RNU 2.44% 8.4¢ renascor resources limited

Yes, MrStrengthsis right to be vigilent. The USA has some issues...

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    Yes, MrStrengthsis right to be vigilent. The USA has some issues indeed on its plate, including Covid which is not all bad news for Australia. Some observations, all in my opinion of course.

    “Every stormruns out of rain just like every dark night turns into day”, as others say.

    It’sinteresting the Asian markets broke the five-day slide ignoring drops in Europeand Wall St. Seems to me international games being played with Ukraine; and China cutting benchmark interest rates. The are other key changes on the international scene. The Bank of International Settlement now includes gold with a basket of currencies in a change of gold status. China will announce at the winter Olympics a move to use back their currency with digital gold which is line with the transition made by BIS which includes members from Europe, USA, China, Russia, Britain, etc. The Perth mint also offers small denominations and crypto gold companies are emerging around the world. In Australia, BullionFx has started and will buy gold directly from miners. It’s also interesting that these sabre-rattling countries share a space station. It seems there are only interests and not relationships.

    The USdollar’s role as an international reserve currency has changed and now is usedin about 60% of transactions compared to its high 90’s in the past. We live ina global economy and as such there has been a proliferation of free tradeagreements and direct swaps in each other’s currency which ultimately determinethe exchange rates and soften blows.

    Ultimately,the exchange rate will be determined by demand for goods and services and thereare new players on the block with modern technology, notably China, Japan,South Korea and India who have an interest in the likes of RNU.

    Australiais in a unique position to benefit from the new business cycle and get out ofold ones because that’s where world mega trends are headed. Australia has minerals in abundance which underpin the change in economic structure. Any dips look like opportunities to me.

    Aside fromCovid, the structural change taking place due to climate change implies that thoseeconomies that have not adapted or are less flexible in adopting structuralchange will enter a growth phase far behind those that are making the changesnow.

    DOW falls havetraditionally reflected structural change IMO. But what has increased the rate of change of late has been the unsustainable quantitive easing enabling select groups to invest and organisations to take profits on the rampant rise of credit and not production. That has generated mega wealth for those able to participate and will enable them to come back in on a lower base. It also skews income distribution which will have social consequences which has been exacerbated by Covid 19. In short, it is the velocity of money which generates production from expressed consumer demand which used to occupy approximately 60% of demand, is low in the USA. Their housing sector will come off the boil, but it is not the same for other economies if capital inflow is maintained through trade.

    Theparadigm shift in consumer demand is occurring internationally and domesticallyinduced by climate change in a world of shrinking resources and populationgrowth. climate change is calling forth production and generating income forfuture growth in the business cycle. It’s just that we are on a different bike and some have no learned to ride.

    You haveonly got to look at the PE ratios to know where production is failing to provequantitive easing has not worked as anticipated by the Keynesian model. Thecashed up will move funds to higher yields emanating from the new businesscycle. I also note that tech sector fall - overweight with speculation? Or lack of supply of semi-conductors from Taiwan? We will see a new drive to be self sufficient whether through Covid or sabre rattling. Sometimes its unfortunate domestic politics takes over from economics and health decisions.

    Key playersin the states have seen the 30 year bond rates fall along with the US dollarfor some time. Talk of raising rates in bonds to cut inflation are probably referring to 10 year bonds. Gold fell in response when 10 bond rates briefly increased last year to do just that IMO. History has demonstrated that the return to long trend is accurate and I stated such, on a couple of gold threads last year. With so much quantitive easing there is a point at which they can’t pay the interest without more quantitive easing. That is a catch 22. You only have to look at German history. The gold price has stabilised and yes in terms of US dollars it will rise, despite talk of yield rises in that illusory 10 year bond. Yellen also said they did not expect inflation to rise so much !!!????? Bond yields are unsustainable IMO. Don’t forget the Fed is privately owned by the banks and lends to government. Our four big banks have massive holdings by big US banks. Our banks also borrow from the Fed. However, our money supply is regulated by the Reserve Bank through government and not the other way around. That means provisions and regulations are much tighter and safer in Australia given that influence is not brought to bear. E.g. Unlike the US banking system, our banks have been regulated by stricter cash reserves to protect against a run.

    While thetalk up or down occurs it would seem the only real armour is through exchangerates and positioning for change. Change is the only constant.

    If werecare to remember in the last financial crisis our exchange rate rosesignificantly over $1. This gives bargaining power and it pays down US debt we have borrowed. It is also interesting to note that both India and Australia were buyers of gold for reserves last year while gold was being talked down. I think we are as only as good as the information we get.

    Ourcommodities are in demand such as RNU’s graphite and emerging countries such asSouth Korea and Japan, and yes China and Germany will be beating a path to thedoor. They are the world suppliers of finished goods now, so the trade dealsstrike a Pareto optimum with multiple buyers and sellers. RNU also has gold and uranium.

    So, to sum up,the cash-upped in the States who sold off the DOW and Nasdaq will seek longterm yield anywhere. Unless sanctions come into play. Otherwise, money knows no boundaries. Is it the strategy that sanctions could support leakage to prop up the domestic US money supply given quantitive easing has its limitations? This is where sanctions are likely lead to investment to allies like Australia, South Korea, India, Japan, and Indonesia as an offset. Vietnam, Philippines etc shying away from China. There is a lot happening. But all countries want our product due to scarcity and necessity. Box seat if diplomacy is exercised.

    Russia suppliesa lot of oil and gas supply to Europe. Both Germany and the Netherlands repatriated their gold reserves from New York but it took 5 years as it was refused at first as a lump transit. It seems it was the Europeans who supported Russia and China to change the trade rules in relation to gold would also be reluctant to use sanctions because of where their energy comes from as well as being mindful of previous pressure exerted on the Euro. On the other hand, the USA domestic economy, could benefit from sanctions and trading with other allies. Trade-offs to come.

    So, drivers for growth could berobust foreign capital inflows; divestments; favourable regulatory reformsacross sectors; acceleration in infrastructure investments and normalisation ofthe fiscal deficit blown out by Covid and foreign aid for natural disaster.

    As a positive, the domestic economyhas become more efficient with digitization and e-commerce. This has been enhanced since many people have been re-skilled by working from home turning lemons into lemonade. Just food for thought.

    https://hotcopper.com.au/data/attachments/4012/4012532-86ec742b13f6c5ab77af6b1c159158d0.jpg

 
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