By now, it may, or may not, have become apparent that when it is my turn to write the Ravenscroft Weekly, I spend a not inconsiderable amount of time poring over the words that I am committing to paper. This may be wholly unnecessary and/ or entirely disproportionate, but I really can’t help think it important … never more so than this week. Truth be told, I have pulled rank and jumped the queue today in order that I can get a few things off my chest and, in doing so, recognise that not everybody may actually know what ordinarily makes me tick as I have a little look round the parts of the world that I hope will be of interest:
- Finding myself using “I,” “me” and “my” much more than I like to;
- Obsessing over probabilities, maths and statistics;
- Revelling in contrarian opinion;
- Making the most of my emotional sterility;
- Finding an acerbic sense of humour in dark places; and
- Making inappropriate jokes at inappropriate times.
All of this is true “ordinarily” … but, let’s face it, today is anything but ordinary.
Philosophy
To apologise for the above, now, would, in my humble opinion, be admitting that the current Covid-19-induced state of affairs that we find ourselves in would have somehow ‘won’ and, perhaps worse, that I had, somehow, previously been ‘wrong’ to try and provide some light relief on a Monday with a little tongue-in-cheek observation of everything from the Royal family to European government debt and plenty in between.
That said, I do hope it goes without saying, that no harm or offence has ever, or will ever, be meant … even when things like, “anyone gearing up on Tesla at USD900 a share was, quite frankly, going to get what they deserved” might have popped out of the page at the end of last month.
Financial loss, of which we have seen enough this year alone to last us a generation, is not a laughing matter. Financial loss does, however, come with the territory of investing in risk assets.
Without wishing to patronise or belittle, without wishing to incite hatred or violence, the following extract from Rudyard Kipling’s 1910 poem "If—" came to mind:
If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss; …
Yours is the Earth and everything that’s in it.
Source: Artist unknown, from www.luozofi.com
From Wiki: As an evocation of the Victorian-era stoicism and "stiff upper lip" self-discipline, which popular culture rendered into a British national virtue and character trait, the poem remains a go-to in times of difficulty. In his posthumously published autobiography, Something of Myself (1937), Kipling said that “If—" had been inspired by Leander Starr Jameson, leader of the failed Jameson Raid against the Transvaal Republic to overthrow the Boer Government of Paul Kruger…
and therein lies a much-needed link to the next topic.
Physical
Ravenscroft Precious Metals Limited, trading as BullionRock, has been absolutely mad busy of late, working from home providing an extra element of excitement! Then we had a week, last week, the like of which we had never previously known. BullionRock clients should know well by now that our business will always offer ‘pre-loved’ cost-effective bars and coins when it can, ordinarily from other client sales in the form of assets in our vault which are due back to the refinery that are looking for a new home or new owner. Every single such remaining ounce of gold, silver and platinum (do call if you want a bit of palladium in your lives before we send it to Switzerland!) was bought in a two-day frenzy stoked by the rumour, then fact, that precious metals were becoming "hard to come by" hit the mainstream news.
Quite understandably, clients have been asking what on earth is going on.
Well, whilst investment demand outstrips supply (which I have seen a couple of times before, but usually specifically in relation to a particular metal or size or type of bar or coin) Covid-19 is causing both demand and supply chain closures (at worst) and logistics difficulties from mine to refinery to customer (at best). We have therefore been updating clients with the message that none of the bullion market players are willing to make promises they cannot keep and that we never want to mislead or misinform. At the moment, most retail bullion dealers have closed, or are taking the opportunity to rip off customers, some major refineries have had to shut, and those that are open periodically put a stop to physical orders, with Metalor, our favourite. included. We have bought everything they have been able to offer and await, tomorrow, further information on stock levels, as we still have substantial further client orders to fill.
Source: Krugerrand one ounce gold coin photograph owned by BullionRock
Otherwise, kindly note that clients of the Ravenscroft group can afford themselves of:
a. The opportunity to buy precious metals “on account” with Metalor, under our nominee company name, but ultimately with LBMA member HSBC in London as a counterparty risk; or
b. The opportunity to buy precious metal exchange-traded commodity investments through the Ravenscroft dealing desk; with a view to using either of these positions to switch into physical bullion once supply is available. Please ask if you want further details or want to be kept in touch with availability
Futures
Still on gold, please let me take this chance to let you know that I have long bemoaned the ability of gold derivatives market(s) to permit poor practices … examples such as woefully low physical margin-at-exchange requirements and the availability to settle using any old bar, or even USD cash, are not features that I think reconcile with what the market was supposed to be all about. A futures contract should represent a deal to buy or sell a known quantity of a known commodity in a known form on a known date at a known place at a known price.
Whilst over 95% of futures contracts (and more than that in the case gold, I think) ordinarily end, not with delivery, but with speculators closing out their contracts at a profit or a loss, it has all of a sudden (but I don’t know why, as this has been true for some time) dawned on those holding long gold futures contracts that are coming up for expiry that they might actually like to request delivery of the physical gold bullion to which they are entitled .... after all, there is a shortage of, and therefore a potential premium to be had from, real gold bars (see Physical point above).
Those speculators on the other side of these futures contracts (aka the seller or short position holder) who, let us not forget, should be more than aware that they, unless able to close out their position beforehand, are OBLIGED to deliver gold at expiry, have suddenly (again, not entirely sure why!) realised that they are going to struggle to get gold in the right form to the right place at the right time, and so are having to pay up to try and solve the equation. I have a horrible feeling that such sellers will be afforded another form of ‘get out’ by the exchange though, I am afraid … Bloomberg picked all of this up and, if of further interest, please read all about it using the link here
Finance
Whilst I have been teased mercilessly by my Advisory colleagues for continually ‘banging on’ about global interest rates, the value of money, global debt levels and negative bond yields … I do have to squeeze in a couple of lines today about what has occurred this week ‘out there’.
I am wondering if you are wondering, like me, where normal economic theory sits in 2020? If the Federal Chair and President of the United States are both effectively admitting that they are running our of ideas, that nothing else has worked and therefore the solution is to zero interest rates and make money almost meaningless by continuing to print the stuff until the problem goes away, then can it can be a surprise that the world is scratching its head? I cannot conceive of how, ultimately, this course of action is going to be good for the US dollar and also have to concur with analysts who have been opining that there is simply no stimulus package that can save markets in the near-term.
It seems that only real progress in containing the coronavirus pandemic will alleviate pressure from stock markets. As Ravenscroft Group Managing Director Mark Bousfield noted (over a Zoom chat) the other day:
“Company and market valuations are difficult to analyse when we have no idea what the E in P/E is going to be!”
Source: www.ft.com “This pandemic is an ethical challenge” published 24th March 2020
An even higher authority, namely International Monetary Fund (IMF) Managing Director Kristalina Georgieva, made a statement this week following a conference call of G20 Finance Ministers and Central Bank Governors:
“the outlook for global growth: for 2020 it is negative—a recession at least as bad as during the global financial crisis or worse. But we expect recovery in 2021. To get there, it is paramount to prioritize containment and strengthen health systems—everywhere. The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.
…The human costs of the Coronavirus pandemic are already immeasurable and all countries need to work together to protect people and limit the economic damage.”
And so, finally to:
Family
Trying to make sense of everything, or anything, at the moment is difficult, if not impossible. It is at times like these we need to trust government, no matter how cynical we usually are, respect the concepts of control and command, and comply with the rules that have been designed to protect us, as much as is possible, both physically and financially. For most, this means time at home with family. For me, that means 24/7 with my wife, our sons and our dogs in a most unnatural and subdued atmosphere, but in no way uncomfortable or unpleasant (just in case Mrs N is reading!), that hangs heavy with the psychological burden that comes from enforced confinement.
It also means time away from my work family. I am most grateful to the amazing information systems team who have made working from home no great hardship at all: in fact, I had been, only very recently, complaining at the office that I needed to put in my noise-cancelling headphones all day, should have a soundproof booth to work from or start working for a day a week from home. That is now tinged with more than a hint of shame and regret as I really miss the whole team.
May I take this opportunity on behalf of every single one of the Ravenscroft group family to say, sincerely, that we all hope and trust that you and yours are safe and healthy. Call us if you need us. We are here and are always happy to help.
