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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

Manufacturers Expand at Fastest Pace in 50 Years, Boosting Commodity Prices

April 19, 2021

Manufacturers-Expand-at-Fastest-Pace-in-50-Years,-Boosting-Commodity-Prices

A raft of positive economic news was released last week, pointing to a robust ongoing recovery from the pandemic-triggered downturn and adding to the thesis that inflation is set to accelerate.

Leading manufacturing data from the Federal Reserve Banks of Philadelphia and New York were extremely constructive for business activity going forward. The Philadelphia Fed Index registered a 50.2 this month, which is the highest level in nearly 50 years if you can believe it. Close to three in four firms reported higher input prices for raw materials as well as higher prices for their own manufactured goods. Manufacturers in New York reported the same, with input prices rising at the fastest pace since 2008 and selling prices surging at a record-setting pace.

Regional Manufacturing Index Rose To Its Highest Level
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Indeed, the producer price index (PPI), issued monthly by the Bureau of Labor Statistics (BLS), shows prices rising at multiyear highs. The index for processed goods, for instance, moved up 4.0% in March, the biggest increase since August 1974. For the 12-month period, unprocessed goods exploded 41.6%, the strongest such growth since July 2008.

A number of commodities have been on a tear lately. Lumber futures are up for the 15th straight day. And just take a look at corn prices. Futures for the crop spiked above $6 a bushel for the first time since June 2013 on tight supply and strong demand from China and South Korea. Corn prices are now up 85% compared to the same time last year and could double before we see a retreat.

No Inflation? Corn Prices Up Alomst Double
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Copper continued its rally last week on a bullish report from Goldman Sachs, which sees the red metal climbing to an all-time high of $15,000 per metric ton by 2025 on an unprecedented supply-demand imbalance brought on by renewable energy. According to the analyst group, current copper prices of around $9,000 “are too low to prevent a near-term risk of inventory depletion.” Only a price point of around $15,000 is enough to incentivize the development of new copper projects.

Copper Could Hit $15,000
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Our favorite copper play continues to be Ivanhoe Mines, led by billionaire Robert Friedland, who sees the lack of new mines as a national security issue. Speaking at the virtual CRU World Copper Conference last week, Robert told listeners that markets still haven’t quite recognized how disruptive the transition to renewable energy and electrification-of-everything will be, nor just how much copper will be required.

“It’s all copper, copper, copper, copper, copper, copper,” Robert said.

Ivanhoe Mines also announced it produced a record 400,000 metric tons of ore grading 5.36% copper at its Kakula and Kansoko mines in March.

Luxury Giant LVMH Returns to Growth

In March, retail sales jumped a whopping 9.8% from the previous month, the second largest surge on record, as consumers made good use of their stimmy checks. As I shared with you recently, sales of cars and light trucks were up an unbelievable 58% in March compared to last year, with many luxury carmakers setting new monthly and quarterly sales records.

U.S. Retail Sales Jumped in March
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The French luxury giant LVMH Moet Hennessy Louis Vuitton announced last week that it had returned to growth following the pandemic, reporting first-quarter revenue of 14 billion euros, or $16.75 billion. Fashion and leather goods had an excellent start to the year, generating record revenue that was 52% higher than the same period in 2020 and an increase of 37% from 2019. The conglomerate was helped by its recent acquisition of U.S. jeweler Tiffany, bringing the number of companies it owns to over 75.

LVMH Closed at a Record High on Strong Q1 Results
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I’m very pleased with how LVMH has performed over the course of the pandemic, during which the fortunes of wealthy consumers have expanded. With a market cap of nearly 320 billion euro ($383 billion), LVHM is Europe’s most valuable company. First-quarter sales were driven by Asia, particularly China, and the U.S., which have done a much better job of combating COVID-19 than Europe. The increasing traffic at U.S. seaports is a clear sign that demand is strong right now. Following its record-setting February, the Port of Los Angeles processed 957,599 twenty-foot equivalent units (TEUs) in March, representing the busiest March in the port’s 114-year history. All combined, it was also the busiest first quarter ever for the seaport. To see the top 10 countries with the largest shipping fleets, click here.

Coinbase Goes Public, Opening the Crypto Floodgates

On a final note, digital currencies stormed Wall Street in a big way last week. Crypto exchange Coinbase went public in a direct listing, opening the floodgates for a number of other crypto-related companies.

This move brings us one step closer to mass acceptance of cryptocurrencies.

Before now, investors seeking to participate had a few options other than to hold the underlying assets. The most obvious among these is to own shares of the crypto miners, including HIVE Blockchain Technologies, the only publicly traded firm to mine both Bitcoin and Ether using green energy. There are also futures contracts through CME Group, and a number of issuers have filed for a Bitcoin ETF.

With Coinbase, ticker COIN, investors get exposure to the entire $2.2 trillion crypto ecosystem, including not just Bitcoin and Ether but also smaller yet fast-growing coins like Dogecoin. All cryptos mentioned hit fresh new highs last week following Coinbase’s debut.

The stock traded a staggering $29 billion in volume on its first day, which could be an all-time high, according to Bloomberg’s Eric Balchunas. 

Several commentators pointed out that Coinbase ended lower than it opened at. As I told Cointelegraph last week, I’ve seen this story play out many times over my 30 years in managing money. Often when a company is up 300% in a year and goes public, it can easily sell off 30%. I don’t believe investors should be too worried about Coinbase’s volatility. I’m incredibly bullish.

That’s not to say the industry isn’t volatile. It remains extremely volatile. A tweet by Documenting Ether on Friday, appearing above, shows just how much your investment would be today had you used the April 2020 stimulus check to buy Bitcoin, Ether or Dogecoin. It’s hard to look at these figures and not kick yourself.

For more on commodities, cryptos and more, subscribe to our YouTube channel by clicking here!

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content. Beta is a measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole.

The Philadelphia Federal Index (or Philly Fed Index) is a regional federal-reserve-bank index measuring changes in business growth covering the Pennsylvania, New Jersey, and Delaware region. A producer price index is a price index that measures the average changes in prices received by domestic producers for their output. Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Mr. Holmes owns shares of HIVE while U.S. Global Investors owns convertible securities. Effective 8/31/2018, Frank Holmes serves as the interim executive chairman of HIVE.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (3/31/2020): Ivanhoe Mines Ltd., LVMH Moet Hennessy Louis Vuitton SA.

 

Net Asset Value
as of 10/27/2021

Global Resources Fund PSPFX $6.88 -0.14 Gold and Precious Metals Fund USERX $12.49 -0.09 World Precious Minerals Fund UNWPX $4.75 -0.01 China Region Fund USCOX $8.47 -0.10 Emerging Europe Fund EUROX $7.42 -0.14 Global Luxury Goods Fund USLUX $25.47 -0.09 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $1.99 No Change