Good afternoon
So another financial year has finished! Certainly one of the more tumultous ones - but also one with some nice opportunites! My fund finished the year up by up 8,37% in Euro-terms, and by 9,55% in A$-terms. Nothing fantastic - but it could have been much worse and has been helped by gold stocks, but also some good trading of industrial stocks over the last few month.
Most serious investors seem to believe, that stocks have run well ahead of their real value, but I very much doubt this. Central Banks and governments around the world will have to make sure, that interest rates stay very low for a long time to come - certainly real interest rates. Otherwise, most countries and many companies will go belly-up! So while this is the case, how do you value equities? The return from bonds is about zero in most countries - the return from property is 2- 4%, depending on the country - the earnings yield from equities is still 4% and more. So where is the alternative? We are in a new world, and it will take time to adjust to it!
The Vhinese PMI is edging higher, and Consumer Confidence in the US is surprisingly strong again.
The US equity market is stronger - again! Not all that much action in base metals - a smaller zinc mine in Peru, operated by Trevali, was shut because of avirus outbreak. Just copper is up in a more emaningful way, also being helped by corona-induced supply-risks in Chile/Peru.
Gold feels like it might be close to start a new challenge to break the 1800 level - currently it´s trading at a new recent high of 1782 US$, and at a 4-week high in A$ at 2587 A$/oz. At this level, we will see quite a few new mines in Australia over the enxt couple of years - but rather 50-1500.000 oz projects, than large mines.Western Africa, if it can avoid too bad ´virus-outbreaks and too much political upheavel, will see more fresh supply. But nothing like a new 500-or 1 mill oz mine is on the horizon, if I am correct - and some of the large producers are continuing to struggle to find any growth.
Prairie Mining - are trading at 25ct+ in Poland today, where the stock is not suspended, on very heavy turnover. Prairie have found a financier - an international litigation firm - which will be financing up to 18 mill A$ for litigation against the State of Poland. Not sure, whether tehy will announce more details soon - but I would have thought, that the potential damages are far above 1 bill A$. It is certainly very encouraging to see, that a professional litigation financier sees high enough chances, to risk 18 mill A$ - for a potential return of several times this amount, I guess. Very often, these things are decided out of court, eventually and after years.But the market cap of 44 mill A$ ( at 21ct ) certainly leaves quite a bit of room. As a holder, I might hold my remaining position - but I am not a buyer of this never ending saga.
While I am ending tjis blog by late afternoon, gold is trading just above 1785 US$, and if it closes here, the GDXJ will make a new high!
have a nice evening
WS
WS
Schröder Equities GmbH
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