Frank Holmes-Fossil Fuels Are Under Siege. Is Misinformation to Blame?

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It's becoming more and more difficult to be in the fossil fuel business. On both sides of the Atlantic, lawmakers and unelected bureaucrats are turning up the heat, so to speak, on companies over the issue of climate change.

In the U.S. House of Representatives, Democrats have launched an inquiry into whether oil companies have participated in so-called “climate disinformation.” This week, letters were sent to top executives of Exxon Mobil, BP, Chevron and Royal Dutch Shell seeking records, and hearings are scheduled for next month.

Meanwhile, the Securities and Exchange Commission (SEC) is expected to propose a series of new disclosure requirements all publicly traded companies must make, possibly as soon as year-end, to inform investors about potential climate risks associated with their business.

Frank Holmes: When Will Social Security Run Dry? Sooner Than You Might Think

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I have some sobering news: Social Security is in worse shape than we thought. The program’s Old-Age and Survivors Insurance (OASI) Trust Fund is now expected to be insolvent by 2033, a year earlier than anticipated.

According to the annual report, its finances have been “significantly affected” by the pandemic and 2020 recession, not to mention “rapid population aging.”

Indeed, the ratio between contributors and beneficiaries has been shrinking for decades. In 1941, there were about 42 workers for every Social Security recipient. Today, that figure is around 2.5 workers per beneficiary.

A tipping point will occur in 2034: Americans age 65 and over will, for the first time ever, outnumber those 18 and under, according to Census Bureau estimates.

Frank Holmes: Texas Freezes in New Commodity Supercycle

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A joint state and federal investigation into the outages has already been announced, and improvements to (and winterization of) aging infrastructure will likely be recommended, if not required, to prevent this from happening again. Such a massive overhaul would require an incredible amount of metals and other basic materials, which would be positive for miners and producers.

We're particularly bullish on copper, used extensively in electrical wiring and circuitry.

Texas is the ninth largest economy in the world, ahead of Canada, South Korea and now Brazil. It consumes more energy than any other US state. Its residents and businesses deserve a world-class power grid that operates reliably in all weather conditions, even those that strike only once every 100 years.

Frank Holmes: Energy and Natural Resources Market

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The best performing commodity for the week was natural gas, up 12.09%. U.S. natural gas futures extended gains through the week, amid colder weather forecasts across the country for February. The spread between March and April natural gas futures -- known as the widowmaker -- flipped to positive on Monday for the first time since January, writes Bloomberg.

Brent crude continues to make a comeback, trading near $60 a barrel, which was a low as $35 three months ago. OPEC+ said it will continue to quickly clear the oil surplus created by the pandemic and is currently withholding 7 million barrels a day of output, or around 7% of global supplies. China’s biggest offshore oil and gas producer said it will boost spending by 19% this year ahead of an expected production surge, in contrast to other global producers cutting spending.

Credit Suisse upgraded the U.S. steel sector to overweight, predicting prices could remain above the historical average of $600 a ton through the year. Bloomberg notes the firm turned bullish on Nucor, Steel Dynamics and Stelco.

Frank Holmes: 2021 Could Be Another Big Year For Silver

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Silver is set to become a major beneficiary of emerging industrial applications.

That includes sources of renewable energy, solar specifically, which continues to ramp up around the globe in response to a combination of carbon emissions legislation and a rapid decrease in the cost of “green” electricity. President Joe Biden has made addressing climate change one of his top priorities and has ambitions to legislate a more rapid transition to clean technologies that favor not just silver but other metals as well.

According to a report by CRU Consulting, solar power generation will increase to 1,053 terawatt hours (TWh) by 2025, close to double the amount that was generated in 2019. Amazon alone is planning five major solar projects around the world, including its first in China, as the retail giant seeks to reach 80% renewable energy by 2024 and 100% by 2030. Once completed, these five projects will generate 1.2 million megawatt hours (MWh) of energy every year, or enough to power 113,000 average U.S. homes.

Frank Holmes: Closing the Gold Window Opened the Door to Modern Monetary Theory (MMT)

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The drawback is that, in the years since the end of the gold standard, there’s been a significant and growing lack of discipline when it comes to government spending. Before 1971, there was a natural limit to how much money could be printed. New issuances were dependent on the amount of gold sitting in the nation’s coffers.

Today, with the dollar backed not by a hard asset but by the “full faith and credit” of the U.S. government, the federal debt is closing in on an astronomical $28 trillion, which is more than 130% of the size of the U.S. economy.

Frank Holmes: Bitcoin Cracks Record High Due To Institutional Buying

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This week the Federal Reserve left interest rates near zero and committed to continue its bond-buying program until “substantial progress” has been made regarding employment and inflation. Initial jobless claims increased for the second straight week, hitting 885,000 in the week ended December 12—the most since early September.

I was floored to see just how much the Fed is buying—and will continue to buy—each month. The central bank is gobbling up as much $120 billion of debt, split between $80 billion of Treasuries and $40 billion of mortgage-backed securities (MBS).

The size of the Fed’s balance sheet now stands at a staggering $7.36 trillion, or 34% of gross domestic product (GDP).

Frank Holmes: Still Plenty of Gas in the Base Metal Rally Tank

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Industrial metals are well on their way to being among the top performers of 2020, supported by red hot demand from China and global supply concerns.

As of today, the MSCI Industrial Metals Index—which tracks the price of copper, nickel, aluminum and more—was up 21.4% year-to-date, just below the index of precious metals, up 21.9%. The broader S&P GSCI, which measures metals as well as agricultural and energy-related commodities, was underwater by nearly 10%.

I believe the rally is only getting started, and we could see ever higher asset prices in 2021, for a couple of significant reasons.

Number one, President-elect Joe Biden plans to make infrastructure one of his top priorities soon after taking office next month. Proposals have the U.S. spending as much as $2 trillion not only to improve roads, bridges and seaports but also beef up the EV sector, add charging stations, convert school buses to zero emissions and more.

Frank Holmes: Dr. Copper Gives the Economy a Clean Bill of Health

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“Dr. Copper,” so named for the metal’s ubiquitous use in many different applications, has been ripping higher since its 52-week low in March, thanks to a number of factors including promising economic data. Copper rose 12.24% in November, its best month in four years. Today it was trading as high as $3.52 per pound, or $7,679 per ton, its highest level since March 2013.

The rally is due in large part to higher demand from manufacturers in the U.S., China and eurozone. For the month of November, the IHS U.S. Manufacturing PMI hit 56.7, up significantly from 53.4 in October. The month-to-month increase was the sharpest since September 2014, according to IHS Markit.

Frank Holmes: Bullish on Dr.Copper and Gold for 2021

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Here at US Global Investors, we're very bullish on commodities, particularly industrial and precious metals. The manufacturing PMI in a number of countries shows that factories are expanding capacity on a greater number of new orders. In August, the US manufacturing PMI registered 56.0, the highest reading since November 2018. The PMI in China – the world's biggest importer of metals and other raw materials – was 51.5 last month, well above the five-year average of 50.6.

 As I've noted before, commodities continue to look remarkably cheap relative to stocks. Below is a chart showing the ratio between the S&P GSCI and S&P 500. At no other time going back to 1972 have commodities been as undervalued as they are today. If Goldman's projections turn out to be accurate, now could be a phenomenal buying opportunity.

Frank Holmes: Gold Could "Absolutely" Hit US$2,000 Again This Year

Frank Holmes: Some Are Betting on Red, Some on Blue. I'm Betting on Gold

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Whether you support President Donald Trump or not, you must acknowledge that one of the bedrocks of his governing style is unpredictability. To some critics, Trump’s behavior and decision-making process may seem erratic, but I believe they make a sort of sense when viewed through the lens of game theory.

Take, for example, his hot-and-cold stance on a new coronavirus stimulus bill this week. On Tuesday, Trump unexpectedly tweeted that negotiations with House Speaker Nancy Pelosi would halt until after the election. “After I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Businesses,” he said.

That same day, Trump appeared to change his mind—reportedly after he saw how the stock market, and particularly airline stocks, reacted to the news. (I often say that he’s the first American president who keeps his eye on the stock market and sees it as a gauge of his success.) “The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support,” he tweeted.