I had one heck of a headache last week. I tried all the usual remedies – water, stretching, fresh air, sleep, Tylenol – to mixed effect. That gold fell below US$1700 didn’t help, even if it does fit my forecast that gold would be boring-to-down for the next little while.

My ideas about what is going on haven’t changed much. Nominal yields keep rising because money is rotating from bonds to stocks to

1. Chase post-COVID growth and
2. Avoid bonds that are likely to keep sliding in price for a while given another $1.9-trillion stimulus bill.

When investors sell bonds, bond yields rise. Check out the 10-Year Treasury yield – it’s shooting upward! At the same time, the market doesn’t know how to forecast inflation in this strange post-COVID recovery, which makes it really hard to pin down real rates.

With real rates hard to assess, nominal rates are stealing the attention. And those rising yields are a negative for gold.

I continue to think this will resolve itself. The outlook for inflation will gradually become clear; when that happens, real rates will re-assert as the prime consideration.

Data over the next while may or may not help this. Many of the data points that the market watches are year-over-year changes. Guess what happened a year ago? The insanely intense COVID crash pulled everything – stocks, GDP, inflation, employment, energy, you name it – WAY down. As such the year-over-year comparisons that come out over the next two months are going to have hot headline numbers.

Most will understand the context in play but just as importantly: the market often sees in data what it wants to see. In a week where growth stocks are surging, a hot GDP number will help. In weeks when bond yields are high, a high inflation number will be discounted. Call me a cynic, but that’s what I foresee.

Still, these crazy data points are coming and will likely push the markets around, in ways that both make sense and don’t.

I last week’s letter I went my thesis on the ‘make sense’ front and what investors should do in the interim as we wait for gold to come around.

I also answered an important reader question: what are Free Trade Dates and why do they matter? I’m sharing that answer with all of you today.

In the rest of the letter: I shared the investment rationale for a new recommendation (a copper explorer!!) and provided portfolio updates on several of the Maven companies.

If you want my full, in-depth analysis on a weekly basis consider subscribing today! 

Mailbox: Free Trade Dates

From the Maven Letter: March 3, 2021

Quick question re free trade date… I swear you explained this in detail in a newsletter over the last few months but I just cannot find it anymore. I tried to google it but I’m only getting rubbish results from commission free trading platforms and free shares.

I’d like to understand this properly after following you into Empress on day one and riding it from a 3 bagger back down to square one now and you mentioned this as part of the reason why the stock has pulled back so much now.

– Reader AF

Good question! and good reminder that I need to explain these things often, as they are far from easy to figure out.

When companies finance – raise money by issuing new shares – the shares issued are NOT free to trade for the first four months. (There are a few kinds of financings where this is not the case, ie where shares are free too trade immediately, but those are the exception rather than the rule in the junior space. The two main ones are direct listing IPOs and prospectus offerings, which is a kind of financing used by larger companies.)

Whatever a share price does in those four months, the investors who bought in the financing have to hold their shares. If the share price appreciates notably, you can understand that these investors are then keen to sell into the strength when they are allowed to do so.

Sophisticated investors, which here means investors with margin trading accounts, can start to sell their financing shares as much as two weeks before the free trade date. regular investors can sell on the free trade date.

Companies try to place financing shares with supportive investors but that’s an imperfect art, because even supportive shareholders will sell some when a stock has multiplied!! Such was the case with Empress, the financing for which was at $0.20 and came free trading last week.

Free trade date selling pressure is also more when the financing included a warrant component, because then investors who remain bullish on the story can sell some of their holdings into strength while remaining comfortable that they retain exposure to the upside through their warrants.

It’s one of management’s jobs to try to manage the impact of a free trade date. That can mean talking to investors about how the free trade date period will likely represent an entry opportunity; it can mean lining up news announcements for that time frame; it can mean reminding shareholders of news that it still pending, and so on.