Over the past 6 months I have regularly tweeted my views on the platinum group metals, gold, and the market, along with observations relating to our political environment.
So some updates. I am very long gold.
I truly believe that changing the way anything is done, whether it be in the market’s perception of something, or a person's habits or way of thinking, is much harder than the simple continuation of a trend.
This theme of gold being primarily influenced by the dollar, rates, and inflation has been the typical view, and admittedly changing this mindset takes time. Gold is still trading either side of $1900 given this perspective.
But a different view and what I believe is the correct view, is percolating. The real determinants of gold’s value are its history of maintaining purchasing power parity, fiat money erosion, and gold’s remarkably limited supply, all of which will lead to a rerating.
This rerating, this move, will not fit the mold of "the way it’s always been", and hence the challenge of overcoming that hurdle of historical behavior. It is a new perception; a new way of thinking about gold.
In fact if the market actually perceived things as I am suggesting, the price would not be here, and our ability to continue to capture this opportunity will have passed.
To me, while said with humility, our perception is really more factual than not. Just look at historical purchasing power parity comparisons (you can go back 3000 years!), inflation adjusted prices, and comparisons of the value of all gold mined annually and gold stock market caps, with what exists in the stock market and fiat money world.
But of course, the real question is whether that perception is correct, or better said, whether there is something that may derail that way of thinking, given the quite factual set of observations that underlie our gold bull view. Is some black swan out there that somehow attacks gold? To me if anything, it is the other way around... ie a black swan or white swan, that in fact brings the world's attention to the proper way of thinking about this most universal of assets.
In the big picture, with enormous price moves in the very biggest stocks taking place on a very regular basis (witness the incredible 20% price changes in companies like AMEX, etc, just the other day with the announcement of the Pfizer vaccine) it is totally illogical for the most historically understood and consistent asset to not find itself more desired by the worlds massive portfolios.
Remember that the annual production of gold, including recycling, Is just 150,000,000 ounces, worth less than $300 billion. That is truly tiny in the context of world money. The role of gold as the most “anchored” currency should be unassailable … after all central banks of the world seem to think so … but it is not being treated that way, yet, by the market. The flows in the market are so massive that when there is focus, the only way demand can be accommodated is with dramatically higher prices.
I am long KL, AGI, PVG, SILV, and SBSW stocks, along with KL and GOLD leaps.
I am also very bullish on Platinum Group Metals, and Sibanye Stillwater, led by the incredible, caring, visionary, disciplined Neal Froneman. SBSW now has paid down essentially all of the debt it took on in purchasing Stillwater, and in my book is now a cheaper stock at $12, than it was at $4 when it was heavily encumbered.
As I have noted throughout this blog, platinum an all of the PGMs are critical, essential strategic, industrial and precious metals, with a truly very, very limited supply. Platinum, for example, has an annual production of less than 8 million ounces, including recycling, which means the total market cap for this metal that has no substitute, outside of other PGMs, is less than $8 billion. It makes no sense. One only needs to look at rhodium now over $14,000 per ounce, to get a sense of what is possible in all of these metals, as much as rhodium’s supply/demand profile is particularly tight.
Meanwhile, I am long, primarily using 2023 leaps, PFE, T, and CSCO, all stocks that I think are stupidly cheap, paying big dividends. Yes, I have my share of AMZN, AMD, FB, COST, HD, WMT.