Posted by AGORACOM-JC
at 9:42 AM on Monday, May 11th, 2020
Secured non-exclusive rights to COVID-19 test kits with Health Canada approval,
Kingdom of Saudi Arabia, Saudi Food & Drug Authority approval, and
CE marking certification for European Economic Area countries, which covers the 27 member states of the EU, the 4 members of EFTA, plus Turkey and the United Kingdom under Brexit.
latest, and fourth kit to be added by Datametrex to distribute is the 1copy™ COVID-19 qPCR Multi Kit
Datametrex anticipates that it will have little or no upfront costs associated with importing and selling these test kits.
TORONTO, May 11, 2020 — Datametrex AI Limited (the “Company†or “Datametrexâ€) (TSXV: DM, FSE: D4G, OTC: DTMXF) is pleased to announce that it has secured non-exclusive rights to COVID-19 test kits with Health Canada (“HCâ€) approval, Kingdom of Saudi Arabia, Saudi Food & Drug Authority (“SFDAâ€) approval, and CE marking certification (“CEâ€) for European Economic Area (“EEAâ€) countries, which covers the 27 member states of the EU, the 4 members of EFTA, plus Turkey and the United Kingdom under Brexit.Â
The latest, and fourth kit to be added by Datametrex to distribute is the 1copy™ COVID-19 qPCR Multi Kit (“qPCR kitâ€), which is Health Canada approved with Authorization Reference Number 312777, Device ID 1020660 and Model No. M22MD100. It is a nucleic test kit providing results in less than two hours that verifies the RdRp gene for SARS-CoV-2 with real-time qPCR kit via a nasopharyngeal swab and oropharyngeal swab, specifically targeting the E gene sequences of COVID-19. The kits are made by 1drop Inc. (“1dropâ€) in South Korea, and are immediately ready for sales orders in Canada.
1drop is located in South Korea and is a medical technology spin-off from Samsung Electronic’s C-Lab program. The C-Lab is an internal incubation program within Samsung that first started in 2012 to help inspire a more creative company culture. 1drop already has more than five products approved in Europe in the past 18 month under the CE marking certification. “CBC News reported that Canada lost almost two million jobs during the month of April as the impact of COVID-19 according to Stats Canada’s release on May 8, 2020. The team has been working around the clock to identify and source high quality test kits from South Korea for Canada. We are thrilled to have secured the rights to sell kits from 1drop, Health Canada approved manufacturer. We will be able to start filling orders immediately and are looking forward to help flatten the curve and get Canadians back to work safely,†says Marshall Gunter, CEO of the Company.
The Company’s ability to fulfill any purchase order for COVID-19 test kits is subject to the availability of inventory at the time of order. Due to the extraordinarily high demand for COVID-19 tests, there is volatility in the supply chain, and available supply may fluctuate on a daily basis.
Datametrex anticipates that it will have little or no upfront costs associated with importing and selling these test kits. Assuming these test kits are purchased by the Canadian Government, the manufacturer will ship the test kits directly to the Canadian government or hospitals, and Datametrex will not be involved in the shipping, warehousing, or distribution process.
The Company did not pay consideration to the manufacturer to obtain sales rights.
The Company granted 16,500,000 incentive stock options to its directors, officers, employees and consultants in accordance with the Company’s Stock Option Plan. These stock options have an exercise price of $0.17 and expire on June 30, 2022. All options will be subject to a vesting schedule, with 25% immediately vesting and 25% vesting on the three, six and nine month anniversaries of the grant date.
About CE Marking
CE marking is a certification mark that indicates conformity with health, safety, and environmental protection standards for products sold within the European Economic Area (EEA). The CE marking is also found on products sold outside the EEA that have been manufactured to EEA standards. This makes the CE marking recognizable worldwide even to people who are not familiar with the European Economic Area (the 27 member states of the EU, the 4 members of European Free Trade Association (“EFTAâ€), plus Turkey and United Kingdom). CE marking also supports fair competition by holding all companies accountable to the same rules. For more information please consult the European Commission website at: CE marking
About Kingdom of Saudi Arabia, Saudi Food & Drug Authority (“SFDAâ€)
The Saudi Food & Drug Authority (SFDA) is the government agency that regulates drugs and medical devices in Saudi Arabia. It is also in charge of biological and chemical substances, as well as electronic products. The agency was established under the Council of Ministers and functions under the Council of Ministers as an independent body that reports to the President of Council of Ministers.
SFDA is in charge of overseeing the safety, security and effectiveness of medical devices, ensuring their accuracy, and controlling and supervising manufacturing facilities, as well as overseeing the importation and registration of these products.
A list of regulations can be found here on SFDA website.
About 1drop Inc.
1drop is located in Jungwon-gu, South Korea, and was incorporated in 2017 following a technology spin-off from Samsung Electronic’s C-Lab program. Samsung Electronic’s C-Lab, located in South Korea is an internal incubation program that first started in 2012 to help inspire a more creative company culture. 1drop already had more than five products approved in Europe in the past 18 month under CE marking is a certification.
For more information please consult the website at: 1drop
About Datametrex
Datametrex AI Limited is a technology focused company with exposure to Artificial Intelligence and Machine Learning through its wholly owned subsidiary, Nexalogy (www.nexalogy.com). Additional information on Datametrex is available at www.datametrex.com
For further information, please contact:
Marshall Gunter – CEO Phone: (514) 295-2300 Email: [email protected]
Neither the TSX Venture Exchange nor it’s Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
This news release contains “forward-looking information†within the meaning of applicable securities laws. All statements contained herein that are not clearly historical in nature may constitute forward-looking information. In some cases, forward-looking information can be identified by words or phrases such as “mayâ€, “willâ€, “expectâ€, “likelyâ€, “shouldâ€, “wouldâ€, “planâ€, “anticipateâ€, “intendâ€, “potentialâ€, “proposedâ€, “estimateâ€, “believe†or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions “may†or “will†happen, or by discussions of strategy.
Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information. The forward-looking information contained herein is made as of the date of this press release and is based on the beliefs, estimates, expectations and opinions of management on the date such forward-looking information is made. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.
Posted by AGORACOM
at 7:37 AM on Monday, May 11th, 2020
VANCOUVER, BC / ACCESSWIRE / May 11, 2020 / Mota Ventures Corp. (CSE:MOTA)(FSE:1WZ:GR)(OTC PINK:PEMTF) (the “Company“) subsidiary, Nature’s Exclusive, an ecommerce provider of CBD products to consumers in the United States and Europe, is pleased to announce record revenues for the month of April totaling Cdn$3,818,000, representing an increase of 39% compared to April 2019. Expenses totaled Cdn$3,609,000, representing a Gross Profit of Cdn$209,000 for the month.
DOMINANT ONLINE CUSTOMER ACQUISITION STRATEGY
The Company credits this success to its’ online customer acquisition strategy, which is capitalizing on the strong consumer demand for natural health solutions, resulting in an interim record number of customer acquisitions for the Nature’s Exclusive brand, as well as, new customers for the immune support category introduced in March 2020.
The Company’s strong ability to continue capturing customers, for both existing and new products, bodes well for the Company’s CBD based hand sanitizer launch this month.
Ryan Hoggan, CEO of the Company stated, “I am very pleased to report another successful month with increased sales over 2019. Our investment in customer acquisition in March 2020, which yielded additional subscribers, has been a significant driver to our increased profitability. Despite the worldwide pandemic, we continue to move forward towards our full year goals for 2020, including expansion into the European market. I look forward to reporting on new customer acquisitions in the coming weeks”.
NATURE’S EXCLUSIVE CBD BRAND LEADING THE WAY
The Company’s Nature’s Exclusive brand offers a CBD hemp-oil formulation intended to provide users with the therapeutic benefits that hemp may offer. The hemp oil used in the products is derived from hemp grown and cultivated in the United States. The extraction process is designed to maintain all the beneficial qualities that hemp may offer. Nature’s Exclusive offers a range of products, which include CBD oil drops, CBD gummies, CBD pain relief cream, CBD skin serum, CBD hand sanitizer and CBD coffee.
We encourage readers to visit www.motaventuresco.com to view our brands and sign up to our newsletter.
We encourage shareholders and prospective investors to visit the Company’s AGORACOM Discussion Forum, a moderated social media platform that enables civilized discussion and Q&A between Management and Shareholders.
The Company cautions that figures for revenue, expenses and margin generated from the sale of Nature’s Exclusive products have not been audited, and are based on calculations prepared by management. Actual results may differ from those reported in this release once these figures have been audited. These figures were translated from US dollars into Canadian dollars using the Bank of Canada monthly average exchange rate of US$1.00:Cdn$1.4058 for April 2020 and US$1.00:Cdn$1.3378 for April 2019.
About Mota Ventures Corp.
Mota is an established ecommerce, direct to consumer provider of a wide range of CBD products in the United States and Europe. In the United States, the company sells a CBD hemp-oil formulation derived from hemp grown and formulated in the US through its Nature’s Exclusive brand. Within Europe, its Sativida brand of award winning 100% organic CBD oils and cosmetics are sold throughout Spain, Portugal, Austria, Germany, France, and the United Kingdom. Mota Ventures is also seeking to acquire additional revenue producing CBD brands and operations in both Europe and North America, with the goal of establishing an international distribution network for CBD products. Low cost production, coupled with international, direct to customer, sales channels will provide the foundation for the success of Mota Ventures.
ON BEHALF OF THE BOARD OF DIRECTORS
MOTA VENTURES CORP.
Ryan Hoggan
Chief Executive Officer
For further information, readers are encouraged to contact Joel Shacker, President at +604.423.4733 or by email at [email protected] or www.motaventuresco.com
Posted by AGORACOM-JC
at 9:45 PM on Sunday, May 10th, 2020
SPONSOR: Hollister Biosciences Inc. (HOLL:CSE) A vertically integrated cannabis company with products in 220 California dispensaries and joint ventures, licensing agreement & partnerships with global brands. The company recently closed $20 MILLION deal with Venom Extracts adding $CDN 16.4 million in revenue and $CDN 2.48 million in EBITDA. Learn More
How The Cannabis Industry Is Coping In 2020
Canada and most U.S. states with legalized cannabis industries declared dispensaries as essential services, allowing sales to continue throughout the COVID-19 crisis, enabling robust demand to be met
Even with strong sales momentum, cannabis stocks broadly suffered during the quarter amid heightened market volatility
Early-stage cannabis companies rely heavily on external capital to fuel their growth ambitions, but investors are stepping back from financing riskier industries in the current environment
Despite these near-term challenges, we remain optimistic on the longer-term prospects for cannabis as its acceptance grows
Amid widespread COVID-19-related retail store closures, many cannabis dispensaries received “essential business” designations. This allowed cannabis consumers to stock up on medicinal and recreational cannabis, fueling strong sales figures despite a tumultuous Q1 2020. Yet, even with strong sales momentum, cannabis stocks broadly suffered during the quarter amid heightened market volatility. Early-stage cannabis companies rely heavily on external capital to fuel their growth ambitions, but investors are stepping back from financing riskier industries in the current environment. Some cannabis companies are now running low on cash, forcing them to sell stakes at undesirable valuations or scale back operations or staffing.
Despite these near-term challenges, we remain optimistic on the longer-term prospects for cannabis as its acceptance grows. New store openings and the sale of edibles are helping to fuel greater legal consumption. In addition, COVID-19’s economic impact is broadly hurting tax revenues at the local, state, and federal level, potentially providing greater impetus to legalize and tax cannabis. With only about 10% of cannabis sales occurring through legal channels, we believe there is substantial opportunity for continued growth across regulated channels.
Is Cannabis A Consumer Staple?
The COVID-19 crisis is plunging the global economy into recession, yet its impact will not be felt equally across industries. During recessions, consumers may forgo discretionary items like jewelry or electronics, but staples such as essential food and beverages tend to see robust sales. Historically, alcohol and tobacco exhibit staples-like characteristics, demonstrating strong sales despite economic weakness. During the global financial crisis, for example, alcohol consumption increased 7.2% in 2008-09 from 2006-07 levels, while total sales in the consumer discretionary sector fell by -9.35% over that time frame.1,2
Legalized cannabis did not exist during the Great Recession, but recent figures suggest cannabis sales share similar characteristics with alcohol and tobacco. Canada and most U.S. states with legalized cannabis industries declared dispensaries as essential services, allowing sales to continue throughout the COVID-19 crisis, enabling robust demand to be met.
Online cannabis purchases in Ontario have surged from 5,000 orders in mid-March to 9,000 orders by mid-April.3
Oregon’s cannabis sales increased 37% year over year in March, its highest single-month increase.4
Between March 16th and March 22nd, year-over-year sales of recreational cannabis across key US markets, including California, Colorado, Oregon and Alaska, were up 50%.5
One of Nevada’s largest cannabis delivery businesses reported a 400% increase in cannabis retail deliveries since March 20th.6
While lockdown may have accelerated cannabis demand, cannabis sales were already on an accelerating path. January and February sales numbers in Canada increased 181% year-over-year to C$154 million and 190% to C$150 million.7 Estimates from Cannabis Benchmarks for March sales show a spike to C$216 million, more than three times March 2019’s sales of C$59 million.8
The shift towards greater cannabis acceptance has spurred much of this growth. Cannabis consumers among the legal adult population in Canada grew to 63% at the end of 2019 from 54% in 2018.9
Canada’s new recreational cannabis market, dubbed Rec 2.0, is also fueling growth. Rec 2.0 officially launched at the end of 2019, almost a year after legalization in Canada. Before Rec 2.0, only dried flower and oil were products sold, but now the sale of cannabis beverages, edibles and vapes, among other forms, is permitted. Derivative formats like these account for almost half of sales in mature and developed markets such as Colorado, showing how Rec 2.0 could play a major role in accelerating cannabis sales in Canada. Aurora Cannabis (ACB), for example, recently mentioned that approximately 20% of total sales could come from Rec 2.0 products.10 OrganiGram Holdings (OGI) also reported new Rec 2.0 products to account for 13% of total revenue in its most recent quarter.11
New Store Openings Grow Legal Cannabis’s Market Share
Curbing illicit cannabis sales is on the agenda for many governments around the world. Globally, legal cannabis sales reached $15 billion at the end of 2019, which is less than 10% of the estimated total market of $160 billion.12 Such low penetration both demonstrates the growth opportunity ahead as well as highlights some of the challenges for the legal market. In Canada, for instance, limited dispensary licenses plays a major factor, as recreational cannabis sales per capita are highly correlated to the number of stores.
In Q1 2020, Canada opened 191 new stores, bringing its total to 806.13 Ontario, Canada’s most populous province, now has 52 stores, versus just 27 at the end of 2019. But the few dozen stores represent just four per 1 million people. For comparison, Colorado has 180 stores for every 1 million people.14 The store comparison between the two countries is notable, as further licenses should help meet consumer demand and promote greater legal sales.
Within the U.S., active dispensary licenses are up 5.5% year-to-date, with 385 new stores opening around the country.15 Yet, given that the US has nine times more dispensary licenses than Canada, more stores is a less critical factor than wider legalization across populous states or at the broader federal level.
Cannabis Industry Leveraging E-commerce To Further Grow Sales
Oftentimes, crises breed both new problems and new solutions. During this social distancing era, Colorado legalized online sales of recreational cannabis, fulfilling a longstanding request from cannabis companies.16 Cannabis consumers can now order, pay online and pick up at-store. A few other states – Massachusetts, Illinois, Michigan and Oregon – already allow cannabis e-commerce.
In Canada, the Alcohol and Gaming Commission of Ontario (AGCO) authorized cannabis retail stores to offer e-commerce solutions, starting April 7th.17 E-commerce authorization resulted from an emergency order by the Government of Ontario to deter illegal cannabis sales amid physical distance mandates. For now, the measure is temporary, but it includes the possibility of extension.
Financing Cannabis’s Growth
Early-stage industries tend to rely on the capital markets to fund growth. The phenomenon describes a healthy dynamic between those with capital to invest and those seeking capital for growth. The cannabis industry is particularly dependent on capital, as growing, harvesting, packaging and distribution require property, equipment and employees. With high growth expectations, cannabis companies tend to plow their freshly raised capital into various parts of the ecosystem, leaving little cash available to weather a storm. The constant need for new financing can expose weaker companies that may need to raise capital at undesirable terms, or worse, cannot raise additional capital at all.
HEXO Corp. (HEXO), for example, a leading cannabis grower in Canada, recently closed a C$46 million public offering but was forced to sell its equity 20% below its last traded price.18 Other larger players have followed suit, like Tilray (TLRY), which raised C$90 also at a 20% discount.19
There are companies, however, with strong cash positions that may be able to weather this challenging financing environment better than others. Canopy Growth Corp. (CGC) and Cronos Group (CRON) both have over $1 billion in cash & equivalents on their balance sheets. GW Pharmaceuticals (GWPH) holds over $500 million in cash & equivalents. Balance sheet strength allows these companies to potentially wait longer before needing to raise additional outside capital.
COVID-19 Could Expedite Cannabis Legalization
In our article “Themes for Defensive Positioning,” we highlighted that economic downturns can accelerate efforts to find new sources of economic stimulus and tax revenue. Legalizing (and taxing) recreational cannabis is one such avenue states could pursue given its track record of generating economic growth and taxes. Estimates hold that nationwide legalization in the U.S. could generate $132 billion in aggregate tax revenue and more than a million new jobs across the country by 2025.20 Such growth comes not from an unproven, speculative market, but from the conversion of a largely illicit market to a legal, regulated one. Such taxes and economic growth could be particularly welcome given stalling economic growth and swelling debt caused by COVID-19.
This year, several states could legalize recreational use. Virginia recently decriminalized cannabis, joining 27 other states that have taken such actions.21 The bill doesn’t legalize cannabis sales yet, but Virginia’s Governor is also clearing the path for easier access for medicinal uses.22 In New Jersey, lawmakers voted to add legalization to November’s ballot. Should the bill pass, it could add additional pressure to neighboring New York and Connecticut.
Illinois, where legalized cannabis went into effect in January, is the most recent model other states could follow. Illinois has the second-highest tax regime on cannabis sales in the country, where taxes vary from 10% to 25%.23 In Q1, Illinois cannabis stores sold $110 million, generating at least $11 million in tax revenues. Another benchmark is Colorado, which legalized cannabis in 2014. In Q1 2020, Colorado generated $79 million in tax revenue from cannabis-related sales.24 In 2019 alone, the state collected over $300 million in tax revenue, which was earmarked for cannabis regulation, research and schools.25
With a global recession looming, the economic benefits of legalized cannabis could be too enticing for states, provinces and countries to ignore.
Conclusion
The recent increase in cannabis sales in the U.S. and Canada since COVID-19 reflects the non-cyclical nature of cannabis sales. While some cannabis companies may struggle from lack of access to capital during this volatile period, the stronger ones could continue to see substantial growth as they meet robust consumer demand. Trends in new dispensary openings, a shift to e-commerce, and the introduction of new consumable forms of cannabis should further fuel growth across North America. Longer term, the potential for further legalization efforts amid the COVID-19 crisis should provide a tailwind to the industry.
Related ETFs
POTX: The Global X Cannabis ETF seeks to invest in companies across the cannabis industry. This includes companies involved in the legal production, growth and distribution of cannabis and industrial hemp, as well as those involved in providing financial services to the cannabis industry, pharmaceutical applications of cannabis, cannabidiol (i.e., CBD), or other related uses including but not limited to extracts, derivatives or synthetic versions.
Please click on the fund name for current holdings.
Footnotes
1. Jacob Bor, et al. “Alcohol Use During the Great Recession of 2008-2009,” January 29, 2013.
2. U.S. Census Bureau. Discretionary sales including retail sales of Motor Vehicles & Parts, Furnitures, Electronics & Appliances, Clothing, Sporting Goods, General Merchandise, and Miscellaneous Stores. Accessed on April 2020.
3. Cannabis Benchmarks, “Canada Cannabis Spot Index (CCSI)”, April 17, 2020.
4. Willamette Week, “Oregon Cannabis Sales in March Were the Highest Ever for a Single Month,” April 6, 2020.
5. New York Post, “Cannabis sales hit new highs in US and Canada,” March 24, 2020
6. Reno Gazette Journal, “Nevada marijuana deliveries are skyrocketing. Is this the new normal for the pot industry?,” March 30, 2020.
7. Statistics Canada, “Cannabis Stores Sales,” Accessed on April 2020.
8. Cannabis Benchmarks, (n3).
9. BDS Analytics, “How Will “Cannabis 2.0″ Affect the Legal Canadian Market?,” February 18, 2020.
16. The Colorado Sun, “Coronavirus fuels marijuana industry’s push for online sales, delivery in Colorado,” April 13, 2020.
17. Alcohol and Gaming Commission of Ontario, “Ontario Allows Cannabis Delivery and Curbside Pick-up from Authorized Retail Stores During COVID-19,” April 7, 2020.
18. Hexo Corp, “HEXO Corp. Closes $46 Million Underwritten Public Offering,” April 13, 2020.
19. Tilray, “Tilray, Inc. Announces Pricing of its $90.4 Million Registered Offering,” March 13, 2020.
20. The Washington Post, “Study: Legal marijuana could generate more than $132 billion in federal tax revenue and 1 million jobs,” January 10, 2018.
21. Leafly, “Virginia just decriminalized marijuana. Here’s what that means,” April 13, 2020.
22. Marijuana Moment, “Virginia Governor Urges Medical Marijuana Expansion As Amendment To Recently Approved Bill,” April 15, 2020.
23. Illinois Policy, “What you need to know about marijuana legalization in Illinois?,” January 1, 2020.
24. Colorado Department of Revenue, “Marijuana Tax Data,” April 2020.
25. Ibis.
Investing involves risk, including the possible loss of principal. The investable universe of companies in which POTX may invest may be limited. The Fund invests in securities of companies engaged in Healthcare and Pharmaceutical sectors. These sectors can be affected by government regulations, expiring patents, rapid product obsolescence, and intense industry competition. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. POTX is non-diversified.
POTX’s investments are concentrated in the cannabis industry, and the Fund may be susceptible to loss due to adverse occurrences affecting this industry. The cannabis industry is a very young, fast evolving industry with increased exposure to the risks associated with changes in applicable laws (including increased regulation, other rule changes, and related federal and state enforcement activities), as well as market developments, which may cause businesses to contract or close suddenly and negatively impact the value of securities held by the Fund. Cannabis Companies are subject to various laws and regulations that may differ at the state/local, federal and international level. These laws and regulations may significantly affect a Cannabis Company’s ability to secure financing and traditional banking services, impact the market for cannabis business sales and services, and set limitations on cannabis use, production, transportation, export and storage. The possession, use and importation of marijuana remains illegal under U.S. federal law. Federal law criminalizing the use of marijuana remains enforceable notwithstanding state laws that legalize its use for medicinal and recreational purposes. This conflict creates volatility and risk for all Cannabis Companies, and any stepped-up enforcement of marijuana laws by the federal government could adversely affect the value of the Fund’s investments. Given the uncertain nature of the regulation of the cannabis industry in the United States, the Fund’s investment in certain entities could, under unique circumstances, raise issues under one or more of those laws, and any investigation or prosecution related to those investments could result in expense and losses to the Fund.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Global X NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the Mid-Point between the Bid and Ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times. Indices are unmanaged and do not include the effect of fees, expenses or sales charges. One cannot invest directly in an index.
Since the Fund’s shares did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in Shares, the NAV of the Fund is used to calculate market returns.
Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC or Mirae Asset Global Investments. Global X Funds are not sponsored, endorsed, issued, sold or promoted by Solactive AG, nor does Solactive AG make any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO, Global X nor Mirae Asset Global Investments are affiliated with Solactive AG.
Tags: Cannabis, CBD, CSE, Hemp, small cap, tsx, tsx-v, weed Posted in Hollister Biosciences | Comments Off on How The #Cannabis Industry Is Coping In 2020 – SPONSOR: Hollister Biosciences $HOLL.ca $WEED.ca $CGC $ACB $APH $CRON.ca $OGI.ca $FAF.ca
Posted by AGORACOM-JC
at 9:30 PM on Sunday, May 10th, 2020
SPONSOR: Esports Entertainment Group(GMBL:NASDAQ) – Millions of people from around the world tune in to watch teams of video game players compete with each other. In first quarter 2020, YouTube reported 1.1 billion hours watched, an increase of 13% when compared to fourth quarter 2019. Wagering on Esports is projected to hit $23 BILLION this year although that number will likely be eclipsed due to the recent pandemic. Esports Entertainment Group is the next generation online gambling company designed for the purpose of facilitating as much of this wagering as possible. LEARN MORE.
CSGO has a million active players, is CSGO the best esports for tournaments?
With over a million active players playing CSGO it’s a huge game and with over 450 million esports fans worldwide. Of these 450 million fans 201 million are active players from League of Legends, Dota 2 and CSGO.
CSGO only recently hit the 1 million milestone. Previously at 950,000 and jumped to 1 million active users. In areas like China, CSGO is unpopular but the game is still clearly the most popular.
Looking at CSGO with Asiabet.org, sites like these offer a wide range of games and reviews that show how much esports fans love esports betting.
Big tournaments in the CSGO Esport universe provide the ability to inspire and improve your style by seeing the incredible talents of athletes representing your favourite team.
Please enjoy this list of the next CSGO 2020 tournaments if you share our enthusiasm. Don’t forget – the list is in progress, and when it is publicly released, we will include updates on other contests according to the CSGO tournament schedule.
Many tournaments have different formats, however, esports platforms have data on each match and data on all teams.
Most pro players do not only use different skins to customise their characters but also to personalise csgo settings.
List of the most-watched CSGO tournaments:
ESL One Cologne (506,000 viewers)
IEM Katowice (1,200,000)
StarLadder Berlin (838,000)
These tournaments see millions of views following the tournament due to esports fans not being able to watch the tournament live.
What is CSGO?
CSGO or lengthened to Counter-Strike: Global Offensive is the Valve and Secret Path Entertainment squad focused the first-person shooter, published in 2012. The name itself was a standalone game developed in 1999 and eventually adapted into a Valve game series.
Players play the role of a terrorist or counter-terrorist with each side having a particular task to achieve before they are eliminated by the opposing team, or according to the full timeline, such as, for example, planting and protecting a bomb on a specific location, while counter-terrorist agents must destroy the terrorists before they can be planted or re-armed
Esports fills the gap while sports declines
In recent years, global recognition on a different stage has been influenced by esports clubs, competitions and matches. The result was that the marketers were looking more and more at the sporting industry in the same way as they consider conventional American sport like basketball and football.
Earlier in this year, we saw leading brands like Nike, BT, and Kia Motors all partner with sports teams at Louis Vuitton’s then planned 2020 League of Legends World Championships.
With the advent of the pandemic of coronavirus, athletics have now another feature where the sporting industry maintains: widespread suspension of live activities and all the resulting destruction.
But one distinction with esports is that it is fairly well placed to change to the pandemic environment, given its increasing popularity for filling stages and arenas around the world. Live sporting competitions can be moved online very quickly, unlike conventional sporting. Even though IEM Katowice is absent from his usual live crowd, the annual Counter-Strike: Global Offensive (CSGO) game event set a new crowd record in early March, making it one of the most highly watched major tournaments ever.
It can only be the solution for the millions of fans whose regular activities are now held. Announcers are informed. So why are companies only just coming on board if they should have had an edge in the first mover?
Posted by AGORACOM-JC
at 9:00 PM on Sunday, May 10th, 2020
SPONSOR: New Age Metals Inc. The company owns one of North America’s largest primary platinum group metals deposits in Sudbury, Canada. The company has an updated NI 43-101 Mineral Resource Estimate of 2,867,000 PdEq Measured and Indicated Ounces, with an additional 1,059,000 PdEq Ounces Inferred. Learn More.
BAML sees platinum, palladium deficit this year as South Africa production losses bite
There is likely to be a deficit of platinum and palladium this year after a COVID-19 lockdown in South Africa, the world’s biggest platinum producer, forced mines to shut, analysts at Bank of America Merrill Lynch predicted on Friday
While demand for platinum group metals, which are mainly used in cars and jewellery, has also plummeted due to the global pandemic, the analysts said they expect demand to rebound, while mine production will take months to build back up.
By Helen Reid; Editing by Mark Potter
In South Africa, which produces 78% of the world’s platinum and 36% of palladium according to BAML, a strict lockdown to stop the spread of COVID-19 forced most mines to shut from March 27.
Though the government allowed mines to restart at up to 50% capacity from April 16, BAML analysts predict it will take six months for production to ramp back up to pre-pandemic levels.
“Our base line assumption is that output runs at 50% in May and June, before rising to capacity by December,” they wrote in a note dated May 7 but distributed to media on May 8.
“Putting it all together, we anticipate that both platinum and palladium will be in deficit this year. As such, we remain bullish the white metals into year-end.”
South Africa’s biggest platinum miners have cut production guidance for 2020 and announced production losses due to the lockdown.
Anglo American Platinum said quarterly production decreased by 7%, while Impala Platinum reported a 6% drop.
Analysts are split on how the demand-supply dynamics will play out: Citi on Wednesday predicted platinum group metals prices could fall 15-20% due to a “rising surplus”.
Platinum prices are down 20% since the start of the year, while palladium prices have fallen 3.6%.
Tags: CSE, palladium, PGM, PGM Demand, tsx Posted in New Age Metals | Comments Off on BAML sees #platinum, #palladium deficit this year as South Africa production losses bite – SPONSOR: New Age Metals $NAM.ca $WG.ca $XTM.ca $WM.ca $PDL.ca $GLEN #PGM
Posted by AGORACOM-JC
at 8:43 PM on Sunday, May 10th, 2020
Loncor Resources ( LN:TSX ) is the preeminent gold exploration company to own. Armed with a Barrick JV on their 200km NGAYU Greenstone property anticipates a maiden drill program on multiple targets in 2020. Loncor controls 3.6 million ounces of high grade gold outside of this relationship.
If the JV and Ounces aren’t enough to grab your attention, then look at ownership; African Majors own impressive pieces of Loncor:
Resolute Mining owns 27% and has a 30% ROFR on any Loncor financing,Â
Posted by AGORACOM
at 11:30 AM on Friday, May 8th, 2020
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With time ticking down for CBD manufacturers to meet the UK’s deadline for having a validated EU novel food application in hand, two European hemp associations are pooling resources to meet the application’s requirements.
The assistance on offer from the European Industrial Hemp Association in Germany and the Association for the Cannabinoid Industry in the UK highlights the urgency with which suppliers and processors need to move if they hope to be selling cannabidiol supplements and foodstuffs on the British market early next year.
That’s because the UK’s Food Standards Agency (FSA) set a deadline of March 31, 2021, for industry players to gather data on their CBD products and have their novel food applications validated by EU authorities.
The legality of CBD products in the European Union became murky in January 2019, when EU authorities classified all hemp extracts and hemp-derived products containing CBD and other cannabinoids as “novel foods.â€
The designation means that manufacturers need to have their CBD supplements and edible products evaluated and seek permission from EU authorities to place them on the market.
EIHA
European Industrial Hemp Association members agreed last year to submit a joint novel foods application with “a range of CBD extracts†to UK and EU authorities. The group said in February it was receiving membership applications “on almost a daily basis†from interested parties.
This week, the EIHA confirmed a report that revealed the scope and costs associated with its joint novel foods application. The association told Hemp Industry Daily:
An EIHA task force is in the process of choosing four formulations of CBD to be consolidated into one novel food application. The formulations will be finalized at the EIHA general meeting in June.
The joint application project, organized as a limited liability company, will cost at least €2 million ($2.16 million). The EIHA estimates that the required lab analysis of CBD and THC toxicology studies alone will cost €1.8 million ($1.94 million).
The group plans to launch the toxicology studies in June.
The cost of joining the consortium is estimated at €10,000 to €50,000 ($10,800 to $54,000), depending on the size of the company and when it joins. Regular EIHA members will be asked to pay the consortium cost in two installments, with the first next month.
This one-time cost comes in addition to the cost of a regular EIHA membership, which ranges from €2,500 to €10,000 ($2,700 to $10,800), depending on company revenue.
All companies that join the EIHA are obliged to join the novel foods consortium.
The association declined to say how much of the necessary funding for lab tests and toxicology evaluations has been raised so far.
Lorenza Romanese, managing director at the EIHA, said companies outside the European Union can join its novel foods consortium and would be eligible to sell products on the EU market if the joint application achieves authorization.
ACI
The UK’s Association for the Cannabinoid Industry announced this week a free hotline for CBD manufacturers with questions about the novel food application process.
The group also offers paid consulting services for individual applications.
The ACI’s approach pools resources for the data-generation phase while taking an individualized approach for each company’s application. The effort aims to help companies get the research they need, said Shomi Malik, ACI’s development director.
“The most expensive part of this isn’t writing the dossier, it’s generating the data,†Malik said.
“The best of both worlds is to share the costs of the real heavy lifting but still give companies the freedom to do their own individual applications. That’s what we’re trying to do here.â€
The ACI estimates that the cost for the toxicology study alone – the portion it’s looking to syndicate – will cost around £250,000 ($309,000). A full toxicology assessment takes seven to eight months to complete, ACI said, followed by an extra month to generate the data report.
The group said its application consulting services could cost anywhere from €50,000 to €500,000 ($54,000 to $540,000), depending on the size of the company and the number of finished products requiring novel foods authorization.
Malik applauded the EIHA for its collective application option, which he said might appeal to CBD players who haven’t budgeted the financial resources required for an individual application.
“Now that ‘novel foods’ is a binary proposition – you’re either in or you’re out – companies have had to find budgets from somewhere,†he said. “Their objective is to do this the quickest and cheapest way possible.â€
On the other hand, in the event that a collective novel foods application is authorized, parties to the application run the risk of finding themselves in a “regulatory straitjacket†not to deviate from those formulations. This could hinder industry innovation, Malik said.
“You’re in a much better position if you’ve got your own novel food authorization, than if you have to share and compromise with some aspects on the data sharing,†Malik said.
Clock is ticking
Whichever path companies choose, it’s time to start the process for any products they want to keep on the shelves next year, said Garrett Graff, an attorney at Hoban Law Group who advises companies doing business in Europe and the UK.
“It’s important that folks get started now,†Graff told Hemp Industry Daily.
“This is not a commonplace application that takes a couple hours. This will take considerable amounts of planning, coordination, time and financial resources to complete, and engaging as quickly as possible given the forthcoming deadline is important.â€
Posted by AGORACOM
at 10:27 AM on Friday, May 8th, 2020
Sponsor: Loncor, a Canadian gold explorer controlling over 3.6 million high grade ounces outside of a Barrick JV. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 814,000 ounces of gold in 2019. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting their Tier One investment criteria. Newmont $NGT$NEM owns 7.8%, Resolute $RSG owns 27% Management owns 29% Click Here for More Info
Concerns about the health of the global economy due to the coronavirus pandemic have boosted ‘safe-haven’ gold by 12%
Barrick Gold Corp posted a nearly 55 per cent rise in quarterly profit on Wednesday as gold prices surged, bolstering its ability to snap up mines including in copper, its chief executive said.
Concerns about the health of the global economy due to the coronavirus pandemic have boosted “safe-haven†gold by 12 per cent so far this year, while copper, seen as a bellwether for economic health, is down about 15 per cent.
Barrick CEO Mark Bristow has previously said the world’s No. 2 gold miner could raise its exposure in copper because of its expected higher use in electrification.
He added on Wednesday the relative price performance between copper and gold made deals more attractive.
“(A stronger balance sheet) improves our capacity to take up opportunities that might arise in the short to medium term given the dynamic nature of the global economy,†Bristow told Reuters.
He did not elaborate, but has expressed an interest in acquiring Freeport-McMoran Inc’s flagship Grasberg mine.
Barrick, which maintained its quarterly dividend of 7 cents per share, trimmed its annual production forecast for gold after shutting its mine in Papua New Guinea.
The Canadian miner now expects attributable gold production of 4.6-5.0 million ounces versus 4.8-5.2 million previously.
The government of Papua New Guinea announced in April it would not renew a 20-year special mining lease for the Porgera gold mine, which is jointly owned by Barrick and China’s Zijin Mining, due to environmental damage and social unrest.
Barrick (Niugini) Limited, the local venture in which both miners have a 47.5 per cent stake, had produced about 597,000 ounces of gold in 2019 from the Porgera mine.
Barrick has said it will contest the move, which it regards as “tantamount to nationalization without due process,†and in the meantime has placed Porgera on temporary care and maintenance, while suspending 2020 guidance for the mine.
Bristow said a mediator would be appointed to help negotiations if initial talks between the government and Barrick failed.
The company, with operations in North and South America and Africa, has not closed any of its mines due to coronavirus restrictions which have hit competitors.
Larger rival Newmont, which was forced to shutter some mines in Canada and South America, warned on Tuesday of a financial hit in the second quarter.
Barrick’s first quarter production fell 9 per cent to 1.25 million ounces. Excluding one-off items, Barrick reported a profit of 16 cents per share, in line with analyst estimates.
Posted by AGORACOM
at 10:02 AM on Friday, May 8th, 2020
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Gold Bullion Surges above March Lows
Gold Mining Equities Track Gold Higher
Gold Mining Equities vs. S&P 500 Show Convincing Breakout
Markets Recalibrate
Capital markets and society continue to recalibrate from the enormity of the fallout of the COVID-19 pandemic. As difficult as the current situation is, gold fundamentals continue to improve. Gold, as an investment, offers a hedge against the current financial turmoil and has significant capital appreciation potential in the years ahead.
The magnitude of central banks and government actions over the past several weeks will resonate for the rest of this decade. In our March commentary (March Roars in Like a Lion), we mentioned that we are now in the “end game” where debt explodes in the face of a financial calamity (although no one predicted that it would be a pandemic). We will discuss what near-term options the U.S. Federal Reserve (“Fed”) will likely implement, and how gold is likely to respond. We will also look at the recent move higher for gold mining equities.
Gold Bullion: Increased Demand for Physical Gold
Gold bullion ended April at $1,687, adding $109/oz, or +6.9% for the month. Gold began its surge in early April as physical delivery shortages resulted in gold futures (COMEX, New York) trading wildly higher than spot gold (London). COVID-19 has caused refining capacity for gold to decline and greatly restricted the transport of physical gold from London to New York. Typically, gold futures trade fairly tight with spot gold due to arbitrage, but in early April, the spreads spiked as high as $70/oz. The unprecedented fiscal and monetary policy response to the worst economic shock since the Great Depression has put gold squarely into investors’ minds.
Gold is almost always in contango (longer-dated contracts are more expensive than the near month). In April, parts of the gold futures curve traded in a rare backwardation (the near month contract is more expensive), usually indicative of a supply shortage. With the usual gold channels disrupted, futures are pulling spot prices higher as short positions are closed by going long futures. Compounding the disruption was the growing demand for gold in physical form, fueled by soaring investor buying interest. The unprecedented fiscal and monetary policy response to the worst economic shock since the Great Depression has put gold squarely into investors’ minds.
Figure 1. Gold Bullion Surges above March Lows Our short-term target is $1,800, and we expect to reach new all-time highs.
Source: Bloomberg. Data as of 4/30/2020.
Gold Mining Equities: Convincing Breakout in April
Gold equities broke out of a multi-year resistance level on massive buying flows. Using the NYSE Arca Gold Miners Index (GDM)5 as a reference, the 860 index resistance level was taken out convincingly. As shown in Figure 2, there is very little meaningful resistance until 1,200 (+25%). In March, gold equities, like bullion, experienced a forced liquidation event. Selling in GDX forced the ETF to trade at a significant discount to its underlying net asset value (NAV). Like many other ETFs, the selling volumes in GDX outpaced the liquidity in the underlying securities. Off the lows, the price action as measured by volume, breadth and money flow far exceeds the bullish thrust of the 2019 summer rally. This breakout, without question, is impressive on the technical measures.
Figure 2. Gold Mining Equities Track Gold Higher The NYSE Arca Gold Miners Index (GDM) has broken out of a broad base pattern; our short-term target is 1,200.
Source: Bloomberg. Data as of 4/30/2020.
The absolute price action is impressive, but when measured relative to the S&P 500 Index6 (Figure 3), the chart pattern looks even more impressive. Typically, new market leadership is more evident when measured against the broad market index. As shown in Figure 3, the NYSE Arca Gold Miners Index (GDM) relative to the S&P 500 Index has put in a very bullish bottom base pattern. There is a double bottom pattern set up with the right bottom shaping a head and shoulder breakout pattern. This bullish pattern within a bullish pattern is a very positive sign.
Figure 3. Gold Mining Equities vs. S&P 500 Show Convincing Breakout GDM is putting a remarkable long-term basing chart pattern and breaking out in the medium term.
Source: Bloomberg. Data as of 4/30/2020.
Increasing Revenue with Deflationary Input Costs
The gold mining industry, like many other industries, is experiencing disruptions due to pandemic shutdowns. But unlike other industries, gold producers are experiencing a steep increase in the selling price of its product. Gold bullion is up +11% year to date and up over +31% year-over-year (through April 30, 2020). From a cost perspective, energy and labor are typically the two highest cost components for miners. The dramatic fall in crude oil is a rare function of both a supply shock (the Organization of the Petroleum Exporting Countries [OPEC] price war) and a demand shock (pandemic shutdowns) co-occurring. The enormity of both events will have lasting price consequences well beyond a few quarters. Labor, the other component, has been devastated by the pandemic. A tremendous labor crisis is occurring globally. In the U.S. alone, jobless claims have now exceeded 30 million, a crushing toll. Both of these conditions are deflationary shockwaves that will ripple out to all corners of the economy. There is virtually no major cost component (reagents, consumables, equipment) that will not see lower costs. Though near-term gold company earnings may be volatile due to COVID-19 disruptions, the potential increase in long-term profit margins may be unlike anything seen in recent history, and most comparable to the 1930s when gold company revenues soared and costs plummeted.
As QE (quantitative easing) Infinity continues to expand and ZIRP (zero interest rate policy) takes hold in a likely recession (or depression), growth equities will become highly sought after. Gold mining equities will have one of, if not the highest growth in earnings of any industry. Because of the nature of its revenue product (gold bullion), and its input costs (deflation), gold equities will likely develop into a convexity trade. Relative to the broad market, gold mining equities have a more direct path to higher prices. In the absence of earnings and post liquidity lift, general market equities require QE to increase stock prices by suppressing the risk-free rate and credit spreads, thereby reducing the discount rate used to calculate the present value of cash flows. Currently, cash flows are near impossible to forecast. The broad market equity risk is if earnings do not recover for more than a year due to COVID-19 and/or if a risk event pushes up credit spreads (i.e., credit defaults). Both risks are quite high compared to the risk for gold mining equities.
The Likely Market Impact of the Fed Stimulus and Fiscal Policy Response
At the end of April, the Fed Balance Sheet had expanded to $6.66 trillion (previous high was $4.5 trillion) and will climb higher. The final number is unknown due to moving variables and the lack of visibility, but $10 trillion by summer is in the ballpark. The deficit for 2020 is estimated to be $3.7 trillion (18% to 20% of gross domestic product [GDP]), an all-time high with risk to the upside. The debt-to-GDP current expected range of 110% to 120% will probably prove to be too low despite being the highest ever. More billions of dollars, week by week, are being added to a dizzying array of Federal programs, credit facilities and swap lines to mitigate the damage of the pandemic.
The amount of debt is genuinely numbing in its size and scale and will keep growing. Long term, there is very little hope that the economy can grow out of this debt load. To manage this debt, we believe the Fed will need to implement three broad conditions: 1) negative real yields, longer and lower than previously expected; 2) yield curve control to maintain a flat and low rate structure, and 3) a weaker or capped U.S. dollar.
1) Negative Real Interest Rates
We have discussed numerous times the importance of negative real interest rates in reducing (debasing) the debt. The huge increase in debt levels and the likely lingering effects of COVID-19 on the global economy will assure that negative real interest rates will be here for years. There will be a persistent and growing erosion of wealth via negative real yields.
Figure 4. U.S. Real Yields Near Zero The Fed Funds target rate is 0.00-0.25%, and real yields are approximately -0.43%. Gold tends to thrive in low-interest rate environments. Source: Bloomberg. Data as of 5/5/2020. Nominal yields are measured by the USGG10YR Index, representing U.S. generic 10-year bond yields. Real yields are measured by USGGT10Y Index, representing U.S. 10-year TIPs (Treasury Inflation Protected) yields. The FDTR Index represents the Federal Funds Target Rate, which is set by the central bank in its efforts to influence short-term interest rates as part of its monetary policy strategy.
2) Yield Curve Control
Yield curve control was last used during World War II to finance the war. As the term implies, the U.S. government exerted control on both ends of the curve. Yields were capped with the short end lower than the long end. The long end was capped at around 2% irrespective of the economic condition. Controlled low yields provided a stable and manageable interest expense. By issuing more Treasuries in the short end, the government encouraged investors to borrow at the short end and to lend in the long end. Also, by issuing more at the short end of the curve, it ensured there was constant ample liquidity searching for yield. Today’s world is vastly different, but we expect to see a similar effort to control the yield curve. The Fed will continue to use QE Infinity to monetize the majority of bond issuances with an effort to keep rates as low as possible and the curve as flat as possible. For example, the $2.2 trillion of fiscal stimulus announced in March has already been monetized; 10-year Treasury yields are around 0.60% and the Fed Fund Rate is at zero.
3) Lower or Capped U.S. Dollar
We have also discussed the importance of a weaker U.S. dollar in previous commentaries. The impact of the global pandemic and the total collapse of crude oil pricing has elevated the importance of the U.S. dollar significantly. The sudden deceleration in global economic activity has dramatically reduced the flow of U.S. dollars. The U.S. dollar is the world’s reserve currency; about 60% to 70% of the world’s economic activity is transacted in U.S. dollars. Crude oil is one of the most critical sources of U.S. dollar liquidity. At year-end, an oil market of 100 Mb/d (million barrels a day) at $50 per barrel equated to $1.8 trillion of yearly U.S. dollar flows. Today, at 75 MB/d at $20 per barrel, crude oil-based U.S. dollar flows are now at $0.55 trillion. Now apply that to every industry that transacts globally, and the magnitude of U.S. dollar funding shortage becomes apparent.
There is an estimated $12 to $13 trillion of U.S. dollar-denominated debt held by foreign holders. The U.S. dollar is now the biggest financial short and there is a massive ongoing short squeeze as the global shutdown makes funding and servicing of this debt difficult. That the U.S. has launched trillions in fiscal and monetary stimulus, and the U.S. dollar has barely budged is an alarming sight. A runaway U.S. dollar in a financial and economic crisis coupled with a deflationary shockwave would be nothing short of a disaster scenario. In March, we had a small taste of what a U.S. dollar funding shortage and dollar hoarding had on global liquidity.
If the Fed has any chance of making this version of MMT (modern monetary theory) work, it will do everything in its power to keep the U.S. dollar in check and control a flat yield curve. Fighting the Fed’s efforts is this significant mismatch between U.S. dollar assets and liabilities. Historically, this has been the justification to devalue the dollar (or the prevailing reserve currency at the time) to bail out the world. Price regime changes typically occur with currency debasements. If we reach the point where the U.S. dollar stages a significant uncontrolled breakout higher, gold will spike as the market begins to price in the possibility of a reset of asset prices. At that point, gold would become the ultimate convexity trade for U.S. dollar debasement. Dollar debasement is a key tail risk in the end game.
Figure 5. The U.S. Dollar (DXY): Highs of March 2020 will be a Crucial Level
Source: Bloomberg. Data as of 4/30/2020.
A Realignment of Asset Classes
In just a few months, a global pandemic has caused a shutdown of the economy to an estimated tune of -25% annualized GDP for Q2, over 30 million U.S. workers filing jobless claims and trillions of dollars (and growing) added to the debt. Whether the news of the virus gets better or worse in the next few quarters, we will be in a ZIRP environment for years due to the debt level. With the Fed capping rates, yields will remain low and the curve flat whether the economic recovery is V-shaped, U, L, or any other alphabet shape (yield curve control). The economy will no longer determine the level of interest rates and the yield curve. The Fed will keep real interest rates negative; the only question is how negative? Investing in Treasuries has moved from a “return on capital” to a “return OF capital” proposition. Investing in Treasuries today is an erosion of wealth in real dollar terms.
The broader U.S. stock market has now recovered a significant part of its decline entirely due to the sheer amount of stimulus thrown by the Fed. To value the equity market today would require a look past a deep valley of uncertain duration, to the other side that may be changed entirely. As companies pull guidance due to the lack of visibility, equities can only rise mainly by never-ending liquidity. Equity valuations are already back to their all-time highs. Equity markets, like the bond market, will continue to decouple from the economy further.
Gold Makes Sense as Equity Volatility Increases
Moreover, if we are correct that the Fed’s main risk focus is containing the U.S. dollar and controlling the yield curve, equity risk (volatility) will trade higher vis-a-vis the U.S. dollar and bond prices than historical parameters (Figure 5). If this becomes the new reality, this repricing of volatility will have a dramatic effect on all asset classes. It will mean more effective equity hedges will be needed, such as gold. The one risk that the Fed cannot remove entirely is a tail risk event in which this current environment is a breeding ground.
Figure 6. Equity Risk Volatility is Trading Higher than Bond Volatility The VIX7 (CBOE Volatility Index for equities) has likely entered into a new trading range relative to the MOVE Index8 (Implied volatility of Treasuries across the yield curve) with far-reaching consequences.
