To note, the rise of wholesale prices became a global phenomenon.
Grocery stores began hoarding inventories to sell at higher prices, forcing governments to intervene and criminalize these actions to avoid an even larger hit to the consumer.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
Inflation surged above 20% in 1920 and the Dow Jones Industrial Average began a decline of 47% from peak to trough from 1920 to 1921 while the world emerged from the pandemic.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
As I pointed out recently, the Bloomberg commodity index already broke out.
Inflation expectation look to be next.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
Meanwhile, the Fed is crippled.
Monetary policy has become a funding mechanism through massive purchases of Treasuries to suppress interest rates.
It enables the US government to run a large fiscal deficit.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
Now, let’s talk gold/silver miners.
That’s one of the best ways to be exposed to this opportunity.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
Investors demanded significant reductions in debt and equity issuances while miners had to effectively tighten up operational costs, cut back investment, and prioritize the quality of their balance sheet assets.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
As a result, major producers have surprisingly swung into being cash flow machines.
That’s only the beginning.
Another important point:
Gold/silver producers are also about to face a supply cliff problem in the next years.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
The good news is:
With cleaner balance sheets & and now making turning into profitable businesses, miners are getting cashed up to make new acquisitions.
That means….
High quality exploration projects are likely to get massively bid up in this next part of the process.
— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020
We discuss this opportunity in our latest letter.
Please take some time to read it: https://t.co/w1uBJkrOhI
Merry Christmas again and greetings from Brazil .
Cheers— Otavio (Tavi) Costa (@TaviCosta) December 26, 2020