Market Report 6th July 2020
World economies are struggling with the fallout of lockdown. As we head into recession and probable depression the second wave of virus infections has started with two US states going into secondary lockdown and several others introducing restrictions. Spain has one region in semi-lockdown and 2 regions in full lockdown while UK has one city in lockdown. A fragile economy struggling to recover from the first round of lockdowns is hit even harder with a second round of lockdowns. But, in turbulent times there are always opportunities which will become more visible in coming months.
Casual Dining Group called in the administrators this week. They own Café Rouge, Bella Italia and Las Iguanas. This follows Carluccios and Chiquitos having already closed, together with the closure of Jamie Oliver’s Restaurants a few weeks ago sees the restaurant industry struggling. In 2008 when the restaurant chains closed local fast food shops such as Fish & Chip Shops boomed.
Markets remain volatile. They were subdued on Friday with the US markets shut for 4th July celebrations. FTSE100 closed lower as investors in UK and Europe took profits.
In China, the government has seized profits from the banks to help prop up the economy. Chinese banks total take is expected to add 1.5 Trillion Yuan to government coffers.
Gold – the value remained static at US$1778 per troy ounce.
Silver – has steadily increased in value closing at US$18.41 an increase of 1.76% for the week. Silver is up 5.22% for the month. With the gold:silver ration at 98.30 this week silver still remains under valued and offering good investment opportunities.
Oil – this market is very active, volatile and very much in the danger zone. Elon Musk’s Tesla developments will see the use of cobalt disappear from electric cars. Cobalt is very expensive and accounts for 40% of the total cost of a car. In addition, lithium-ion batteries are being replaced with lithium-iron batteries which are far more efficient and will allow cars to travel up to 400 miles before needing a recharge making electric cars more affordable and more attractive. With the zero emission standards set for trucks starting to come into effect from 2024 and global political issues the oil industry is looking less vibrant for future investment.
Gas – natural gas is at very low prices and offers good investment opportunities. Warren Buffett announces Berkshire Hathaway has purchased 25% stake in Cove Point LNG with a $4Billion purchase tag and $5Billion towards reducing debt.
Mining – In Spain, the lockdown has had an impact on the use of coal with all coal plants being closed ahead of schedule with many plants unlikely to reopen.
Trump last year signed a deal allowing mining in Space. NASA this week confirmed the viability of mining the moon within 5 years as it has identified various metals and minerals in craters. Preliminary reports show the deeper the crater the better the concentration of metals meaning they can be mined in a very specific location reducing costs of searching and deploying mining facilities.
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