Berkshire Buys Barrick

Also: Japan's Dreadful GDP Reading, Precious Metals Week, Dislocations within the U.S. Housing Market

Japan’s GDP plummeted by 7.8% last quarter – annualized this comes out to a 27.8% drop. This is the biggest decline since the beginning of the dataset.

The New York Fed didn’t have great news either. Its Empire Manufacturing survey came in at just 3.7, well below the 15.0 expected by economists.

The one saving grace among the data released today is the National Association of Home Builder’s Market Index, which stands at 78.

Real Vision Blog - Chart: NAHB Market Index - Seasonally Adjusted
U.S. Nonfarm Payrolls

This matches the record level set during December 1998.

Demand for new homes is robust. While the NAHB’s rosy headline picture is getting talked about a lot, one data set not getting as much buzz is the mortgage delinquency rate from the mortgage bankers association (MBA). It now stands at 8.22%, nearing the highs seen during the financial crisis.

What’s even more remarkable is that the foreclosure rate continues to decline.

This is indicative of the federal moratorium on foreclosures. Normally, the delinquency rate and the foreclosure rate move together…

 Because they’re correlated.

This makes sense because the foreclosure rate is a essentially a derivative of the delinquency rate. But the correlation has now gone negative.

 Foreclosures have stalled even as delinquencies approach 2010 levels.

The moratorium on foreclosures keeps on getting rolled over, the current deadline is August 31.

Gold

And lastly, it’s precious metals week.

Today on Real Vision Lyn Alden spoke to Ron William today, it was nice pair Lyn’s macro insights with Ron’s technical expertise. A lot of charts so check that out.

Tomorrow Ed’s going to be speaking to Peter Cechinni, stay tuned for that. and then on Wednesday, Raoul’s going to be speaking to James Rasteh about investing in mining stocks.

We could not have picked a better time to start this campaign, with the bombshell coming out last Friday that Warren Buffett’s Berkshire Hathaway bought over half a billion dollars worth of Barrick Gold Corp, the largest precious metal miner in north America. This is highly significant as the oracle of Omaha has been a Skeptical of gold for the bulk of his career.

Barrick shot up after hours on Friday…

…and it continued its rally into this morning.

Other large-cap gold mining stocks quickly followed suit.

It’s not just the underlying price that spiked, but the implied volatility, too.

 

Real Vision Blog - Chart: Barrick Gold Implied Volume
Source: Bloomberg

This is a very dramatic time for gold, you had the epic rally these past few months…

…then Tuesday’s selloff was one of the biggest ever,

And then on Friday, Berkshire Hathaway invested in Barrick Gold Corp…

Real Vision Blog - Chart: Buffett Barrick
Source: Berkshire Hathaway 13F Filing, Q2 2020

The dominoes are lining up and that’s why we hope you join us this week on Real Vision as we dive deep into precious metals.

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