Markets & Metals Navigator (October 4th, 2020)

Precious Metals Regain Mojo on the Back of a U.S. Political Upheaval

Gold and silver has a solid recovery last week after a very rough prior week, gold was up 2% on the week while silver was up 4%.  The 1st U.S. Presidential debate clearly put investors on guard for “tail risk”, it could be politely described as gong show.

Then to add fuel to an already murky U.S. political backdrop, on early Friday morning Donald Trump had announced that him and his wife had tested positive for the coronavirus.

In classic Trump political theatre, he tweeted a video on Sunday night that he’s doing well and learned much about virus. The market took all of this well, S&P 500 futures are up 0.7% and Nasdaq futures are up 1% as of late Sunday night.

Gold has been the Asset Class to own this Millennium

A great chart below highlighting total return of gold, S&P 500 and U.S. treasuries (7-10 years) since 2000.

This obviously makes a ton of sense when you overlay the epic balance sheet expansion of the world’s major central banks over this period.

Great trades play out over years and the best trades play out over decades. Gold is one of them.

Higher Permanent Job Loss in America vs. Previous Recessions

An excellent graph below highlights the severity of this recession with respect to permanent job loss in America.  The clearest take away is that investors should anticipate higher levels of money printing to offset the economic hardship.  An attractive backdrop to own precious metals.

Bankers Never Do Time for Crime

Dave Collum, Professor of Organic Chemistry at Cornell had the best take on JP Morgan’s $1 billion settlement with the U.S. government for manipulating the precious metals markets with “spoofing trades” – nobody went to jail and JP Morgan admitted no wrong doing.

Dave is absolutely correct people should be destroyed for that level of egregious criminality. Kid glove penalties like this are exactly why the general population believe the system is rigged in the favor of the ruling class.

Materials Underpin Green Energy

This is a great graph that highlights the level of resource input required for different low carbon electricity sources.

We believe that the commodities that underpin the green economic revolution are the best way to play this trend, Capital 10X begins its ‘Green Metals in Focus’ series this week – stay tuned!

Can the Stimulus Bill Inject Life into U.S. Cannabis Stocks?

The Daily Caller reported the new $2.2 trillion stimulus bill introduced by the Democrats in the US house had the word “cannabis” listed 68 times, it was more than the word “jobs” by a wide margin.

The U.S. House has included the Secure and Fair Enforcement (SAFE) Banking Act in its latest COVID-19 relief package. The SAFE Banking Act would allow state-legal cannabis businesses to work with banks and other financial institutions.

Year-to-date the US cannabis stocks have decoupled from their Canadian cannabis peers significantly, the passage of the stimulus bill could widen the margin significantly.

Aurora Cannabis: Nelson Peltz Jumps Ship

Nelson Peltz has officially left the sinking ship that is Aurora Cannabis. As we discussed in last week’s 10X Navigator, Aurora isn’t cheap enough to attract interest by other potential suitors.

A reminder Mr. Peltz was brought into to help Aurora make inroads with potential consumer packaged goods (CPG) partners, needless to say very little (if anything) ever developed.  It likely was an effort by previous management to create share price “hype”, one of many such efforts.

Rumors Swirl: Will Canopy Growth Acquire Aphria?

This weekend there has been rumored speculation that Canopy Growth is looking to acquire Aphria. Obviously we don’t know if this is fact or fiction, but what can be said is that Canopy Growth lacks top line revenue growth – and ultimately must find it.

Since taking the reins of CEO at Canopy Growth in December 2019, David Klein has been laser focused on cost cutting – which makes a lot of sense. Now Klein must figure out how to boast it’s anemic top-line growth rate, which was +17% year-over-year last quarter.

The company trades at 13x forward Price-to-Sales, a lofty multiple for its anemic growth.

 

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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Capital 10X gets down to the real money business, actionable financial insights for traders and investors. We analyze company earnings, interview management teams and help teach the fundamentals of financial analysis and options trading. Our mission is to hunt for genuine 10 baggers.
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