Welcome back to the show, thanks for having me it’s been a while since we’ve talked to you last, a lot has happened: um a lot to uh, discuss with the viewers. Let’S start with a global macro outlook. Mckinsey has been putting out a series of reports discussing uh the effects that covid has had on various industries around the world. Uh. Why don’t you give us a synopsis sure if you look at the world in covet, is obviously a very rapidly changing. Uh situation and we’re constantly looking to sort of change what we’re looking at. But in general we look at the world in sort of nine different scenarios of how covid could could happen and recover in the rest of the world, with two scenarios being most chosen by ceos that we’ve surveyed around the world. Of being true, we call these a1 and a3 just to give a quick example. A1 is sort of uh we’ve, seen the sharp drop off so that occurred, uh and then sort of a slow but bumpy recovery, not quite v shaped, but but a pretty quick uh recovery a3 is uh sort of what we’re seeing in the u.s south in california And some other countries around the world, like south africa, where you’ll see sort of it, looks like you’re out of the woods and then all of a sudden.

You have another big increase in covid and you go back down again and then you start to come back up, but it will take a number of years uh before uh vaccines are fully into the economy and therefore it will take.

You know two to three years to fully recover: okay, let’s break it down by geography now offline. You were telling me that a lot of economies outside the us are actually performing better than the us. Can you explain why this is sure i mean everyone’s response to cope? It seems, like it’s, been quite a bit different around the world, and you know. China, for example, seems to have come out of kovit very, very rapidly the the statistics that they are coming out with the demand numbers we’re, seeing particularly copper imports. Iron ore imports are quite drastic. They really seem like they’re pure v recovery. They went very sharp down and very sharp backup. Europe also is seeing uh the covet cases, sort of drop significantly and sort of staying at a very low level. Their economies seem to be recovering faster. However, other economies around the world – brazil, south africa, the united states – have seen sort of a resurgence in coven us in particular, which is really going to slow down the us economy and that’s as you’re. Seeing that things, even as uh mundane is the u.s dollar evaluation? Really getting hurt here over the last few months, would you say um american underperformance in terms of the economy can be attributed to government response and uh you, you, you have looked into how various governments around the world have reacted to covet.

How would you rate the american response relative to its peers? Well, if you look at the numbers, the us hasn’t done very well, i mean we sort of had the dip off here when most of the us shut down, but then it just popped up around rest of the country and i believe, as a whole, it hasn’t Been very good, the question is: how will that impact economic performance, and how will we see that going forward today? You actually saw jobless claims in the u.

s rise for the first time since early march, and so those are the type of economic statistics you’ll look at to see. How is the recovery going and then again from from an investor’s standpoint, you’ll want to know okay well, how does that impact, particularly the dollar and the dollar, for you know for us, for our commodity? Investors is really important because remember. A lot of these are priced in dollars if the value of the dollar goes down. By its very nature, the value of commodities will rise, because it’s it’s uh it’s being helped by a weak dollar and so that’s something we’re actually seeing in the marketplace today. Most evidently in the precious metals of gold and silver we’re going to be talking about precious metals in the mining sector in just a minute, but just going back to what you just said, how do you feel about cpr rising a little bit faster in june? Over may and retail sales in june, as well climbing 7.

5, which is you know higher than what was uh. What was in may as well. Do these two metrics give you a positive uh picture of what’s happening right now, we’re just too early um, the numbers have been coming out and they’ve been all over the place. Look, economists have no rule book, so the numbers and where the economist estimates sort of come out with, i think are don’t really mean too much to markets and you you actually see very little market movement on these numbers and i think a lot of it is.

We just don’t know you know when you see, you know, i believe the singaporean economy quarter quarter was down something like 40. The world doesn’t know how to model 40 down it just doesn’t happen. So so i think, as the recovery occurs, we’ll watch for the trends we want to see the trends be consistently higher and we’ll watch it the covet and how that’s actually impacting the economy as well. In between that, i think don’t get too carried away with month by month, uh scenarios, okay, fair point – and i want to show the viewers this table that mckinsey has put together. It shows uh the timeline of recovery from various sectors and at the top, as you might expect, is arts entertainment. You know discretionary sectors and what surprises me is uh. That mining is also near the top um to the middle to the top 20 23 to 2024.

Is what mckenzie is expecting for a free full recovery back to pre cover levels uh? Can you explain why this is i mean just just to play devil’s advocate here. It would occur to me that mining is an indispensable uh industry and that basic materials is going to be needed, regardless of our current economic situation. What would you say? Well, i think you have to look. The buckets that we use to put in those industries are quite blurred, so in that bucket of binding and extractive industries is energy, and energy is a very big part of that bucket and okay and energy has been impacted tremendously, particularly in travel.

Both vehicle travel, air travel, uh, ship travel, etc, um, and so that is the one area we think is going to have a long time. Recovery uh coal in particular, may never see the recovery uh of its pre coveted levels just because the move uh globally, uh away from carmen emitting sources and coal being sort of public enemy number one that you could see just a long, slow decline and even saw Some railroad executives come out today and fully say that they never think that coal will recover to the levels that they were pre coveted. So so those are type of the things going against. Maybe some of the more positive aspects of the mining industry, gold, obviously is – is doing well. Iron ore obviously is doing well, copper, uh shipments are doing quite, but i think that’s being offset mainly by the carbon side of the economy.

So what about precious metals, miners and also base metals miners? How how do they fit into the picture? Well, i mean i, i think, if you look at these companies they’re looking at a few different things from it from a supply side, it’s been very spotty which industries have been hit by coveting, which is not um you’ve, particularly seen in south america. A number of areas sort of hit, most known is iron ore in brazil has been been quite hit and and copper in chile has been quite hit as well. So i think those are some areas, sort of shorter term that could have some issues.

However, one of the things you’ve seen in chile is they reduce their staffing by 40 to 50 at the mines, they’ve kept up quite a bit of the production, and a lot of our analysts spent some time. Looking at this and what they came out is, it seems as if that they’re sort of hydrating the mines and they’re not doing the proper stripping ratios, which could work for a while, but that could have an impact in supply in 2021 and 2022. So there could be some lingering effects of what’s going on today. That could impact the market long term. Do you think expectations for slower production are partly what’s contributing to the rally we’re, seeing in the press, the prices of silver and gold today? Well, i think silver and gold – you put it in a different bucket uh gold and we’ve, talked to kitco for for many many years back from my days when i was at bloomberg, gold as a currency uh – and it is a currency that holds up very well In in a world where the printing presses are going wild, if you look at m2 in the united states is up more than 20 this year, if you’re, looking at m2 in china it’s up more than 40 this year, gold productions up a couple percent, so so So gold just sticks on its nice merry slow, two to three percent growth rate and the rest of the world.

Printing presses can print at any number uh and when you see those printing presses really go wild it’s. Just a relative trade there’s, just many more dollars, chasing relatively less gold and you’re, seeing that in the marketplace today and my prices are very, very close to 1900 uh, at least as of this feeling right now, uh, you know you, you brought up a very good Point, which is that gold uh, is a currency. What does this tell you about fiat currency, the fact that we’re all we’re near all time highs in gold? Well, i mean gold has hit all time highs in pretty much every other currency in the world. It’S only been the us dollar that it has not hit an all time high. Now it looks as if it’s it’s heading very close to that number um. So um, you know that’s something really really interesting and – and i think a lot of it has to do with the fact that the world is is trying to get away from the dollar you’ve seen a number of chinese sources call about de dollarization um, and so, As the world maybe tries to look for a different currency other than the u.s dollar, gold makes a lot of sense. There’S no government over it, there’s no central bank to worry about it’s, just sort of there and it’s worldwide recognized as a currency. So from that standpoint that’s why a lot of investors have been really for the last year or so talking about allocations into gold and so that’s made.

You know those those trades that worked out well for those for those investors. Last question: for you, ken, as you look around the world and just factoring everything, we’ve discussed with our current macro conditions. What are the metals you think um base, metals or precious metals that you think will be most affected by this period of recovery in the next six to 12 months? Well, i think what you really need to look at is the big movers will be driven by the government. So if you believe uh in the u.s is going to go more green, the green metals will do much much better. Look at the money supplies look at see how the governments are trying to just throw a lot of money to try to stabilize their economies. Those are numbers that help certain metals, so you need to sort of have a view on what governments are really doing. Central banks are really doing that’s going to be the primary short term driver of demand, trends and that’s going to give you your investment thesis perfect. Thank you very much for your thoughts. Ken appreciate you coming on the show today. Any time thanks, thank you for watching kikko news.

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