27 08/21 27/08/2021

Weekly Newsletter Week 34

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WEEK 34 | AUGUST
WEEKLY NEWSLETTER

 

OVERVIEW

  • Financial Markets & EconomiesWe’re Back
  • Good to knowReshaping the U.S. Economy
  • Your portfolio highlightsSolar Resources Fund, Sprott Physical Gold Trust
  • In other news: Fairfax Announces Successful Completion of Sale of RiverStone Europe to CVC, Markel Announces Investment In Buckner, Australia’s State Super Joins Brookfield in GeelongPort Sale
Financial Markets & Economies

The U.S. markets recovered from their slide last week and reached new all-time highs several times this week. Although there are still tapering concerns, investors did not shy away from the stock market. Markets continued the upward trend ignoring the historical data that categorizes August as one of the least favorable months for investors. The S&P500 ended up reaching 9 all-time highs so far in August.

Since we discussed India last week, the State Bank of India is projecting a 18.5% GDP growth in the first quarter of 2022. The Reserve Bank of India is even more optimistic with a 21.4% projection. This strong growth however is due to the sharp decline in production due to COVID-19. The Indian stock indices (Nifty 50 and Sensex) continued their way upwards.

In other news, some countries started raising interest rates to curb inflation. Sri Lanka and South Korea are among the first to do so. New Zealand had plans to raise rates as well but ended up postponing it due to a newly imposed lockdown. The U.S. will not increase interest rates till early 2023 said the Federal Reserve.

 
Good to Know

Since President Joe Biden took over, his administration began working on different bills to help reshape the U.S. economy for the future. At the moment the administration is working on a bill that is meant to slow climate change, expand college financial aid and Medicare benefits while also reducing poverty. This bill is even larger and longer lasting than the previously proposed infrastructure bill. If successful, this bill can positively affect the education sector, the healthcare sector, and perhaps even the climate.

Climate
The major provision in the new bill is for the energy sector to reduce pollution over the next decade and a half. Incentives would be given by subsidizing the use of clean energy (solar, wind, hydro etc.) and the disincentive would be the penalization of the use of “dirty” energy (oil, gas, & coal). The bill can also include a provision to help families pay for energy-efficient homes and electric cars according to experts.


Healthcare
The bill will expand Medicare so to include dental, vision, and hearing for Americans of 65 and above while simultaneously trying to reduce the overall healthcare spending. There will be more subsidies in the sector to avoid people moving to nursing homes. Other initiatives include the reduction of prescription drug prices. The bill will undoubtedly face opposition from the pharma industry.

Education
The bill will subsidize prekindergarten for all 3- and 4-year old’s and expand financial aid for community colleges to include both tuition and living expenses. It also includes a provision for subsidized childcare. These initiatives will reduce education inequality and consequently poverty.


All of the above is important for investors. With the U.S. being the world’s biggest economy and one of the most attractive countries for capital allocation, it is imperative for investors to follow their economic reform closely and consider the effects these may have on their investments. Keep in mind that the bill is still in its early stages and must be further discussed and voted on. The democrats are planning to pay for the bill by rising taxes on the affluent.
 

 
Your Portfolio Highlights
 
 
The Solar Resources Fund (SRF), as you well know, seeks substantial capital appreciation by investing in a diversified portfolio of international publicly traded equity securities. The fund also invests in equity funds with a rule that no more than 10% of the net assets can be invested in a single position. The fund concentrates its research and capital on undervalued resource companies, such as precious metals, base metals, and the energy sector (oil, gas and renewables). Some of these investments carry a greater risk, but this allows for extraordinary return potential in the future. The Fund returned -3.50% year-to-date due to an industry wide decline so far in Q3. One of the holdings we want to highlight this week is Sprott Physical Gold Trust. Sprott returned -4.84% year-to-date and +33.99% since purchase.

 

Sprott Physical Gold Trust (NYSE:PHYS) is an exchange-traded investment alternative where physical gold is held. In other words, it is a convenient way to own physical gold without having the hassle of storage and illiquidity. The Trust’s objective is to allocate all of its capital in physical gold bars. There is an overwhelming amount of gold bars which are distinguished by their weight, manufacturer, and refinement process. Sprott only deals in London Good Delivery (LGD) gold bars.

LGD bars contains approximately 400 troy ounces of fine gold and are traded in the loco-London builon market which is the world’s most important physical gold market. Although the bars are traded by international dealers, central banks, other financial institutions, mining companies, and major investors and corporations; they are also used by jewelers and other fabricators. Almost all of the new LGD bars are produced by miners that are accredited by the London Builon Market Association (LBMA).

Gold has long been held as a hedge/ protection against bad markets. By holding Sprott investors enjoy even more advantages. As previously said, the Trust holds actual physical gold bars which are safely stored at the Royal Canadian Mint. There is also the benefit of liquidity. Units of the Trust can be easily traded in market hours or exchanged for physical gold once a month. In addition to these, the Trust can also provide tax advantages for non-corporate investors. Besides gold, Sprott has several other Trusts focused on other metals such as silver and uranium.
 

*Please visit the Sprott website for more information or click on one of the images below for their latest presentation.

Sprott Physical Gold Trust - 3 Year Price Movement
In Other News
 
We wish you a pleasant weekend and hope you stay safe.

Kind regards, 
Shernel Thielman 
Investment Manager 

www.solar-asset.com | shernel@solar-asset.com 
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