POG, page-73

I have been quietly dismissive of banks and others with POG targets for end of 2024 of $2,600 to $3,000 but I have now in July changed my mind with my view is that those targets look sensible and some may be too low.

There are two main reasons for the change in my view:

A. With respect to interest rate reductions history shows that the biggest increase in POG occurs once the cuts are actually made not leading up to the rate cuts. Looking at recent POG changes based on anticipated rate cuts that have NOT yet happened, there seems to be significant upside to the POG (ie hundreds of dollars) if and when the cuts in the US are actually made particularly if there are 2 or more rates cuts this year. This alone could result in POG increasing much closer to $3,000.

B. It appears increasingly likely that Trump will win the US election with a majority in the lower house for the republicans. If this becomes more likely as we approach the election in early November the could see further rises in the POG as Trumps agenda is inflationary and if the republicans win a majority in both houses then they may be very inflationary. Under this scenario the rises in the POG could be quite significant by the end of 2024 and if Trump implements his agenda then POG will continue to rise in 2025 and beyond.

There continue to be many other reasons why POG will increase over the next few years including high budget deficits in many countries particularly in the US, high debt in many counties especially in the US, commercial real estate issues which are very opaque, BRICS strategy, etc. However these are more long term issues that are unlikely to result in a significant move in POG in the rest of 2024.

Then there are the possibility of ‘black swan’ events which are very difficult to predict alone estimate their timing.

A caution - history never repeats but rhymes and past performance is not indicative of future performance. That is my views above are speculative in nature.