What Did I Learn at PDAC?

By Rob Bruggeman

The annual Prospectors & Developers Association of Canada, or PDAC, convention in Toronto has ended.  I was there, as were 25,000 other people.  While I actually didn’t attend the convention much, here are a few things I learned and observed at this PDAC:

1. Some people can never have enough free pens or squishy toys.  I’d like to see a concerted effort by the mining industry to eliminate all the free junk that is given away at conferences like PDAC.  When you feed a pigeon, you’ll get more and more pigeons that suddenly show up.  Ask yourself if you really want to attract pigeons pen collectors.  People who covet free trinkets are not who we want to attract to an investment conference.  On a side note, thanks to Lundin Mining (LUN.TO) for providing small chocolate bars that I gave to my kids so they would still love me after PDAC.

2. Copper exploration is hot.  There are a lot of big mining companies looking for large scale copper projects. Since there are not a lot of those for sale due to the lack of exploration in the past 5-10 years, producers are now funding juniors to go out and drill.  This is good for copper explorers, since there isn’t much new institutional or retail money flowing into the mining sector right now.  We should all pool our money and hire the Angry Geologist to go out there and find the next behemoth copper deposit for us.

Continue reading What Did I Learn at PDAC?

Sentiment Snapshot: Fundamentally Sound

By Callum Thomas

Price by itself can very quickly change the tone in markets, and we saw a very clear example of that in the latest weekly sentiment survey on Twitter.  With the S&P500 closing above its 50-day moving average on Friday and apparently completing a so-called “W-shaped recovery”, technicals-sentiment rebounded sharply on the week.  Fundamentals sentiment also rebounded, and is part of a wider and critical set of data points which help shed light on the outlook for markets.

Indeed, equity fundamentals sentiment is running at very optimistic levels, and while it seems short-term at odds with what we are seeing in the bond survey there are a couple of key supporting points.  For one, economic data has been surprising to the upside, and earnings revisions momentum has been heating up.  Pair this with the backdrop of booming economic confidence, and it certainly paints a picture of supportive fundamentals.

While some of these indicators may be close to mean reverting, and the business cycle is steadily maturing, it’s a backdrop that in the near term that provides some justification for optimism in markets. And for now, as the technical analysts might say, the trend is your friend.

Continue reading Sentiment Snapshot: Fundamentally Sound

Japanese Bubble Bursting Playbook

By Kevin Muir

Every now and then I stumble across a new source of information that I can’t wait to share with my readers. Today is one of those days. If you have even the tiniest shred of interest in commodities, then head over to the Goerhring & Rozencwajg website immediately. It’s just terrific stuff.

I must admit to being partial to their bullish commodity story, but in a recent RealVision TV interview, Leigh Goehring solved a problem that I have wrestled with for some time.

Continue reading Japanese Bubble Bursting Playbook

Jim Grant On The Bond Bear Market, Jerome Powell And Much More

By Heisenberg

Well, everyone wants to talk about rates these days and it’s no mystery why.

The Fed is under new leadership at a pivotal juncture. Balance sheet rundown has commenced and the Trump administration has embarked on what multiple sellside desks (see here, here, and here for a few takes) have described as an ill-advised quest to try and supercharge an already hot economy with late-cycle expansionary fiscal policy.

And so, the supply/demand dynamic in the Treasury market has shifted. Financing the tax cuts and increased spending means more supply and with the Fed out of the market, it’s left to price sensitive private investors to provide the bid. This comes as the global reserve diversification debate heats up and as second-order effects of increased bill supply could further sap foreign demand for U.S. debt (see here). To be sure, the market will clear – the question is, at what price?

That gets to the heart of the debate about where yields go from here and the concern is that between everything said above and the suspicion that between fiscal stimulus and now tariffs, price pressures could build quickly, the Fed will be forced to take a hawkish turn that’s not yet priced in by markets. All of these concerns helped fuel the bond rout that conspired with the February 5 vol. shock to send global equities careening into correction territory last month.

Well, one person you might be interested in hearing from on all of this is Jim Grant, and  happily, Erik Townsend welcomed him to the MacroVoices podcast this week.

You can listen to the interview in full below, but here are a couple of excerpts that touch on the questions everyone wants answered.

Continue reading Jim Grant On The Bond Bear Market, Jerome Powell And Much More

Inflation, Deflation and Bond Market Returns

By Charlie Bilello

Inflation. Deflation.

Two words often heard in conversations about the bond market.


Because bond investors tend to demand higher yields in periods of higher inflation and lower yields in periods of lower inflation or deflation.

Looking at a long-term chart of yields and inflation, the relationship is clear.

Data Source: Federal Reserve Economic Data (FRED).

Not as clear from this chart is how bonds have actually performed during various levels of inflation. What has been the best environment for bond investors historically: high inflation, low inflation, or something in between? To answer that question, we need to take a closer look at the data.

Continue reading Inflation, Deflation and Bond Market Returns

OECD Leading Indicators at a Turning Point

By Callum Thomas

The latest round of OECD Composite Leading Indicators was just released, and given how useful these indicators can be in shedding light on the state of the economic cycle (and market cycle) it’s worth taking a look at the trends within the data. Indeed, the January round showed a further down tick in the diffusion index across the 36 countries that OECD calculates these indicators for. In the past this sort of pattern has been a signal of a turning point.

While I have been optimistic on the global economic outlook (on the basis of still supportive monetary policy, rising property prices in the major economies, solid manufacturing and consumer confidence, improving corporate earnings, and accelerating global trade growth), it is worth keeping track of indicators like this for an unbiased guide on potential turning points in the cycle.  As I note below, it could well be a more benign type of signal e.g. a mid-expansion slowdown such as that which occurred in 2005, but with equity market valuations increasingly expensive, and the tides turning in global monetary policy, it’s not something to completely dismiss either.

The key takeaways for investors are:

Continue reading OECD Leading Indicators at a Turning Point

Q4 2017 Z.1 Flow of Funds

By Doug Noland

So much uncertainty in the world these days. Some things, however, we know with certitude: U.S. Debt, the value of the securities markets and Household Net Worth do grow to the sky. The Fed’s latest Z.1 report documents another quarter of inflating Credit, markets and perceived wealth – three additional months of history’s greatest Bubble.

Total (non-financial and financial) U.S. System borrowings jumped a nominal $495 billion during the quarter and $2.630 TN in 2017 to a record $68.591 TN. Total Non-Financial Debt (NFD) expanded at a seasonally-adjusted and annualized rate (SAAR) of $1.407 TN during 2017’s fourth quarter to a record $49.050 TN (’17 growth of $1.793 TN). Credit growth slowed from Q3’s SAAR $3.007 TN and Q2’s SAAR $1.921 TN, while it was closely in line with Q4 2016’s SAAR $1.435 TN. NFD as a percentage of GDP ended 2017 at 249%. This compares to 230% to end 2007 and 179% in 1999.

By major category for the quarter, Household Debt expanded SAAR $790 billion, a notable acceleration from Q3’s $516 billion and Q2’s $573 billion. For perspective, one must go back to 2007’s $946 billion to see annual growth exceeding Q4’s pace of Household borrowings. For 2017, total Household Borrowings expanded $604 billion, up from 2016’s $510 billion, ‘15’s $403 billion, ‘14’s $402 billion, ‘13’s $241 billion, and ‘12’s $266 billion. Household Borrowings contracted $51 billion in ’11 and $61 billion in ’10.

Continue reading Q4 2017 Z.1 Flow of Funds

Friday’s Employment-Sparked NASDAQ Rally Appears To Be A Short-Term Bullish Indication

By Rob Hanna

The employment report has helped to spark a big rally today, and the NASDAQ is hitting new all-time highs. I looked back at other instances where the NASDAQ spiked higher and closed at a new high on the day of an employment report. The results I saw were compelling. Here are the list of instances along with their 5-day returns:


With the only loser closing down 0.06%, the stats are completely lopsided for the bulls. Employment-sparked momentum leading to new highs like we are seeing today has seen positive short-term follow through in the past. This certainly appears worth keeping in mind as traders ready for next week.

Hat-tip to @McClellanOsc for the idea to test!

Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.

Jobs Friday! 313K Jobs Added [Higher Than Expected]

By Anthony B. Sanders

The Bureau of Labor Statistics has released their report for February. In a nutshell, 313k jobs were added, Labor Force Participation increased to 63%, but  YoY average hourly earnings fell to 2.6%.


Total nonfarm payroll employment increased by 313,000 in February, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today.

Employment rose in construction, retail trade, professional and business services,
manufacturing, financial activities, and mining.

Household Survey Data

In February, the unemployment rate was 4.1 percent for the fifth consecutive month,
and the number of unemployed persons was essentially unchanged at 6.7 million.
(See table A-1.)

Among the major worker groups, the unemployment rate for Blacks declined to 6.9
percent in February, while the jobless rates for adult men (3.7 percent), adult
women (3.8 percent), teenagers (14.4 percent), Whites (3.7 percent), Asians (2.9
percent), and Hispanics (4.9 percent) showed little change. (See tables A-1, A-2,
and A-3.)

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.4 million in February and accounted for 20.7 percent of the unemployed.

Over the year, the number of long-term unemployed was down by 369,000. (See table A-12.)

The civilian labor force rose by 806,000 in February. The labor force participation rate increased by 0.3 percentage point over the month to 63.0 percent but changed little over the year. (See table A-1.)

In February, total employment, as measured by the household survey, rose by 785,000.

Continue reading Jobs Friday! 313K Jobs Added [Higher Than Expected]

The Tightening Lead (Pb) Market (from IKN459)

By Otto Rock

This was part of last weekend’s edition of The IKN Weekly. Just one small edit, the name of a company at the end.

More on Lead (Pb)

It was hectic and a bit of a squeeze to get the edition out on time last week, since then I’ve had time to fill in some blank spaces and none more so than the intriguing situation in the lead market. What I’ve found by checking the data is that there’s every reason to suppose an acceleration in the demand for lead that justifies the current voracious appetite of smelters for product.

The place to go for reliable supply demand data is the International Lead and Zinc Study Group (ILZSG), based out of Portugal and comprised of a selection of industry experts from all corners of the sector. We’ve made use of their database (22) on these pages previously for the zinc exercise which showed in 2016 the rise in demand (that’s worked out very nicely thank you) and it’s now time for its ugly sister, known in Latin as plumbum and the reason we call out the plumber who’ll often bring his plumb line. This chart derived from the data shows the supply make-up of Pb and the first thing to note is the high percentage of end user supply that comes from the re-cycling business. There are well-established firms that do this and as much as 97% of the lead used in car batteries is scavenged and sent back to battery makers to use again. However, mined supply is also on the rise and with 11 months of data for 2017 already published, our estimated as seen in the charts is likely to be within a tight margin of error and shows supply expanding again after a couple of stagnant years.

Continue reading The Tightening Lead (Pb) Market (from IKN459)

3 Amigos of the Macro, Updated


You thought I was done with the Amigos shtick, did you? Not by a long shot ma’am. They are the happy-go-lucky riders in play as the stock bull market churns on. They are the rising SPX/Gold ratio and stocks in general vs. gold (Amigo #1), rising US 10yr & 30yr yields (Amigo #2) and the flattening 10-2 yield curve (Amigo #3). On their current trends these goofy riders have signaled “a-okay!” to casino patrons playing the stock market and other risk ‘on’ items.

Taking our macro indicators out of order, let’s start with Amigo #2, who we have been noting to be bracing for something…

What is that something? Well, it is the targets for 10yr & 30yr bond yields we laid out 4-5 months ago in a bearish case for bonds; you know, back when everyone didn’t hate bonds as is currently the case under the much more recent expert guidance of Bill, Ray and Paul? It might as well have been Ringo, George and Paul making the call.

Another Heavy Hitter Calls Bond Bear

I am not trying to come off as a contrarian bond bull, deflationist. There are very valid reasons to be open to if not expect a new and secular bond bear market. But with the yields at our targets, which were established for a reason (being caution) and with the financial eggheads fully in unison, it has come time for caution on the bond bear stance and at least some aspects of a stock bull stance.

Continue reading 3 Amigos of the Macro, Updated