When Trust Evaporates

I thought I’d compare the current Wuhan zombie apocalypse bat virus to that of SARS and see what is similar this time around…and what is not.

Now, I’m not going to get into which virus wins the “I killed more faster”, (thus far, it was SARS with a fatality rate of 9.6% vs 2.8%). Or which is more infectious (SARS again, though Coronavirus can spread while still incubating). Or join the silly debate of whether we should eat bats (they carry the disease, so ummm…NO). Rather, I’m going to focus on what’s been different in terms of the reaction globally…and why this is important. Because let’s face it, statistically, you’re still far more likely to be killed by some dolt crossing the centerline while watching his Insta feed…and nobody is running around like headless chickens screaming…don’t drive, don’t drive.

The Difference This Time

When SARS arrived on our doorsteps, the world’s response was one of cooperation, collaboration and a concerted effort to help our fellow man.

This time, the geopolitical world is completely different. We’re going into this at a time when trade wars have been ignited, Europe is fragmenting (Brexit, EU disharmony) US political polarisation is really something to behold. That’s bad enough, but there is an accelerating sense of distrust between countries at a political level and of institutions by the public at a private level.

All of these factors combined explain why it is that amongst other things…

Russia, Mongolia and North Korea have closed their land borders with China, and even HK has restricted their border. Flights in and out of mainland China have been cancelled indefinitely, with planes arriving from China landing in many countries only to be told…no way buddy back you go.

Who’s To Blame?

Blame is being thrown around like a frisbee on the beach. The Chinese think the round eyes are trying to destroy their economy with suggestions that the virus is a biological weapon designed by the CIA. Fringe. Truth? Maybe, what do I know?

Thing is, we never saw this sort of rhetoric with SARS. 

Americans say this is nonsense, because it was Chinese scientists themselves who designed this as a biological weapon, intended, presumably to be unleashed on housewives in Ohio, before it escaped from its cage. Fringe? Maybe. Again, what do I know? – But, again, we never saw this with SARS. Then, of course, fueling the entire fire is Joe Sixpack, pecking away at his iPhone, who knows as much as I do about this (nothing), who opines nonetheless and reminds everyone that he doesn’t care because “the Chinese are getting what they deserve since they’re a bunch of filthy little bat-eating disease-spreading bastards. Whatever. 

Humans under stress basic fallback is one of tribalism. You’re watching it unfold now. 

My point – Distrust!

But it’s not solely a cross border “you look and speak differently to me” problem. The Chinese trust their own government in the same way I trust a feral cat. And that’s not surprising when they’ve got drones watching citizens’ every move and yelling at them.

This could turn out to be a major issue for Emperor Xi because a populace pissed with the CCP is no longer a populace pissed with an establishment. You see, ever since Xi consolidated power, turning an authoritarian regime into a dictatorial one, it meant that there is only one guy to blame when something went pear shaped. And Xi is that guy.

That’s really a story for a different day, but realise that the pressure on Xi is NOT the same as the pressure on the CCP back when SARS was an issue. This time around, the pressure on him is much much worse.

Elsewhere in the world the zeitgeist is decidedly untrusting. The US hasn’t been so politically polarized in my lifetime. The EU…pfff well we’ve just seen Boris Johnson explain in detail why the Brits don’t see eye to eye with their neighbors.

The point is this. Distrust is massively elevated. What else?

The impact, at this point, on the global economy will be felt. No question. In China, it will be most acute. What will the PBOC do?

The same thing they’ve been doing every time they become concerned their magic 6% GDP print looked to be in jeopardy. Expand the PBOC balance sheet. But, unlike the west, they’ll do what they have been doing. Spend it on fiscal policies.

What about the west?

Good question. Well, the inevitable economic impact itself will mean that millennial “non-binary tri-gender fluid” will lose their job making coffees at Starbucks and be unable to afford imported avocados and you know what that means don’t you? They’ll blame it on billionaires. The economic downturn will pit these already antagonistic forces against one another.

The billionaires don’t trust the millennials – because they’re threatening to take away their jets. And then, there is the average Joe, who trusts neither the billionaires (because they’re doing sweetheart deals with the government…yes, you, Bezos) nor the green-haired girl…or is it a boy – (hard to tell) who is screeching about ice caps melting and hollering something or other about the polar bears. So there is bugger all unity because there is bugger all trust.

The question is – What do you want to own in a world that – dare I say it – feels rather combustible at this point?

A world where trust is evaporating like common sense at an Extinction rebellion convention?

Distrust is the reason to own gold. And not because some bearded old fart is trying to sell you on the idea but because when you can trust little else, certain assets become relatively more interesting to investors than others. 

This you do as an insurance policy. But if you want to play it for leverage, well, then you look to the equities. Which brings me neatly to a little something we’re doing here at HQ. A competition. 

Imagine getting 11 of the world’s top investors in the resource sector and finding out what their top 2-3 picks are for 2020. 

Well, we wondered the same thing. And so we created a challenge and invited the following fine gentleman to participate.

  • Ross Beaty Chairman of Pan American Silver, Chairman of Equinox Gold and Founder of the Lumina Group of companies
  • Steve de Jong, the CEO & Co-Founder of VRIFY technology Inc. and Chairman of Integra Resources. 
  • Otavio Costa, the portfolio manager at Crescat Capital. 
  • Dan Earle, the CEO of Solaris Resources – one of the leading authorities on exploration and development stage mining projects. 
  • Marcel de Groot who is co-founder and President of Pathway Capital.
  • Warren Irwin, the President and Chief Investment Officer of Rosseau Asset Management, who, I will remind you, has been outperforming the sector for 20 years and was ranked the top performing hedge fund in the world in 2016.
  • Tolga Kumova, a resource industry entrepreneur and corporate finance specialist.
  • Willem Middelkoop, a successful entrepreneur, founder of the Commodity Discovery Fund, and publicist from The Netherlands. 
  • Dr. Mark O’Dea, a mining industry entrepreneur who founded Oxygen Capital Corp. and is currently chairman of Liberty Gold, director of Pure Gold Mining, Discovery Metals, and Sun Metals. 
  • Nolan Watson, Co-founder of Sandstorm Gold, a diversified royalty company with a billion-dollar market capitalization.
  • Adam Lundin, CEO of Filo Mining, and President, CEO and a Director of Josemaria Resources Inc. and a Director of NGEx Minerals Ltd, and Africa Energy Corp. And, no, I’ve no idea when Adam finds time to sleep.

Whew! That’s a lot of intellectual firepower there. 

To find out exactly what these fine gents have picked as their top companies for 2020, go HERE. We’ll be tracking their progress throughout the year providing updates and in-depth analysis so that even if the zombie apocalypse comes to our doors – at least we’ll die rich.

-Chris

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