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Big Fat Idea – Gold Royalty Companies

Should you add royalty generating companies to your portfolio? Mike is joined by Frederick Bell, CEO of Elemental Royalties, to find out what kind of investor can benefit from them, how they work and how they can help with your cash flow and hedging.

Mike’s Editorial

Helping people who been hard hit by the pandemic is not the same as giving government carte blanche – but no worries – it’s our children and their children who’ll pay the price.

Gold Production Expected to Rise in 2021

In their recent Industry report Raymond James analysts Farooq Hamed and Judith Elliot expect significant rebounds for precious metal producers in 2021.

According to Mr. Hamed, “in general, precious and base metals producers continued to generate positive [free cash flow] in the fourth quarter of 2020, however at lower levels than in the previous quarter due to lower quarterly average gold prices. We expect increasing production over the next three years.”

In most cases, this involves a return to ‘normal’ operations after 2020 was marked by downtime caused by Covid-related shutdowns. Among precious metal producers the report expects strong production gains from are firms like Agnico Eagle, Yamana Gold and Calibre Mining.

Interesting to note that Raymond James has Calibre (TSX:CXB) as a “strong buy”, and BMO Nesbitt Burns has also started Calibre Mining coverage with a “market perform” rating. You can watch Ryan King’s complete Calibre Mining presentation from the 2021 World Outlook Financial Conference, along with 15 other precious metals companies HERE.

Elsewhere Mr Hamed and Ms. Elliott see exploration spending ticking up across the sector. With improved balance sheets and a focus on replacing reserves, producers are providing forward looking guidance of significant increases in 2021 exploration budgets.

At the same time operating costs are generally expected to be higher year over year as companies factor in additional health and safety costs related to Covid protocols and higher inputs on cost inflation.

What sectors will benefit from the $1.9T stimulus bill?

 

How might the stock markets respond to the historic bill? One way to find out is to study the past.

Financial analytics firm Toggle AI looked at the performance of US stocks after 5 other historic stimulus bills:

  • 2001: Economic Growth and Tax Relief Reconciliation Act
  • 2008: Economic Stimulus Act
  • 2009: American Recovery and Reinvestment Act
  • 2017: Tax Cut and Jobs Act
  • 2020: CARES Act

Its analysis shows that Consumer Discretionary is the top-performing S&P 500 sector 3 months after these bills are signed into law.

When the cheddar hits, investors look to anticipate significant consumer spending and have historically targeted names like Nike, Starbucks, Home Depot, Target, and McDonald’s (’cause nothing says “pent-up demand” like people crushing Big Macs).

Which sector has historically been the loser? The boring old Utilities sector, with an average return of -3.3% over this span

Full Study

 

 

 

There is no return to the “old normal.”

 

Signs Are Everywhere: Businesses Have Changed Permanently as a Result of the Pandemic

There is no return to the “old normal.” Employment adjusts too. But it will take years to sort out the issues these sudden massive shifts leave behind.

One of the biggest permanent changes coming out of the Pandemic is that businesses have invested in technologies that have long been available, but that hadn’t been deployed because there was no visible need to deploy them, and because businesses were stuck in a rut, and change is hard and costly – and the rules of inertia had taken over.

But now the Pandemic has forced businesses to change. There is no going back to the old normal. And these technologies impact employment in both directions.

Full Story