The first part of this post is a monthly update about AuAg Fonder. This is followed by a summary of our view of the market (AuAgTrends).
The first part of the month was a lot about vaccines, the White House, but perhaps most unexpectedly all the small savers who gathered their strength to crack big shorters. More about that in AuAgTrends further down. Going forward, the ambition is that we write a letter "AuAgTrends" every month with the most important things that have happened in the market.
AuAg Precious Green has continued its journey upwards in both return and growing capital (AUM - Asset Under Management). With over SEK 300,000,000 in five months, we are very proud and look forward to the way ahead now when both the mega trends - Monetary Inflation and A Green World - are so strong.
Now we have also made finalised what we hope will be the next fund. The concept is set and we will now see if it can "pass through" all instances. So far, we do not want to say too much .... But we can say that the fund will be an ETF - an exchange-traded fund. If it goes really smoothly, we could call in the listing on the London Stock Exchange in mid-April (with listing also on Xetra / Frankfurt and Borsa Italiana / Milano) - Keep your fingers crossed!
*** Together with you, we reached our first billion under management yesterday. A significant milestone that weighs heavily. Thank you for being part of our joint journey! ***
We look back at a historic 2020, and have now ended the first month of the new year. The stock market has shown good form and despite the fact that we closed at new record levels last year, the stock market is yet up a few more percent since then. Expectations of a massive climate package, a new stimulus package, and vaccine news has given many investors hope for a bright future.
If there is one thing that really stood out in terms of price development since Joe Biden won the presidential election almost two months ago, it is assets with a focus on sustainability. This is also confirmed by the positive price development for underlying raw materials such as Copper, Lithium and Rare Earth Elements, all of which are important in our fund AuAg Precious Green. These are all
indispensable elements in the transformation into a greener world. Despite the fact that AuAg Precious Green, in addition to the sustainability focus, which accounts for a total of 60% of the fund's assets, also has about 40% gold ETC exposure, the fund still managed to deliver satisfactory returns in January to our investors.
The returns from our second fund, AuAg Silver Bullet, which focuses on companies that extract precious metals, primarily silver and gold, has also been positive for the month, though very volatile. For instance, we started in January by taking out a previous all-time high level for the fund and then experienced a sharp rebound that reduced the returns by almost 25%. At the end of the month, it picked up speed again and we believe we are now heading with determination towards a new record level. At the same time as this information reaches out to our readers, we are in fact witnessing the highest silver price since 2013! In 2020, we also saw the strongest development for the silver price since 2010.
For those of you who have the pleasure of following me on Twitter (www.twitter.com/AuAgStefan), I have for a long time pointed out that something massive has been brewing below the surface in silver. What we have witnessed is a rarely seen accumulation that most certainly would result in a continued and strong upward movement. The catalyst for that was probably the forum Reddit and the Wallstreetbets followers which has been a hot topic in the media the past week. It all started with investors mobilising together in a forum in a coordinated way, taking bets against hedge funds that shorted shares of companies such as Gamestop, AMC Entertainment, BlackBerry, Naked Brand & Koss Corp. Until now, since Thursday last week, it rather looks like the silver market is their next target.
To understand the proportions, for example, Gamestop's trading volume was $82.3 billion in just four trading days. That's actually enough to buy more than 3 times of the annual global silver production! Just as for the above-mentioned companies, silver also has an enormous short position, which is why a short squeeze of greater magnitude is entirely possible here as well. What fundamentally distinguishes the case, however, is that a shorted company always can issue new shares. The physical raw material silver on the other hand is nothing that can just be printed by anyone anyway. It is an extremely limited asset. A "precious” metal. It became very noticeable to people around the world the last few days when they wanted to buy physical silver, but in many cases the bullion dealers where out of stock due to unprecedented demand.
Instead of making a political statement and choosing to speculate in a grossly overvalued company that would probably have gone bankrupt in the next few quarters if it were not for the WSB Reddit mob. It seems that many investors have instead opened their eyes to the fact that silver is real money and has been money for 5000 years. It is a trade on a fundamental basis. A rare commodity that has been extremely undervalued for a very long time. The only metal with both monetary properties, but also indispensable properties for industrial applications and our everyday lives.
The recently coordinated attacks on heavily shorted stocks has definitely had an impact on investors, leading to an increased awareness of the price manipulations that occurs in different markets. In our crystal ball, however, we see a tendency that the stock market is beginning to look overvalued and parabolic in many stocks and sectors, hence it would be rather healthy with a slight cooling off period.
A declining stock market or sideways movements going forward should nevertheless be able to generate positive returns for precious metals driven primarily by the mining companies' profits, which continue to be robust at current gold & silver price levels. All other things being equal, this should be seen in the Q4 reports, which are presented in the second half of February. The tendency for companies to advertise for future share repurchases, increased dividends, and acquisitions, has increased recently and this is something that we believe will continue going forward.