Tag Archive for Input Costs

Russ Winter Returns To Precious Metals – Pan American Silver

This post is an example of the actionables available on my subscription site. It this distinct from the Daily Rant pieces seen on Winter Watch. I was an active and successful mining shares investor in the early days of the precious metals bull market. I learned a lot about mining during that period.   I also learned that mining is very tough business subjected to extra risks and cost pressures.  To win in this sector output has to be increasing faster than you costs (energy, labor, etc).  Additionally mining stocks have been ETFed to death, and trade too much as baskets not individual stocks. Accordingly I have only rarely used this sector in recent history. However, right now, certain mining stocks seem to present unusual levels of opportunity, even without any further moves higher in PM prices.  Further, I think we are at an inflection point where the value of the product produced will outrun the input costs.  I have given my view on silver here and here. One stock I would bring to your attention is Pan American Silver (PAAS).   PAAS has been severely marked down by the recent Argentine energy nationalizations. There have also been operational difficulties in Argentina because [...]

Consumer is Gassed Out

In the consumer economy, gasoline demand has strangely collapsed. I have always felt this was a solid indicator of consumer behavior, and still do.  At a core level I sense that in reality the consumer is MIA.  As you can see the normal seasonal pickup in driving  is barely registering. At the same time a combination of refining problems, high input costs,  and speculation has driven gasoline prices to the highest levels this time of year ever. This does not look like a good recipe for meaningful consumer spending, and the window for an Iranian shock is fast approaching. Per the Conference Board survey the consumer view of the job market can only be called shockingly dire. Consumers’ assessment of the labor market was also less positive. Those saying jobs are “plentiful” decreased to 6.1 percent from 6.6 percent, while those claiming jobs are “hard to get” increased to 43.5 percent from 41.6 percent.        

We Don’t Have Wealth Creation

This post was written by Lugnut at Capitalstool.com. I think we just have a liquidation cycle gathering because Uncle Fed didn’t come through with more $ from the pump. So you get commodity liquidations because hedgies were working a self fulfilling inflation play. Then you get equity liquidation pressure from a recession and baby boomer…

China- A Profiteers Bagunca (Mess)

For those of you who don’t remember the Hunt Brothers, here is the background.  Fast forward to today, and we see a “mystery holder” of copper stocks at the LME. Let’s see: a massive manipulation at the same time China is blowing up, could get very interesting.  Just a thought, but does anybody care to wager that this is Chinese or a Chinese stooge? I would not want to be involved with being long any metal now. Anyone in these markets should start reading obscure stories in the China Daily, under reported in the West. These stories are just special, take the time to read and reflect on them. They go on and on, painting a revealing picture of what a crony communist capitalist Bubble economy looks like when the wheels come off. In the first, the refiners are pointing finger at crony state oil apparatchiks for, in effect, profiteering. In the next China surveys the shortage landscape and decides to “crack down on profiteers.” I would surmise that a profiteer in China is anybody not paying large bribes or a who is not a well connected apparatchik. Even more likely the profiteer IS an apparatchik. The third story shows how, if you aren’t an [...]

Stranguflation in Abundance

The formula to watch looks like this:  Profit = Sales – (input cost + production cost + overhead).    If companies want to subsidize consumers by keeping prices down, then profits are squeezed. If they want to offset input costs with offsetting production and overhead costs, then labor (consumers) and capex gets cut. The realities are as follows: We are getting increasing confirmation about this on the stranguflation watch. And remember that this reflects 3Q input costs, which have  since gone parabolic.   For instance, Goodyear and Cooper Tires put through a significant price increase last month. Rubber futures have since surged even higher. Kimberly Clark came up short on estimates, attributing the shortfall to rising input costs.  Interestingly, the problem is centered around oil based commodities as much as anything, and that’s been a lagging commodity. Analysts are quoted as being uncertain about passing on costs, so chalk it up to profit squeeze. Costs have been an issue, too, in recent months and rose $265 million in the quarter, the highest increase in a quarter the company has ever seen. The rise was primarily from fiber, but also other inputs including polymer resin and oil-based materials. Arcelor Mittal, the world’s largest [...]