No silver lining: Why the Hunt brothers bet on silver was doomed to fail

At one point Herbert Bunker Hunt and his younger brother Nelson, as well as other members of the Hunt clan owned around two-thirds of all the privately held silver on the planet.

According to their subsequent legal defense the vast stockpile wasn’t a ploy to manipulate the price of silver higher only for them to ultimately cash in. Instead, their motive – according to their defense at least – was to hedge against the surge in inflation of the 1970’s and the debasement of the US dollar. read more

Potash: The pink gold rush

Food security is back on the agenda in 2020. Flooding in China and elsewhere in Asia, a plague of locusts across East Africa and the Middle East and finally COVID-19 induced precautionary stockpiling as a hedge against future supply disruptions. All around the globe governments have seen how precarious food supplies can be.

Consumption of fertiliser is expected to increase significantly in many parts of the world as countries look to lock in self-sufficiency. Meanwhile, rising populations and improved diets are likely to put even greater pressure on available farmland. read more

The Simon-Ehrlich wager: 40 years later it still holds lessons for commodity investors

Paul Ehrlich (Stanford University biologist and and author of the 1968 book “The Population Bomb”) thought that overpopulation would cause disaster and widespread scarcity. Ehrlich’s bleak vision was anything but that of a lone crank. Countless experts made similar forecasts in the 1950s and 1960s. In his book, Ehrlich declared that:

“the battle to feed all of humanity is over. In the 1970s, the world will undergo famines – hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.” read more

What is the Cantillon Effect?

When the US Federal Reserve and other major central banks embarked upon their quantitative easing programs shortly after the Global Financial Crisis many feared that the impact would be inflationary.

In an open letter to then Federal Reserve Chairman Ben Bernanke, twenty-three of the most recognised economists, investors and analysts outlined their concerns:

“We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment. read more

Illiquidity crisis: Water futures likely to be deserted

Although it may seem anathema to put a price on something as essential to human life as water, the arguments for doing so could be compelling, especially in areas of water stress. Looking ahead into the next quarter century, clean drinkable water is expected to become scarcer as the human population grows and climate change shifts the shorelines and weather patterns.

As with other commodities, price can theoretically help manage demand while providing an incentive to increase supply. As weather patterns shift, water could be transported to areas of high demand from areas where there is excess supply. At present, water use tends to be tightly regulated at a local level, while the cost of transporting water over long distance is prohibitively high. read more

What is a mine streaming company?

Banks and other financial institutions have become cautious about lending to the mining sector. Poor returns for gold miners in the past and concerns over ESG issues has meant that many traditional forms of finance are not always available, especially to junior and mid-tier mining companies. Many mining companies have turned to streaming contracts as an alternative source of finance.

In short, streams seek to monetise expected future production and assets from a venture. Of course this could be for anything that generates a predictable flow of assets and doesn’t have to be a commodity. Although typically applied to commodities, they could equally be applied to intellectual property assets such as music or books. read more