The largest wealth transfer in history.

Time for a thread 👇👇👇

Today’s mix of monetary and fiscal policies are having a very different economic impact then we saw post the GFC.

Back then, deflationary forces were exacerbated by a brutal wealth loss problem.

Especially the lower classes.

They lost over 84% of their net worth from '07-'11.

This time we are seeing the complete opposite.

Lower classes just increased their wealth at the highest annual amount in the history of the data.

In fact, the bottom 50% net worth not only increased but is now 77% higher than it was at the peak of the housing bubble.

If we zoom out, this is what the prior chart looks like going back to the 90s.

A classic early sign of a commodity cycle.

Mining industry nonfarm payrolls near historical lows.

This happened in early 1970s & 2000s.
Both marked the onset of a commodities bull market.

Labor & capital constraints are the amplifiers of bull market in resource stocks.

👇👇👇

Energy & soft commodities are obviously not mining related.

See below the nonfarm payrolls for oil & gas extraction which is also at historical lows.

To recall:

The green agenda hasn’t even started.

The decline in agricultural workers look even more severe.

To be fair, this is not a domestic problem.
We’re are experiencing similar issues worldwide.

This pandemic has truly magnified a long-term trend of labor reduction and under investments in the commodities space.

Resource companies have been facing a deep recession for some time now with not enough workers willing to enter this industry.

On top of it:

Government policies seem to be discouraging folks from return to the labor market.

People continue to leave the labor force like never before.

Where are we in the precious metals cycle?

There is no shortage of questions on why gold has significantly underperformed during such an ideal macro setting.

Here is thread 👇👇👇

Let’s start by looking at the usual fundamental trends of this industry as part of prior historical cycles.

Gold and silver stocks have never peaked at historically undervalued levels.

Miners are now trading at the cheapest fundamental multiples we have ever seen.

Assuming the current 2022 free-cash-flow estimate relative to the current enterprise value, the median company among the 50 largest miners in the US and Canada exchange now trades at an unprecedented 7% yield.

Note that in aggregate terms, the same basket of companies also trades at its highest free-cash-flow yield in history.

Additionally, as shown in the second panel of the chart below, gold and silver miners continue to expand their margins in a significant way.

The median free-cash-flow margin is now above 25%.