in gold we trust · • current environment is not very favorable for gold. despite massive...
TRANSCRIPT
In Gold we Trust ?!
…or why we might be expecting too much
from gold at the moment
Ronald-Peter Stöferle
Managing Partner & Fund Manager
Incrementum AG, Liechtenstein
Precious Metals Summit, November 2017
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Life is all about timing….
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…and about expectations!
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• Stocks rallying from all-time high to all-time high
• Volatility at all-time low
• Real estate rallying
• Bonds trading close to all-time highs
• Trust in financial system and banks is back
• Low price inflation
• Fed raising rates and implementing QT
• Cryptocurrencies are stealing the show
„People are expecting too much from gold!“ Adrian Day
1. Macro Picture & Gold: Where
Are We Now and Where Are We
Going?
„A bull market is like sex.
It feels best just before it ends.“
Warren Buffett
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400
800
1200
1600
2000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2008 2010 2012 2014 2016
Com
bin
ed
Ba
lan
ce
Sh
ee
t (U
SD
trn
.)
PBOC SNB BOJ ECB FED Gold
Go
ldin
US
D
Monetary Surrealism Continues – 1 trn. USD printed in 1 Quarter
Source: Bloomberg, Incrementum AG
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2. The Sceptics
300%
350%
400%
450%
500%
550%
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018
Fin
an
cia
l Asse
ts o
fH
ou
se
ho
lds / D
isp
osa
ble
Pe
rson
al In
co
me
DotCom Bubble
Housing Bubble
Everything Bubble ?
Inflation Is Too Low?Monetary Inflation –> Asset Price Inflation –> Consumer Price Inflation
Source: Incrementum AG, Jesse Felder, Federal Reserve St. Louis, The Economist
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Explanation: Aggregated 15 Developed Markets Country Average Bond (Nominal Yields) and Equity Percentile Valuations. 100 % = most expensive, 0% = cheapest
Bonds and Stocks at Highest Valuations since 1800!
Source: Deutsche Bank Research, Global Financial Data Incrementum AG
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Source: Goldprice.org
Gold Price Performance % Annual Change
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40%
60%
80%
100%
120%
140%
160%
180%
2011 2012 2013 2014 2014 2015 2016 2017
Gold/S&P Ratio
50d Moving Average
200d Moving Average
Relative Weakness Of Gold vs. Stocks Coming To An End?
Source: Federal Reserve St. Louis, Incrementum AG
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0
1
2
3
4
5
6
7
8
9
10
201720132008200420001996199219881983197919751971
GSCI Commodity Index / S&P 500
Median: 4.1
Dot.com Bubble
Gulf Crisis 1990
GFC 2008Oil Crisis 1973/1974
GSCI/S&P500 Ratio: Equities Expensive, Commodities Cheap
Source: Bloomberg, Incrementum AG, Torsten Dennin, Lynkeus Capital
2. Headwind Becomes Tailwind
Recession and Inflation Risks
"The two main risk factors for the average
portfolio are less than expected growth and
more than expected inflation."
Ray Dalio
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0
5
10
15
20
25
30
35
40
45
50
-1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
Num
be
r o
f A
na
lyst
Fo
reca
sts
Expected GDP growth
2017
2018
2019
A Black Swan? Zero Analysts See Recession
Source: Bloomberg, Incrementum AG
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0
2
4
6
8
10
12
14
16
18
20
1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
US Recessions Effective Fed Fund Rate (pre 1955 Fed NY discount rate)
12
3 4
14
12
11
10
98
76
5
13
15
16
17?
Rate Hike Cycles And Following Recessions
Source: Federal Reserve St. Louis, Incrementum AG
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50
70
90
110
130
150
170
190
210
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
S&P 500 Gross Tax Receipts
Mind The Gap! S&P 500 vs. Gross Tax Receipts
Source: https://www.fms.treas.gov/dts/index.html, Mac Overton, Incrementum AG
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How Does Gold Perform During Recessions?
Source: Incrementum AG
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0
50
100
150
200
250
300
Infla
tion
Sig
na
l (1 to
-0,5
)
Inflation Signal Silver Gold Bloomberg Commodity Spot Gold Miners
Incrementum Inflation Signal Switching To Rising Inflation
Source: Incrementum AG
3. Mining Stocks:
The Biggest Comeback Since Rocky IV?!
“Going in one more round when
you don't think you can – that's
what makes all the difference in
your life.”
Rocky Balboa, Rocky IV
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-6000
-4000
-2000
0
2000
4000
6000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Fre
e C
ash
Flo
ws
ofH
UI
co
mp
an
ies
1266
1244
1160
Gold Ø:
USD 1620
Source: Incrementum AG, Bloomberg
Free Cash Flows of HUI companies 2016 higher than in 2011!
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0%
20%
40%
60%
80%
100%
1 41 81 121 161 201 241
Perf
orm
ance
Wochen
08.1974 - 08.1976 03.1968 - 12.1969
02. - 11.2008 01.1996 - 10.2000
10.1980 - 06.1982 01.1983 - 11.1986
03.1939 - 04.1942 04.2011 - 01.2016
Source: Nowandfutures, TheDailyGold.com, Barrons, Incrementum AG
2011-2016: The Longest and Most Severe Bear Market in History!
Weeks
Pe
rfo
rman
ce
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When Do You Buy Christmas Decoration?
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0%
100%
200%
300%
400%
500%
600%
700%
800%
1 41 81 121 161 201 241 281 321 361 401
Pe
rfo
rma
nce
Number of Weeks
10/1942-02/1946 07/1960-03/1968 12/1971-08/1974 08/1976-10/1980
11/2000-03/2008 10/2008-04/2011 01/2016-09/2017
We are
here!
Source: Nowandfutures, TheDailyGold.com, Barrons, Incrementum AG
Historical Bull Markets in Mining Stocks
Outlook
"In an economic system, if the goal of
the authorities is to reduce some
particular risks, then the sum of all
these suppressed risks will reappear
one day through a massive increase
in the systemic risk and this will
happen because the future is
unknowable."
Karl Popper
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0
20
40
60
80
100
120
1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
US
Mo
ne
tary
Cove
rage
Ratio
Scenarios
Coverage Ratio 100% = Gold
price $14,000
Coverage Ratio 40% = Gold price
$5,400
Coverage Ratio 20% = Gold price
$2,700
Coverage Ratio 8.2% = Gold price
$1,174
Nixon Shock
Source: BMG Bullion, Federal Reserve St. Louis, Incrementum AG
US Monetary Coverage Ratio: Gold Is Cheap!
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• Current environment is not very favorable for gold. Despite massive headwinds, gold is still up 10% since Jan. 2017.
• If the normalization of monetary policy does not succeed – which we expect - gold will pick up momentum.
• Price inflation might surprise on the upside, due to oil prices, political events, wage inflation,….
• Mining stocks are in the beginning of a new bull market – creative destruction has taken place, leverage on rising gold price is higher than ever
• We expect the gold-silver ratio to decline. Silver mining stocks should offer particularly interesting investment opportunities.
Source: Hedgeye
Source: Hedgeye
Executive Summary
Many Thanks For Your Time!
www.incrementum.li
www.ingoldwetrust.report
@IGWTreport
• Managing Partner at Incrementum AG, focussing on Research and Portfolio Management
• Business Administration and Finance Studies at Vienna University of Economics and University of Illinois
• Chartered Market Technician (CMT) and Certified Financial Technician (CFT)
• Erste Group Research 2006 - 2012
o Analysis of Asian Equities
o Development of Commodity Research (Precious Metals, Energy)
o Asset Allocation
• Manager of a global macro fund that is based on the thoughts of the Austrian School of Economics
• Since 2007 author of the annual „In Gold we Trust“-Report, one of the mostwidely followed publications on gold
• Since 2013 lecturer for Austrian Economics at Scholarium as well as lecturerat the academy of the Viennese Stock Exchange
• 2014 Publication of the bestseller „Austrian School for Investors“
• Advisor for Tudor Gold, a Canadian junior explorer
Biography – Ronald-Peter Stoeferle
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• The gold standard of gold-research: Extensive
annual study of gold and gold-related capital market
developments
• Reference work for everybody interested in gold and
mining stocks
• International recognition – newspaper articles in
more than 60 countries, more than 1.5 mn. readers
• German and English versions, available in a
Compact and Extended version
• Published for the 11th time in 2017
• Further information and old editions can be found at:
www.ingoldwetrust.report
About The „In Gold we Trust“ Report
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Incrementum AG
Im alten Riet 102
9494 – Schaan/Liechtenstein
www.incrementum.li
www.ingoldwetrust.li
Email: [email protected]