Why Safety Nets Aren’t Always Safe

Dear Rundown Reader,

“By the way,” a reader says, “you might mention the government’s role in the skyrocketing cost of college with their takeover of the student loan program… and preaching the life and death necessity of a college education.”

We covered that extensively with lots of colorful commentary in the fall of 2018; here’s a sample: “I think the current education system is geared towards college prep instead of trades.

“But 35% of high school graduates do not need/should not get college degrees. Their abilities and talents are suited for the trades… and the trades pay well. But the idea is often shunned by highly-educated elites.

“Truckers make more than bookkeepers, plumbers more than junior bankers, electricians more than educators and oil roughnecks more than most managers.”

Switching gears entirely, yesterday a reader and economist likened the coffee-cup parable featured Friday to a moral hazard.

The moral hazard principle outlines the danger of safety nets for businesses and individuals alike; for example, a tenured professor might become apathetic in the lecture hall because, well, he’s got job safety. Absent job safety, he’d probably operate differently. That’s a moral hazard.

How then does the moral hazard principle apply to socialism (as our economist reader said)?

Send your opinions to, TheRundownFeedback@SevenFigurePublishing.com.

Your Rundown for Tuesday, Jan. 28, 2020

Not A Goldbug? No matter… 

You don’t have to be a goldbug to value exposure to precious metals. A hassle-free way to do so? Gold mining stocks.

Today we break down the merits of the two largest gold mining companies in the world — Newmont Corp (NEM) and Barrick Gold (GOLD) respectively.

Fierce competitors, the two companies are headquartered in North America but operate mines throughout the world. And last year, one company’s shares soundly outperformed the other.

Since Jan. 2019, GOLD shares have climbed 57.4% versus NEM shares at 33.5%. That doesn’t necessarily mean Barrick’s the better investment.

Other factors to consider — while the two companies are neck-and-neck when it comes to market cap — Newmont edged out Barrick in terms of gold production last year with NEM coming in at an impressive 1.6 million ounces against Barrick’s 1.3 million. On the other hand, Barrick has a better record when it comes to free cash flow.

But here’s where Newmont might have the advantage: NEM has a rock-solid plan to optimize mining operations it acquired from Goldcorp in Apr. 2019. According to an article at the Wall Street Journal, analysts believe Newmont has more upside in 2020 going into 2021.

Not only that, Newmont is now offering the best dividend in gold mining “with an increase of 79% to 25 cents a share,” the article says. Add to that, “in December, the company started a $1 billion share buyback program.”

Newmont’s CEO Tom Palmer says: “This opens us up to a generalist investor.” Like I said, gold mining stocks aren’t just for goldbugs.

Market Rundown for Tuesday, Jan. 28, 2020

S&P 500 futures are up 20 points to 3,260.

Oil’s up 24 cents per barrel to $53.38.

Gold’s lost $3.90 to $1,573.50 per ounce.

Bitcoin’s up 1.6% to $9,052.42.

Send your comments and questions to, TheRundownFeedback@SevenFigurePublishing.com.

We’ll talk more tomorrow. Have a great day!

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler

Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown and has been with Agora Financial / Seven Figure Publishing since 2005. He's been covering technology and markets for over a decade.

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