Seeking alpha or uncovering the best asset or asset class in 2024 should be top of mind for every investor. But, the world is awash with chaos and shifting momentum. As the Red Sea becomes unusable for some of the largest shipping companies in the world, like Maersk, many commodities are increasing in value. Recent attacks on western tanker ships by Houthi rebels, a militant group supported by Iran, in the Red Sea have sent shockwaves through global geopolitics. U.S. Secretary of State Antony Blinken arrived in Israel recently and is warning of war spreading throughout the Middle East as attacks spill into Yemen.
In a once-unimaginable scenario, major Western shipping firms are now considering switching to China-flagged vessels to avoid conflicts. Iran has sent a new warship to the Red Sea…
Allocating capital to the best asset is becoming increasingly difficult as cold wars turn hot and political tensions rise in an election year that will see 49% of the world’s population (64 countries) head to the polls.
Best Asset No More: First Quantum Disaster May Spell Opportunity for China’s Jiangxi Copper
In perhaps the biggest fiasco since Kinross’ Fruta del Norte’s world-class gold project in Ecuador, which it had to walk away from after spending billions following massive windfall taxes and royalty payments, First Quantum Minerals shares a similar fate. The Canadian miner is being forced to shutter one of the world’s largest copper mines as they remain at a legal impasse with the Panamanian government.
Debt rating agency Fitch has now warned the fallout in Panama could hurt the company’s borrowing capacity. To this end, earlier this month, it was reported that First Quantum Minerals is talking with Chinese state-owned Jiangxi Copper Corp. about selling a stake in its Zambian copper mines to bolster the company’s finances.
First Quantum is in a world of hurt and has lost billions in market cap. The seizure of this asset provides a stark reminder of the perils of going abroad, particularly to countries where the rule of law may be changed depending on the political winds. Oftentimes investors get caught up in what they believe is the best asset, only to realize the politics of the country it resides in make it virtually uninvestable.
Bitcoin Spot ETF Drives Speculation and Price Higher
Bitcoin was the best-performing major financial asset in 2023. The cryptocurrency soared about 150% in value and added $530 billion to its market cap.
But 2024 could start with a bang for BTC if the world can buy and sell Bitcoin through a spot ETF. That will be determined by the SEC any day now. In a Bloomberg article by Emily Graffeo, Reggie Browne believes a spot Bitcoin ETF would trade at a significant premium to its net asset value, as high as 8%!
Canada’s Real Estate Market Finally Stalls, Hurts Small-Caps
Canada’s economy has increasingly relied on a robust real estate market for years. But, with interest rates soaring in 2023, buyers and investors hit the brakes. According to Nesto.ca,
“Canada’s benchmark single-family home price increased by 1.0% year-over-year to $788,200 in November 2023.”
That is the smallest gain in many years. Furthermore, many real estate markets, particularly those in the suburbs around Vancouver and Toronto, are down double-digits from the highs of 2021 and early 2022. The decline in real estate values has impacted Canada’s small and micro-cap markets as liquidity dried up in 2023.
Finding the Best Asset and Why Interest Rates Must Drop in 2024
As we enter 2024, declining interest rates could drive capital back into speculative assets. Cheap money is what the doctor ordered to keep asset prices inflated, or at some point, we will see continued stagnation and declines across the board. Finally, the amount of interest nations like the U.S. and Canada are now paying on their debt is completely untenable and must be brought down very soon.
The most prescient issue of 2024 is perhaps how quickly the Fed will lower rates and what impact that will have on inflation. While safe and providing somewhat of a hedge against inflation, sitting in cash was not the best asset in 2023 as the U.S. markets (led largely by the Magnificent 7) outperformed once again.
Finally, as U.S. debt continues to roll over at higher rates, federal government interest payments are soaring. According to CNN‘s Tami Luhby,
“The spike in payments was evident in October, the first month of fiscal year 2024, though experts caution against drawing too many conclusions from a single month. The government paid $76 billion last month, up 77% from the $43 billion tab in October 2022.”
