Month: April 2022

No Punches Pulled at NobleCon18 Panel Discussion

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Image Credit: NobleCon (4/20/2022)


Panelists Pulled No Punches at NobleCon18 Discussing ESG, Politics, Inflation, and War

 

Is the world going through a financial, political, and logistical phase that will forever change investment markets? This was not the name given to the panel discussion that closed the first day of presentations at NobleCon18. The actual title was more directly, The World Is HOT Right
Now! The room full of investors was treated to insights by panelists from the world of energy, banking, retail, and the U.S. military. Mike Gallagher, the host of the Mike Gallagher radio show, made sure the panelists didn’t pull any punches as they agreed and disagreed on subjects as hot as political unrest, supply chain constraints, the ESG movement, inflation, and War.


The Line-up

Radio Personality, Host of the Mike Gallagher Show (Moderator)

Brigadier General Blaine Holt, Deputy US Military Representative to NATO (Panelist)

Rani Selwanes, Noble’s Head of Investment Banking (Panelist)

Chuck Rubin, former Chairman & CEO, Michaels (Panelist)

Mark Chalmers, CEO, Energy Fuels (Panelist)


ESG Movement

Mike Gallagher began the discussion with the day’s big news story that Disney (DIS) could lose its special district privileges in Florida. This would cost the public company dearly. He dovetailed this into the discussion of companies taking a strong stance on subjects that come under the mantle of ESG.

None of the panelists shied from discussing their take on the topic as the former CEO of Michael’s pointed out that management’s job is to make money, and that they should do this in a way that has a good impact. He relayed a story where the craft giant he ran, that sold items that averaged between $7-$8, saved on costs, and helped the environment by using less packaging. The overall message was to serve your customers in a way that benefits society. Don’t cater to the PR benefit, instead, do what makes sense.

The investment banker on the panel discussed the movement from an investor’s standpoint. He discussed many examples where issuers, particularly in the fixed income market are being required by investors and asset managers for their ESG policies.


Geopolitical Events and War

The Brigadier General was brought into the conversation as Mike Gallagher pointed out that this is the first time since the 1980’s that the words “World War III” and possible “nuclear war” is being used. The General made sure the investor crowd was aware that President Putin had sold all of Russia’s holding of U.S. Treasuries in 2018. He told the listeners that they should teach military officers more about economics because Russia then proceeded to increase its gold position to $140 billion worth. The point was that this aggression has been going on for the past eight years, and only recently has it reached a point where it’s being recognized.

The concern raised by a few panelists is that Ukraine and Russia provide 30% of the world’s wheat. Conditions could reach a point where there is famine, and in the past, those conditions lead to war.

The CEO of an energy company explained to the attendees that we have become addicted to “cheap.” By this, he explained we are always shopping for the lowest price, and not building at home. With this, a country allows its capacity to wain and leaves them relying on others, potentially future enemies. One notable example given was that we no longer enrich uranium anyplace in the United States. We rely on unfriendly nations for enriching nuclear fuel and even weapons-grade material. The expression used by the CEO was, “digging a hole that you don’t have a ladder to climb back out of.”


Inflation

Rising prices is more than just supply chain issues. We have been creating money which has been our answer to every problem. Instead, we need to build our way out of challenges. From the military point of view, it was explained that the higher inflation goes, the more national security is threatened.

The conversation moved to why people aren’t going back to work. While there was no definitive explanation, it was clear the panelists are perplexed that it is not likely to lead to a soft landing of the economy. The basic cost of living is rising, workers at the lowest levels are able to command much higher wages, and it is very difficult to attract employees which is inflationary.


Take Away

While this discussion hit on many difficult realities, and the panelists, to their credit took them head-on, the silver lining was pointed out to the investors at the end.

The Head of Investment Banking at Noble Capital Markets called upon his international knowledge and experience to remind the audience of something important. He told investors that during periods of turmoil capital experiences a “flight to quality.” That quality has historically been to the U.S., the largest receiver of capital when the world senses enhanced risk. He reminded everyone, including many of the C-level audience members, that there is plenty of capital looking for opportunity in the U.S., they just don’t know where to find you. His advice was to find an advisor (i.e. investment bank) that can help you find this capital.

Paul Hoffman

Managing Editor, Channelchek

 

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Evaluating Gold Royalty Companies to Gain Exposure to Precious Metals

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Image: James St. John (Flickr)


Adding Precious Metal Exposure to Your Portfolio? Gold Royalty Company Considerations

 

Investors have many options to gain exposure to gold. They may purchase gold bullion, gold coins, gold exchange-traded funds (ETF) and mutual funds, gold mining companies, or gold futures and options. Publicly traded equities of gold producers and royalty companies may offer an attractive way to invest given the disproportionate percentage impact higher commodity prices may have on a company’s bottom line and valuation for a given percentage increase in the commodity itself. While most investors are likely familiar with mining companies and how they operate, royalty companies may be less familiar.


What is a Gold Royalty?

A gold royalty is a contract that gives the owner the right to a percentage of gold production or revenue. Since royalties typically cover the life of a mine, gold royalty companies benefit from the exploration upside that may extend the life of a mine and thus increase the amount of gold or revenue they receive from the mining company at no additional cost.

There are several ways to generate royalties. First, royalty businesses may help finance a development project in exchange for a royalty. Second, a royalty business may purchase existing royalties from third parties, and 3) a royalty company may take a property that they already own, sell it to a mining company, and retain a royalty on the property.

There are several types of royalties. The two most common are NSR and NPI royalties. A net smelter return (NSR) royalty is an agreement where the mining company agrees to pay the royalty owner a percentage of the revenue, less refining and smelting costs. A net profit interest (NPI) royalty entitles the royalty owner to a percentage of the profit from a mine.

A stream is a purchase agreement that provides the owner of the stream, in exchange for an upfront payment, the right to purchase all or a portion of one or more metals produced from a mine at a negotiated price for the life of the agreement. The negotiated price is generally at a significant discount to the spot price.


Royalty Company Advantages

Compared with investing in gold production companies, royalty businesses generally benefit from low overhead costs, geographically diversified asset portfolios, and exposure to multiple operators.  Additionally, they avoid costly exploration expense which is borne by operators while sharing the benefit and upside of exploration investment in properties where they retain a royalty interest.  Like mining companies, royalty businesses offer greater leverage to changes in gold prices than investing in bullion.  Lastly, royalty businesses generally seek to build portfolios of producing royalties that support dividend payments to shareholders. 

Investors in gold royalty companies understand that revenues increase with rising gold prices, increasing production on its royalty properties, and a growing royalty portfolio, while costs remain relatively fixed and stable. These various scenarios position royalty companies to thrive in good markets and weather more challenging sets of circumstances.

As a royalty company grows, it offers the potential for multiple expansion, dividend payments, and the ability to execute larger transactions which could accelerate its growth. Junior royalty companies generally perform well in their early years since they can grow rapidly based on an increasing capacity to transact larger deals. Additionally, junior royalty companies may become attractive acquisition candidates for a larger royalty company seeking to enlarge its royalty portfolio.

Investor Considerations

It is important for investors to keep several factors in mind when conducting due diligence on prospective royalty company investments. These include: 1) management, 2) asset portfolio, 3) asset quality, 4) jurisdiction, and 5) valuation.

Management – Should you bet on the horse or the jockey? It is important to evaluate management’s history and track record of creating value for shareholders. Does the management team reflect a balance of technical, financial, legal, and capital markets expertise? Is the board of directors comprised mostly of independent directors who provide a diversity of relevant experience and perspectives? Do they articulate clear objectives, and is their business model sound? Most importantly, do they focus on areas they know and employ a disciplined growth strategy, or are they seeking growth at any price?

Asset Portfolio – How is the company’s asset portfolio balanced between royalties that are producing cash flow streams versus royalties that are expected to produce cash flow within five years and/or longer?

Asset Quality – Because royalty companies have little control over the decisions of the mining companies that control the properties on which the royalty interest is held, it is important for investors to evaluate the operators associated with the properties in the royalty portfolio. Are they well-capitalized major mining companies or small start-ups? Additionally, it is helpful to evaluate mineral resource estimates associated with properties in the portfolio and the operators’ plans for development.     

Jurisdiction – While geographic diversity is a selling point for most royalty companies, it is often helpful to consult the Fraser Institute’s Annual Survey of Mining Companies to check if royalty interests are in favorable mining jurisdictions versus high-risk areas.

Valuation – Royalty companies are often valued based on price to net asset value. Net asset value is the net present value (NPV) or discounted cash flow (DCF) of all future cash flow of a mining asset, less any debt plus cash. Price to net asset value is the company’s market capitalization divided by the net present value of all mining assets minus net debt. For those that pay a dividend, investors may also compare dividend growth rates and yield. Larger companies generally trade at higher valuation multiples which generally increase with scale due to lower perceived risk due to greater asset diversification and a proven track record of growth. As royalty companies grow, they may be able to establish and grow dividends to shareholders, offer greater liquidity due to listings on major exchanges, and benefit from broader research. Some may also benefit from their inclusion in stock indices. For those that pay a dividend, it is important to know whether the dividend is paid from operating cash flow or whether the company is borrowing to pay the dividend.


Take-Away

Just as with other classes of equities, mining royalty company investing has categories and nuances within those categories that separate one from the other. Investors should be mindful of each of these and find respected sources of information on the particular names they are considering. Channelchek can be a goldmine of information when searching for companies, understanding their business, and looking at their numbers.


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Sources

4 Reasons Why We Believe in Royalty Companies

How Precious Metals Royalty and Streaming Companies Create Value

Streaming & Royalty Companies: Mutually Beneficial Arrangements for Everyone, including Investors

 

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What is the Feds Beige Book? (In 500 Words or Less)

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Why the Beige Book Takes on Added Importance in Times of Growing Economic Uncertainty

 

The Beige Book, more technically known as the Summary of Commentary on Current Economic Conditions, is a report compiled by the United States Federal Reserve Board (The Fed) eight times each year. The information a review of economic conditions within the Feds 12 banking districts. The information discusses the business activity in the area, the trends, and how tight labor markets are.

Information in the Beige Book is divided by industry, including real estate, tourism, agriculture, financial services, manufacturing, and high-tech. Trends in employment, prices, and wages for each of the 12 districts is also a regular part of the reporting.

Additionally, the districts comment on how the businesses of their region are impacted by national and international trends. The Beige Book will also examine how local businesses are affected by changes in exchange rates, oil prices, and inflation.


Common Beige Book Usage

If the district overall reports show economic activity is slowing, the FOMC may begin to lean toward easing monetary policy, to stimulate economic strength.

The FOMC may also discern from the districts an overheating national economy inflationary risks headed higher than the Fed target. In this case they will discuss at the FOMC meeting hitting the economic brakes with a contractionary strategy. This could include pulling money out of the economy and raising interest rates. 

The Beige Book allows investors and analysts to see a report that the FOMC will use to help guide their hand. Many view it as a lagging indicator as the information is looking in the rearview mirror. Other Fed watchers consider the Beige Book contents a leading economic indicator because it influences the FOMC’s decisions.

The most critical change the Fed may take after reviewing economic detail of the entire country and the business is adjustments to the Fed Funds rate. Surprises in the report has the ability to cause the markets (bond and stock) to suddenly turn.


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Release – Garibaldi – Nickel Mountain Ztem Survey Identifies New Pipe-Like Target

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Nickel Mountain Ztem Survey Identifies New Pipe-Like Target

Research, News, and Market Data on Garibaldi Resources

 

Vancouver, British Columbia, April 21, 2022 – Garibaldi Resources (TSXV: GGI) (the “Company” or “Garibaldi”) is pleased to announce that further to the company’s 2021 ZTEM survey results (see news release March 31, 2022) at Nickel Mountain in the Eskay Camp of northwest British Columbia, 3D processing has identified several new low-resistivity ZTEM responses located 5 km northeast of the E&L nickel-copper-cobalt massive sulphide zone, including an exciting new anomaly at target B1/White Fox.

The flagship E&L project generated especially promising deep penetrating ZTEM data providing renewed focus on several drill targets to test the large geophysical anomalies beneath and along trend from E&L, for mineralization. The ZTEM survey over the remainder of the claim group also identified an unexpected alignment of high priority targets, with similar features. The B1 ZTEM anomaly which rises from a great depth like E&L, extends vertically up to the B1 VTEM conductor near surface.

Several other features elevate the B1 target to high priority status besides the coincidence of a ZTEM anomaly with a VTEM conductor. The presence of gabbroic intrusions of the Nickel Mountain Complex, and numerous in-situ surface samples and mineralized boulder train samples with elevated copper, zinc and lead over a broad 3km strike length. Also, elevated MgO concentrations up to levels found at the E&L intrusion, along with anomalous nickel, indicating the potential for magmatic sulphides.

The ZTEM data for the B1 target, which has not been drill tested provides a key target for the 2022 property scale field program which is highlighted by the following observations:

  • The property-wide ZTEM survey has identified several low-resistivity responses that plunge to considerable depth, and also correlate with the location of near surface conductors from the 2017 and 2018 VTEM surveys. Coinciding ZTEM and VTEM anomalies offer strong support for the B1 target. The ZTEM response rising to surface from great depth, may be highly significant.
  • Similar low-resistivity responses to those beneath the E&L mineralized zones continue along a 15 km long trend of gabbroic intrusions within the Hazelton Group, striking to the northeast towards Mount Shirley. A corridor within this belt of coincident ZTEM-VTEM responses with clusters of samples containing elevated Base Metals, aligns over a 3 km trend.
  • The modelled ZTEM responses along strike coincides with base metal assays from in-situ samples and boulder trains with elevated nickel, copper and zinc. Additional conductive data supports an alignment along the northeast strike of E&L extending over and continuing past B1.

The primary exploration focus will be on the robust ZTEM-VTEM targets supported by geochemistry, and located along strike from E&L. Garibaldi will provide shareholders with more forthcoming analysis of the most prominent amongst the notable dozen new ZTEM anomalies at Nickel Mountain, as they become available.

Figure 1 Anomaly B1: White Fox displays a consistent ZTEM low resistivity zone coincident with a near surface VTEM conductive anomaly. The ZTEM low resistivity zone extends to great depths, similar to the low resistivity zone beneath E&L.

Jeremy Hanson, Garibaldi’s VP Exploration, stated: “We now have numerous ZTEM anomalies corresponding to VTEM conductors, coupled with elevated surface base metal content in samples along a significant trend. This season we will be able to hone in on the highest priority targets, for possible drill testing, likely starting with B1.”

Steve Regoci, Garibaldi’s CEO, stated: “We look forward to a very productive 2022 exploration season, better than expected ZTEM results have identified over a dozen significant ZTEM responses to test. These prospective targets beginning at E&L are large with deep roots, providing significant potential for further discoveries at Nickel Mountain as strong nickel and battery metal prices continue rising.”

Please see www.garibaldiresources.com/investor/presentations/ for more details.

Qualified Person

James Hutter, P.Geo., qualified person as defined by NI- 43-101, has supervised the preparation of and reviewed and approved of the disclosure of information in this news release.

About Garibaldi

Garibaldi Resources Corp. is an active Canadian-based junior exploration company focused on creating shareholder value through discoveries and strategic development of its assets in some of the most prolific mining regions in British Columbia and Mexico.

We seek safe harbor.

GARIBALDI RESOURCES CORP.

Per: “Steve Regoci”
Steve Regoci, President

Neither the TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or the accuracy of this release

Release – Alvopetro Announces Discovery at 182-C1 Well

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Alvopetro Announces Discovery at 182-C1 Well

Research, News, and Market Data on Alvopetro Energy

 

CALGARY, AB, April 21, 2022 /CNW/ – Alvopetro Energy Ltd. (TSXV: ALV) (OTCQX: ALVOF) announces that we have completed drilling the 182-C1 well on our 100% owned and operated Block 182 in the Recôncavo basin. Based on open-hole wireline logs the well has discovered 25 metres of potential net natural gas pay, with an average porosity of 8.2%.

President and CEO, Corey Ruttan commented:

“Preliminary drilling results from our 182-C1 well represent the first successful step in our organic growth strategy to expand our natural gas business in Brazil. We are currently increasing the capacity of our gas processing facility and we look forward to testing this well to understand the full development and production growth potential relating to this exciting new discovery.”

The 182-C1 well was spud on March 2, 2022 and drilled to a total measured depth (“MD”) of 2,926 metres. Two open-hole logging runs were completed and based on the open-hole logs, the 182-C1 well encountered a 36-metre-thick Agua Grande Formation sand at 2,550 to 2,586 metres total vertical depth with 25 metres of potential net natural gas pay, at an average 34% water saturation and average porosity of 8.2%, using a 6% porosity cut-off, 50% Vshale cut-off and 50% water saturation cut-off.  Neutron-density crossover on logs is interpreted to be reflective of natural gas pay but will be confirmed with well testing.

The primary and secondary targets of the 182-C1 well were the Agua Grande and Sergi Formations, respectively. Based on preliminary drilling results, the 182-C1 well encountered net pay in the Agua Grande Formation but did not encounter the Sergi Formation, the secondary target, due to the well crossing a normal fault before reaching the Sergi Formation. Data obtained from drilling the 182-C1 well is expected to assist in drilling follow-up development Agua Grande wells that will also be designed to reach the Sergi Formation further east from the bounding fault.   

Based on these drilling results, we plan to undertake a testing program of the 182-C1 well with a service rig, subject to customary regulatory approvals and equipment availability. This additional testing will assess the productive capability of this well and help define the field development plan. 

After running casing, we plan to mobilize the drilling rig to our next exploration location, the 183-B1 well, which is expected to be spud in May. The 183-B1 well also targets the Agua Grande and Sergi Formations as the primary and secondary targets, respectively.  

Corporate Presentation

Alvopetro’s updated corporate presentation is available on our website at:

http://www.alvopetro.com/corporate-presentation.

Social Media

Follow Alvopetro on our social media channels at the following links:

Twitter – https://twitter.com/AlvopetroEnergy
Instagram – https://www.instagram.com/alvopetro/
LinkedIn – https://www.linkedin.com/company/alvopetro-energy-ltd
YouTube – https://www.youtube.com/channel/UCgDn_igrQgdlj-maR6fWB0w

Alvopetro Energy Ltd.’s vision is to become a leading independent upstream and midstream operator in Brazil. Our strategy is to unlock the on-shore natural gas potential in the state of Bahia in Brazil, building off the development of our Caburé natural gas field and our strategic midstream infrastructure.

Neither the TSX Venture Exchange nor its 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 news release.

All amounts contained in this new release are in United States dollars, unless otherwise stated and all tabular amounts are in thousands of United States dollars, except as otherwise noted.

Cautionary statements regarding the filing of a Notice of Discovery. We have submitted a Notice of Discovery of Hydrocarbons to the Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (the “ANP”) with respect to the 182-C1 well. All operators in Brazil are required to inform the ANP, through the filing of a Notice of Discovery, of potential hydrocarbon discoveries. A Notice of Discovery is required to be filed with the ANP based on hydrocarbon indications in cuttings, mud logging or by gas detector, in combination with wire-line logging. Based on the results of open-hole logs, we have filed a Notice of Discovery relating to our 182-C1 well. These routine notifications to the ANP are not necessarily indicative of commercial hydrocarbons, potential production, recovery or reserves.

Testing and Well Results.  Data obtained from the 182-C1 well identified in this press release, including hydrocarbon shows, open-hole logging, net pay and porosities, should be considered to be preliminary until testing, detailed analysis and interpretation has been completed. Hydrocarbon shows can be seen during the drilling of a well in numerous circumstances and do not necessarily indicate a commercial discovery or the presence of commercial hydrocarbons in a well. There is no representation by Alvopetro that the data relating to the 182-C1 well contained in this press release is necessarily indicative of long-term performance or ultimate recovery. The reader is cautioned not to unduly rely on such data as such data may not be indicative of future performance of the well or of expected production or operational results for Alvopetro in the future.

Forward-Looking Statements and Cautionary Language. This news release contains “forward-looking information” within the meaning of applicable securities laws. The use of any of the words “will”, “expect”, “intend” and other similar words or expressions are intended to identify forward-looking information. Forward?looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the expectations discussed in the forward-looking statements. These forward-looking statements reflect current assumptions and expectations regarding future events. Accordingly, when relying on forward-looking statements to make decisions, Alvopetro cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. More particularly and without limitation, this news release contains forward-looking information concerning potential natural gas pay in the 182-C1 well, exploration and development prospects of Alvopetro and the expected timing of certain of Alvopetro’s testing and operational activities. The forward?looking statements are based on certain key expectations and assumptions made by Alvopetro, including but not limited to expectations and assumptions concerning testing results of the 182-C1 well, equipment availability, the timing of regulatory licenses and approvals, the success of future drilling, completion, testing, recompletion and development activities, the outlook for commodity markets and ability to access capital markets, the impact of the COVID-19 pandemic, the performance of producing wells and reservoirs, well development and operating performance, foreign exchange rates, general economic and business conditions, weather and access to drilling locations, the availability and cost of labour and services, environmental regulation, including regulation relating to hydraulic fracturing and stimulation, the ability to monetize hydrocarbons discovered, the regulatory and legal environment and other risks associated with oil and gas operations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Although Alvopetro believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Alvopetro can give no assurance that it will prove to be correct. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on factors that could affect the operations or financial results of Alvopetro are included in our annual information form which may be accessed on Alvopetro’s SEDAR profile at www.sedar.com. The forward-looking information contained in this news release is made as of the date hereof and Alvopetro undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

www.alvopetro.com TSX-V: ALV, OTCQX: ALVOF

SOURCE Alvopetro Energy Ltd.

What Media Experts Expect from the Metaverse

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NobleCon18 Brought Media Experts Together to Discuss the Metaverse, Here’s What Happened

 

Media all-star Steve Forbes kicked off this year’s NobleCon18 and the conference’s first panel presentation. Forbes, who is no stranger to changes in media, showed up in the room virtually. This was fitting as the discussion centered around the metaverse. The live panel included all-stars that are on the edge of shaping what is often called Web3. The expert panelists are well-known names in data, gaming, news and information.

No doubt the investors that attended the panel discussion at the Seminole Hard Rock Hotel (Guitar Hotel) left the large room with a better understanding of what the metaverse is, what it can be, and more importantly, where the opportunities are.

Following Steve Forbes’ introduction, the metaverse panel was moderated by Eric Bolling, TV Host of Eric Bolling The Balance. Rob Goldman, a data-driven world-changer who created the model for growth and monetization at Facebook brought his unique insights to the panel. Mike Federle, brought his own experience related to media changing and adapting, as CEO of Forbes Media Group. Christopher Ruddy, the CEO of Newsmax which owns several different news mediums brought well thought out scenarios as to how Web3 will become integrated into our daily lives. And, Dimitry Kozko, CEO, Motorsport Games who understands the important role that gaming has and will continue to play in the growth and normalizing of the metaverse, explained gamings’ critical role in invention and public acceptance.


What was Said

In the coming weeks, Channelchek will post a video broadcast of the panel’s exchange, sign up for Channelchek updates to be sure not to miss the video replay.

Rob Goldman, with his big tech background, reminded the room full of investors that the metaverse is just the next phase of augmented reality. He says this should be comfortable as “we already have a place we go to immerse ourselves in an augmented world.” He sees tech as allowing us to go where we want to go when we want to go. The audience was reminded that smartphones now fit seamlessly into our lives, yet the concept may have been incomprehensible a few short years ago.

Goldman sees the future of the metaverse as split in three ways and perhaps unfolding with heavy input from a few current tech powerhouses. He sees the three segments as hardware & design, technology & partnerships, and network. As for the hardware, Goldman recognizes that the public may not immediately be comfortable with metaverse glasses banding our eyes. He has confidence that Apple (AAPL) which has been tasked before with making abnormal tech changes socially acceptable, can find the successful path to this big challenge. Goldman named Microsoft (MSFT) as having the connections to develop the needed tech partnerships to provide a metaverse that is one day largely connected. The former Facebook head believes Meta (FB) will provide the network piece.

Dmitry Kozko, CEO of Motorsport Games (MSGM) said the digital environment of gaming is helping to bring about the change and acceptance of augmented reality including the metaverse. Kozko described the digital environment as creating understanding and advancing the adoption of augmented reality.

Newsmax’s founder and CEO Chris Ruddy explained that traditional media outlets should be excited to be part of it. He explained the lifecycle of growing tech trends in a way most investors in the room should have taken note of. Ruddy says that the path of previous tech trends was first awareness, followed by a “goldrush,” he said this ushers in capital and resources from which the infrastructure is built. He explained there is then expansion that is followed by a crash as the new industry gets ahead of itself. The new field that will be worth trillions will then regain its footing, building off the infrastructure that was created earlier. Ruddy thinks the metaverse will have its own need for news and his company is excited to be part of this journey.

Mike Federle, CEO of Forbes (OPA) could have added to the discussion from many different angles. As he pointed out, Forbes gets to dip their toe into everyone’s business around the world. This gives him broad insight into most any business discussion. He chose to address the crypto angle of the metaverse. The Forbes CEO suspects the metaverse will bridge the gap for the digital currencies. Federle explains we currently have the crypto-committed (true believers), the crypto curious, and as he explained the crypto-uninitiated. The uninitiated he says is the largest group. Drawing a corollary to the internet’s beginnings (web1), experimentation will lead to adoption. With this, web3 reduces every human interaction into a transaction.


Take-Away

The metaverse presents massive opportunity. One risk is over-speculation, another is government involvement including regulation and probable taxation. Understanding the companies that are getting involved and the contribution they provide is key to investing in what these panelists all believe can grow to become its own world.

NobleCon18 is the 18th annual investor conference held by Noble Capital Markets. The conference which is free to investors will wrap-up all presentations on Thursday April 22. Limited seats are still available.

 

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April 20 the Making of a Holiday

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Image Credit: Mike (Flickr)


April 20 Growing as a Day of Cannabis Recognition

 

Did you get your significant other a gift for 4/20 this year? Probably not, it isn’t considered a traditional mainstream gift-giving day like Valentines or Christmas. After all, April 20 recognizes, among other things, the counterculture that didn’t care much for the mainstream. So why would it become commercial in that way — the origin has more to do with a push for access and legalization. But there is a huge uptick in sales leading up to this day. And while many mainstreamers, myself included, only heard of the “420 code” a year or two ago, it is getting far more buzz than ever, and undoubtedly this will be even greater in the coming years.

What it Means for the Industry

Commercial cannabis providers would be missing an opportunity if they didn’t leverage the day’s recognition in a “Cinco de Mayo” meets “St. Patty’s Day” marketing effort. And they are. To confirm this I asked Margot Micallef the founder and CEO of GABY Inc. (GABLF) if 4/20 is a big day for dispensaries. She was gracious enough to take some time away from discussions with investors at NobleCon18 to respond. Ms. Micallef quickly said, “It’s Christmas for cannabis consumers!” She explained, “Consumers wait for it with anticipation and retailers love it because it brings consumers into their stores.”  

In a recent article, MJBiz.com refers to the day as “As the biggest shopping day of the year for the cannabis industry…” They say, leading up to 4/20/22 businesses were preparing by stocking more of their more perishable items such as rolled leaf.

Many dispensaries are providing discounts and sales this week to bolster even more traffic as the biggest shopping day of the year for the recreational sector of the industry peaks. Part of the preparation includes a focus on selling flower, mainly in the form of pre-rolls.

Just as Mother’s Day and Valentine’s is the high point of the year for selling roses and chocolate, the third week in April, the unofficial April 20 marijuana holiday resembles mainstream retail’s Black Friday shopping day after Thanksgiving in that consumers flock to cannabis stores to stock up on heavily discounted products. Most companies spend months preparing for this period.

The cannabis industry estimates that sales increase by about 30%-50% the week of 4/20. Using data from Headset, sales compared to an average week can be even higher. 

Broken out into product categories, the data forecasts week over average week increases of:

  • Vape Pen +92%
  • Pre-Rolls + 126%
  • Edibles +124
  • Flower +135%
  • Concentrate 152%

If 4/20 grows as the day to recognize the efforts of the counterculture and all subsequent movements to provide more freedom of choice, it will serve the industry well. Investors should take note, perhaps it could even become a benchmark for the cannabis business similar to Black Friday has for other retailers. I spoke with Justin Dye, Chairman and CEO of Schwazze (SHWZ). Schwazze is the largest cannabis company in Colorado by revenue. Justin was also busy with investors at NobleCon18, but took time to discuss the industry and the opportunity. Dye said, “The cannabis industry is maturing and a terrific growth sector.” He explained, “The industry is countercyclical, and trading at all-time lows. It is just a matter of time before meaningful catalysts such as safe banking regulation and continued legalization buoy the industry.”

Not unlike other industries that maintain their status most of the year, but have one or two celebrations that they “own,” The cannabis industry will certainly be well served by further elevating 4/20 as a day where even those that don’t partake all year long, participate in their own way.

Paul Hoffman

Managing Editor, Channelchek


Suggested Reading



Cannabis Legalization and the Road for Psychedelics

Psychedelic Laws and Investments May Follow Cannabis’ Success





Marijuana Hits the House This Spring

The Synergistic Effects of Crypto on Cannabis Businesses

 

Sources

https://mjbizdaily.com/how-cannabis-companies-are-capitalizing-on-420-amid-easing-covid-19-restrictions/

https://www.headset.io/solutions/retailers-and-dispensaries

https://www.vox.com/policy-and-politics/2019/4/19/18484698/what-is-420-meaning-marijuana-legalization

 

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Release – Direct Digital Holdings to Present at NobleCon18

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Direct Digital Holdings to Present at NobleCon18 – Noble Capital Markets’ Eighteenth Annual Investor Conference

Research, News, and Market Data on Direct Digital Holdings

 

HOUSTON, April 19, 2022 /PRNewswire/ — Direct Digital Holdings (Nasdaq: DRCT) today announced that Mark Walker, Chief Executive Officer and Founder of Direct Digital Holdings, and Keith Smith, President and Founder of Direct Digital Holdings, will present at NobleCon18 – Noble Capital Markets’ Eighteenth Annual Investor Conference at the Hard Rock Hotel & Casino in Hollywood, Florida on Thursday, April 21 at 1:30pm ET.

There is also the opportunity to meet the management team at a breakout session scheduled for Thursday, April 21 at 10:00am ET.

A high-definition, video webcast of the presentation will be available the following day on Direct Digital Holdings’ investor relations website, and as part of a complete catalog of presentations available at Noble Capital Markets’ Conference website: www.nobleconference.com and on Channelchek www.channelchek.com, the investor portal created by Noble.

The webcast will be archived on Direct Digital Holdings’ investor relations website, the NobleCon website and on Channelchek.com for 90 days following the event.

About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT) brings state-of-the-art supply- and demand-side advertising platforms together under one umbrella company. The holding group’s supply-side platform Colossus SSP offers advertisers of all sizes extensive reach within general market and multicultural media properties. Its operating companies Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare and travel to financial services. Direct Digital Holdings’ buy-side solutions manages over 200 clients daily, and the sell-side solution serves over 80,000 advertisers generating over 70 billion impressions per month across display, CTV, in-app, and other media channels.

SOURCE Direct Digital Holdings

Release – Tonix Pharmaceuticals Announces Results of Retrospective Observational Database Study In Over 50000 Long COVID Patients

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Tonix Pharmaceuticals Announces Results of Retrospective Observational Database Study In Over 50,000 Long COVID Patients

Research, News, and Market Data on Tonix Pharmaceuticals

 

Over 40% of Long COVID Patients Had Fibromyalgia-Like Multi-Site Pain Symptoms

Rate of Opioid Use in Long COVID Patients with Multi-Site Pain is a Potential Health Concern

CHATHAM, N.J., April 20, 2022 (GLOBE NEWSWIRE) —  Tonix Pharmaceuticals Holding Corp. (Nasdaq: TNXP), a clinical-stage biopharmaceutical company, announced today the results of a retrospective observational database study in over 50,000 patients diagnosed with Long COVID1-2. Long COVID is known officially as Post-Acute Sequelae of COVID-19 (PASC3). Tonix recently announced that the U.S. Food and Drug Administration (FDA) has cleared the Investigational New Drug (IND) application to support a Phase 2 clinical trial with TNX-102 SL4 (cyclobenzaprine HCl tablets for sublingual administration) as a potential treatment for a subset of patients with Long COVID whose symptoms overlap with fibromyalgia, and expects to initiate this study in the second quarter. The goal of the retrospective database study was to assess the proportion of Long COVID patients who experience fibromyalgia-like multi-site pain and to measure their use of opiates.

In the study, over 40% of patients with symptoms of Long COVID had fibromyalgia-like multi-site pain 1,2. In addition, the study reported on the rate of opioid use in Long COVID patients. Opioid use noted was in 36% of Long COVID patients with multi-site pain symptoms relative to 19% of Long COVID patients without multi-site pain. In patients with multisite pain, opiate use increased to 39% of patients when fatigue was present, and 50% of patients when insomnia was present.

“We undertook this retrospective analysis in part to determine the feasibility and representative nature of our upcoming Phase 2 study of TNX-102 SL in patients with Long COVID who present with fibromyalgia-like multi-site pain,” said Seth Lederman, M.D., Chief Executive Officer of Tonix Pharmaceuticals. “The finding that more than 40% of Long COVID patients in this sample have fibromyalgia-like multi-site pain symptoms suggests that we should be able to recruit a robust cohort of participants to test the effects of TNX-102 SL in treating this condition. Further, these findings suggest that the group of Long COVID patients with fibromyalgia-like multi-site pain represents a significant portion of this underserved population. Finally, the high level of opiate use reveals the urgency to provide effective non-opioid analgesia that is targeted toward widespread pain thought to be nociplastic in nature, meaning that augmented CNS pain and sensory processing, as well as altered pain modulation, play a role. The primary efficacy endpoint of the upcoming Phase 2 study will therefore be change from baseline in the weekly average of daily self-reported worst pain intensity scores.”

The study queried data from the TriNetX Dataworks USA Network. The network is a federated network of de-identified inpatient and outpatient electronic medical records from 48 U.S. healthcare organizations. From 75 million people in the network, approximately 1 million adults (18-65) had been diagnosed with acute COVID-19. Of these, approximately 260,000 followed up with a healthcare provider in the network within six months of having acute COVID-19. Of these, approximately 52,000 had Long COVID symptoms in the period between 3 and 6 months after acute COVID-19, which was the time-frame for the analysis for diagnostic codes consistent with multi-site pain, fatigue and insomnia.

1Harris, H, et al. Tonix data on file. 2022
2TriNetX Analytics
3Feb. 24, 2021 – White House COVID-19 Response Team press briefing; Feb 25, 2021 – policy brief from the World Health Organization on long COVID.
4TNX-102 SL is an investigational new drug and has not been approved for any indication.

About Tonix Pharmaceuticals Holding Corp.

Tonix is a clinical-stage biopharmaceutical company focused on discovering, licensing, acquiring and developing therapeutics and diagnostics to treat and prevent human disease and alleviate suffering. Tonix’s portfolio is composed of immunology, rare disease, infectious disease, and central nervous system (CNS) product candidates. Tonix’s immunology portfolio includes biologics to address organ transplant rejection, autoimmunity and cancer, including TNX-15001 which is a humanized monoclonal antibody targeting CD40-ligand being developed for the prevention of allograft and xenograft rejection and for the treatment of autoimmune diseases. A Phase 1 study of TNX-1500 is expected to be initiated in the second half of 2022. Tonix’s rare disease portfolio includes TNX-29002 for the treatment of Prader-Willi syndrome. TNX-2900 has been granted Orphan-Drug Designation by the FDA. Tonix’s infectious disease pipeline includes a vaccine in development to prevent smallpox and monkeypox called TNX-8013, next-generation vaccines to prevent COVID-19, and an antiviral to treat COVID-19. Tonix’s lead vaccine candidates for COVID-19 are TNX-1840 and TNX-18504, which are live virus vaccines based on Tonix’s recombinant pox vaccine (RPV) platform. TNX-35005 (sangivamycin, i.v. solution) is a small molecule antiviral drug to treat acute COVID-19 and is in the pre-IND stage of development. TNX-102 SL, (cyclobenzaprine HCl sublingual tablets), is a small molecule drug being developed to treat Long COVID, a chronic post-acute COVID-19 condition. Tonix expects to initiate a Phase 2 study in Long COVID in the second quarter of 2022. The Company’s CNS portfolio includes both small molecules and biologics to treat pain, neurologic, psychiatric and addiction conditions. Tonix’s lead CNS candidate, TNX-102 SL, is in mid-Phase 3 development for the management of fibromyalgia with a new Phase 3 study launched in the second quarter of 2022. Finally, TNX-13006 is a biologic designed to treat cocaine intoxication that is expected to start a Phase 2 trial in the second quarter of 2022.

1TNX-1500 is an investigational new biologic at the pre-IND stage of development and has not been approved for any indication.
2TNX-2900 is an investigational new drug at the pre-IND stage of development and has not been approved for any indication.
3TNX-801 is a live horsepox virus vaccine for percutaneous administration in development to protect against smallpox and monkeypox. TNX-801 is an investigational new biologic and has not been approved for any indication.
4TNX-1840 and TNX-1850 are live horsepox virus vaccines for percutaneous administration, in development to protect against COVID-19. TNX-1840 and TNX-1850 are designed to express the SARS-CoV-2 spike protein from the omicron and BA.2 variants, respectively. TNX-1840 and TNX-1850 are investigational new biologics at the pre-IND stage of development and have not been approved for any indication. 
5TNX-3500 is an investigational new drug at the pre-IND stage of development and has not been approved for any indication.
6TNX-1300 is an investigational new biologic and has not been approved for any indication.

This press release and further information about Tonix can be found at www.tonixpharma.com.

About TriNetX, LLC

TriNetX is a global health research network that connects the world of drug discovery and development from pharmaceutical company to study site, and investigator to patient by sharing real-world data to make clinical and observational research easier and more efficient. TriNetX combines real time access to longitudinal clinical data with state-of-the-art analytics to optimize protocol design and feasibility, site selection, patient recruitment, and enable discoveries through the generation of real-world evidence. The TriNetX platform is HIPAA and GDPR compliant.

Forward Looking Statements

Certain statements in this press release are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “forecast,” “estimate,” “expect,” and “intend,” among others. These forward-looking statements are based on Tonix’s current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks related to the failure to obtain FDA clearances or approvals and noncompliance with FDA regulations; delays and uncertainties caused by the global COVID-19 pandemic; risks related to the timing and progress of clinical development of our product candidates; our need for additional financing; uncertainties of patent protection and litigation; uncertainties of government or third party payor reimbursement; limited research and development efforts and dependence upon third parties; and substantial competition. As with any pharmaceutical under development, there are significant risks in the development, regulatory approval and commercialization of new products. Tonix does not undertake an obligation to update or revise any forward-looking statement. Investors should read the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2022, and periodic reports filed with the SEC on or after the date thereof. All of Tonix’s forward-looking statements are expressly qualified by all such risk factors and other cautionary statements. The information set forth herein speaks only as of the date thereof.

Contacts

Jessica Morris (corporate)
Tonix Pharmaceuticals
investor.relations@tonixpharma.com
(862) 799-8599

Olipriya Das, Ph.D. (media)
Russo Partners
Olipriya.Das@russopartnersllc.com
(646) 942-5588

Peter Vozzo (investors)
ICR Westwicke
peter.vozzo@westwicke.com
(443) 213-0505

Source: Tonix Pharmaceuticals Holding Corp.

Why Poison Pills Have Been Effective at Warding off Unsolicited Offers

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Image Credit: Alex Castro (Flickr)


Do Poison Pills Work? A Finance Expert Explains the Anti-Takeover Tool that Twitter Hopes Will Keep Elon Musk at Bay

 

Takeovers are usually friendly affairs. Corporate executives engage in top-secret talks, with one company or group of investors making a bid for another business. After some negotiating, the companies engaged in the merger or acquisition announce a deal has been struck.

But other takeovers are more hostile in nature. Not every company wants to be taken over. This is the case with Elon Musk’s US$43 billion bid to buy Twitter.

Companies have various measures in their arsenal to ward off such unwanted advances. One of the most effective anti-takeover measures is the shareholder rights plan, also more aptly known as a “poison pill.” It is designed to block an investor from accumulating a majority stake in a company.

Twitter adopted a poison pill plan on April 15, 2022, shortly after Musk unveiled his takeover offer in a Securities and Exchange filing.

 

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and opinions of Tuugi Chuluun, Associate Professor of Finance, Loyola University Maryland

 

I’m a scholar of corporate finance. Let me explain why poison pills have been effective at warding off unsolicited offers, at least until now.

 

What’s a Poison Pill?

Poison pills were developed in the early 1980s as a defense tactic against corporate raiders to effectively poison their takeover efforts – sort of reminiscent of the suicide pills that spies supposedly swallow if captured.

There are many variants of poison pills, but they generally increase the number of shares, which then dilutes the bidder’s stake and causes them a significant financial loss.

Let’s say a company has 1,000 shares outstanding valued at $10 each, which means the company has a market value of $10,000. An activist investor purchases 100 shares at the cost of $1,000 and accumulates a significant 10% stake in the company. But if the company has a poison pill that is triggered once any hostile bidder owns 10% of its stock, all other shareholders would suddenly have the opportunity to buy additional shares at a discounted price – say, half the market price. This has the effect of quickly diluting the activist investor’s original stake and also making it worth a lot less than it was before.

 

Twitter adopted a similar measure. If any shareholder accumulates a 15% stake in the company in a purchase not approved by the board of directors, other shareholders would get the right to buy additional shares at a discount, diluting the 9.2% stake Musk recently purchased.

Poison pills are useful in part because they can be adopted quickly, but they usually have expiration dates. The poison pill adopted by Twitter, for example, expires in one year.

 

A Successful Tactic

Many well-known companies such as Papa John’s, Netflix, JCPenney and Avis Budget Group have used poison pills to successfully fend off hostile takeovers. And nearly 100 companies adopted poison pills in 2020 because they were worried that their careening stock prices, caused by the pandemic market swoon, would make them vulnerable to hostile takeovers.

No one has ever triggered – or swallowed – a poison pill that was designed to fend off an unsolicited takeover offer, showing how effective such measures are at fending off takeover attempts.

These types of anti-takeover measures are generally frowned upon as a poor corporate governance practice that can hurt a company’s value and performance. They can be seen as impediments to the ability of shareholders and outsiders to monitor management, and more about protecting the board and management than attracting more generous offers from potential buyers.

However, shareholders may benefit from poison pills if they lead to a higher bid for the company, for example. This may be already happening with Twitter as another bidder – a $103 billion private equity firm – may have surfaced.

 

A poison pill isn’t foolproof, however. A bidder facing a poison pill could try to argue that the board is not acting in the best interests of shareholders and appeal directly to them through either a tender offer – buying shares directly from other shareholders at a premium in a public bid – or a proxy contest, which involves convincing enough fellow shareholders to join a vote to oust some or all of the existing board.

And judging by his tweets to his 82 million Twitter followers, that seems to be what Musk is doing.

 

Suggested Reading



Two Key Elements to Musk’s $54.20 a Share Offer for Twitter

Jack Dorsey, Corporate Boards, and Bad Apples





Dogecoin Group Works to Give Currency Greater Purpose

Zuckerberg Top Executive Joins NobleCon18 Lineup

 

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Maple Gold Mines (MGMLF)(MGM:CA) – An Emerging World Class Gold Project in Quebecs Renowned Abitibi Greenstone Belt

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Tuesday, April 19, 2022

Maple Gold Mines (MGMLF)(MGM:CA)
 An Emerging World Class Gold Project in Quebec’s Renowned Abitibi Greenstone Belt

Maple Gold Mines Ltd. is a Canadian advanced exploration company in a 50/50 joint venture with Agnico Eagle Mines Limited to jointly advance the district-scale Douay and Joutel gold projects located in the prolific Abitibi Greenstone Gold Belt of Quebec, Canada. The Company also holds an exclusive option to acquire 100% of the Eagle Mine Property located at Joutel.

Mark Reichman, Senior Research Analyst of Natural Resources, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

    Initiating coverage. Maple Gold Mines is an exploration company in a 50/50 joint venture with Agnico Eagle Mines Limited (NYSE: AEM, TSX: AEM), Canada’s largest gold producer and the third largest globally, to jointly explore the contiguous Douay and Joutel Gold projects located in Quebec’s renowned Abitibi Greenstone Belt. The projects represent a large and highly prospective land package encompassing 400 square kilometers, including an existing gold resource with significant expansion potential at Douay, along with the past producing Telbel and Eagle mines at Joutel. Maple Gold controls 100% of the Eagle mine.

    Significant resource expansion potential.  Recently released results from an updated NI 43-101 mineral resource estimate for the JV’s Douay gold project highlighted an increase in indicated and inferred gold ounces to 3.036 million from 2.774 million ounces. The estimate does not include results from the Fall 2021 drilling program …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

 

Chakana Copper Corp (CHKKF)(PERU:CA) – Revised Option Agreement Significantly Enhances Financial Flexibility

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Tuesday, April 19, 2022

Chakana Copper Corp (CHKKF)(PERU:CA)
Revised Option Agreement Significantly Enhances Financial Flexibility

Noble Capital Markets research on Chakana Copper Corp is published under ticker symbols CHKKF and PERU:CA. The price target is in USD and based on ticker symbol CHKKF. Chakana Copper Corp is a Canadian-based minerals exploration company that is currently advancing the high-grade gold-copper-silver Soledad Project located in the Ancash region of Peru, a highly favorable mining jurisdiction with supportive communities. The Soledad Project consists of high-grade gold-copper-silver mineralization hosted in tourmaline breccia pipes. A total of 33,353 metres of drilling has been completed to-date, testing nine (9) of twenty-three (23) confirmed breccia pipes with more than 92 total targets. Chakana’s investors are uniquely positioned as the Soledad Project provides exposure to several metals including copper, gold, and silver.

Mark Reichman, Senior Research Analyst of Natural Resources, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

    New payment terms. Chakana executed a binding agreement with Condor Resources Inc. to amend the terms of its Soledad purchase option agreement. Instead of making a US$4.425 million final payment on April 23, 2022, Chakana will complete the exercise of the option by either paying US$2.8 million and issuing 9,480,198 shares to Condor by June 23 or making cash and share payments to Condor over a three-year period.

    Drilling expected to resume in June.  In 2022, the company will likely conduct a 10,000-meter exploration drilling program to test 20 new targets. We expect the company’s geophysics program and target ranking to be completed shortly with drilling beginning in June using one rig. Outcomes from exploration drilling will likely determine high priority targets for a future resource drilling program …

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

 

Will the Fed Push Gold and Crypto Up by Raising its Inflation Target

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Image: Marco Verch (Flickr)


Allianz Economist Explains His Thoughts on Gold and Crypto’s Future

 

Muhamed A. El-Arian is the Chief Economic Advisor at Allianz, (Allianz owns PIMCO). He said in an interview on CNBC he believes the Fed may have to raise its inflation target to 3%. The Fed’s current and ongoing inflation target is 2%. Recent inflation reports show YOY inflation at 8.5%. The Allianz economist sees prices increasing within the various asset classes that are generally seen as inflation hedges. This is why he is bullish on gold and cryptocurrencies.

Gold and cryptocurrency prices would increase if the Federal Reserve were to lift its inflation target as it engages in a prolonged fight to bring down consumer prices, economist Mohamed El-Erian told CNBC on Monday (April 18).  “They both go higher in a world like that,” he said, referring to the notion that the Fed may need to increase its long-term inflation target to 3% from 2%.

“What will force them to change their target is the recognition that by being so late, they can’t get to that target and their credibility is threatened,” said El-Erian. “They will also worry that by hitting the brakes too hard, they may push this economy not just into a short-term recession, but into a longer term recession.” Controlling inflation and calming markets while orchestrating price stability is tricky. El-Arian believes that the markets will view the Fed as being more credible if they set and attain a 3% target rather than fail at a 2% target while crippling the economy longer term. 

Currently, the FOMC Fed Chair Jay Powell is working to tamp down the rise in prices which is due to tight labor markets, supply chain issues, higher fuel demand with less fuel production, an increase in money supply, and an overall expectation of higher prices. Inflation in March beat a 40-year high at 8.5% year-over-year. The last time price increases were so rampant, Ronald Reagan had just begun occupying the oval office.

Last month the FOMC began what is being viewed as an interest rate-hike cycle when it raised the Fed Funds rate 25 basis points from a range of 0% to 0.25%. It has also begun tapering and will soon shrink its balance sheet which has the impact of taking cash out of the market which makes money more expensive (interest rates).

Impact on Gold and Crypto

Gold is considered a safe haven when there is uncertain global stability or a risk of higher prices. With the accelerated money creation attributed to the pandemic and the Russian invasion of Ukraine, gold prices have risen about 9% this year, trading at $1,960 per ounce. In contrast, bitcoin has decreased in value by 16% to $41,300 and ether has lost 21% to trade at $2,900.

Is crypto as good of a diversifier as precious metals? The Allianz economist said, “The concern for the crypto people is that this decline is happening at a time when gold is up and hitting almost $2,000,” He continued, “The big argument for crypto is it’s a diversifier — at a time of inflation, it is attractive.” But crypto hasn’t worked as a cushion recently, he said. “And that’s because crypto, unlike gold, benefited enormously from all the liquidity injections.

The way El-Arian reads the increase in gold and decline in crypto prices is there is a tug of war between the recognition that liquidity is going out from the system as a whole and attractiveness as a diversifier. He explained the liquidity element is winning out.

The Fed’s Inflation Target

El-Arian, as mentioned earlier believes that a credible target will comfort the markets compared to one that the Fed is less likely to attain soon. “What will force them to change their target is the recognition that by being so late, they can’t get to that target and their credibility is threatened,” said El-Erian. 

El-Arian told CNBC he would expect gold and crypto prices to rise if the Federal Reserve were to raise its inflation target to 3%.  

 

Suggested Reading:



Can One Wrong Board Member Cost Stockholders?

With the Russia-Ukraine War, Gold’s Safe-Haven Status Lasts





We Still Haven’t Reached the Inflation Finale

Was the Inflation of 1982 Like Today’s?

 

Sources

https://twitter.com/elerianm/status/1516319290605154309?ref_src=twsrc%5Etfw

https://www.cnbc.com/video/2022/04/18/we-are-nowhere-near-the-end-of-our-inflation-challenge-says-mohamed-el-erian.html

 

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