Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Wednesday, December 11, 2019

A year of deflation was pretty good for gold miners

I have been showing the long-term graph of US dollar index vs gold for some time, arguing that the last twelve years have, on average, been deflationary.

Since early 2008, the gold price has risen from ~900USD per oz to nearly 1500 USD/oz, whereas the US dollar index has risen from about 72 to nearly 98. Richard Russell seems to have been right, with his bet of 50% gold and 50% US dollars.

Now, here's a thought. If the graph trending upward and to the right is deflation, how does inflation plot?

Down and to the right (rising gold, falling dollar). Deflation and inflation are not opposites . . . they are perpendicular.

In the above graph, even though the trend has been deflationary, there are inflationary and disinflationary intervals as well.

From about mid September last year until the end of August, we had pretty steady deflation. But on much shorter timescales, individual actions are on the inflation-disinflation axis. (I have not decided what to call the opposite of deflation - perhaps #$!?@!?).

My thesis of the past several years is that deflation is good for the price of gold companies. So let's see how one did.

Franco Nevada is a royalty streaming company with about 80% of its revenues coming from precious metals production. This company is a good one to test the hypothesis as it is more likely to be affected by economic factors such as the price of gold and less affected by company-specific factors as would be the case for a mid-tier producer.

From late September 2018 to about the end of August of this year, Franco Nevada embarked on a powerful price advance from about $80/share to $130/share--a 62% gain. This gain corresponded with the period of deflation, where both gold and the US dollar index were rising.

Similarly, a quick look at other companies including SSR Mining, Wheaton Precious Metals, Wesdome, Semafo, and even a small exploration company like Bravada showed strong gains over the same period.

Sunday, December 8, 2019

Gold x USDX has a convincing breakout in phase space

I'm getting back into the swing of phase space reconstructions in preparation for next month's presentation in Washington

Something we have been going through for some time.

Gold x USDX (the product of gold the gold price and the US dollar index) broke out in the summer of 2019 (similar to this post) in most convincing fashion. As we speak, the trajectory of the system has moved away from any of the previous areas of Lyapunov stability.

Generally speaking, the bigger this product, the better for mining companies. So economically, they ought to be doing pretty well right now. Unfortunately, that number seems set to decline for the near future, but we'll see how things go going forward. Trump seems determined to drive down the value of the US dollar

Note that the current excursion is much more substantive than the one we had in 2011, when the gold price ran to $1800/oz.

Thursday, November 28, 2019

Help me cross the square

The wind rises, and the days grow short.

In a trench is a group of men. They sit together, but each is alone in his thoughts.

Happier times in the public market? Performing on the sports field? Father swinging the scythe in the wheatfield? Your wife? Your children?

You are going to die. You know this. You are among the last holdouts as the Bolsheviks destroy all resistance throughout Russia. Your position is surrounded, and the Bolsheviks are ready to crush you beneath the weight of their guns and armour. All of you are going to die, in today's battle or another that will soon follow.

This is not the worst. Your family are class enemies. They will die too. Your only hope may be that your children are young enough to be spared and adopted into a new family. Maybe you have sung enough to them that they will hear your voice, see your face--in dreams.

They have made no secret of their plans. The churches will be destroyed, the Men of Cloth--all will be gone. Every cultural touchstone that has given your life meaning will soon be wiped from the earth.

Someone begins to sing.

A song of a blind, dying man, who is asking for help to cross the tumult of the public square so he can die in peace in the fields of his youth. (Spoiler - he doesn't make it)

You join in.

Friday, October 18, 2019

The church-sale indicator tells me that silver is at a significant low

Every spring and fall the neighbourhood church has a rummage sale. Parishioners donate used goods, which are sold to benefit the church (although this year, the beneficiary seems to be a separate charity). In past years I have bought books and games for the kids, books for me, and once some jigsaw puzzles when my wife's aunt came for a long visit from Singapore.

About twenty years ago, I had started to buy silver. At that time, there was a lot of silver jewellery available at the church sale. Nobody was interested in it. I bought a really fascinating piece from the opium era in China for probably about $5. I remember getting a pair of art deco silver earrings for $2, that my wife wore a lot and said were her favourite pair (at that time). And lots of other things--generally jewellery and utensils.

The price of silver rose, and the clientele abruptly changed. Gangs of young men would show up, line up early, and buy up all the silver within minutes of the doors opening. It was very difficult to get anything unless you too were willing to line up for a few hours in advance. As a result, I stopped looking for silver there, choosing to shop for books and music instead.

This year I arrived at the sale quite late, and the crowd was already thinning out. After picking up some books, I thought of taking a look at the jewellery, since that section wasn't jammed with people. Surprisingly, there was quite a bit of silver jewellery available, and numerous sterling spoons (more plate, too, of course). I bought a few sterling silver teaspoons for my collection.

This points to a lack of interest in silver among not only the general public, but among the type that research the topic and buy accordingly. This suggests to me that the silver price is at an important low.

Sunday, October 6, 2019

Abstract accepted to Chapman conference on the Evolution of the Monsoon


So I'll be going to Washington in the New Year.

No word yet on the format of the presentation.

I've never taken part in a Chapman conference before, but I gather they are rather more collaborative than typical conferences