Last Monday, I was seated in the Great Room in my humble abode on the shores of the Great Scugog Swamp, wondering upon all wonder whether the Trump team would have the audacity to order a stock market stick-save in the face of weakening economic data, rising rates, and deteriorating breadth.
At first, I shrugged it off on the assumption that they would recognize the brazen bravado and obvious window-dressing being applied to the second inauguration of a narcissist bent upon altering international map lines and global trade rules as his lasting legacy. On second reflection, I decided that since this is a man that has survived media attack, justice department harassment, civil suits from retired porn stars, and two assassination attempts in his mission to recapture the White House, Donald Trump would succeed in having the S&P 500 gallop northward the day before he steps into the seat of power.
Notwithstanding that he has to get sworn in on Martin Luther King Day, which must be a major annoyance due to having to share the news cycle with a deceased civil rights activist, Donald John Trump takes over the realm of a largely vacated presidency where the nation was largely governed by a shadow committee of woke liberals sporting a grave abhorrence for the "Orange Man" having levied literally every facet of the U.S. government — judicial, legislative, and executive — in an attempt to block his second run for the throne.
As he travelled around the country last year in an amazing show of stamina and septuagenarian energy, he was speaking to large adoring crowds of people described by 2015 Democratic candidate Hillary Clinton as "deplorables" and it was these denizens of the lower middle and working classes that caught Trump fever and ushered him into office while the protest of Kamela Harris faded into oblivion.
After the Monday ceremony, I contend that the international rules of engagement will have changed forever. No longer will kissing the ring of the American emperor grant nations a free ride to sovereign protection by the U.S. Armed Forces. Trump intends to make every member of NATO (including Canada) pay their fair share of military expenses by way of tightened border security and personnel deployment. Do not be surprised if many of the NATO countries are forced to resort to conscription in order to fall into the line drawn by Trump's visions.
More significantly, he intends to make the invaluable American market a "pay-per-view" site where tariffs are the cover charge required to access the trillions of consumer dollars that are currently the envy of every nation and corporation on the planet. No longer can Japanese steel companies take excess inventory and dump it into the U.S. market to the detriment of companies like Cleveland Cliffs and U.S. Steel.
No longer can Canadian timber be shipped under the umbrella of government subsidies into U.S. housing markets. More significantly, these gargantuan Chinese container ships full to the brim with all manner of toasters, bottle openers, air conditioners, or slave-labor hi-tech gadgets (reversed engineered from American prototypes) will be stalled in the middle of the Pacific Ocean until Trump gets their tariff cheques in the mail. To coin a phrase, "There's a new sheriff in town," and he arrives well-armed and in ill humor.
How does this new regime of "MAKE AMERICA RICH AGAIN" affect the capital markets worldwide?
I think that all that is required is a fundamental understanding of Econ-101, where the history of taxation is studied in its impact upon "end prices." In every instance of tax increases, corporations pass along that added input cost to the "end price" for the product that they intend to sell. If Japanese steel is forced to pay an advantage-killing tariff at the port of entry, that steel will seek a non-U.S. market where the benefit of the reduced price will be felt by the consumer in purchases of all things that contain Japanese steel.
Similarly, avocados from Mexico used in culinary enterprises all over North America will result in higher food costs in the supermarket and in restaurants cost to be absorbed by the American consumer and certainly reflected in the CPI and Fed-preferred personal consumption expenditures (PCE).
In the end, tariffs are no different than a tax, and their imposition is not only inflationary, it is an impediment to global trade and, therefore, an impediment to global growth. Since growth is the only way to solve the debt problem, according to both Fed Chairman Jerome Powell and incoming Secretary of the Treasury Scott Bessent, it will be interesting (to put it mildly) to see how monetary and fiscal policies can adapt to the slowdown in tax revenues caused by tariffs.
As I have been writing about for decades, it is that ignoble four-letter word — "D-E-B-T" — that holds all the cards in this massive global poker game where straight faces and bluffs are ineffectual against the enforcement of sovereign intent and diplomatic gamesmanship. The problem as I see it lies in the mistaken assumption held by the Trump team that the U.S. military remains the globe's premier policeman, but recent evidence provided by geopolitical analyst the brilliant Peter Zeihan would show that hypersonic missile technology being developed by Russia and China and shared by Iran and others under their protective umbrella might be rapidly leveling the playing field.
What I would cringe from is a scenario where the Americans think they can call a bluff from either China or Russia, as we have recently seen on the Russia-Ukraine border where missiles built and provided by NATO are being lobbed into sovereign Russian airspace. This is the ultimate form of Russian Roulette because Vlad the Impaler is not the kind of leader that will run for cover very long. This is what happens when the world sees the global hegemonist lacking competent leadership, as was the case in the last four years under Joe Biden.
While the globe is fortunate to have a person of Trump's leadership ability now reassuming power in the White House, he does not have a balance sheet that can accommodate many of his grandiose plans for U.S. economic ascendancy. The debt monster has both hands around his throat and can impose a lethal constriction at the drop of a hat.
Most of the economists that I follow are in agreement mostly, I believe, out of "wishful thinking" that the tariffs are simply Trumpian bluster and that aspirations for annexing Canada and Greenland are merely negotiating tactics carried out in classic Vaudevillian fanfare by an obvious showman capable of rivaling P.T. Barnum.
Nonetheless, Monday ushers in a new and very dangerous regime and one that is going to threaten to derail the last 15 years of stock market worship and altruistic benevolence. Caveat emptor.
Gold
As I wrote in the GGMA 2025 Forecast Issue, uncertainties over tariffs and potential geopolitical turmoil have mollified the raging copper market outlook, which remains a textbook case of "exploration gone quiet," resulting in rapidly-dwindling supply and escalating demand.
However, it is the demand side of the equation that continues to give me pause as I try to figure out whether the upgrading of the electrical grid in China can provide enough demand for copper wiring to offset the demand-dulling effects of a global tariff war. Without a crystal ball, I had to shift copper to second place behind gold in my 2025 ranking for the metals.
As of last Friday, thumbing through my chartbook that I still update every week with a pencil and eraser, the technical picture for gold is absolutely sublime. Chart-wise, a move to surpass the late-October high at $2,800.80 will set up a run for the magic $3,000 number, a move which should (operative word being "should") light a propane torch under the backsides of the senior gold miners with special anatomical targeting for the two lumbering prehistoric laggards — Newmont Corp. (NEM:NYSE) and Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) — whose weighting in the major gold mining indices (XAU and HUI) is an agonizing impediment to any form of excitement in the sector from a technical perspective.
The juniors are starting to stir with my top-rated Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB), now finally registering a double off its 52-week low at CA$.11 from a little over a month ago. It was my top-ranked tax-loss selling candidate for purchase in November, and many of us are now delighted to have made the plunge.
Far more important than our net worth statements is the behavior of the TSX Venture Exchange, whose performance has always been perfectly correlated to the direction and amplitude of the gold price (and I go back to 1978 with that observation). I have been critical of the performance of the junior mining sector, and while I can make a twenty-paragraph essay citing all the excuses for its dismal behavior despite a rocketing gold price and out-of-control fiscal and monetary policies, all I care about here in this frigid month of January 2025 is that investment flows move in the right direction. I write with bated breath that it certainly appears that money is once again gravitating toward the developers that have limited cash, limited institutional support, and even more limited happy retail investors.
The TSXV is less than twenty points off its July 2023 high above 630. If it can surpass that level in response to the rising gold price, I see a test of the 2022 peak at 660 and then an assault on the 2020 peak above 1,100 (which feels like three decades ago).
Notwithstanding the fact that letters like mine are in need of validation by moves like that, it is the industry that is in dire need of an injection of both cash and sponsorship because the global economy desperately needs the exploration expertise and entrepreneurial risk appetites of the men and women that have discovered most, if not all, of the world's most important sources of mineral resource and they usually toiled for penny mining stocks trading on either the old Vancouver Stock Exchange or the TSXV. The world needs the "penny dreadfuls" far more than they need Fartcoin or another hybrid cellular phone deal.
Copper
Despite my trepidation over the possible repercussions of the Trump tariffs, please allow me to contradict myself by saying that the action in copper last week caught me totally by surprise, and luckily for me, it caught the market by surprise as well.
No sooner had I relegated copper to a retest of the August lows under $4.00/lb., it turned on a proverbial dime (penny?) and rocketed northward in a stunning China-stimulus-inspired reversal, running headlong into a downtrend line at $4.45/lb. in a matter of two-and-a-half weeks.
The copper producers chose to largely disbelieve the move, with my darling Freeport-McMoRan Inc. (FCX:NYSE) barely getting back above $40.00. Markets seem to be ignoring the substantial gold input to the FCX income statement, but what I also think has been lurking under the radar screen is the move by the Mali army to confiscate $250 million worth of gold held by Barrick Gold Corp. at their mine in that African country.
Freeport's operations are truly a global affair leaving them open to the same kind of operational blackmail and vulnerability as Barrick. However, Barrick has had a habit of getting into hot (or contaminated) water in more than a few countries around the world, while FCX has enjoyed relative immunity from confiscatory policies.
As a result, I added to FCX at $40 and believe that there is a trading opportunity for at least the typical 100-day "grace period" for incoming presidents to enjoy before the media and the markets begin to judge.
Copper and gold remain my two favorite metals for 2025, with the greatest leverage contained in the junior developers and explorers listed on the TSXV or CSE.
| Want to be the first to know about interesting Silver, Critical Metals, Gold and Base Metals investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Getchell Gold Corp. and Barrick Gold Corp.
- Michael Ballanger: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with Getchell Gold Corp. and Freeport-McMoRan Inc. I determined which companies would be included in this article based on my research and understanding of the sector.
- Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
- This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
For additional disclosures, please click here.
Michael Ballanger Disclosures
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.
