Despite today’s pullback, a very bullish sign for gold and silver is flashing green, plus more signs of serious economic problems.
Bullish Indicator For Gold & Silver
August 15 (King World News) – Graddhy out of Sweden: This ratio chart shows that silver miners have broken out vs larger gold miners. This is what we want to see as it means the more speculative, smaller silver stocks are outperforming the larger gold stocks. Means the market is buying risk up from the low.
Silver Stocks Outperforming Gold Miners
Bear Market Rallies
The Kobeissi Letter: This bear market is not like 2020 or 2008, it’s like 2001. Valuations were too high and rates were too low and now 40-year high inflation was thrown in. In 2000-2001, we had 7 relief rallies of 10%+. We have had just 3 this bear market. Can we make history with a bottom here?
Trouble For Homebuilders
Steph Pomboy: The -35 point decline in the NAHB Index so far this year is the fastest in history (outside Covid). Faster even than during the deflation of the housing bubble. But, no. We’re not in recession.
NAHB Collapse To -35 Is Fastest In History!
More Signs Of Serious Economic Problems
Peter Boockvar: The August NY manufacturing index collapsed to -31.3 from +11.1 and well worse than the estimate of +5. That’s the weakest since May 2020 when it was at -48.5. New orders went from +6.2 to -29.6.
Manufacturing Plunges To Weakest
Level Since COVID Collapse
Shipments dropped by almost 50 pts m/o/m to -24.1. Backlogs fell further below zero at -12.7, its 3rd straight month under. Inventories were down by 8 pts. Employment dropped a touch more than 10 pts to 7.4, the lowest since April. The workweek went negative at -13.1. Delivery times also went negative. As for pricing, those paid dropped to the slowest since January 2021 but prices received rose a touch.
After falling by 20 pts in July to -6.2, the 6 month outlook got a touch back above zero at +2.1.
Not Much Of A “Dead Cat” Bounce
For 6 Month Business Outlook
Expectations for prices paid and received rebounded with the latter getting back all of what it lost in July. New orders expectations also bounced m/o/m. Capital spending plans dropped again as if there is less cash flow available, or limited visibility in one’s business, there is less cash or desire to invest in one’s business in the short term.
Bottom line, the NY Fed said this was the “2nd largest monthly decline in the index on record, and among the lowest levels in the survey’s history.” Now we still of course have many more regional manufacturing survey’s to look at to see if this is a one off or not but such a rate of change is unlikely to be isolated to this region. So, go on and continue to debate the semantics of whether we’re in a recession or not but we should be paying much more attention to the trajectory of economic activity and this was an ugly report.
With respect to wages, last Thursday the Atlanta Fed’s wage growth tracker came out for July and it saw an increase of 6.7% y/o/y for a 2nd straight week, the highest since at least 1997.
Wage Inflation Highest Since 1970s
The wage growth for a job switcher was 8.5% from 7.9% in June. If one stayed in their job, the wage growth was 5.9% vs 6.1% in June. The high skilled worker saw the fastest wage growth in 20 years at 5.1% where the low skilled workers wages rose 6% for a 2nd move, a high in this data. Of course all of these stats are still running below the rate of inflation which is the obvious strain on consumer spending that is being seen for lower income people. Also, these multi decade highs in the pace of wages will lead to further profit margin degradation that companies will still try to mitigate with higher prices.
Tighter Lending Standards
We know we’ve seen a rather sharp rise in the cost of capital and now we’re seeing tighter lending standards from the banking community. The Fed last week said that 24.2% of medium and large banks tightened standards for C&I loans from 1.5% easing in Q2 and 14.5% easing in Q1. That is the biggest number since Q4 2020.
Percentage Of Banks Tightening Lending Standards
Demand for those loans did rise. Standards were tightened for commercial real estate loans but were unchanged for residential real estate. The demand for CRE loans were softer for construction and land development. Demand for mortgage were weaker but did rise for HELOC’s. Standards for consumer loans like credit cards and auto loans remained unchanged. Loan demand rose for credit cards but fell for auto loans.
Bottom line, it only makes sense for banks to be tougher in their loan underwriting process in a slowing economy so we’re now going to have less businesses get loans and for those that do will be paying up for them.
Homebuilders Getting Worried
The August NAHB home builder sentiment index is in contraction now at 49, with 50 the breakeven line. That is down from 55 in July and below the estimate of 54.
Homebuilder Confidence Lowest Since COVID Collapse
The Present Situation fell to 57 from 64 while the Future Expectations component fell another 2 pts to 47. More expensive homes, up 40% over the past 2 years, and higher mortgage rates drove a 5 pt drop in Prospective Buyers Traffic which is now down to 32, 18 pts below the breakeven pace.
Prospective Buyer Traffic Also Hits Lowest
Level Since COVID Collapse
Also, that buyers traffic number is at “the lowest level since April 2014 with the exception of the spring of 2020 when the pandemic first hit” said the NAHB chairman.
The NAHB chief economist said it pretty succinctly as a bottom line here, “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession.” Remember, that housing all in is about 15-18% of the US economy historically.
In Case You Missed It…
Big Acquisition!
American Pacific Mining Corp and Constantine Metal Resources Ltd. announce that they have entered into a definitive agreement pursuant to which APM will acquire all of the issued and outstanding common shares of Constantine in an all-share transaction.
Premier Exploration & Development Company
The combined company will be a premier exploration and development company in the western USA with two projects being aggressively advanced under strategic partnerships with well-respected major metal producers and an expanded portfolio of prospective precious and base metals assets.
Highlights of the Transaction and Strategic Rationale:
- Shareholders of the combined company will gain exposure to two advanced exploration projects under strategic partnerships with majors:
- Palmer (Constantine) is an attractive PEA-stage (US$266 million after-tax NPV at 7% discount rate) zinc-copper-gold-silver volcanic massive sulfide (VMS) project located in a strategic area of Southeast Alaska, being advanced with world-class joint-venture (“JV”) partner Dowa Metals & Mining Co., Ltd. of Japan (“Dowa”). The JV approved 2022 program and budget is US$18 million, with funds being advanced exclusively by Dowa, as required, during project advancement. Constantine has an option to contribute pro-rata, up to December 31st, 2022, to maintain Constantine’s 44.91% interest.
- Madison (APM) is a past-producing high-grade copper-gold skarn and porphyry system located in the heart of Montana’s prolific copper-gold belt under an earn-in joint-venture agreement, whereby Kennecott Exploration Company, part of the Rio Tinto Group, may spend US$30 million to earn a 70% interest.
- The combined company will be well financed with a pro-forma cash balance exceeding C$10 million allowing APM to aggressively progress projects while leveraging spending commitments of partners.
- Improved capital markets profile with increased market capitalization exceeding C$85 million and better positioned to attract additional institutional and high net-worth investors.
- The Transaction has strong shareholder support, with Constantine’s two largest shareholders Michael Gentile and John Tognetti and management and directors of Constantine, together representing 27% of the issued and outstanding common shares of Constantine, entering into voting support agreements with APM.
- Strong and experienced management team (APM was recently nominated for five awards at the S&P Global Platts Metals Awards) with demonstrated ability to raise capital and operate in the western USA.
- APM and Constantine shareholders will have exposure to expanded portfolio of precious and base metals exploration projects in Idaho, Nevada and Arizona.
Both CEOs Comment On The Powerhouse Merger
CEO of American Pacific Mining, Warwick Smith, stated: “This is a transformational step for American Pacific as the Palmer Project gives us an established PEA-stage asset with a tremendous amount of exploration upside. We are very impressed with the quality of technical work completed by Constantine and Dowa to-date and look forward to collaborating with our new partners and stakeholders to expand resources and realize the full potential of this high-grade VMS system while continuing to deliver exposure to progress and new discoveries across our existing portfolio of highly prospective past-producing exploration projects.”
CEO of Constantine Metal Resources, Garfield MacVeigh, commented: “Constantine is pleased to enter into this agreement and our Board unanimously recommends the transaction to shareholders at a significant market premium. We believe American Pacific’s focus, financing capabilities and breadth of exploration experience in the US will result in Palmer reaching its full potential. We would like to thank our shareholders, the team at Constantine, our Board and our joint venture partner at Palmer, Dowa, for all their support.” American Pacific Mining, symbol USGD in Canada and USGDF in the US. To learn more about the opportunity this powerhouse merger creates CLICK HERE.
ALSO JUST RELEASED: James Turk – Gold & Silver Pullback Not Surprising But Look At This Shocking Chart! CLICK HERE.
ALSO JUST RELEASED: Greyerz – This Global Collapse Will Be Like Nothing Seen Before Featuring Economic Disintegration, War & Riots CLICK HERE.
***To listen to Alasdair Macleod discuss the breakout in gold and much more CLICK HERE OR ON THE IMAGE BELOW.
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