the dots in between zones. So, that's the value proposition, linking these zones to show that this is a mineable project.

Maurice Jackson: I referenced business acumen, when and under what terms was StrikePoint Gold able to acquire the Willoughby gold project?

Shawn Khunkhun: That's an interesting story. So back in October of 2018, the gold price got sold down to about $1,100 an ounce. And at that moment, we were able to acquire Willoughby for $85,000 in cash and by issuing three million shares of StrikePoint, which at that time was valued at about half a million dollars. Considering the amount of drilling that was done on the property, its proximity to Red Mountain, which was subsequently acquired by Ascot, it was a once-in-a-generation acquisition for the company.

Maurice Jackson: Germane to the value proposition and exploration thesis is an important stratigraphic marker known as the Red Line. What is the Red Line and where is it in relation to the Willoughby gold project?

Shawn Khunkhun: There are two British Columbia Geological Survey geologists, Jeff Kyba and JoAnne Nelson, who were looking at this tremendous area that's produced very high-grade deposits. They were trying to look at a geological model to identify where to look for the next giant gold, silver, and copper deposits in the region. So Kyba and Nelson came up with this theory, and it's a theory that has been widely accepted by the scientific community and identifies a contact.

The big deposits in the Golden Triangle are found within two kilometers of where two different rock types meet. So this is the Triassic to the rocks and the Jurassic Hazelton formation. These are two different rock types that meet within two kilometers of that contact, which have produced some of the biggest deposits in the region.

Maurice Jackson: Thus far, we've been able to determine that StrikePoint Gold is in a friendly mining jurisdiction, located in the prolific Golden Triangle, neighboring some very prominent names, and the project is along the Red Line. Two prong question, can you delve a little further into historic resource and share some of the grades with us?

 

 

Shawn Khunkhun: Willoughby does not have a formal NI 43-101-compliant resource on the property, however, the historic resource has about eight different areas throughout the Willoughby property where there's tremendous grade and there's been a lot of drilling. So, on the back of a napkin, I don't want to speculate in terms of ounces, but what we're looking for here is the neighboring Red Mountain deposit, which is just under a million ounces at about 7.5 grams per tonne.

We think this is analogous to Red Mountain. And if you look at the footprints of the mineralization from surface, it leads us to believe that we're onto a very, very large gold system here. So, this season is going to be crucial. We've done some significant work on the property to date.

We've got assays pending and we're trying to accomplish two things. Number one, link different zones of mineralization. Number two, we're looking for where we could fit a deposit into the system. And we are drilling what I would describe as Wildcat holes into areas that should host a very, very large system. There are two opportunities on the property. One is for a KSM-style disseminated large system. These are two systems, one's 40 million ounces of gold, and the other is 10 million ounces of gold.

And then the other opportunity is for a higher-grade epithermal vein-rich system. We have seen both types of mineralization on the property. And if you look at what Ascot is doing in terms of their hub-and-spoke model, along Ascot you also have Yamana and Newmont. So there's a huge appetite from larger gold entities for consolidation and acquisition.

Maurice Jackson: Speaking of Wildcat drilling, last month StrikePoint Gold announced the commencement of a 3,000-meter drill program. How's the program coming along and when can shareholders expect results?

Shawn Khunkhun: The program's going well. I was just up in Stewart, along with our technical advisor Rob McLeod. StrikePoint Gold is blessed with one of the best teams in the exploration business. These are professionals that have worked on a lot of the big projects in the Golden Triangle. We originally came out with a 3,000-meter program at Willoughby, and we're halfway through that program. It's going exceptionally well. It's on time, it's on budget.

It's very difficult to speculate on assays because you are dealing with third-party labs. And if 2020 taught me anything, we were exceptionally delayed in assay times, but I would suspect that we're going to have a very results-rich autumn season, a very result-rich fall after Labor Day and that we should be reporting ongoing into Q1.

Maurice Jackson: Sounds very intriguing. If you enjoyed the value proposition of Willoughby, wait till you read about Porter. Mr. Khunkhun, please introduce us to the Porter silver project.

Shawn Khunkhun: But before we get specifically into Porter, I want to share with readers this goes beyond Porter. This goes more to why silver, and my last experience in a bull market for gold. When gold prices went from hundreds of dollars up to thousands of dollars into 2011, it was the silver stocks, the silver equities that delivered the best returns for resource investors. I was very deliberate during this cycle.

In 2018, the company acquired Porter from Skeena resources. I was very deliberate in positioning the company with a high-grade silver property. If you look at the number of pure high-grade silver properties in the world, you could count them on a couple of hands. There are very few opportunities for resource investors in the silver space and even fewer outside of Chile, Argentina, Mexico, and Peru.

Porter is in a safe jurisdiction. It's a past-producing silver mine and one of the highest-grade silver mines I've ever come across in my career. The average production grades at Porter were 2,500 grams per tonne, but it's the exploration thesis. It's the opportunity that really has us excited. The high-grade mineralization is on both sides of Mount Rainey overlooking the town of Stewart. Porter is two kilometers from the town, but you've got this high-grade mineralization that's at either side of Mount Rainey. We can see the Petro Canada Gas Station, the Deepwater Seaport going into the Portland Canal, Highway 37A. 

So all the infrastructure is there. So, you've got the Silverado mine on one side, you've got Prosperity Porter Idaho on the other side. They're separated by about two kilometers and there was a large glacier, the Silverado glacier, that prohibited exploration in the past. That glacier is pulled back.

It's opened up a new exploration corridor and we believe those two systems are going to meet. And when you have two systems meeting, you usually have exceptional grades. The opportunity there is to link up these two past-producing mines by drilling into the center of the mountain. And it's an opportunity that previously was not accessible. And this is the season that StrikePoint tests that theory.

In addition to stepping out from each of the mines on either side, we've got step outs where we're trying to extend the known high-grade resources and known areas that were once in production. But the real opportunity is a target that we call Big Flex. The Big Flex opportunity is a series of drill holes right into the center of the system where these two systems should meet. And, if we're successful and if the assays come back anywhere in the neighborhood of where historic production grades were, this is going to be a transformational year for StrikePoint.

Maurice Jackson: You referenced 2,500 grams per tonne on the historical work. Let's put that into perspective for readers. What kind of grade would you need to go into production?  

Shawn Khunkhun: Not all deposits are the same. You've got underground mines and open-pit mines. Typically what you'd see at an open-pit silver mine is one-ounce material or 30 gram material. At an underground mine, you're probably closer to 200 grams per tonne, which is about eight ounces roughly. So, we're talking about a system here that is 10 times richer than most underground mines. That's the opportunity here. And, just so you know that this isn't the exception in the area.

If you look at some of the giant silver mines in the area like Eskay Creek, they produced almost 200 million ounces of silver at better than 2000 grams per tonne. There's a lot of precedent in this area for mines like this — Eskay is one example. At the Premier mine there was a lot of high-grade silver recovered, at Pretium’s Brucejack there's a lot of high-grade silver that's coming out. And just to the south of us is Dolly Varden Silver.

Maurice Jackson: I see that Porter has a historic resource. Is the goal to twin the holes?

Shawn Khunkhun: No, the goal is not to twin the holes. The goal is to extend the known band. While we were drilling the Willoughby property last season in 2020, we sent a team out to do some surface work at Porter. They were looking to extend the veins at surface. This was the deep vein, the blind vein. This is on the Prosperity Porter Idaho side.

We were successful.

At surface, we had come up with new extensions, we've discovered new veins. And so the goal here is to extend and expand the known veins at both Silverado and Prosperity Porter Idaho. It's to uncover new veins around that. But the big prize here is if we were able to come up with some structure, some mineralization in between those two zones that had never been explored.

Maurice Jackson: You've also been busy doing some field mapping and grab samples. What were the results?

Shawn Khunkhun: Recently, we've had up to 3,800 grams per tonne, but when we first acquired the property. At the Silverado side we've had up to 44,000 grams per tonne. This is one of the most exceptional specimens I've ever come across in my career and so up to 44,000 grams per tonne, that's 20 times the average production grades.

Maurice Jackson: All right. So let's discuss some important topics that are germane to your projects, and that is, are the projects 100% owned?

Shawn Khunkhun: They are 100% owned.

Maurice Jackson: And what is your relationship with the First Nations?

Shawn Khunkhun: There are two First Nations groups in the area. South of Treaty Creek, we're in Nisga'a territory. And so we've got a very, very strong relationship with the Nisga'a Nation. About a third of our workforce comes from Nisga'a and everyone from our team had a long history of just a very strong relationship there. I've said this before, they're our brothers, they're sisters, they're our friends. They're truly our partners and it goes beyond Nisga'a, it's everybody close to the Stewart community. These are non-First Nations. These are non-indigenous peoples as well. We are truly from the north for the north and that's our policy.

Maurice Jackson: We've discussed the good, let's address the bad, what can go wrong? And what are your action plans to mitigate that wrong?

Shawn Khunkhun: In 2020, we had one of the worst weather years up in the Golden Triangle that we've seen in about a decade. That hasn't been the case this year. But last year, if you scanned about two dozen junior resource companies and went through their financial statements, what you'd see is some companies were operating at 30% production because of weather.

I'm happy to report that StrikePoint combated the weather, and we were operating at about 90%, 95% productivity last season. So, we overcame weather, but weather can be a challenge in this part of the world. Apart from the weather, we went through the COVID pandemic in terms of more regulations and just a stronger adherence to health and safety.

We are always on high alert in terms of COVID outbreaks. And lastly, just with the scarcity of certain supplies. We started the season, we saw some trends in lumber in late 2020. We made all of our wood purchases in Q4 of 2020 and in late Q3, and thankfully so, because how do we try to secure lumbering in Q1 and Q2? We would have paid twice the price.

Now, thankfully things like lumber and other costs have come down, but there is a shortage of certain goods and items. Sometimes there are some delays, but those are the types of things that can go wrong

Maurice Jackson: All right. Let's discuss the people responsible for increasing shareholder value. Mr. Khunkhun, please introduce us to your board of directors and management team, and what skill sets they bring to StrikePoint Gold.

Shawn Khunkhun: StrikePoint Gold has a diverse group, but, if you look at the skills and experience matrix, we've got a lot of boxes checked here. We've got a mining engineer, Ian Harris. Ian, was instrumental in the sale of Corriente Resources for about $690 million.

We've got an exploration geologist, Adrian Fleming. I don't think we have enough time to go through all of Adrian's successes, but he's just a tremendous mentor to the geologists that work for the company.

We've got a tremendous mining engineer. We've got a great exploration geologist. Carol Li, who is the chief financial officer for Ascot Resources and is on the board.

And then beyond the board of directors, we've got advisors like Rob McLeod, Ryan Weymark, myself. To round things out, I come from a marketing and capital reserve background. So we've got all the right elements you need to move a company like StrikePoint forward.

Maurice Jackson: Let's get into some numbers. Please provide us with the capital structure for StrikePoint Gold.

Shawn Khunkhun: StrikePoint has about 200 million shares issued and outstanding. Eric Sprott is the largest shareholder at close to 20%. We have a couple of corporate shareholders in Ascot and Skeena. In terms of institutional ownership, I believe it's around 40% and you've got tremendous names in institutional leadership.

You've got firms like Delbrook, Crescat, US Global, Gold 2000, Sprott. So, it's all the who's who in the resource fund space.

Maurice Jackson: How much cash and cash equivalents do you have?

Shawn Khunkhun: So, we've got about $10 million in the bank. And, we've got about a $4 million budget here. We should start January 1st, 2022, with about $6 million after all of our exploration expenditures and spending.

Maurice Jackson: How much debt do you have?

Shawn Khunkhun: Zero.

Maurice Jackson: And if you can just remind us one more time, what is the float?

Shawn Khunkhun: The float is roughly 40 million shares.

Maurice Jackson: In closing, sir, what keeps you up at night that we don't know about?

Shawn Khunkhun: When our crew is in the field, they're on my mind. I sleep like a baby come December when the crews are off the property. When you go to work with people, you start to care about them. And until everybody's gone home to their families at Christmas, that's the one thing in the back of my mind. And it's part of the reason that we make our best efforts to go up and to spend time with our crews. Team morale is important.

Maurice Jackson: Last question, what did I forget to ask?

Shawn Khunkhun: One of the things that you should know is that I've personally invested about $500,000 in StrikePoint. For me, that's a material amount of money. And so my interests are aligned with shareholders' interests, my family, and my friends. There's a lot more in terms of reputation and, then, in personal skin in the game. So, that's one thing I'd like your viewers to know.

Maurice Jackson: Mr. Khunkhun, it's been a pleasure speaking with you today. Wishing you and StrikePoint Gold the absolute best, sir.

And as a reminder, I am a licensed representative to buy and sell precious metals through Miles Franklin Precious Metals Investments, where we have several options to expand your precious metals portfolio, from physical delivery of gold, silver, platinum, palladium, and rhodium, to offshore depositories, and precious metals IRAs. Give me a call at 855.505.1900 or you may email: Maurice@MilesFranklin.com. Finally, please subscribe to www.provenandprobable.com, where we provide Mining Insights and Bullion Sales; subscription is free.

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

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Disclosures:
1) Maurice Jackson: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: StrikePoint Gold Inc., Dolly Varden Silver Corp. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: StrikePoint Gold Inc., Dolly Varden Silver Corp. My company has a financial relationship with the following companies mentioned in this article: StrikePoint Gold Inc., Dolly Varden Silver Corp. Proven and Probable disclosures are listed below.

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Precious Metals

Your cash will lose at least 5% of its purchasing power in the next year

Earlier this week, Fed Chair Jerome Powell announced that the real yield on dollar cash and cash equivalents is likely to be -5% or less over the next…

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Earlier this week, Fed Chair Jerome Powell announced that the real yield on dollar cash and cash equivalents is likely to be -5% or less over the next 12 months. Yes, your cash balances will lose at least 5% of their purchasing power over the next year, and that's virtually guaranteed. So what are you—and others—going to do about it?

Assumptions: This forecast of mine optimistically assumes that 1) the first Fed rate hike of 25 bps comes, as the market now expects, about a year from now, and 2) the rate of inflation slows over the next 12 months to 5% from its year-to-date rate of 5.9%. Personally, I think inflation next year likely will be higher, if only because of the delayed effect of soaring home prices on Owner's Equivalent Rent (about one-third of the CPI), the recent end of the eviction moratorium on rents, and the continued, unprecedented expansion of the M2 money supply.

I'm a supply-sider, and that means I believe in the power of incentives. Tax something less and you will get more of it. Tax something more and you will get less of it. Erode the value of the dollar at a 5% annual rate and people will almost certainly want to hold fewer dollars than they do today.

I'm also a monetarist, and that means I believe that if the supply of dollars (e.g., M2) increases by more than the demand for dollars, higher inflation will be the result. We've already seen this play out over the past year: the M2 money supply has grown by more than 25% (by far an all-time record) and inflation has accelerated from less than 2% to 6-8%. Massive fiscal deficits have played an important role in this, but so has an accommodative Fed. Between the Fed and the banking system, 3 to 4 trillion dollars of extra cash were created over the past 18 months. At first that was necessary to supply the huge demand for cash the followed in the wake of the Covid shutdowns. But now that things are returning to normal, people don't need or want that much cash. Yet the Fed continues to expand its balance sheet, and they won't finish "tapering" their purchases of notes and bonds until the middle of next year. That means that there will be trillions of dollars of cash sitting in retail bank accounts (checking, demand deposits and savings accounts) that people will be trying to unload.

If we're lucky, the inept and feckless Biden administration will be unable to pass its $1.5 trillion infrastructure and $3.5 trillion reconciliation bills in the next several weeks. This will lessen the pressure on the Fed to remain accommodative, but it's not clear at all whether it will encourage the Fed to reverse course before we have a huge inflation problem on our hands. Non-supply-siders (like Powell) view an additional $5 trillion of deficit-financed spending as an unalloyed stimulus for the economy. Supply-siders view it as a virtually guaranteed way to increase government control over the economy and thereby destroy growth incentives and productivity.

Amidst all this potential gloom, there are some very encouraging signs, believe it or not. Chief among them: household net worth has soared to a new high in nominal, real, and per capita terms. Also, believe it or not, the soaring federal debt has not outpaced the rise in the wealth of the private sector. See the following charts for more details:

Chart #1

Chart #1 is a reminder of just how low today's interest rates are relative to inflation. Terribly low! In normal times, a 4-5% inflation rate would call for 5-yr Treasury yields to be at least 4-5%. yet today they are not even 1%. The incentives this creates are pernicious: holding cash and/or Treasuries implies steep losses in terms of purchasing power. That in turn erodes the demand for cash and that fuels more spending and higher inflation.

Chart #2

Chart #2 shows the growth of the non-currency portion of M2 (currency today is about 10% of M2). Currency in circulation—currently about $2.1 trillion—is not an inflation threat, because no one holds currency that they don't want. The rest of M2, just over $18 trillion, is held by the public (not institutions) in banks, in the form of checking, savings, and various types of demand deposits. For many, many years M2 has grown at an annual rate of 6-7%. But beginning in March of last year, M2 growth broke all prior growth records. As the chart suggests, the non-currency portion of M2 is about 25% higher than it would have been had historical trends persisted. That means there is almost $4 trillion of "extra" money in the nation's banks. This extra money has been created by the same banks that are holding it: banks, it should be noted, are the only ones that can create cash money. The Fed can only create bank reserves, which banks must hold to collateralize their deposits. Today banks hold far more reserves than they need, so that means they have a virtually unlimited ability to create more deposits. And they have been very busy doing this over the past 18 months. 

For most of the past year I have been predicting that this huge expansion of the money supply would result in rising inflation, and so far that looks exactly like what has happened. People don't need to hold so much of their wealth in the form of cash, so they are trying to spend it. But if the Fed and the banks don't take steps to reduce the amount of cash, then the public's attempts to get rid of unwanted cash can only result in higher prices, and perhaps some extra spending-related growth. It's a classic case of too much money chasing too few goods and services. And Fed Chair Powell has just added some incentives for people to try to reduce their cash balances. He's fanning the flames of inflation at a time when there is plenty of dry fuel lying around.

Chart #3

Now for some good news. Chart #3 shows the evolution of household balance sheets in the form of four major categories. The one thing that is not soaring is debt, which has increased by a mere 20% since just prior to the 2008-09 Great Recession. 

Chart #4

With private sector debt having grown far less than total assets, households' leverage has declined by 45% from its all-time peak in mid-2008. The public hasn't had such a healthy balance sheet since the early 1970s (which was about the time that inflation started accelerating). Hmmm....

Chart #5

In inflation-adjusted terms, household net worth is at another all-time high: $142 trillion. 

Chart #6

On a per capita and inflation-adjusted basis, the story is the same (see Chart #6). We've never been richer as a society.

Chart #7

Total federal debt owed to the public is now about $22 trillion, or about the same as annual GDP. It hasn't been that high since WWII. So it's amazing that, as Chart #8 shows, federal debt has not exploded relative to the net worth of the private sector. As I've shown in previous posts, the burden of all that debt is historically quite low, thanks to extraordinarily low interest rates. 

Chart #8

Chart #8 adds some color to my prior post, "What's wrong with gold?" What it suggests is that gold prices are weak today because the market is anticipating higher short-term interest rates. The red line shows the yield on 3-yr forward Eurodollar futures contracts (inverted), which is a good proxy for where the market thinks the federal funds rate will be in three years' time. Gold peaked when forward interest rate expectations were at an all-time low. Why? Because super-low interest rates pose the risk of higher inflation. With the Fed now talking about raising rates (albeit sometime next year, and very slowly thereafter), gold doesn't make as much sense because forward-looking investors are judging the risk of future inflation to be somewhat less than it was a few years ago.

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Articles

Commodities and Cryptos: Oil’s path higher, Gold turns positive, China’s Bitcoin blow

Oil Crude prices continue to climb higher as both short-term supply and demand fundamentals suggest the oil market will remain tight throughout the winter. …

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Oil

Crude prices continue to climb higher as both short-term supply and demand fundamentals suggest the oil market will remain tight throughout the winter.  The crude demand outlook is turning very upbeat as some scientist’s models predict a steady decline in COVID cases through March.  Holiday bookings will continue to pick up, supporting jet fuel demand and a trucking demand crisis will likely mean diesel demand will remain very strong.

A cherry on top for the bullish outlook is that low natural gas inventories and a cold winter for the northern hemisphere could mean added demand for crude as an alternative energy source.  Today’s rally in crude prices is impressive as it has been a steady climb higher this week, alongside a strengthening dollar that normally dampens appeal for commodities.   Oil prices have one direction to go for the remainder of the year and that is higher.

Before the New York open, WTI crude softened after Iranian Foreign Minister Hossein Amirabdollahian said Iran nuclear deal talks will resume soon.  Expectations for sanction relief for Iran have diminished since Iran’s inauguration day.  Negotiations will be a long drawn-out process that will likely require compliance before the US gives any sanction relief.  Extra Iranian barrels of crude seem unlikely to be a 2021 story.

Gold

Gold prices turned positive after Evergrande’s woes extended beyond China.  US Evergrande investors reportedly have not yet received interest payments and the China Evergrande New Energy Vehicle Group Ltd has a serious shortage of funds.  It looks like China won’t save Evergrande but will try to contain any systemic risks, which should lead to some safe-haven flows for bullion.

Gold has been battling against a stronger dollar that stemmed from surging Treasury yields post-Fed.  Gold is in a very tough spot and volatility will remain elevated with the risks remaining to the downside.  The US growth story will continue to improve if COVID modelers are right about a steady decline in COVID cases through March.  If Evergrande’s fallout is contained over the weekend, gold could be vulnerable for a test of the $1700 level.

Bitcoin

Bitcoin was dealt a major blow after China’s central bank said all cryptocurrency transactions are illegal and must be banned.  Bitcoin initially fell over 5% and the other top coins dropped around 10%.   Overseas exchanges that offer Chinese residents services are illegal, also taking aim at Chinese nationals who work at those exchanges are at risk of an investigation.  Bitcoin, Ethereum, and Tether were specifically named as cryptos that can’t circulate in China.

Beijing withheld banning possession of cryptocurrencies, which would have dealt a massive blow to the entire crypto space.  A banning of possession of cryptos probably would have sent everything crypto 20% lower.  If you are a Chinese crypto holder, you might be deciding now is the time to cash out.  Three years ago, crypto was heavily centralized in China, with over two-thirds of the mining happening there.  If Chinese crypto holders fear a ‘possession ban’ is looming, a tremendous amount of selling from old wallets may occur.

Bitcoin remains extremely vulnerable on the break of the $38,000 level, which could trigger momentum selling to the $35,000 level.

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7 Materials Stocks to Buy as Investors Look Forward to 2022

While materials stocks occupy the undesirable quality of competing for the title of most boring investment category, Wall Street might very well apply…

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While materials stocks occupy the undesirable quality of competing for the title of most boring investment category, Wall Street might very well apply a premium for dull holdings. For instance, while the S&P 500 index has been a solid performer — up 18% on a year-to-date (YTD) basis — over the trailing month, it’s down just under 1%.

Concerns about domestic economic stability, along with rumblings overseas has investors spooked. Not surprisingly, many folks are deciding enough is enough, taking their money out of risky ventures. While the U.S. market isn’t exactly a sterling opportunity, the reality is that over the long term — as legendary investor Warren Buffett implied — America represents a solid place to grow your wealth. And that sets up an intriguing scenario for materials stocks.

As you know, one of the reasons for President Joe Biden’s election victory last year was his promise to “build back better.” What that slogan translated to was a multi-trillion-dollar infrastructure bill, an initiative that if passed would augur well for materials stocks. Of course, fiscally conservative Republicans and moderate Democrats aren’t exactly thrilled at the scope of the proposal. Per the Washington Post, Biden is attempting to broker a truce within his own party ranks.

Given the acrimony — and sometimes sheer chaos — of the Washington machinery, it’s not entirely clear what will come of the infrastructure bill. But in terms of the viability of materials stocks, prospective investors might not need to worry so much about domestic politics. As it turns out, the situation in China — particularly the liquidity crisis of major property developer China Evergrande (OTCMKTS:EGRNF) — is much worse.

Therefore, a combination of faith in the American political process and cynicism that not many stable opportunities exist abroad casts a favorable light on boring but reliable companies dedicated to rebuilding from the novel coronavirus disaster.

Volatility-weary investors may want to consider these materials stocks:

  • International Paper (NYSE:IP)
  • Celanese (NYSE:CE)
  • LyondellBasell (NYSE:LYB)
  • DuPont (NYSE:DD)
  • Nucor (NYSE:NUE)
  • Southern Copper (NYSE:SCCO)
  • Olin Corporation (NYSE:OLN)

Just to be clear, boring investments don’t necessarily equate to insulation from red ink. As U.S. Treasury Secretary Janet Yellen reminded us in an op-ed for the Wall Street Journal, we’re not exactly out of the woods either — far from it. Thus, it’s best to approach these materials stocks with the same due diligence as you would any other business sector.

Materials Stocks to Buy: International Paper (IP)

Source: Mark ONCE / Shutterstock.com

At first, you might be forgiven for rolling your eyes at International Paper. While materials stocks never registered highly on the excitement scale, International Paper also appears to be irrelevant. With so much emphasis placed on going green — and therefore digital — there doesn’t seem to be much room for IP to grow. The Covid-19 crisis has also placed importance on contactless transactions.

Nevertheless, growing is exactly what it’s doing right now. Certainly, 2020 was a rough year for International Paper, with its revenue down 8% from 2019’s tally. However, in the trailing-12-month period, the company is on course to generate $21.3 billion, up nearly 4% from 2020’s result. That’s not bad for a seemingly anachronistic investment.

In reality, materials stocks form the physical backbone of our economy, and International Paper is no different. True, we may be attempting to reduce our dependency on paper, but thanks to the mercurial rise of e-commerce during the lockdowns, packaging demands have accelerated. Additionally, IP is directly linked to seemingly mundane but vital goods like baby diapers and personal hygiene products.

Celanese (CE)

A photograph of various medical tubes attached to equipment in a hospital.Source: sfam_photo / Shutterstock.com

One of the peculiar dynamics of materials stocks is that while the segment as an investing opportunity doesn’t always bring the pizzazz, the underlying products and services are vital to everyday living. Take Celanese as an example. A global chemical and specialty materials firm, it’s not exactly a household name. However, it’s no hyperbole to suggest that Celanese represents the difference between life and death for its innovations’ ultimate end-users.

Among the many solutions the materials company provides, it has a robust healthcare and life sciences business. From drug delivery methods and devices to surgical and medical consumable solutions (i.e., tubing, respiratory equipment, dental products), it’s very likely that we’ve all come in contact with the Celanese brand.

If that wasn’t enough to pique your interest, the company also represents a vital cog in the 5G rollout — that’s right, it’s not just telecom shares that you should consider but also materials stocks! In this case, Celanese lends its hand through expertise in liquid crystal polymer solutions and other high-performance thermoplastics.

Materials Stocks to Buy: LyondellBasell (LYB)

A LyondellBasell production plant in Wesseling, Germany is seen at dusk.Source: Flagmania / Shutterstock.com

For those who are looking for value in their materials stocks, you might want to check out LyondellBasell. Based in the Netherlands, LyondellBasell is one of the world’s largest plastics, chemicals and refining companies. From high-level industrial applications to the most mundane activities, LYB features “background” relevance across the board.

For instance, a major component of LyondellBasell’s everyday solutions is in food packaging. According to Grand View Research, the global ready-made meals market reached a valuation of $159.15 billion in 2019, with experts predicting that it will expand at a compound annual growth rate of 5.5% from 2020 to 2027. That translates to global revenue of $244.3 billion by the end of the forecasted period.

Why is this important for LYB stock? The underlying company recognizes that consumers are looking for “the quick and easy solution” in their packaged food products, an attribute that LyondellBasell specializes in.

Best of all, LyondellBasell is the world’s largest licensor of polyolefin technologies, which have myriad applications in industries ranging from medical, filtration and transportation sectors, among others. Should the U.S. and other nations spark a build out, LYB could benefit handsomely.

DuPont (DD)

The logo for DuPont (DD).Source: ricochet64 / Shutterstock.com

One of the world’s premiere materials stocks, DuPont is synonymous with everyday products and innovations that we take for granted. From home goods to military applications, if you want maximum coverage in this sector with one name, DD stock would be it.

What’s particularly appealing about DuPont at this juncture is that it could be one of the most viable value plays among materials stocks. Similar to LYB and CE above, DuPont shares have printed some red ink recently. Over the trailing month, DD found itself staring at a 7% loss. And on a YTD basis, it’s down over 3%.

However, that could be due for a change because of our rapidly changing world. For instance, DuPont produces Nomex, a heat-and-flame resistant material that’s vital for protecting firefighters. As you know, climate change has contributed to record-breaking wildfires, which cynically drives demand for Nomex products.

As well, DuPont is famous for manufacturing Kevlar, which in addition to being vital for infrastructure is best known for undergirding military body armor. With our national security profile increasingly shaky, DD stock offers multi-tiered relevance.

Materials Stocks to Buy: Nucor (NUE)

Steel stocks: rods, bars and other forms of steelSource: Shutterstock

If you believe that President Biden can resolve conflicts brewing between high-profile Democrats and succeed in pushing through the infrastructure bill, Nucor will be one of the top materials stocks to consider. Billed as the “safest, highest quality, lowest cost, most productive and most profitable steel and steel products company in the world,” Nucor has a track record that few can assail.

At the same time, it’s appropriate to consider the risks, which are rather sizable. Obviously, if Washington acrimony succeeds in scuttling the infrastructure bill, NUE stock will look far less attractive than it does now. In addition, the underlying company is exposed to global growth dynamics; hence NUE’s sharp loss on Sept. 20 following China Evergrande’s default worries.

As a result of the nearer-term threats, NUE has been discounted sharply in recent days. Over the trailing month, it’s down 15%. However, if the government approves some level of infrastructure spending, NUE could benefit.

Also, Nucor provides steel solutions for the automotive industry, which has been a disaster due to the semiconductor supply crisis. Nevertheless, once that problem fades away, Nucor could swing higher on a demand ramp up.

Southern Copper (SCCO)

Piece of copper set against black backgroundSource: Coldmoon Photoproject/Shutterstock.com

Back in May of this year, some commodity analysts suggested that investors take a contrarian view on the copper mining space, arguing that it was undervalued compared to the target commodity. Further, they anticipated higher prices in the fourth quarter of 2021, suggesting that key copper fundamentals — including dollar weakness and a post-Covid-19 recovery trek — should bode well for the industrial metal.

Despite some key changes to the global economic forecast since then till now, many factors remain positive for copper. By logical deduction, Southern Copper could be one of the top materials stocks to buy once we work out of the present funk.

Moving forward, should the Biden administration succeed in its infrastructural buildout initiatives, Southern Copper stands poised to deliver big contrarian gains as the underlying commodity is critical to electric vehicle production. If the White House is serious about getting the U.S. economy to hit net-zero emissions by 2050, EVs will play a critical role.

Further, copper being a highly efficient conductor of electricity is also crucial for renewable energy systems. Thus, SCCO is one of the must-watch names among materials stocks.

Materials Stocks to Buy: Olin Corporation (OLN)

Olin Corp (OLN) logo displayed on a mobile phone screen representing dividend stocksSource: IgorGolovniov / Shutterstock.com

As one of the global leaders in chemical production — particularly chlor alkali products and epoxy — Olin Corporation enjoys relevant demand sources from myriad industries. As such, OLN will be among the materials stocks to gain an advantage from the infrastructure bill should it pass.

However, I can understand that some people might not be interested in buying shares that have anything to do with Biden’s policies. Following the Afghanistan debacle, the president doesn’t exactly have the confidence of the nation. But if you do happen to have hard feelings about the current administration, then OLN stock could be a cathartic wager.

In addition to chemical products, Olin owns the Winchester brand of ammunition. Due to the record-breaking surge in firearms sales, ammo prices have likewise shot through the roof due to dwindling supplies. Moreover, the ridiculous prices continue to be a challenge for the outdoorsman types.

Some reports indicate that the ammo shortage could last between 12 to 24 months. Moreover, threats of gun control policies could spike up demand for firearms and related products. Thus, the Biden administration is a perfect catalyst for OLN stock.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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