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A couple articles back, I laid out the "still bullish" case on silver, and one of them being that demand has outstripped supply for 3 years now. But it isn't just silver that's been in a deficit.
AI has a lot of people buzzing, with the "darling" high fliers like NVDA and AMD making these new high powered chips. But lost in the shuffle is one quite interesting fact. All these computers for AI need copper. Every single one of them and guess what? Copper is in supply/demand deficit.
SANTIAGO, April 12 (Reuters) - Copper's bull run should continue for at least the next three years, fueled by global supply challenges and hot demand for the metal to power energy transition and artificial intelligence technologies, industry analysts say.
The outlook is an optimistic harbinger for Freeport-McMoRan and other producers as decarbonization and technological shifts fuel copper's latest demand wave after China's rise powered a similar one two decades ago.
But with question marks hanging over a number of key projects, some estimate production will struggle to meet that demand.
These themes are expected to dominate conversations in the Chilean capital of Santiago at the CRU World Copper Conference from April 15-17, the largest annual gathering of industry executives, investors and analysts. Chile is the world's biggest copper producer but its output has faltered in recent years.
But with question marks hanging over a number of key projects, some estimate production will struggle to meet that demand.
Once again, Pam and Russ Martens have grabbed our attention with another zinger.
In today’s Wall Street on Parade newsletter, they feature Michael Hsu, the acting director of the Office of the Comptroller of the Currency (OCC).
The OCC charters, regulates, and supervises national banks, federally chartered savings associations and federal branches and agencies of foreign banks in the U.S.
They stand beside the Federal Reserve as a major regulator of banking institutions.
Specifically, the Martens write about how Hsu “undermined [already declining] public trust in the U.S. banking system” when he approved JPMorgan Chase’s acquisition of failed First Republic Bank in May.
(By now, readers know that JPMorgan Chase is America’s largest – and, by some measures, the riskiest – bank in the nation.)
The Martens go on to note that Hsu’s response to that “collapse in public trust” was to, yes, issue a survey measuring public trust in, yes (again), banks.
The Martens tie much of Americans’ lack of trust to the number of unlawful acts committed by the largest of the too big to fail banks over the last 23 years.
Tuesday the yield on the ten year hit 4.757%. Just three weeks ago the market would have a hissy fit plunge when it came close to just 4.3%
For months on end I’ve been suggesting that some form of credit market/debt market “event” was going to happen and if/when it does, all hell will break out. But, what could it be? The Japan carry trade collapse? A major bank has to “bail in” it’s depositors to save itself? A massive commercial real estate default? I don’t know which one, but something’s lurking out there.
The drenching Hurricane-turned-Tropical-Storm Hilary is forecast to leave a destructive swath up the western U.S. this week as relief workers in Maui continue their search for any signs of life among the 850 missing residents of Lahaina over 3,000 miles away.
Meanwhile, economic prognosticators are wondering what’s in store this weekend at the Kansas City Fed’s symposium in Jackson Hole, WY.
The annual summer conference, which will be held Thursday through Saturday, features a slew of speakers who will largely be preaching to a pre-occupied choir.
They will mostly pontificate their profligate theories (or, if you prefer, officiously wax poetic) about this year’s theme – “Structural Shifts in the Global Economy.”
Dispassionate and Fedspeak enough to escape the attention of most common Americans? You betcha!
Although the stream of papers slated to be delivered and discussed at the event have yet to be released, one thing is clear:
Perhaps the most compelling mantras underlying the Structural Shifts theme should be focusing on the storm debt – public and private – brewing in the U.S.
As Jennifer Sor suggests in a recent Business Insider article, troubles are already bubbling up to the surface “as loans pile up and borrower confidence falters.”
Banks Were an Early Sign
We recall how the Covid pandemic upended our lives and economy – as well as those of people around the world.
The largely mandated shutdowns in early 2020 caused a devastating reduction of economic activity and huge job losses not seen since the Great Depression.
The downturn came as government restrictions and citizens’ fear of the virus kept people at home and businesses and schools shut – both here and abroad.
Workers in jobs that paid lower wages and required face-to-face encounters with consumers – in the hospitality and retail industries, for example – were especially affected.
Those facing massive employment and earnings losses were disproportionately women, workers of color, workers without a college degree, and foreign-born workers.
Congress, the White House and the Federal Reserve enacted significant fiscal and monetary relief measures in 2020 and 2021 to prevent the economy from facing a depression and to relieve hardships faced by everyday Americans.
Most economists agree that those actions helped fuel an economic recovery starting as early as May 2020, making the deepest recession in the post-World War II era also the shortest.
According to the National Bureau of Economic Research, the consensus arbiter of official business-cycle dating, the economic downturn lasted just two months – March and April 2020.
On the one hand, the CBPP says the expansion in economic activity in the recovery from the pandemic recession was stronger and quicker than initial forecasts.
Those cautious projections may have been tainted by the Great Recession of 2007-2009, which at the time was the worst recession since the Great Depression.
The recovery from which also was disappointingly slow, with high unemployment – in the range of 6-9% – lasting several years after the economy began to grow (see chart above).
Declaration of Independence –
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
Preamble to the U.S. Constitution –
“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
Happy Independence Day to a deeply divided America.
As we celebrate another 4th of July holiday, the rifts in our nation’s collective conscience have never seemed wider.
It’s always a good day to remind ourselves of the unrealized ideals set forth in our country’s founding documents.
Yes, you can argue – with hundreds of historical examples in hand – that it’s always been this way.
That “we the people,” “life, liberty and the pursuit of happiness,” and “one nation…with liberty and justice for all” have always been worthy – but unfulfilled – platitudes for our experiment in self-governance.
Indeed, it’s been almost two and a half centuries since that Declaration was adopted by representatives from the nascent 13 colonies.
But with 24-hour cable and internet news and round-the-clock social media diatribes overwhelming our daily realities, perceptions of a future dystopia abound.
This American Division is stark; some even think it’s irreconcilable. Perhaps they’re right. But that doesn’t mean a 21st century Civil War is inevitable.
It isn’t…not yet anyway (but see the end of this essay; another January 6th event could be lurking around the corner).
If we’re being honest with ourselves, Americans have been at war with ourselves since our founding – it’s the nature of a democratic republic.
On the one hand, as our nation’s first chief justice of the U.S. Supreme Court John Marshall observed, “Between a balanced republic and a democracy, the difference is like that between order and chaos.”
On the other hand, as the wise Ben Franklin once quipped, “If everyone is thinking alike, then no one is thinking.”
Indeed, unity per se was never a goal of the nation’s founders, except maybe in an apocryphal sense. Turns out, democracy is a messy, often ugly process.
And in any event, policymaking in a democratic republic was never expected to be unanimous; it’s always been the art of achieving what is possible at any given time.
The problem with our ever-evolving internal war of words is that it’s growing more and more un-civil.
And that’s what some fear is leading to another Civil War – one with guns and blood and Americans killing other Americans.
But we’ve struggled with that very experience since our founding…and it continues as we celebrate our nation’s 247th Independence Day.
It's time to stock up on gold. Reuters' Seher Dareen reports that gold prices are near two-month lows in holiday-thinned trading today.
On the one hand, the "agreement in principle" to raise the nation's $31.4 trillion debt limit is easing investor worries.
On the other hand, chances that the Federal Reserve will raise rates at its next meeting in two weeks is tempering the demand for bullion.
Spot gold was mostly unchanged at $1,944 per ounce by 1:15 EDT this afternoon, while U.S. August futures were up to $1,962.
The news from the Capitol of a debt deal, which still has to pass both houses of Congress -- no done deal to be sure -- came on a low-volume day with the U.S. and parts of Europe on holiday.
Until a couple of days ago, most investors were betting that the Fed would keep its benchmark rate steady and wouldn't raise them on June 14th.
Last week's economic data changed that view, with investors now expecting the Fed's FOMC to raise rates for the 11th time since March last year.
Fed Fund futures now show a 59% chance of a 25-basis-points increase and a 41% chance of rates holding steady -- with rates peaking in July at 5.32%.
A little over two weeks ago, over 90% of futures traders were expecting a rate freeze, with only 10% seeing a 25bp rate hike.
Tim Waterer at KCM Trade said, "With a possible June rate hike by the Fed still in play, it is the greenback and U.S. treasury yields which continue to prosper."
Gold has no yield of its own, so it tends to fall out of favor with investors when interest rates rise and vice versa.
The dollar index was near a two-month high, and that's been weighing on gold prices. A stronger dollar makes bullion more expensive for holders of other currencies and vice versa.
Carlo Alberto de Case at Kinesis Money said, "As long as we remain above $1,900, I don't see too much risk of further decline."
Spot silver was down 0.63% today at $23.17, platinum was up 0.24% at $1,024, and palladium was down 0.63% at $1,412.
It's always good to add gold and silver to your nest egg. But from a pure pricing perspective, it's even better to be adding them today.
You know what “they” say: past performance does not guarantee future results.
What we can say, however, is that some statistical measures are better at predicting the future than others that make investors’ lives easier.
And one such metric that's been capturing the attention of economists and investors for over 60 years is the New York Fed's recession probability tool.
Writer Sean Williams explains this indicator as the difference in yields between the 3-month and 10-year Treasury bonds (the “spread”) to forecast how likely it is that a recession will come to pass in the coming year.
A normal yield curve is sloped upward and to the right, showing bonds with longer maturities (10-20-30 years) with higher yields than bonds scheduled to mature sooner – kind of what we typically see in a healthy economy.
When troubles in the economy stir up, though, the yield curve tends to become inverted – that is, shorter-term bonds have higher yields than longer-term bonds.
A yield-curve inversion doesn't guarantee a forthcoming recession. But Williams (and others before him) note that every recession after World War II has been preceded by a yield-curve inversion.
According to the latest NY Fed's recession-probability indicator, there's a 68.22% chance the country will enter a recession over the next 12 months.
Williams notes that's the highest probability of a recession occurring in the next 12 months in over 40 years.
“Not coincidentally,” he says, “we're also witnessing the largest yield-curve inversion between the 3-month and 10-year note in more than four decades.
Since 1959, there have been eight instances when the NY Fed's recession-forecasting tool has exceeded a 40% probability of an economic downturn.
With the exception of October 1966, every other previous time a reading has been above 40% the economy has dipped into recession – that's 57 years without a miss.
One of the reason recessions matter is because no bear market has bottomed since World War II before the National Bureau of Economic Research has officially declared a recession.
I’ve been trying to climb out of crisis mode lately.
Soulful Bob Marley keeps replaying in my head: “Don’t worry ‘bout a ‘ting. Cause every little ‘ting gonna be alright…”
But as we get ready to head into another spring weekend, I’ve been finding it hard to find a meaningful and timely topic to write about that doesn’t entail some impending disaster, tragedy or danger.
There’s the Inflation Crisis…
Fed governor Michelle Bowman traveled all the way to Germany to tell a crowd attending an ECB symposium that the Fed will likely have to continue raising interest rates if price growth and the jobs market don’t further cool down.
She's clearly an outlier right now. Over 83% of Fed Funds Rate futures traders on the CME believe the Fed will (although not necessarily should) pause rate hikes at the Fed's next meeting in mid-June.
I think they should have paused a few months ago -- mainly to avoid the coming recession -- but that's another story for another time.
(FYI...inflation, as measured by the CPI – All Urban Index, increased 4.9% year-over-year in April. Core inflation, which excludes food and energy prices, rose 5.5% annually – despite a 12.6% fall in oil and other energy commodities.)
And the Debt Crisis…
The government is another day closer to X Day when it runs out of extraordinary measures to continuing paying its bills – and when global financial markets start to implode.
But with President Biden and House Speaker McCarthy delaying until next week their next “negotiating” pow wow that had been scheduled for today – while their staffs presumably get closer to a blueprint for compromise, I’m waiting to write about that, too.
So, the Banking Crisis…
“The banking system is sound and resilient.”
That’s what the Federal Reserve’s press release said on Wednesday in the statement announcing another 25 basis point interest rate hike.
Sound and resilient.
A few hours later, multiple media sources reported that PacWest Bank is exploring strategic options, including a possible sale.
Is PacWest the Next to Fail?
Shares of PacWest stock were already down about 80% since February. After the news hit, the stock took another 50% nosedive.
In fact, since January 1st, its share price has tanked – having fallen from $22.95 to a new 52-week low of $3.17 as of yesterday’s market close.
Bloomberg’s Joe Wiesenthal noted in his Thursday column that “overall, the ‘banking system’ may be sound and resilient, but there's clearly anxiety surrounding individual banks that hasn't gone away.”
PacWest sank over 50% in early trading and was halted multiple times because of volatility.
At the same time, Tennessee-based First Horizon Bank also fell 33% after the regional lender and TD Bank announced that they were terminating their merger agreement.
The banks jointly said that the move was because of uncertainty around when (not if) TD would receive regulatory approval for the deal and was not related to First Horizon.
Other notable declines included a drop of 38% for Western Alliance and 12% for Zions Bancorp. The SIPDER S&P Regional Banking ETF (KRE) was down more than 5%.
Western Alliance’s fall came despite the company advising Wednesday evening that deposits have grown since the end of March.
KBW CEO Tom Michaud said, “That hasn’t taken the heat off of the stock, or the bond prices. Investors are very nervous.
“And I think what they’re nervous about is the fact that Silicon Valley lost 75% of their deposits in 36 hours. There’s not a bank in the world that could really sustain that.”
“The banking system is sound and resilient.”
That’s what the Federal Reserve’s press release on Wednesday said in the statement announcing another 25 basis point interest rate hike.
Sound and resilient.
A few hours later, multiple media sources reported that PacWest Bank is exploring strategic options, including a possible sale.
Is PacWest the Next to Fail?
Shares of PacWest stock were already down about 80% since February. After the news hit, the stock took another 50% nosedive.
In fact, since January 1st, its share price has tanked – having fallen from $22.95 to a new 52-week low of $3.17 as of yesterday’s market close.
Bloomberg’s Joe Wiesenthal noted in his Thursday column that “overall, the ‘banking system’ may be sound and resilient, but there's clearly anxiety surrounding individual banks that hasn't gone away.”
PacWest sank over 50% in early trading and was halted multiple times because of volatility.
At the same time, Tennessee-based First Horizon Bank also fell 33% after the regional lender and TD Bank announced that they were terminating their merger agreement.
The banks jointly said that the move was because of uncertainty around when (not if) TD would receive regulatory approval for the deal and was not related to First Horizon.
Other notable declines included a drop of 38% for Western Alliance and 12% for Zions Bancorp. The SIPDER S&P Regional Banking ETF (KRE) was down more than 5%.
Western Alliance’s fall came despite the company advising Wednesday evening that deposits have grown since the end of March.
KBW CEO Tom Michaud said, “That hasn’t taken the heat off of the stock, or the bond prices. Investors are very nervous.
“And I think what they’re nervous about is the fact that Silicon Valley lost 75% of their deposits in 36 hours. There’s not a bank in the world that could really sustain that.”
As the Wicked Witch of the West orders her minions toward the end of Wizard of Oz, “Seize them!”
And seize them, they did.
San Francisco bank First Republic was taken over by the Federal Deposit Insurance Corporation over the weekend and was sold to too big to fail JPMorgan Chase in the pre-dawn hours this morning.
All in a day’s work.
It was the third bank failure in two months and the second-largest in the nation’s history, and the one unanswered question now is, is there a systemic banking crisis or not?
What’s Going On?
JPMorgan, the country’s largest bank, will assume all of First Republic's $92 billion in deposits, including ones that weren't insured.
The FDIC didn't even need to invoke its so-called “systemic risk exception” to insure them, as it did with Silicon Valley and Signature Banks.
Members of Congress who run the banking committees in both houses generally praised the federal takeover of First Republic and called its sale to JPM an example of a successful public-private collaboration.
Rep. Maxine Waters of California and the top Democrat on the House Financial Services Committee said: “This prompt and cost-effective sale of the bank protects depositors, limits contagion, and ensures that no cost is borne to our nation’s taxpayers.”
Perhaps. Still, such effusive praise should raise our eyebrows, given the nearly $17 million in campaign contributions the commercial banking industry gave to members of Congress in 2022, according to OpenSecrets.org.
But as Pam and Russ Martens of Wall Street on Parade remind us, it shouldn’t be lost (but, apparently, it has been on the regulators that approved the sale and their fans in the Capitol) that JP Morgan is a five-time felon, with the same CEO – Jamie Dimon – at its helm.
But I digress…