🇨🇱 🇺🇸 The iShares MSCI Chile ETF is crushing this year. $ECH is up 53% and counting year-to-date (vs. 17% for $SPX). Why?

1️⃣ Copper is up 27% this year, and materials make up 40% of $ECH. Higher copper prices lift revenues, earnings, and dividends for mining giants like Sociedad Quimica y Minera de Chile SA ($SQM).

2️⃣ Lots of earnings surprises have pushed the gap between Chile and the broader emerging markets, while consumer sectors have benefited from wage gains due to a tight labor market.

3️⃣ Domestic politics have turned conducive. After a two-year battle, a market-friendly draft constitution was approved (with no massive royalty hike for miners). This has narrowed the equity risk premium in Chile.

4️⃣ Banco Central de Chile cut the base policy rate to 4.75% in July and signaled a willingness to go further. This was the last in two years' worth of cuts in a cycle that saw the rate fall from 11.25%. Obviously this reduces the cost of funding & debt, revives credit demand, and rerates domestic banks (20% of $ECH—Santander Chile's net income is +63% YoY). It also supports the peso, which...

5️⃣ The Chilean Peso has appreciated 7% against the Dollar this year. It's been buoyed by copper prices, the carry trade, and a two-year cutting cycle at the central bank. $ECH is dollar-denominated, so appreciation in $CLPUSD boosts the gains of its dollar-denominated investors.

🕯 INTELRUNNER 🕯

🌍 The gold-to-silver ratio has plummeted to 73:1.

After a two-week spike following Liberation Day, the ratio topped out at 107:1. It's down 31.57% in the 7-8 months since, so it's probably fair to say we're in the secondary, silver-oriented phase of the precious metals bull market.

This is—or was—the undervaluation in silver I've been pointing out for some time. The traditional normal range was something like 50-80, but uncompromising gold buying since 2008 by everyone from central banks to Asian households seems to have shifted the modern range a bit higher.

Perhaps longer-term that will still be the case (historically & naturally, it's about 16:1), but over the last ten years, it looks more like a 70-100 range is the appropriate heuristic.

🪙 I N T E L R U N N E R 🪙