Copper Shines Again! Your Money - February 19th 2021

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Some days you can throw away the proverbial text books when trying to discern market action and this is one of those weeks. Bitcoin traded through $55,000 today giving the electronic currency a combined market cap of $1 Trillion dollars. Granted some of the demand is coming from new derivative instruments like ETF’s, options and futures but we are still talking about a fictional currency created by an unknown entity used as a medium of exchange. Just before Christmas Bitcoin was trading at $18,000. And remember there is nothing backstopping the currency. You might say the same thing about the Canadian Dollar or the US Dollar which are backed by all but bankrupt governments but at least they can tax the goods and services of their country. We have a lot of natural resources that we can convert to consumables while Bitcoin has no country. Remember, with a couple of dollars and a few tech geeks you too can set up your own digital currency. I am going to call mine “Bokor Bucks”!

Meanwhile the other safe haven inflation protection asset class, gold, did not have a great week. It broke through $1800 this week, so global gold mining companies did not fare well. Witness the sell-off in both Newmont and Barrick gold while Teck Corp on the other hand, set 52 week highs thanks to their exposure to met coal (used to make steel) and copper. Even energy stocks rallied this week as the price of oil broke through $60 thanks to a freezing snow storm that froze half of Texas and halted producers and refiners from operating. However, with the chill easing and the Biden administration offering olive branches to Iran, the supply of oil should resume shortly and partially explains the drop off in prices of crude today. Personally, given the drilling curtailment over the last 3 years, I believe oil prices could be significantly higher by summer. This will be dependent upon vaccine rates and a return to normal economy sooner rather than later.

Turning to next week, most eyes will be on Jay Powells’ two day Senate and Congressional testimony which means I may once again either duct tape my throwing hand to my arm chair or, change the news channel to cartoons or be forced to listen to politician after politician grilling the head of the US Federal Reserve with questions that have no bearing on the function or job of the US Central Bank. However, for the few that do, they may provide insights not yet disclosed by Mr. Powell and his colleagues who administer monetary policy. In particular, I am hoping through either pre released texts or in answer to intelligent questions regarding inflation, rising bond yields and the expected direction of the US trade weighted dollar. Who knows maybe he will make reference to Bitcoins like the way Mr. Greenspan did when referring to irrational exuberance and US stock prices starting in 1995. 

On the earnings front over 800 US companies will be reporting next week so it will be a very busy one for analysts. Couple that with today’s option expiration and the unwinding of positions by market makers and we could see some increased volatility next week. names of note include Nvidia, and Occidental Petroleum.

Lastly, speaking of earnings, Canadian investors will get their first look at the Banks who will be reporting 2021 first quarter numbers starting on Tuesday. All told just over 100 Canadian companies will also be reporting earnings next week

Happy trading and Stay Safe.

Cheers Steve and Michele.

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Steve Bokor

Steve Bokor

Portfolio Manager