For a junior gold explorer, hitting visible gold during a drill program is the best of all possible outcomes, right up there with a discovery hole returning high-grade assays.
For the third time since drilling started in June at its Blackfly gold project in northwestern Ontario, Marvel Discovery Corp (TSXV:MARV, FSE: O4T1, IMTFF:OTC PINKS) has put out news saying that drilling has intersected “VG”.
According to the Vancouver-based company,
Hole BF19-21 encountered a quartz vein with galena and minor chalcopyrite and several specks of VG at 39.3m, hosted within sheared and strongly bleached diorite (Figure 1).
Visible gold was also noted in BF21-15 which targeted a newly discovered zone (Mosquito Zone) 100m southwest of the main Blackfly Zone. Discovered by mapping and sampling in 2021, VG was noted at a downhole depth of only 8m.
“Visible gold is always a very good indicator in drill core when finding it in multiple holes,” said President and CEO Karim Rayani, in the Aug. 3 news release. He added:
“The geological team reports that holes completed to date all look visually encouraging with quartz-veining, mineralization, alteration and shearing. Our first hole into mineralization discovered during our 2021 sampling and mapping program also reported VG. To date we now have four sub-parallel gold mineralization trends that have been confirmed by drilling.”
The news lifted the shares of Marvel, which trades on the Toronto Venture Exchange as MARV, to an all-time high Tuesday of 21 cents a share. Over the past year MARV’s share price has more than doubled.
Marvel’s Blackfly property is located in the Atikokan gold mining camp, within the Marmion Lake fault zone, approximately 13.6 kilometres southwest of Agnico Eagle’s Hammond Reef gold deposit.
One of Agnico’s main exploration projects, Hammond Reef has an estimated 3.32 million ounces of gold in reserves (123.5 million tonnes grading 0.84 g/t gold), plus 2.3 million ounces in measured and indicated resources (133.4 million tonnes grading 0.54 g/t gold).
Resurging interest in the Atikokan camp led to the development of Hammond Reef and Agnico’s recent efforts to stake lands close to this multi-million-ounce deposit.
The Hammond Reef gold property lies on the Hammond shear zone, which is a northeast-trending splay off the Quetico fault zone and intimately associated with gold mineralization.
Assessment file records indicate that the original Blackfly gold discovery was made in 1897, making the occurrence one of the earliest found in the Atikokan gold camp. The project’s 45-foot shaft was sunk in 1898 shortly after gold was discovered.
Several companies have since added to the property’s database, including Rebair Gold Mines Ltd. (1945 to 1948), Steeprock Mines Ltd. (1949, and again in 1961), Aavdex Corporation (2004) and TerraX Minerals Inc. (2009 to 2012).
Initial work documented by D.K. Burke in 1941 reported two gold vein shoots, a northern and a southern one. The southern shoot averaged 11.9 g/t Au over a thickness of 0.33m along a strike of 21.6m, and the northern shoot averaged 13.44 g/t Au over 0.27m over a 32m strike length.
The most recent work was conducted by Terra-X during 2010-2012, which included compilation of much of the historical reports and data, diamond drilling and surface geochemistry.
According to Terra-X’s assessment report, the lineament containing the Blackfly vein has alteration and mineralization traceable over a 4.4-km strike length, as shown by the distribution of samples collected along it.
The best gold values from this lineament occur within the historical work, where TerraX’s grab samples included results of 167 g/t and 85.6 g/t Au.
The project, comprising 64 unpatented mining claims covering 1,296 hectares of land, was acquired by Marvel (formerly International Montoro Resources) in September 2020 via an option agreement.
To earn a 100% interest in the property, the company must make escalating payments totaling $65,000 in cash and issue 500,000 shares plus an additional 500,000 warrants. It must also spend a total of $153,600 in exploration on the property over a four-year period.
This year’s exploration program at Blackfly is a continuation of work initiated in 2020, which included a compilation of historical information, high-resolution airborne magnetics and time-domain electromagnetic data collection.
Several geophysical anomalies were identified from the geophysical report, and targets for follow-up were recommended.
Marvel’s geological team began the 2021 program work of prospecting, bedrock mapping and rock sampling. Trenching is being done for further definition of the gold mineralization associated with the known anomalies and geological structures.
Drilling commenced on June 24, with nine diamond drill holes out of 16 completed to date for 1,116.25m. Drilling has concentrated around the historical shaft area with four holes drilled at the Blackfly Northeast Zone.
The first round of assays was released in early June, consisting of 78 samples with coarse visible gold noted in one sample that returned 24.3 g/t gold.
On July 8, the gold junior received an additional 168 assay results, the third of three rounds from this year’s prospecting and mapping program. Highlights of surface samples:
- 29 samples returned assays greater than 500 ppb gold;
- 12 samples graded from 1.00 g/t and up to 2.99 g/t gold;
- 9 samples in excess of 3.00 g/t gold; and
- 3 samples assayed greater than 30 g/t gold
To date 456 samples have been submitted to the lab for analysis. Channel and surface samples from 2021 mapping and sampling are also pending.
According to Marvel one of the holes, BF21-20 was drilled at the Blackfly Northeast zone where TerraX Minerals Inc. intersected 10.96 g/t Au over 2.0m in 2011. Hole BF21-20 encountered strong ankerite-silica-pyrite+/-sericite altered diorite with galena in several quartz veins.
Alongside its Blackfly field program, Marvel Discovery Corp has assembled a sizeable land position, about 60,000 hectares, right in the thick of the Exploits Subzone of Central Newfoundland — potentially one of the world’s last easily accessible, district-scale gold camps.
See below for Marvel’s map of the area including the major faults shown as heavy black lines.
The company has been busy snapping up claims and adding to its land package.
In June, Marvel acquired 420 claims totaling 10,250 hectares, 45 km south of Gander, close to the boundary between the Exploits Subzone and the Gander Zone.
The new ground, dubbed Gander South, is around 10 km east of the Dog Bay-Appleton-GRUB Line fault system, which extends from northern coast of Newfoundland 200 km southwest through Gander, and hosts New Found Gold’s area play-leading Queensway project.
Two days later, on June 10, Marvel enlarged its Gander South property by adding 274 claims totaling 6,850 hectares. The new claims, located 10 km north of Gander South, and contiguous to New Found Gold’s Queensway project, upsized the Gander South project to 17,100 ha, making Marvel a major player in the Central Newfoundland Gold Belt.
In late June, the company took a commanding land position within the Hope Brook area by staking 763 claims (19,075 hectares) located contiguous to First Mining Gold and the Sokoman Minerals-Benton joint venture.
Of significance is the Hope Brook gold mine, which was in production between 1987-1997, producing 752,163 ounces of gold plus a copper concentrate.
Marvel’s latest acquisition, announced in July, comprises 478 claims totaling 11,875 ha. The new claims, rolled into Marvel’s latest addition to its Newfoundland portfolio, named Gander North, are located 25 km east of New Found Gold’s Queensway project and are contiguous to Sassy Resources’ (CSE:SASY) Gander North project, whose management includes Shawn Ryan of Yukon White Gold fame.
In addition to Gander North, Gander South and Hope Brook, Marvel has two other projects within the Exploits Subzone of the Central Newfoundland Gold Belt.
The Slip Lake property hosts gold mineralization with historical sampling of up to 44.5 g/t Au on surface. It is located 17.5 km northwest of New Found Gold’s Queensway project.
The Victoria Lake property is tied onto Marathon Gold’s Valentine Lake deposit, exhibiting a similar style of gold-bearing veins. Preliminary work on the project located several quartz-arsenopyrite veins returning grab samples ranging in value from 15.5 g/t to 24.9 g/t gold.
Marvel Discovery Corp has everything we like to see in a gold junior, starting with a great property in an established gold jurisdiction with plenty of upside. The Atitokan gold camp in Ontario is one of the country’s most prolific, and the Blackfly project is one of the camp’s earliest gold occurrences, dating as far back as 1897.
The property is in a highly enriched gold neighborhood, located within the Marmion Lake fault zone about 14 kilometers from Agnico Eagle’s Hammond Reef gold deposit, which hosts an estimated 3.32 million ounces of gold in reserves.
Marvel’s mission is to see whether the historical exploration around the Blackfly mine has more to offer. So far the results look promising.
Drilling commenced on June 24, with nine diamond drill holes out of 16 completed to date for 1,116m. Drilling has concentrated around the historical shaft area with four holes drilled at the Blackfly Northeast Zone.
Visible gold has been discovered in a number of surface samples and in multiple drill holes, a very good sign that MARV may have hit upon a gold system of yet to be determined size. Four sub-parallel gold mineralization trends have been confirmed by drilling.
The company understands it’s never a good idea to put all your eggs in one basket. Management has been casting a prospective eye over one of the hottest gold camps in the world right now, the Exploits Subzone of Central Newfoundland, and is acquiring claims close to the action.
This includes Gander North, located 25 km east of New Found Gold’s Queensway project and contiguous to Sassy Resources’ also-named Gander North project, the upsized Gander South project, and Hope Brook, located contiguous to First Mining Gold and the Sokoman Minerals-Benton joint venture.
Marvel has compiled a huge land base in Central Newfoundland, that can be gradually explored as funds allow, or claims could be hived off to raise capital for upcoming drill programs without having to go to the market and diluting the share float. We also like the discovery potential of Blackfly, and are encouraged by what Marvel has achieved so far. Plenty of news flow left to come from MARV before the year is out.
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Nova’s Christopher Gerteisen talks gigantic gold hits, lithium exposure, and the path to production at Estelle
The Tintina gold province in North America is tremendously fertile, with over 200 million ounces of documented discoveries and production. … Read More
The Tintina gold province in North America is tremendously fertile, with over 200 million ounces of documented discoveries and production.
And while operations like Kinross Gold’s ‘Fort Knox’ run at grades well under a gram of gold per tonne (g/t), they are highly profitable, producing more than 200,000 ounces of gold a year at all-in sustaining costs (AISC) of US$1,000 ($1,300) an ounce.
This is the type of bulk mining operation Nova Minerals (ASX:NVA) envisages establishing at its flagship Estelle gold camp in Alaska.
In 2019, Nova ran its first drilling program at Estelle and came out with a maiden 2.5Moz resource from the ‘Korbel’ deposit.
Since then, the explorer has been drilling nonstop, increasing that maiden resource to 4.7Moz in two short years.
That’s all from Korbel, one of ~15 known targets on Nova’s tenure.
Last week, the explorer hit 132m at 10.1g/t gold at the newly drilled ‘RPM’ deposit.
Outrageous numbers. That must be up there as one of the gold hits of the year, if not the decade.
Stockhead chats with chief exec Christopher Gerteisen about gigantic gold hits and the path to production at Estelle, as well as some very interesting lithium exposure.
How does RPM now fit in with your development plans at Estelle?
“The Korbel deposit has always been our focus, but it is just one of 15 known prospects across our 324sqkm project area,” Gerteisen says.
“Next cab off the rank was always RPM, which sits 20 miles along mineralised strike due south of Korbel.
“We had a historic drill hole there of 120 metres at 1g/t. Not too shabby of a result, so we always wanted to go there, do some follow up drilling on that.
“This year we decided to go out there and start drilling, focussing on RPM North first.
“The first two holes came out a month or six weeks ago and looked pretty good. They confirmed the original historical drilling — we got similar results like 120 metres at 1g/t in those holes.
“This current hole — RPM five — hit the bullseye.
“People have thrown out all kinds of numbers — like it’s in the top 30 intercepts in the world ever; one person told me its top 10 in decades on the ASX.
“Either way, it is certainly world class.
“The thickness, the consistency and continuity of the grade, through those 130 metres is very impressive. And then it’s also right on the surface. Very happy with the result.
“I’m still waiting for results on hole three, four and six. At that stage, we’ll send all the data over to our resource estimation people and get a maiden resource out on RPM.
“I think it is going to be a ripper.
“By the size and shape of this thing we think this can be quite a large, large system.”
How does RPM compare with Korbel?
“They’re both intrusive related (IRGS) deposits,” Gerteisen says.
“These things can vary in tenor. When you are in the intrusive itself, like we are at Korbel, they tend to be lower grade.
“When you get into the contact and into the hornfels or sedimentary contact rocks they tend to be higher grade. And so that’s what we’re seeing in RPM.
“It seems to be a relationship at most deposits. At Korbel we just don’t see any of the contact areas; if we keep stepping out maybe we’ll eventually hit it.
“But Korbel is a beauty in its own right.”
And the metallurgy at Korbel is simple? An easy to mine, easy to process orebody?
“Yes. On surface, very low strip ratio,” Gerteisen says.
“It’s not one narrow vein or fault or structure you’re following — it’s basically sheeted veins throughout the entire intrusive.
“It’s just a sea of veins, a sea of mineralisation. The shape of the ore body, the geometry, is more like a big ‘blob’ like a large ellipsoidal shape.
“And so when we go to mine our strip ratio will be very low, approaching zero really, because everything you dig up is basically paydirt.”
How big is the resource going to get before you hit the button on a feasibility level study?
“This was our dilemma,” Gerteisen says.
“Our 4.7Moz resource is at what we call the Korbel Main deposit, but throughout the Korbel valley where the deposit sits we currently have numerous other geophysical anomalies to test.
“Plus, the Korbel Main orebody currently has a strike length of 1.8km and it is still open in both directions. We think we are on one of these 10Moz whoppers just at Korbel alone.
“With RPM [and all the other targets] who knows how big this could be.
“We are unlocking the district. So — do we drill for the next two years, five years to just keep increasing the resource? We are on the path to production here.
“About a year ago we decided our strategy would be to have a starter operation, something that Nova can do on their own.
“The sweet spot would be a 100,000oz to 150,00ozpa, something that has a 10-year mine life, something like a year to a year-and-a-half pay back, ~$200m to $250m capex to build.
“That would be the starter operation – we would get some cashflow to just start ramping up.
“The plan is to establish the Korbel mining and processing hub – that’s where our tonnes are – and then through the years have this pipeline of other projects coming through.”
Onto the lithium stuff. You don’t mention the Thompson Brothers project too much but that was your original flagship back in 2016, wasn’t it?
“That’s correct. It’s a great project in Manitoba Canada. Currently has a resource of ~11Mt at ~1% lithium,” Gerteisen says.
“It will be the first zero carbon hard rock spodumene mine in the world. Manitoba runs 100% hydropower.
“One of the reasons we don’t talk about it a lot right now – we want to, because lithium is so hot – is because we are spinning that off [via Snow Lake Resources] and listing it on the NASDAQ.
“That listing is not far off.
— Snow Lake Resources (@snowlakeres) January 22, 2021
“Once we get this listing done the valuation will be about $120m.
“After listing, Nova will probably have 65 to 68% ownership [of Snow Lake].
“Once we get that money we will release the PEA, and drill to get that resource up to 20 to 30Mt.
“If you look at our [lithium] peers that have a PEA and have a similar resource, they are running up to $500m, $1bn valuations.
“We have a lot of people approaching us right now to do a block trade, take some of the shares off us – even buy us outright but we don’t want to do that pre-IPO.
“We want to let it run. We think there is a lot more value to be gained for Nova.”
At what point do you guys think you would be in production at Estelle?
“Our schedule is this: resource update coming out before the end of the year, and then very soon thereafter — based on the new resource numbers — we will release our Scoping Study,” Gerteisen says.
“We are hoping to get that out before the end of the year, early next year.
“We have already started our next level of PFS test work. The PFS will continue through the next year, and we would like to release that in mid-2023.
“Then we will go straight into the BFS and we would like a decision to mine around 2024, 2025 timeframe.
“I would like to be digging first dirt by 2025, 2026. That is very ambitious but there are number of things going for us and I think we have a good chance of hitting those targets.”
Weekly Market Pulse: Perception vs Reality
It was the best of times, it was the worst of times… Charles Dickens, A Tale of Two Cities Some see the cup as half empty. Some see the cup as half…
It was the best of times, it was the worst of times…
Charles Dickens, A Tale of Two Cities
Some see the cup as half empty. Some see the cup as half full. I see the cup as too large.
The quote from Dickens above is one that just about everyone knows even if they don’t know where it comes from or haven’t read the book. But, as the ellipsis at the end indicates, there is quite a bit more to the line than the part everyone remembers.
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.
The book is set during the French Revolution but it does a pretty good job of describing our current condition. How you see the world is a function of your circumstances, some of which you control and many of which you don’t. There has never been one America, one that everyone perceives the same, but it certainly seems that today there are more versions of it than there have been in the past. This is true within a lot of spheres but maybe none so much as the economic one. COVID has made the divide between rich and poor, blue collar and white collar, that much more stark. There is the America of work from home and there is the America of essential workers. There is the America of shareholders and homeowners and there is the America of paycheck to paycheck. Or, increasingly during COVID, from stimulus payment to stimulus payment or unemployment check to unemployment check. The economy is in a very different state depending on your position in this hierarchy. For those of us who are able to keep doing our jobs from our spare bedroom, the last 18 months has, for many, been a boom time. For those in service businesses that were victims of the shutdowns, the last 18 months has been a time of high anxiety.
In truth, for many Americans the high anxiety is not new. COVID merely accelerated trends that were already in place. Economic growth is ultimately about two things: workforce growth and productivity growth. Both have been weak for at least a decade and really quite a bit longer. The workforce has grown pretty steadily but the participation rate has been in decline for two decades. It did stop falling for a period from about 2016 to 2020 and had even started to rise again but COVID brought that short term trend to an end.
This, almost by itself, is why US economic growth has been unsatisfying for so long. This is also the genesis of today’s “labor shortage”. We can see the effect weekly in jobless claims which recently dropped below 300k for the first time since the arrival of COVID. I heard someone say a few weeks ago, when the weekly total was 335k, that it was improving but still “elevated”. I’ve been doing this a long time and I’m getting old but my memory has not failed yet and that just didn’t seem right to me. So, I checked the history and indeed a level of 335k is actually pretty average even during the boom of the late 90s. In fact, since 1980 there have been 384 weeks with claims less than 300k and only 25.5% of them happened prior to 2014. There have been 247 weeks with claims less than 275k but only 3.6% of them happened before 2014. And there have been 162 weeks with less than 250k and none of them happened before 2014. That tells me that employers have been very reluctant to fire workers for a long time before COVID and the only reason I can think of for that is that they fear they can’t replace them.
Why is this happening? That is a question with many answers – it isn’t just one thing and I don’t think you can say that all of it is “bad”. Baby boomers retiring is not something that is bad (in most cases) and that is certainly part of this. Some portion of this, especially since the onset of COVID, is about couples reassessing their life and deciding that the cost of a two income household is actually pretty high in ways that aren’t all economic. Some portion of it is due to the opioid epidemic (although I don’t think that is as large a part as is commonly believed). Some of it is due to an increase in the time people spend in collage; 13.1% of the population has a masters degree up from 8.6% in 2000. There is also an anger – call it wealth inequality or elite snobbery or envy or just a sense of fairness, it’s all the same – that manifests itself in the political arena. The election of Donald Trump and the popularity of Bernie Sanders and socialism at the same time are merely two sides of the same populist coin. Both sides of the political aisle recognize that the average American worker is angry and increasingly adopting a Johnny Paycheck attitude toward their employers. Where they differ is in the solutions – although in some areas there seems little difference. The divide between Bernie Sanders’ and Donald Trump’s views on immigration is not discernible to the naked eye. And there is a reason you’ve seen almost no change in trade policy since the election of Joe Biden.
It is ironic too that the provision of fiscal largesse during COVID may have finally pushed the economy to a tipping point. With help wanted signs everywhere, labor appears to have finally gained the upper hand. 10,000 workers went on strike at Deere last week and 1400 are out at Kellogg. There may or may not be an intentional work slowdown/sickout going on at Southwest Airlines. 32.000 nurses are considering a strike against Kaiser Permanente. American Airline pilots are picketing in Miami. A strike was barely averted in Hollywood by backstage workers after they got basically everything they asked for. It isn’t just union workers either as the Quits rate proved last week. I’ve written in the past about the surge in new business formations since the onset of COVID and that is part of this too. There’s a lot going on in the labor market right now and how it impacts the economy is almost impossible to say. At this point rising prices are eating up wage gains but that may not last and if it doesn’t then workers gains may turn into profit margin losses. Or it may be the spur for investments that improve productivity. Companies aren’t racing to perfect self-driving vehicles because they’ll be safer. They’re doing it because truck drivers are expensive and Uber drivers want health insurance.
Productivity growth has also been weak but the change is less dramatic than in the labor market. Since 2000 annual productivity growth has averaged 1.9% down from 2.7% from 1995 to 2000, a period of high investment and innovation. That doesn’t seem like a big change but compounded over many years it has an impact. I think a better way to look at productivity growth is through investment in capital goods. Core capital goods (ex-defense and ex-transportation) show why productivity growth has stalled:
Core capital goods orders peaked in 2000 and didn’t exceed that peak for over 20 years. As you can see though, orders have recently broken through that old top. This may be the most important economic development in two decades.
I included the George Carlin quote above because it describes how I, as an investor, have to think about the economy. I am a pragmatist and have no expectations as to how things will unfold in the future. I don’t know why people are quitting their jobs and not taking jobs that are available. I assume there is some wage level where workforce participation would rise again but I don’t know what that level is other than to say that it is higher than what is being offered today (and it certainly isn’t just about wages). I would also say that if that wage level is so high that businesses can’t stay profitable when paying it, they will do something else, they will substitute capital for labor, they will find ways to operate with fewer employees. Which may be why core capital goods orders are running higher right now. But I don’t know that and to be a good investor I can’t make assumptions. It is what it is.
This problem of perception versus reality is important for investors. Your reality does not necessarily bear on how the economy is perceived by the majority. Even objective reality doesn’t really matter for the markets in the short run – which can be a lot longer than you think. Markets tell us how the majority perceives it, not necessarily its real condition today. We have to invest based on that perception, not on reality, until we believe the gap between the two is so large that the current perception becomes untenable and has to shift to something new. And we need to understand that it is often the perception that creates the reality, the markets that shape the economy rather than the other way round.
At Alhambra, it is Jeff Snider’s job to describe the objective reality of the economy – how it really is. He is, however, human and so his perception of the economy is skewed by his own experiences and relationships. But he knows that and I know that and I think he does a pretty good job of describing the way things really are. We don’t always agree on how he describes it, the language he uses, but in general I think he gets a lot more right than most of the people in our business trying to decipher the myriad human relationships that create an economy. But the reality he describes does not always align with how we invest. It is at turning points, when the gap between Jeff’s reality and the market’s perception get too wide, that his research bears most on our investment choices.
Right now, the dominant narrative in markets is about inflation. Jeff and I agree that what is happening today is not real inflation (a monetary phenomenon) but rather rising prices that are a result of the supply side nature of the last recession. And in particular it is a condition created by government intervention, as first the Trump administration and now the Biden administration applied demand side government solutions to a – mostly – supply side problem. In short, the real problem right now is not actually supply but rather that demand is excessive due to the largesse of government “stimulus” (there are exceptions to that such as semiconductors). It was certainly necessary to support those who were truly hurt by the pandemic shutdowns. Service workers who were put out of work by government diktat certainly deserved a helping hand from that government. But the payments to those who didn’t need it – and that was and continues to be (child tax credits) a large cohort – were unnecessary, counterproductive and now hurting those who actually needed assistance. Rising prices hurt the poorest among us the most.
But the fact that today’s rising prices are from fiscal and not monetary excess is largely irrelevant to the markets and to individuals dealing with them. Investors are reacting to the “inflation” just as they would if it were driven by monetary factors. They are buying commodities, TIPS and other assets they perceive will protect them from it. And in doing so, they change markets in ways that can affect the nature of the future economy. As an investor it doesn’t matter if commodities are rising for the “wrong” reason. What matters is that they are and if you aren’t allocated there you’re missing a source of return for your portfolio. It also doesn’t really matter whether some individual commodity isn’t participating in the rally or if the general commodity indexes are rising mostly because of energy. Investors aren’t focused on whether platinum or iron ore is going up. They are focused on “commodities”, on the idea that in inflationary times “commodities” go up and they want to own them.
There is also an emerging perception, a narrative about economic growth right now, that it is accelerating as the delta variant fades. You can argue that COVID is a hoax or that delta didn’t really have much of an impact or that we’re going to get another wave in winter or whatever you want. But if the majority believes that economic growth is going to accelerate, that’s how they’re going to invest and you’re argument won’t make you a plug nickel. Investors right now are selling gold and buying copper. They aren’t doing that because they think the economy is going to slow. They aren’t selling bonds because they think growth is slowing either. Yes, they aren’t selling TIPS at the same rate as nominal bonds but that makes sense if you are worried about inflation and also think the economy is going to accelerate. We saw this last year when rates rose too; nominal rates initially went up a lot faster than TIPS yields. But eventually TIPS caught up because growth did accelerate. Will we see the same thing again? I don’t know but it certainly isn’t outrageous to think so and a lot of people do.
Our economy, the global economy, is undergoing a profound shift right now. Some of the trends that were in place prior to COVID have accelerated (labor market) and some may be reversing (investment and productivity). I do not believe there is any way to know how these changes will shape our economy and markets in coming years. Periods of economic upheaval like the last twenty years are always disconcerting, disorienting to those going through them. But similar periods in the past have also produced great innovations, big changes to the social and economic fabric of a nation. What those changes are will be revealed by the markets, through the perceptions and actions of investors, long before they are obvious. It’s going to be an interesting time for sure.
The emerging narrative about a Q4 economic acceleration gained some credence last week as the copper/gold ratio rose over 4%. Despite that move, I am not changing our economic environment assessment yet. The current level is about as high as it has been able to get since 2008 and absent a shift to a declining dollar I question whether it can go much higher. I am also skeptical of shifting to rising growth until we see a more decisive move higher in TIPS yields. The emerging economic acceleration narrative is exactly that – still emerging.
Job openings fell in August but are still historically high. Hires also fell but quits continued to rise. None of this is actually news since we’ve gotten plenty of other data on the labor market since August. But it does confirm what we already believed about the labor market.
The inflation data was wholly unsurprising and added nothing to the ongoing inflation debate.
The retail sales data was a big upside surprise though and will feed the accelerating growth narrative even though an inflation adjusted view isn’t as robust. Consumer sentiment continues to support the slowdown view but the idea that we’re near or entering recession – as some prominent economists speculated last week – seems a bit over the top.
We get more housing data this week and it will be interesting to see if there is any pickup. Based on my very unscientific method of talking to realtors and homeowners around the country, the housing market is cooling rapidly.
Stocks were up last week but the inflation side of the portfolio did even better with real estate and commodities both producing higher returns for the week. Non-US stocks also outperformed as the dollar fell slightly.
Growth took the lead for the week but the trend back to value seems intact.
Cyclicals and inflation sensitive sectors (real estate, materials) led the way last week.
Please note that I’ve added some new items at the bottom of this chart.
I have said many times that an investor’s job is not to predict the future but to interpret the present. Predicting the future is impossible but interpreting the present accurately isn’t as easy as it sounds. Today’s debate about inflation and economic growth and labor shortages certainly prove that by my reckoning. Is there a labor shortage? Is this inflation or is it some transitory thing that will fade as fiscal stimulus fades? Are those who had their unemployment benefits run out applying for open jobs? Is economic activity accelerating as delta fades or was the slowdown caused by something else? These are all questions about the state of the economy today, not in the future. And frankly, we don’t have very good answers for them. What markets are doing today, how people react to these things, will impact the outcome. What looks like a supply/demand imbalance causing prices to rise today could shift to something more permanent and monetary if it causes people to lose confidence in the Fed and subsequently the dollar. The long term health of the economy may improve because workers who refuse to work today cause companies to invest in productivity enhancing technology. Perception creates reality. Invest accordingly.
dollar gold inflation commodities commodity monetary markets policy fed inflationary ax copper iron
MiB: Soraya Darabi, TMV
This week, we speak with Soraya Darabi, who is co-founder and general partner at TMV, an early-stage venture firm that has funded a broad range…
This week, we speak with Soraya Darabi, who is co-founder and general partner at TMV, an early-stage venture firm that has funded a broad range of startups. Darabi is also the founder of Transact Global and host of the podcast “Business Schooled.” She previously served as manager of digital partnerships and social media at The New York Times.
She discusses how the firm invests in “Non-Obvious” founders. There are market inefficiencies in this overlooked segment of entrepreneurs, while in Silicon Valley, there is both efficiency and similarity that lowers the probability of successful innovation. She also explains some of the advantages that being a successful entrepreneur lends to her as a venture capitalist.
Investing in seed rounds in places from Baltimore to Austin, being persistent in areas overlooked by others gives her access to deals in start-ups that are both cheaper and at lower capital requirements than perhaps places like SIlicon Valley or NY require.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Sukhinder Singh Cassidy author of “Choose Possibility” hailed as one of the Top 100 People in the Valley by Business Insider and a Power Woman by Elle. She has 25 years of experience founding, scaling, and advising companies like StubHub! Google, Amazon, and Yodlee. Thoughts?
Soraya Darabi Favorite Books
Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond by Deepak Malhotra and Max Bazerman
Give and Take: Why Helping Others Drives Our Success by Adam Grant
Drown by Junot Diaz
Passing by Nella Larsen
The Diamond as Big as the Ritz (The Art of the Novella) by F. Scott Fitzgerald
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