Haymaker Friday Edition
Haymaker Friday Edition
A broad, insight-packed presentation of high-finance, economic, and industry/stock charts from the Haymaker and his top-notch external resources.
Shutterstock
“Nobody could have predicted the Treasury market collapse of the last two years—apart from every critic of artificially low interest rates since John Locke. There is only one true law of history, and that is the law of unintended consequences.” -Famed economist, Niall Ferguson, 10/9/23 (the even more famous John Locke died in 1704 and is widely considered to be the father of liberalism — in the classic, not progressive, sense)
Hello, Readers and Subscribers:
It’s been a little while since we put together chartbook for you, so here’s just that: a chartbook! We might continue with this format on a monthly or semi-monthly basis, but a lot of that decision will come down to what you, our supporters, think of the material. Let us know in the comments section if you want to see more posts like this one.
With great appreciation,
David “The Haymaker” Hay
Evergreen Compatibility Survey
1.
(GSCI is an initialism for “Goldman Sachs Commodities Index”)
On Wednesday, Haymaker Founding Members received a research note from Louis Gave entitled Got Commodities? In it, he made the case that a number of commodity prices are breaking out, in some cases to all-time highs. Naturally, this should ring a bell with Haymaker readers. Per the first chart shown above, courtesy of Louis, the overall commodity index appears to be valiantly attempting to break through multi-year resistance, though it has not yet done so… emphasis on, “yet”. There are multiple reasons why we might be in a new super-up-cycle for real assets. One is that most Western currencies are in various stages of debasement, including (especially?) the U.S. dollar (USD). Another is that emerging countries, frequently voracious consumers of natural resources to fuel their growth, are increasingly unconstrained by their often-deficient USD reserves. More and more, they are able to buy commodities in their own currencies with their proliferating trading bloc partners and then settle any net balances in the oldest and most reliable currency: gold. There may also have been a new international accord to weaken the USD. The last time this happened, in 1985, the answer to the question “Got Commodities?” should have been a resounding yes, as you can also see above.
2.
Rosenberg, BWD
Speaking of gold, there’s little doubt that a major propelling force behind its impressive “range expansion” to a new all-time high this year has been China’s persistent bullion buying. Its central bank has bought gold for 18 straight months, per the Wall Street Journal.
WSJ
This spree has increased its yellow metal reserves by 16%. Despite this aggressive accumulation, the Bank of China only holds about 4% of its reserves in gold versus the global average of around 15%. It continues to own just over $750 billion in U.S. Treasurys, but it has been selling those down at a rapid clip. In this year’s first quarters, that stash was reduced by nearly $50 billion. The odds are high that it will continue to redeploy its stash of USTs, which are vulnerable to appropriation by the U.S. government, and move the proceeds into gold. This should put a dependable bid under the price of gold.
3.
Bloomberg – Disclosure: Past performance is no guarantee of future results.
Despite the fact that gold has risen by 14% this year and the energy sector is up 9%, money continues to flow out of both the former and the latter (as measured by the GLD ETF and the iShares Energy Select ETF, XLE). Additionally, the energy sector has produced the S&P 500’s best earnings growth since the Covid crash, out-legging even tech. That is likely a factoid that astounds most investors. Similarly, the XLE’s total return has smashed the S&P’s price appreciation plus dividends since then, 361% to 153%. Perhaps counterintuitively, outflows are actually a bullish indicator. This is because investors who traffic in ETFs tend to excel at putting the most money to work near peaks and exiting close to troughs or, frequently, in the early stages of an upcycle.
Subscribe to Haymaker to read the rest.
Become a paying subscriber of Haymaker to get access to this post and other subscriber-only content.
A subscription gets you:
 | Subscriber-only posts and full archive |
| Post comments and join the community |
IMPORTANT DISCLOSURES
This material has been distributed solely for informational and educational purposes only and is not a solicitation or an offer to buy any security or to participate in any trading strategy. All material presented is compiled from sources believed to be reliable, but accuracy, adequacy, or completeness cannot be guaranteed, and David Hay makes no representation as to its accuracy, adequacy, or completeness.
The information herein is based on David Hay’s beliefs, as well as certain assumptions regarding future events based on information available to David Hay on a formal and informal basis as of the date of this publication. The material may include projections or other forward-looking statements regarding future events, targets or expectations. Past performance is no guarantee of future results. There is no guarantee that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein will be realized or that an investment strategy will be successful. Actual experience may not reflect all of these opinions, forecasts, projections, risk assumptions, or commentary.
David Hay shall have no responsibility for: (i) determining that any opinion, forecast, projection, risk assumption, or commentary discussed herein is suitable for any particular reader; (ii) monitoring whether any opinion, forecast, projection, risk assumption, or commentary discussed herein continues to be suitable for any reader; or (iii) tailoring any opinion, forecast, projection, risk assumption, or commentary discussed herein to any particular reader’s investment objectives, guidelines, or restrictions. Receipt of this material does not, by itself, imply that David Hay has an advisory agreement, oral or otherwise, with any reader.
David Hay serves on the Investment Committee in his capacity as Co-Chief Investment Officer of Evergreen Gavekal (“Evergreen”), registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. The registration of Evergreen in no way implies a certain level of skill or expertise or that the SEC has endorsed the firm or David Hay. Investment decisions for Evergreen clients are made by the Evergreen Investment Committee. Please note that while David Hay co-manages the investment program on behalf of Evergreen clients, this publication is not affiliated with Evergreen and do not necessarily reflect the views of the Investment Committee. The information herein reflects the personal views of David Hay as a seasoned investor in the financial markets and any recommendations noted may be materially different than the investment strategies that Evergreen manages on behalf of, or recommends to, its clients.
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this material, will be profitable, equal any corresponding indicated performance level(s), or be suitable for your portfolio. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
20240531
