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2 Stocks That Could Fly As EV’s Gets A Second Wind This Summer

The rise of electric vehicles is one of the biggest trends of the last decade, taking names like Tesla and Nio to the top of the markets. 
But 2021 is proving that other types of companies may be ready to make their mark.
Last year, it seemed EV…

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The rise of electric vehicles is one of the biggest trends of the last decade, taking names like Tesla and Nio to the top of the markets. 

But 2021 is proving that other types of companies may be ready to make their mark.

Last year, it seemed EV companies could do no wrong, with countless companies in the industry seeing their shares hit new highs.

Nikola, for example, soared for 672% gains at its highs.

Tesla was up 695% on the year.

And Nio took off for incredible 1,210% gains.

But today, we’re finally seeing some chinks in the armor of the companies that seemed invincible just 6 months ago.

And space is finally being made for new, exciting companies with a different spin on how to use this new technology.

For example, while Nikola, Nio, and Tesla, for example, are all slightly down for the year from their highs...

Two companies in other but related industries that we've discovered are looking to have a banner year thanks to key new partnerships and acquisitions.

This rise and transition of EVs could duplicate the same trend we've seen over and over again with major booms.

While some successful EV companies may just be taking a breath to come back to reality...

The market also appears to be trimming the fat and revealing who the truly valuable companies are.

Today, we're seeing a second wave shaping up - one where the EV automakers have already played out their incredible upside.

And others who are taking electric vehicles in creative new directions.

These are the pick and shovel plays we think might prove akin to the big winners of the gold rush.

Here are 2 non-EV companies that could benefit in the second wave of the EV boom.

Facedrive (TSXV:FD; OTC:FDVRF)

Facedrive is a fast-growing Canadian company which has seen shares soar for incredible 526% gains over the last year.

And they've done it by leveraging the power of the first EV boom by taking it in exciting new directions.

For example, they became well-known first for their signature ridesharing service.

Giving riders the flexibility and eco-conscious options that Uber and Lyft are only planning to provide, Facedrive allows customers to choose whether they'd like to take their ride in an electric vehicle, gas-powered vehicle, or hybrid.


And it even takes it a step further by planting trees to help offset the carbon footprint of each ride using AI technology.

It's this sort of "people and planet first" philosophy that has helped Facedrive multiply their business several times over throughout 2020 and into 2021.

But while they've done well for themselves growing this side of the business, they've also been acquiring major pieces to help them take it to the next level.

That includes the acquisition of Steer, a company with a unique subscription model for EVs.

It used to be that if you wanted an electric vehicle, you'd have to shell out anywhere between $40,000 to $80,000 (or more) to do it.

But Steer's unique subscription model allows for not just lower upfront costs but much more flexibility than the old personal car ownership model we've grown so accustomed to.

That's because many are drawing the line and saying that while going green is important to them, they also aren't willing to pay exorbitant costs for it.

It's the reason why Steer charges a much lower monthly subscription rate in exchange for the choice of a whole line of EVs, including luxury EVs.

And as long as you're a subscriber, you can keep the same car or trade it for another of your choice.

Steer has been building a strong following in the Washington DC area, and given its success, it's now being taken international.

That's because they've recently branched into Canada as it's become available in Toronto as well.

With 2 of the biggest metro areas in North America hopping on board, the momentum appears to be picking up for Steer.

For Facedrive, between their signature EV ridesharing service and Steer's unique subscription service, they also added more pieces to make 2020 a year of incredible growth.

That includes a thriving EV food delivery service, a clothing apparel line partnering with A-list celebrities, and even breakthrough contact tracing technology for COVID-19.

And with their creativity and business savvy, this is making Facedrive (TSXV:FD; OTC:FDVRF) a prime competitor to benefit in the EV Boom 2.0.

Oshkosh Corporation (NYSE: OSK)

Oshkosh Corporation is a manufacturer that's been in business for well over a century now.

But most people hadn't heard about them until just a month ago when they won a major contract over one of the industry darlings, Workhorse.

Oshkosh manufactures specialty trucks along with military vehicles, truck bodies, and access equipment like cranes and lifts.

But lately they've received loads of press for their new EV delivery trucks.

So while folks like Tesla are busy selling one-off cars to individual consumers, Oshkosh has focused on locking down major contracts for tens of thousands of electric vehicles.

And that's exactly what helped them sign a contract with the United States Postal Service last month.

Through this partnership, they'll manufacture EV mail trucks for the USPS, helping flip their fleet to go electric.


They're set to assemble between 50,000 and 165,000 next-generation vehicles in the years ahead.

And the agreement comes with $482 million toward retooling and building out its factory.

This is major news for an under-the-radar company like Oshkosh.

But the truth is, this is just the first part of a multi-billion dollar deal that will help the USPS replace much of their fleet over the next 10 years.

And this has been established as a top priority for Biden, as shown in his American Jobs Plan.

In the fact sheet for his plan, he stated he'll "utilize the vast tools of federal procurement to electrify the federal fleet, including the United States Postal Service."

That has helped Oshkosh's shares jump 40% this year, as they're finally recognized as a key piece of the second wave of the EV boom.

The Next Winners of the Second Wave of the EV Revolution

As major companies like Tesla and Nio have seen their stocks rise to incredible new highs over the last year, more competition is inevitable for these industry giants.

But as the second wave of the EV revolution takes off, it could be the small innovators in other industries like Facedrive and Oshkosh that benefit by finding exciting new applications for electric vehicles everywhere.

Other Potential Winners In The Next Stage Of The EV Boom

General Motors (NYSE:GM) is one of the legacy automakers benefiting from a shift from gas-powered to EV technology. With the news of GM’s new business unit, BrightDrop, they plan to sell electric vans and services to commercial delivery companies, disrupting the market for delivery logistics.

That’s not all its working on, either. In October, auto industry legend, GM announced that it’s majority-owned subsidiary, Cruise, has just received approval from the California DMV to test its autonomous vehicles without a driver. And while they’re not the first to receive such an approval, it’s still huge news for GM.

Cruise CEO Dan Ammann wrote in a Medium post, “Before the end of the year, we’ll be sending cars out onto the streets of SF — without gasoline and without anyone at the wheel. Because safely removing the driver is the true benchmark of a self-driving car, and because burning fossil fuels is no way to build the future of transportation.”

Canada is not likely to be left out of this boom, either. GreenPower Motor (TSX:GPV) is an exciting company that produces larger-scale electric transportation. Right now, it is primarily focused on the North American market, but the sky is the limit as the pressure to go green grows. GreenPower has been on the frontlines of the electric movement, manufacturing affordable battery-electric busses and trucks for over ten years. From school busses to long-distance public transit, GreenPower’s impact on the sector can’t be ignored.

NFI Group (TSX:NFI) is another one of Canada’s most exciting companies in the electric vehicle space. It produces transit busses and motorcycles. NFI had a difficult start to the year, but it since cut its debt and begun to address its cash flow struggles in a meaningful way. Though it remains down from January highs, NFI still offers investors a promising opportunity to capitalize on the electric vehicle boom.

Recently, NFI has seen an uptick in insider stock purchases which is often a sign that the board and management strongly believe in the future of the company. In addition to its increasingly positive financial reports, it is also one of the few in the business that actually pay dividends out to its investors.

Another way to gain exposure to the electric vehicle industry is through AutoCanada (TSX:ACQ), a company that operates auto-dealerships through Canada. The company carries a wide variety of new and used vehicles and has all types of financial options available to fit the needs of any consumer. While sales have slumped this year due to the COVID-19 pandemic, AutoCanada will likely see a rebound as both buying power and the demand for electric vehicles increases. As more new exciting EVs hit the market, AutoCanada will surely be able to ride the wave.

Magna International (TSX:MG) is a great way to gain exposure to the EV market without betting big on one of the new hot automaker stocks tearing up Robinhood right now. The 63 year old Canadian manufacturing giant provides mobility technology for automakers of all types. From GM and Ford to luxury brands like BMW and Tesla, Magna is a master at striking deals. And it’s clear to see why. The company has the experience and reputation that automakers are looking for.

Like Magna, Westport Fuel Systems (TSX:WPRT) is another hardware and tech provider in the auto-industry.It builds products to help the transportation industry reduce their carbon footprint. In particular, it provides systems for less impactful fuels, such as natural gas. In North America alone, there are over 225,000 natural gas vehicles. But that shies in comparison to the global 22.5 million natural gas vehicles globally, which means the company still has a ton of room to grow!

By. Andrew Grewel

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

Forward-Looking Statements

This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements.  Forward looking statements in this publication include that the demand for ride sharing services will grow; that Steer can help change car ownership in favor of subscription services; that tech deals signed already will increase company revenues; that Facedrive will achieve its plans for manufacturing and selling Tracescan devices; that Facedrive will be able to expand to the US and globally; that Facedrive will be able to fund its capital requirements in the near term and long term; and that Facedrive will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information.  Risks that could change or prevent these statements from coming to fruition include that riders are not as attracted to EV rides as expected; that competitors may offer better or cheaper alternatives to the Facedrive businesses; changing governmental laws and policies; the company’s ability to obtain and retain necessary licensing in each geographical area in which it operates; the success of the company’s expansion activities and whether markets justify additional expansion; the ability of the company to attract drivers who have electric vehicles and hybrid cars; and that the products co-branded by Facedrive may not be as merchantable as expected. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

DISCLAIMERS

This communication is not a recommendation to buy or sell securities. Oilprice.com, Advanced Media Solutions Ltd, and their owners, managers, employees, and assigns (collectively “the Company”) own a considerable number of shares of FaceDrive (TSX:FD.V) for investment. This share position in FD.V is a major conflict with our ability to be unbiased, more specifically: This communication is for entertainment purposes only. Never invest purely based on our communication. Therefore, this communication should be viewed as a commercial advertisement only. We have not investigated the background of the featured company. Frequently companies profiled in our alerts experience a large increase in volume and share price during the course of investor awareness marketing, which often end as soon as the investor awareness marketing ceases. The information in our communications and on our website has not been independently verified and is not guaranteed to be correct.

SHARE OWNERSHIP. The owner of Oilprice.com owns a substantial number of shares of this featured company and therefore has a substantial incentive to see the featured company’s stock perform well. The owner of Oilprice.com will not notify the market when it decides to buy more or sell shares of this issuer in the market. The owner of Oilprice.com will be buying and selling shares of this issuer for its own profit. This is why we stress that you conduct extensive due diligence as well as seek the advice of your financial advisor or a registered broker-dealer before investing in any securities.

NOT AN INVESTMENT ADVISOR. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

RISK OF INVESTING. Investing is inherently risky. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities. No representation is being made that any stock acquisition will or is likely to achieve profits.

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Government

Gen Z, The Most Pessimistic Generation In History, May Decide The Election

Gen Z, The Most Pessimistic Generation In History, May Decide The Election

Authored by Mike Shedlock via MishTalk.com,

Young adults are more…

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Gen Z, The Most Pessimistic Generation In History, May Decide The Election

Authored by Mike Shedlock via MishTalk.com,

Young adults are more skeptical of government and pessimistic about the future than any living generation before them.

This is with reason, and it’s likely to decide the election.

Rough Years and the Most Pessimism Ever

The Wall Street Journal has an interesting article on The Rough Years That Turned Gen Z Into America’s Most Disillusioned Voters.

Young adults in Generation Z—those born in 1997 or after—have emerged from the pandemic feeling more disillusioned than any living generation before them, according to long-running surveys and interviews with dozens of young people around the country. They worry they’ll never make enough money to attain the security previous generations have achieved, citing their delayed launch into adulthood, an impenetrable housing market and loads of student debt.

And they’re fed up with policymakers from both parties.

Washington is moving closer to passing legislation that would ban or force the sale of TikTok, a platform beloved by millions of young people in the U.S. Several young people interviewed by The Wall Street Journal said they spend hours each day on the app and use it as their main source of news.

“It’s funny how they quickly pass this bill about this TikTok situation. What about schools that are getting shot up? We’re not going to pass a bill about that?” Gaddie asked. “No, we’re going to worry about TikTok and that just shows you where their head is…. I feel like they don’t really care about what’s going on with humanity.”

Gen Z’s widespread gloominess is manifesting in unparalleled skepticism of Washington and a feeling of despair that leaders of either party can help. Young Americans’ entire political memories are subsumed by intense partisanship and warnings about the looming end of everything from U.S. democracy to the planet. When the darkest days of the pandemic started to end, inflation reached 40-year highs. The right to an abortion was overturned. Wars in Ukraine and the Middle East raged.

Dissatisfaction is pushing some young voters to third-party candidates in this year’s presidential race and causing others to consider staying home on Election Day or leaving the top of the ticket blank. While young people typically vote at lower rates, a small number of Gen Z voters could make the difference in the election, which four years ago was decided by tens of thousands of votes in several swing states.

Roughly 41 million Gen Z Americans—ages 18 to 27—will be eligible to vote this year, according to Tufts University.

Gen Z is among the most liberal segments of the electorate, according to surveys, but recent polling shows them favoring Biden by only a slim margin. Some are unmoved by those who warn that a vote against Biden is effectively a vote for Trump, arguing that isn’t enough to earn their support.

Confidence

When asked if they had confidence in a range of public institutions, Gen Z’s faith in them was generally below that of the older cohorts at the same point in their lives. 

One-third of Gen Z Americans described themselves as conservative, according to NORC’s 2022 General Social Survey. That is a larger share identifying as conservative than when millennials, Gen X and baby boomers took the survey when they were the same age, though some of the differences were small and within the survey’s margin of error.

More young people now say they find it hard to have hope for the world than at any time since at least 1976, according to a University of Michigan survey that has tracked public sentiment among 12th-graders for nearly five decades. Young people today are less optimistic than any generation in decades that they’ll get a professional job or surpass the success of their parents, the long-running survey has found. They increasingly believe the system is stacked against them and support major changes to the way the country operates.

Gen Z future Outcome

“It’s the starkest difference I’ve documented in 20 years of doing this research,” said Twenge, the author of the book “Generations.” The pandemic, she said, amplified trends among Gen Z that have existed for years: chronic isolation, a lack of social interaction and a propensity to spend large amounts of time online.

A 2020 study found past epidemics have left a lasting impression on young people around the world, creating a lack of confidence in political institutions and their leaders. The study, which analyzed decades of Gallup World polling from dozens of countries, found the decline in trust among young people typically persists for two decades.

Young people are more likely than older voters to have a pessimistic view of the economy and disapprove of Biden’s handling of inflation, according to the recent Journal poll. Among people under 30, Biden leads Trump by 3 percentage points, 35% to 32%, with 14% undecided and the remaining shares going to third-party candidates, including 10% to independent Robert F. Kennedy Jr.

Economic Reality

Gen Z may be the first generation in US history that is not better off than their parents.

Many have given up on the idea they will ever be able to afford a home.

The economy is allegedly booming (I disagree). Regardless, stress over debt is high with younger millennials and zoomers.

This has been a constant theme of mine for many months.

Credit Card and Auto Delinquencies Soar

Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.

Record High Credit Card Debt

Credit card debt rose to a new record high of $1.13 trillion, up $50 billion in the quarter. Even more troubling is the surge in serious delinquencies, defined as 90 days or more past due.

For nearly all age groups, serious delinquencies are the highest since 2011.

Auto Loan Delinquencies

Serious delinquencies on auto loans have jumped from under 3 percent in mid-2021 to to 5 percent at the end of 2023 for age group 18-29.Age group 30-39 is also troubling. Serious delinquencies for age groups 18-29 and 30-39 are at the highest levels since 2010.

For further discussion please see Credit Card and Auto Delinquencies Soar, Especially Age Group 18 to 39

Generational Homeownership Rates

Home ownership rates courtesy of Apartment List

The above chart is from the Apartment List’s 2023 Millennial Homeownership Report

Those struggling with rent are more likely to be Millennials and Zoomers than Generation X, Baby Boomers, or members of the Silent Generation.

The same age groups struggling with credit card and auto delinquencies.

On Average Everything is Great

Average it up, and things look pretty good. This is why we have seen countless stories attempting to explain why people should be happy.

Krugman Blames Partisanship

OK, there is a fair amount of partisanship in the polls.

However, Biden isn’t struggling from partisanship alone. If that was the reason, Biden would not be polling so miserably with Democrats in general, blacks, and younger voters.

OK, there is a fair amount of partisanship in the polls.

However, Biden isn’t struggling from partisanship alone. If that was the reason, Biden would not be polling so miserably with Democrats in general, blacks, and younger voters.

This allegedly booming economy left behind the renters and everyone under the age of 40 struggling to make ends meet.

Many Are Addicted to “Buy Now, Pay Later” Plans

Buy Now Pay Later, BNPL, plans are increasingly popular. It’s another sign of consumer credit stress.

For discussion, please see Many Are Addicted to “Buy Now, Pay Later” Plans, It’s a Big Trap

The study did not break things down by home owners vs renters, but I strongly suspect most of the BNPL use is by renters.

What About Jobs?

Another seemingly strong jobs headline falls apart on closer scrutiny. The massive divergence between jobs and employment continued into February.

Nonfarm payrolls and employment levels from the BLS, chart by Mish.

Payrolls vs Employment Gains Since March 2023

  • Nonfarm Payrolls: 2,602,000

  • Employment Level: +144,000

  • Full Time Employment: -284,000

For more details of the weakening labor markets, please see Jobs Up 275,000 Employment Down 184,000

CPI Hot Again

CPI Data from the BLS, chart by Mish.

For discussion of the CPI inflation data for February, please see CPI Hot Again, Rent Up at Least 0.4 Percent for 30 Straight Months

Also note the Producer Price Index (PPI) Much Hotter Than Expected in February

Major Economic Cracks

There are economic cracks in spending, cracks in employment, and cracks in delinquencies.

But there are no cracks in the CPI. It’s coming down much slower than expected. And the PPI appears to have bottomed.

Add it up: Inflation + Recession = Stagflation.

Election Impact

In 2020, younger voters turned out in the biggest wave in history. And they voted for Biden.

Younger voters are not as likely to vote in 2024, and they are less likely to vote for Biden.

Millions of voters will not vote for either Trump or Biden. Net, this will impact Biden more. The base will not decide the election, but the Trump base is far more energized than the Biden base.

If Biden signs a TikTok ban, that alone could tip the election.

If No Labels ever gets its act together, I suspect it will siphon more votes from Biden than Trump. But many will just sit it out.

“We’re just kind of over it,” Noemi Peña, 20, a Tucson, Ariz., resident who works in a juice bar, said of her generation’s attitude toward politics. “We don’t even want to hear about it anymore.” Peña said she might not vote because she thinks it won’t change anything and “there’s just gonna be more fighting.” Biden won Arizona in 2020 by just over 10,000 votes. 

The Journal noted nearly one-third of voters under 30 have an unfavorable view of both Biden and Trump, a higher number than all older voters. Sixty-three percent of young voters think neither party adequately represents them.

Young voters in 2020 were energized to vote against Trump. Now they have thrown in the towel.

And Biden telling everyone how great the economy is only rubs salt in the wound.

Tyler Durden Sat, 03/16/2024 - 11:40

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Government

Copper Soars, Iron Ore Tumbles As Goldman Says “Copper’s Time Is Now”

Copper Soars, Iron Ore Tumbles As Goldman Says "Copper’s Time Is Now"

After languishing for the past two years in a tight range despite recurring…

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Copper Soars, Iron Ore Tumbles As Goldman Says "Copper's Time Is Now"

After languishing for the past two years in a tight range despite recurring speculation about declining global supply, copper has finally broken out, surging to the highest price in the past year, just shy of $9,000 a ton as supply cuts hit the market; At the same time the price of the world's "other" most important mined commodity has diverged, as iron ore has tumbled amid growing demand headwinds out of China's comatose housing sector where not even ghost cities are being built any more.

Copper surged almost 5% this week, ending a months-long spell of inertia, as investors focused on risks to supply at various global mines and smelters. As Bloomberg adds, traders also warmed to the idea that the worst of a global downturn is in the past, particularly for metals like copper that are increasingly used in electric vehicles and renewables.

Yet the commodity crash of recent years is hardly over, as signs of the headwinds in traditional industrial sectors are still all too obvious in the iron ore market, where futures fell below $100 a ton for the first time in seven months on Friday as investors bet that China’s years-long property crisis will run through 2024, keeping a lid on demand.

Indeed, while the mood surrounding copper has turned almost euphoric, sentiment on iron ore has soured since the conclusion of the latest National People’s Congress in Beijing, where the CCP set a 5% goal for economic growth, but offered few new measures that would boost infrastructure or other construction-intensive sectors.

As a result, the main steelmaking ingredient has shed more than 30% since early January as hopes of a meaningful revival in construction activity faded. Loss-making steel mills are buying less ore, and stockpiles are piling up at Chinese ports. The latest drop will embolden those who believe that the effects of President Xi Jinping’s property crackdown still have significant room to run, and that last year’s rally in iron ore may have been a false dawn.

Meanwhile, as Bloomberg notes, on Friday there were fresh signs that weakness in China’s industrial economy is hitting the copper market too, with stockpiles tracked by the Shanghai Futures Exchange surging to the highest level since the early days of the pandemic. The hope is that headwinds in traditional industrial areas will be offset by an ongoing surge in usage in electric vehicles and renewables.

And while industrial conditions in Europe and the US also look soft, there’s growing optimism about copper usage in India, where rising investment has helped fuel blowout growth rates of more than 8% — making it the fastest-growing major economy.

In any case, with the demand side of the equation still questionable, the main catalyst behind copper’s powerful rally is an unexpected tightening in global mine supplies, driven mainly by last year’s closure of a giant mine in Panama (discussed here), but there are also growing worries about output in Zambia, which is facing an El Niño-induced power crisis.

On Wednesday, copper prices jumped on huge volumes after smelters in China held a crisis meeting on how to cope with a sharp drop in processing fees following disruptions to supplies of mined ore. The group stopped short of coordinated production cuts, but pledged to re-arrange maintenance work, reduce runs and delay the startup of new projects. In the coming weeks investors will be watching Shanghai exchange inventories closely to gauge both the strength of demand and the extent of any capacity curtailments.

“The increase in SHFE stockpiles has been bigger than we’d anticipated, but we expect to see them coming down over the next few weeks,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone. “If the pace of the inventory builds doesn’t start to slow, investors will start to question whether smelters are actually cutting and whether the impact of weak construction activity is starting to weigh more heavily on the market.”

* * *

Few have been as happy with the recent surge in copper prices as Goldman's commodity team, where copper has long been a preferred trade (even if it may have cost the former team head Jeff Currie his job due to his unbridled enthusiasm for copper in the past two years which saw many hedge fund clients suffer major losses).

As Goldman's Nicholas Snowdon writes in a note titled "Copper's time is now" (available to pro subscribers in the usual place)...

... there has been a "turn in the industrial cycle." Specifically according to the Goldman analyst, after a prolonged downturn, "incremental evidence now points to a bottoming out in the industrial cycle, with the global manufacturing PMI in expansion for the first time since September 2022." As a result, Goldman now expects copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25.’

Here are the details:

Previous inflexions in global manufacturing cycles have been associated with subsequent sustained industrial metals upside, with copper and aluminium rising on average 25% and 9% over the next 12 months. Whilst seasonal surpluses have so far limited a tightening alignment at a micro level, we expect deficit inflexions to play out from quarter end, particularly for metals with severe supply binds. Supplemented by the influence of anticipated Fed easing ahead in a non-recessionary growth setting, another historically positive performance factor for metals, this should support further upside ahead with copper the headline act in this regard.

Goldman then turns to what it calls China's "green policy put":

Much of the recent focus on the “Two Sessions” event centred on the lack of significant broad stimulus, and in particular the limited property support. In our view it would be wrong – just as in 2022 and 2023 – to assume that this will result in weak onshore metals demand. Beijing’s emphasis on rapid growth in the metals intensive green economy, as an offset to property declines, continues to act as a policy put for green metals demand. After last year’s strong trends, evidence year-to-date is again supportive with aluminium and copper apparent demand rising 17% and 12% y/y respectively. Moreover, the potential for a ‘cash for clunkers’ initiative could provide meaningful right tail risk to that healthy demand base case. Yet there are also clear metal losers in this divergent policy setting, with ongoing pressure on property related steel demand generating recent sharp iron ore downside.

Meanwhile, Snowdon believes that the driver behind Goldman's long-running bullish view on copper - a global supply shock - continues:

Copper’s supply shock progresses. The metal with most significant upside potential is copper, in our view. The supply shock which began with aggressive concentrate destocking and then sharp mine supply downgrades last year, has now advanced to an increasing bind on metal production, as reflected in this week's China smelter supply rationing signal. With continued positive momentum in China's copper demand, a healthy refined import trend should generate a substantial ex-China refined deficit this year. With LME stocks having halved from Q4 peak, China’s imminent seasonal demand inflection should accelerate a path into extreme tightness by H2. Structural supply underinvestment, best reflected in peak mine supply we expect next year, implies that demand destruction will need to be the persistent solver on scarcity, an effect requiring substantially higher pricing than current, in our view. In this context, we maintain our view that the copper price will surge into next year (GSe 2025 $15,000/t average), expecting copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25’

Another reason why Goldman is doubling down on its bullish copper outlook: gold.

The sharp rally in gold price since the beginning of March has ended the period of consolidation that had been present since late December. Whilst the initial catalyst for the break higher came from a (gold) supportive turn in US data and real rates, the move has been significantly amplified by short term systematic buying, which suggests less sticky upside. In this context, we expect gold to consolidate for now, with our economists near term view on rates and the dollar suggesting limited near-term catalysts for further upside momentum. Yet, a substantive retracement lower will also likely be limited by resilience in physical buying channels. Nonetheless, in the midterm we continue to hold a constructive view on gold underpinned by persistent strength in EM demand as well as eventual Fed easing, which should crucially reactivate the largely for now dormant ETF buying channel. In this context, we increase our average gold price forecast for 2024 from $2,090/toz to $2,180/toz, targeting a move to $2,300/toz by year-end.

Much more in the full Goldman note available to pro subs.

Tyler Durden Fri, 03/15/2024 - 14:25

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International

The millions of people not looking for work in the UK may be prioritising education, health and freedom

Economic inactivity is not always the worst option.

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Taking time out. pathdoc/Shutterstock

Around one in five British people of working age (16-64) are now outside the labour market. Neither in work nor looking for work, they are officially labelled as “economically inactive”.

Some of those 9.2 million people are in education, with many students not active in the labour market because they are studying full-time. Others are older workers who have chosen to take early retirement.

But that still leaves a large number who are not part of the labour market because they are unable to work. And one key driver of economic inactivity in recent years has been illness.

This increase in economic inactivity – which has grown since before the pandemic – is not just harming the economy, but also indicative of a deeper health crisis.

For those suffering ill health, there are real constraints on access to work. People with health-limiting conditions cannot just slot into jobs that are available. They need help to address the illnesses they have, and to re-engage with work through organisations offering supportive and healthy work environments.

And for other groups, such as stay-at-home parents, businesses need to offer flexible work arrangements and subsidised childcare to support the transition from economic inactivity into work.

The government has a role to play too. Most obviously, it could increase investment in the NHS. Rising levels of poor health are linked to years of under-investment in the health sector and economic inactivity will not be tackled without more funding.

Carrots and sticks

For the time being though, the UK government appears to prefer an approach which mixes carrots and sticks. In the March 2024 budget, for example, the chancellor cut national insurance by 2p as a way of “making work pay”.

But it is unclear whether small tax changes like this will have any effect on attracting the economically inactive back into work.

Jeremy Hunt also extended free childcare. But again, questions remain over whether this is sufficient to remove barriers to work for those with parental responsibilities. The high cost and lack of availability of childcare remain key weaknesses in the UK economy.

The benefit system meanwhile has been designed to push people into work. Benefits in the UK remain relatively ungenerous and hard to access compared with other rich countries. But labour shortages won’t be solved by simply forcing the economically inactive into work, because not all of them are ready or able to comply.

It is also worth noting that work itself may be a cause of bad health. The notion of “bad work” – work that does not pay enough and is unrewarding in other ways – can lead to economic inactivity.

There is also evidence that as work has become more intensive over recent decades, for some people, work itself has become a health risk.

The pandemic showed us how certain groups of workers (including so-called “essential workers”) suffered more ill health due to their greater exposure to COVID. But there are broader trends towards lower quality work that predate the pandemic, and these trends suggest improving job quality is an important step towards tackling the underlying causes of economic inactivity.

Freedom

Another big section of the economically active population who cannot be ignored are those who have retired early and deliberately left the labour market behind. These are people who want and value – and crucially, can afford – a life without work.

Here, the effects of the pandemic can be seen again. During those years of lockdowns, furlough and remote working, many of us reassessed our relationship with our jobs. Changed attitudes towards work among some (mostly older) workers can explain why they are no longer in the labour market and why they may be unresponsive to job offers of any kind.

Sign on railings supporting NHS staff during pandemic.
COVID made many people reassess their priorities. Alex Yeung/Shutterstock

And maybe it is from this viewpoint that we should ultimately be looking at economic inactivity – that it is actually a sign of progress. That it represents a move towards freedom from the drudgery of work and the ability of some people to live as they wish.

There are utopian visions of the future, for example, which suggest that individual and collective freedom could be dramatically increased by paying people a universal basic income.

In the meantime, for plenty of working age people, economic inactivity is a direct result of ill health and sickness. So it may be that the levels of economic inactivity right now merely show how far we are from being a society which actually supports its citizens’ wellbeing.

David Spencer has received funding from the ESRC.

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