Late Night Thoughts On Listening To Mahler's Ninth Symphony

Ok. Here I am, not reading the wonderful book by Lewis Thomas that I have noted above, but by working hard to understand how to make music in this market. 

The book is a series of essays. Here are a series of thoughts:

Sibanye-Stillwater - Now the largest producer of Platinum in the world, and #2 in Palladium, this stock has excellent leadership and has a remarkable portfolio of assets that are priced at far to deep a discount, with the stock at this moment, at $3.84. The discount in part reflects South African risk; in part financial leverage; and in part a lack of focus or understanding by the world's investors. With the acquisition of Lonmin, SBGL has a vertically integrated portfolio of platinum group metals and significant gold production. Importantly, Neal Froneman, is a man of discipline and vision who has demonstrated genuine fairness and awareness in dealing with the unions. Yes, Platinum negotiations are forthcoming.

Platinum - Currently $793, the discount to gold and palladium makes no sense. With the other platinum group metals (pgms), namely, palladium, rhodium, iridium, ruthenium and osmium, the pgms are the rarest elements on the planet, which also happen to be critical and essential to the military and civilian economy. There are no significant inventories, relative to the world's money flows, and production is primarily in Russia and South Africa though there is modest Canadian and Australian production, while the one US mine, in Stillwater, Montana, is owned by Sibanye-Stillwater. There are only 8 million ounces mined and recycled each year, valued at $6.4 billion. Wow. Not much. I would only be long.

Gold - The world's annual gold production, including recycling is about 150 million ounces, valued at $195 billion. That is not a lot given it's certainty as a store of value, tested throughout history; the bids by the world's central banks; and the confidence gold provides universally to people across the globe. I own Kirkland Lake (KL) and SBGL.

Crisis, Currency & Inflation

I don't believe gold's future performance will be the result of crisis, a weaker dollar (gold tends to be supported when the dollar is weaker, as gold is priced in dollars and purchases in foreign currencies are effectively cheaper), or inflation. It will simply be a function of supply and demand, with demand motivated by the world's central banks and investors wanting their share of the most certain store of value that maintains purchasing power.

Structurally, with technology so radically improving productivity, I expect there are increasingly huge inflation buffers being built into the world's economies. As such, interest rates will likely remain far below historic norms ... within the context where they are today (+ or - 1%), which is also supportive of precious metals, since higher interest rates draws money away from non-interest bearing assets like gold.


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