Friday, May 28, 2010
By way of Johnny on the spot IKN, I found this article (statement of clarification) from Jeff Christian, which really did me some good to read. Not because it enlightened me, but because yours truly has run a blog and a website that has made no secret of its distaste for the more out there gold bugs. It is good to see normal people like Mr. Christian get some air time in the precious metals area.
I have gotten hate mail from Sinclair fans and been lectured by GATA droids. The blog is not nearly as popular as it could be if I felt like being a fucking wing nut, telling the gold bug community what it wants to hear and keeping it on full titillation 24/7, with the gory details of the control exerted by the 'master planners', 'elite financiers' and '1-world government' statists.
But no, I am just going to give you the blog reader my best effort on a balanced presentation of financial markets and the [currently] one asset on which I am big picture bullish, and to newsletter subscribers I am going to continue to give what I consider the be high quality (I know it's honestly produced) analysis in keeping us on the right side of these markets and the macro-events which ultimately dictate their fate.
Consider this another one of those posts that attempts to clear out the crazies from the readership. You will never realize what kind of pill you have swallowed because the power of the message, 'good against evil' is so strong and so righteous. Just be aware that the gold market has been here before and a lot of these characters have been waiting a long time for their time to return to prominence.
Gold is a monetary metal that is not officially money. You can easily buy it, if you can keep your greed and gullibility in check, you just might be glad you did one day. Gold is so misunderstood it is not even funny. This presents me personally with opportunities because doods, this gold/commodity/inflation herd is special. When it barfs up the gold mining shares as oil, copper, to a degree silver, and to a much lesser degree, gold go down, out comes the inevitable mania in the other direction (and not surprisingly, out pop the D-Boyz).
I'll keep the developing fundamentals for the newsletter at this juncture, because combined with sector technical status at any given time, this opportunity, with patience, just might turn out to be a whopper, and is not to be micro managed on a free blog. But this advice which you see here often: 'KEEP YOUR HEADS SCREWED ON STRAIGHT' is going to come into play ever more intensely for the remainder of 2010, not just in gold but especially in the entire, broad construct.
When you read the juiciest of the 'us against them' gold bug stuff, take it with a grain of salt. If you have feelings of dislike or even hatred as you read this, find another blog... Please. Even if the more strident gold bugs are right about everything, the emotion will screw up their (and your) trading. In fact, most in the sector can't trade and the 'hold against evil forever' mantra serves to justify this. But I have got to think there's a counter party that loves seeing the true believers so well tended.
Now, keep yer heads screwed on straight and have a great weekend.
Anyway, here is an excerpt from a note this morning by Jurrien Timmer, Director of Research and co-fund manager @ Fidelity. Note the last line. I don't think I am riddling you if I leave out the answer to the last question. With the Fed on pump 'n pray, you know what I think.
Interest rates: Low for long
Ironically, the threat of contagion could be seen as bullish. Why? Against a background of positive economic momentum, we now have a situation that could cause the Fed to become even looser than it has been.
What made 2009 so positive was the combination of an improving economy and an easy monetary policy. As the expectation mounted that the Fed was eventually going to take away the punchbowl, the bullishness faded.
Now, the Fed may feel it needs to recommit to an easy policy. That could mean renewed asset purchases, and, if necessary, liquidity facilities to prop up the funding markets.
So, instead of the Fed starting to get ready to take the punchbowl away, it may now have to pour even more into the bowl. That could put a whole new lease on life for the U.S. recovery and therefore the asset markets.
Long Term Capital Management redux?
This notion that the Fed is staying loose even though the recovery is continuing reminds me a bit of the 1998 Long Term Capital Management (LTCM) episode. Back then the economy was fine but we had systemic risk in the credit markets (because LT Capital had amassed a trillion-dollar book it couldn't unwind). The Fed responded by cutting rates three times even though the economy was growing. What followed? The dot-com bubble. What could it be this time?
Thursday, May 27, 2010
This will come as the bi-polar herd asks itself "what, I am supposed to be bullish the euro now?!" amid another ratcheting down of confidence in the global currency shell game.
There is a reason gold is the only asset in blue sky. It's funny, but I am usually hesitant to sound like a gold bug when I feel the relic is over frothy and sponsored by too many unhealthy holders. I don't however, have that feeling at the moment. I know CoT is generally bearish and I know Karl Denninger and the D-Boyz are nay sayers. So what? We are witnessing the slo-mo unwinding of a confidence scheme and the risk is in not having exposure to eternal monetary value.
Thus concludes another gold bug moment brought to you by your friends at Biiwii.com
Barton Biggs Says US Stock Markets Over Sold [duh], Set For Big Pop in Days
As these things come into the public consciousness, we are happily on our way to a reset of sentiment. That is all it is. At least for my money. Readers are of course free to read whatever they want into it, including new or continuing bull market.
Wednesday, May 26, 2010
The Chinese do not like to buy hype and they do not like to chase assets. Just as they would not tend to talk in a threatening manner about US Treasuries and the US dollar as/if they planned to sell it, what do you suppose they would do if they planned to buy massive amounts of euros? Hmmm?
This MarketWatch piece may include the answer. "Look that way while I do this!"
"It is not as if the market needs new reasons to be bearish the euro, but the news that the market seems to be reacting to now is a Financial Times piece claiming, apparently without attribution, that China's State Administration of Foreign Exchange is reviewing its holdings of European bonds," wrote Marc Chandler, currency strategist at Brown Brothers Harriman & Co.
"Many thanks... Closed most of my shorts on Thursday, Friday (and the rest on Monday)...
With a large bit of the thinking being based on your Thursday alert that, yes, the mass psychology was oversold.
Good call. Looking to go short again mid to late next week."
Thanks Doug, but it was all your call my man. Seeing as how I cannot possibly predict anything but rather, merely point out risk vs. reward at any given time.
The stock market is mucho bearish. It's just that risk came into play for bears as well, joining the dopy bulls.
The rally being expressed right now was expected - although I must admit yesterday's start put me on 'rut roh' alert, as it threatened the preferred scenario put forth in NFTRH86. Ah, but what is the rally? You know what it is; it is relief of unsustainable bi-polar sentiment swings. Going forward we will watch this pig for the next bearish phase now that it has gotten it together for Relief Blip '10.
Gold stocks have established themselves as leaders and here is the best part; NOT to the downside, but to the upside. Ah, but the precious metals cheering squads will get all whooped up once again and perhaps the time frame for the real play is not going to conform to their wishes. Still, the gold sector is very big picture bullish, unlike heading into 2008 and the err, events that blew up in Q4 of that year. So in my opinion, any would-be gold bull avoiding the sector right now is taking a big chance.
As stated a few times recently, the markets have gotten fun again after the drudgery that was the 2nd half of Hope '09. I love it when information is flying around, inflationists are still confident, deflationists are chest thumping and the public is well... doing what the public does.
Anyway, Bob showed up on Yahoo's Tech Ticker - and who knows what other mainstream outlets - in a sure sign of impending rally.
Prechter on Yahoo! Finance: "On Schedule for a Very, Very Long Bear Market"
Robert Prechter discussed the recent global sell-off that has sent all major
U.S. averages 10% below their 2010 highs with Yahoo! Finance Tech Ticker host
Aaron Task on May 20, 2010. Prechter says that the current climate shows that "we're
in a wave of recognition" where the fundamentals are catching up to the
technicals and that it's time to prepare for a "long way down."
For more information from Robert Prechter, download
a FREE 10-page issue of the Elliott Wave Theorist. It challenges current
recovery hype with hard facts, independent analysis, and insightful charts.
You'll find out why the worst is NOT over and what you can do to safeguard
your financial future.
Tuesday, May 25, 2010
Gold is the only safety asset left; and that applies whether its price of the moment goes up or down. Its value proposition is what will be important. Pays no dividend, denominates no liability, remember? If the shit hits the fan, gold's REAL price is going to rise strongly for all the reasons belabored repeatedly. US treasuries will get the bid for sure if markets tank, but they have a nagging detrimental issue; namely their mark to unpayable debt of a nation that runs on debt.
It is never good for gold to get pumped on war, so I am glad to see the Korea news has not sent it up sharply. Gold is a place where value can be stored over time as authorities systematically erode the value of their respective currencies.
If today's downside is driven mostly by war fears, the markets should rebound from it. If it is driven by the news of Spain springing another leak in euro land, and the euro breaks to new lows, our potential rebound scenario is in trouble.
This has the makings of the fear that would be necessary to support the next bubble, after the smoke clears; that next bubble would be not in gold, which would simply seek out its proper price value in relation to other things (ie, its real price), but in gold stocks, whose leverage to the POG will come into play soon enough.
To subscribers: If the whole mess takes another lurch south, the NFTRH speculative portfolio will likely reduce down a bit to a core of gold stock holdings and await buying opportunities as noted on the weekly HUI chart. But I personally want to be very careful about trying not to blink, through emotianswer this questionon or over-reaction. I know what I hold and why. We should all know 'what' and 'why'. It is a time for cash, patience and the understanding that gold is THE unique asset class when systems are falling apart and confidence is being eroded.
Meanwhile, we watch to see if the global macro market managers can pull a rabbit out of the hat. Either way, the next bubble stands to be an outstanding one; born of fear as opposed to the usual greed: Gold and especially gold stocks leveraged to the POG. But please remember the time frame noted in #86, for the likely next leg up.
Edit (4:03) There, that wasn't so bad now was it? :-) BTW, I just noticed some strange words in this post; gobbldeegook of some sort. Must've happened in the post editor. Seriously, I really am not losing it... I don't think.
Monday, May 24, 2010
Euro hype to the upside was expressed for years by touts who had presented a picture that it was just the big, bad USA alone that had major problems. All along as a public writer and then in NFTRH I had presented the euro as just another piece of paper with no real value backing it. So recent events are somewhat refreshing from the standpoint of the analysis, which sees major currencies in a race to the bottom [of the barrel].
It appears that the mania toward the opposite pole from over-bullish has gone too far however, and the euro can rally at any time, possibly providing a good relief story for the broad market to pin its ‘hope’ on once again. Similarly, the US dollar has expressed itself in ‘too far, too fast’ fashion amid the euro hype.
The euro just made a weekly close above important support while Uncle Buck remains below the highs last seen during the worst parts of Armageddon ’08. Again, this is a picture of potential short-term relief for many markets, first and foremost obviously, the euro. Longer term, these two debt backed basket cases are featured players in the race to the bottom in the currency world. All major currencies are contestants in this race by the way; at least all major paper currencies. That is how pervasive the ‘debt as economic fuel’ ethic of the current global economic system has become.
While on the subject of currencies, let’s have a look at the progress of gold as measured in a few of them by way of our Gold-Dow, Gold-Currencies ratio chart. The breakout in Gold-Dow from its Hope ’09 consolidation is very early in its progress. While there can be some post-breakout chop and grind, the risk vs. reward in gold vs. Dow is favorable.
In the currency panels we see gold correcting from over bought in British Pounds and euros after having achieved the rough upside targets of the Cup ‘n Handle patterns. Further upside is projected after some corrective consolidation. Gold in Canada dollars breaks out from the handle but hits resistance at the rim of the cup. It looks to go higher after dealing with this resistance. Gold-Aussie dollar was noted previously as not being a cup due to very low right side, yet was bullish above support. This expressed well in a strong rise up toward resistance.
We are in the age of natural economic contraction being fought by policy makers in the only way they seem to know; leveraging confidence in their respective currencies into debt creation in a massive, world-wide funding scheme. How long can this work? Perhaps longer than you or I could hold out if we take a strong, active stance against it.
The last year of euphoric bullish activity tells us something, and that is that the masses are not yet ready to accept that the Fed, Treasury and their counterparts around the world cannot ultimately control financial events. So by definition, a confidence scheme runs as long as its one underpinning – confidence – remains intact.
Notes From the Rabbit Hole
We then look at nominal stock markets, commodities and the all-important US treasury market and interpret the inter-relations and meanings there. Perhaps NFTRH's most important ongoing signpost, 'Smart/Dumb' money sentiment along with volatility (VIX & equity put/call ratio) are doing some very interesting things as well.
NFTRH's risk table has been adjusted this week on the short term (from 'high' and 'elevated' in most cases), a couple precious metals stocks are looked at in technical detail; one a current holding and one I would like to buy - with patience - at a certain technical level that shouts 'LOW RISK'.
There is also a 'Wrap Up' segment focusing on the US dollar and euro. This will be sampled in the next post.
Have a great week and keep your heads screwed on straight. It's noisy out there.
Friday, May 21, 2010
Damned if I know... I am going to leave the great questions to be answered by the great minds. Is this the end of the financial world as we know it? It should be, given that it is built on lies upon lies. But here in Wonderland, things don't usually work out as they 'should', now do they?
So I will just continue to specialize in my own little corner of the vast, wheezing Ponzi scheme on the verge of meltdown. Our junk bond to investment grade bond indicator has come in... sentiment has come in... VIX, US Dollar... all in. Then there is the big daddy of my personal investment (and investment avoidance) stance, the GSR.
Of particular interest to me is the GSR's relationship to the gold mining sector. Now, this is a free blog and I gladly share some general things, but it is now getting serious and the serious focus must remain for the people who pay for it, in the newsletter. The time for fooling around with the Hope '09 (and Full Hubris '10) stupidity is at an end. As a bottom feeder and a buyer of peoples' misery and misperception I must now get on the job.
Meanwhile, here is a chart of the GSR and its longer term correlation with HUI. Draw some conclusions (among them that gold stocks can get royally hammered even as the rising GSR indicates rising gold miner fundamentals), have patience and turn down the noise; that would be the harangues of the inflationists and now, increasingly the deflationists as well.
Time to begin sorting through the debris, with patience and perspective. There, how's that for a riddle?
Thursday, May 20, 2010
This is not an indicator on timing but it is another of those things that tell me we can rally; not necessarily in the broad market, but sometime soon in the gold stock sector. There are key differences between today and Armageddon '08 and they are key to gold and gold stocks. Just look at the relative position of the precious metals to the USD in its precariously lofty state. But then, it's the inflationistas that worship the death of the buck, isn't it?
Real gold sector people know that what drives up the dollar... what drives up the VIX... what drives up the gold-silver ratio... gold-oil, gold-copper... all that stuff; they know what this means and my newsletter is going to focus on these meanings ever more maniacally going forward because for the first time in a year I have something I feel I can be actionably bullish on.
Back on subject...
One key ingredient for me that long time readers will remember is when deflationists come on with the 'taking the dumb bulls to school' attitude. Well, here is the one and only Karl Denninger; school is in session:
The Roof Is On Fire
I emphasize patience and I emphasize cash. Beyond that, with the 'D Boys' out in force, I also emphasize that it is time to once again begin focusing on the investment merit of the gold sector (the metal first and foremost) in an environment where economic contraction is being forced upon us by all manner of bad monetary policy.
I should note that I like Denninger and do not disagree with much of what he has to say here. But again, I have been awaiting a "deflation event" for longer than I found convenient. It is here.
And I say that as a guy obviously getting dinged today. Good thing I know my big picture. O.P.P.O.R.T.U.N.I.T.Y upcoming.
As I have always said, cash is a position. The bear positions did their job and now that I like the dawning RvR in the gold sector, it is time to think about finding gems on sale there; albeit very patiently.
That's why. I will be a bear again when the RvR says it is a good risk.
"Gold has witnessed a meteoric rise over the last 10 years. At $1,193 per troy ounce today, it is now up over 300% (15%/year) since the start of 2000. By comparison, the S&P 500 is down 24% over that same period. Oil is up over 170% (10%/year)."
A secular change occurred in 2000. This new era has seen ever more intense monetary policy being used as THE primary economic fundamental underpinning; in other words, the age of inflate-or-die is upon us as economies begin to wheeze and lock up in the absence of liquidity that feeds them (as opposed to the productivity traditional growth economies once used). As blog readers know, the Copper-Gold ratio has been used to illustrate the inflate-or-die dynamic as well as indicate a recent bearish divergence to asset markets.
"While gold may continue to trade up for some period of time, history predicts that the when the gold run ends, it will end badly. That is to say that the fall could be fast and far. Since Nixon took the country off the gold standard in 1971, there has been only one other gold rally on the order of the current one. It began in Aug 1976 and peaked in Jan 1980. Gold increased over 700% in less than three and one half years to $825. Unfortunately for those who bought on the way up, gold proceeded to shed 64% of its value over the next two and one half years. Worse, for those who thought “it will come back,” it took almost 28 years for gold to eclipse its Jan 1980 high in Dec 2007. On an inflation adjusted basis, even the enormous recent run has only brought gold back to just over half of its Jan 1980 peak."
Thank you Paul Volcker. Anybody see any policy makers out there with Volcker's combination of guts and available policy tools? Articles that implore you to beware the 'gold bubble' (which has not even gotten started yet, I might add) often highlight how badly gold underperformed in the 20 year post-Volcker period during which Alan Greenspan, the financial services leviathan, and an overall ethic of greed sucked the life out of the wellspring of financial resources the former Fed chairman had injected directly into the productive economy thanks to his stern monetary policy and resulting rates of interest.
Yes gold under-performed as I suppose, it should have. But the gold-bearish articles always seem to ignore the other side of the coin; it has a lot of catching up to do, still, at $1100+ an ounce.
"So, how does one determine when the end of the current gold bull market is near? No one knows. Many are buying gold as a hedge against anticipated inflation. But, inflation is nowhere near where it was in the late 1970s. Specifically, on an unadjusted basis, year-over-year inflation in April was 2.2%. That was largely in line with an average reading over the last 25 years and a long way below 8% to 14% readings being registered during gold’s last spike. While future inflation may be in the cards, it would have to increase an awful lot from current levels to justify the recent run in gold. And, it likely has an uphill battle against high unemployment and a Fed that is at least saying the right things."
Here comes the convolution; if inflation were busting out (our monthly EMA 100 'line in the sand' on inflation fears remains intact) this would indeed signal the coming of an era to consider the potential of oil, industrial metals, agricultural commodities and many other resources to keep up with, and perhaps in some cases outperform, gold. Although, depending on what said inflationary spike does to economic growth, that is no given.
The current system operates on a series of liquidity draw-downs, which pump life into the primary economic funding system; namely, confidence in the US treasury market. Here is the chart I did months ago to illustrate. It is updated to current status and shows that the 'line in the sand' has held and funding may continue.
The monthly EMA 100 represents a continuum during which all crises have been met with debt-fueled funding. The problem since 2000 has been illustrated well by various ratio charts often posted here; things like the Dow-Gold and Copper-Gold ratios have shown clearly that growth over the last decade has been hugely dependent on monetary policy born of debt creation (monetary policy to which gold is very sensitive) vs. productivity.
I agree with 'Chart Facts' that inflation has been muted, at least its effects (that's important) have thus far been so. But this is an era of 'deflation impulse always met by inflation policy'. Look at how poorly oil performed vs. gold during the first real deflationary episode of the 'inflate-or-die' era. So yes, I am in agreement that inflation is muted (from the perspective of its 'effects'), which is precisely the environment for gold as policy makers will feel ever-more empowered to meet economic contraction with new inflationary policies after being given the green light by the Treasury market; you see?
"Maybe the better question to ask about gold is whether, given its performance, there are better investments at the moment. On the corporate side, an ounce of gold will again buy the S&P 500. Before the recent run, that had not been the case since Feb 1991. And, with corporate earnings after tax (also plotted on the chart below) showing recent traction, there are good reasons to believe that the S&P is not overvalued. Addressing the inflation concern, stocks generally provide a good inflation hedge over the long-term. The risk right now, however, is that the European issues could put pressure on the corporate earnings which support the S&P."
I saw this advice at gold 350, gold 420, gold 600 and so on and so forth. Here's the SPX-Gold ratio from well before stocks topped out in secular fashion in ratio to gold. The nominal price of gold is shown as well. All the way up we have seen this type of analysis by gold bears. Gold has made up a significant portion of the value gap, but in light of the inflation policy baked into the system (and reflected by $Trillions in unpayable - save for devaluation - debt) and considering that secular trends often run around 20 years (just like the previous one in paper assets), there is a long way further to go in gold's outperformance vs. the broad stock market.
As for corporate earnings "showing recent traction", I think it is better to be forward-looking, don't you? Copper, oil, China... the tools of the inflationary growth trade beg to differ with this analysis.
"Taking it all the way down to the consumer level, an ounce of gold will currently buy you about one year’s worth of gasoline here in the US. Specifically, it will purchase almost 430 gallons at Monday's $2.86/gallon. With data available back to the early 1990s, that had not happened prior to the last two years. A very quick, very informal survey of non-money managers who live near me failed to turn up any people who found an ounce of gold more valuable than one year’s worth of gas for their cars."
The very same money managers who did not see the 2008 crash coming despite at least four years of clues. Next...
"Translating that to oil, a commodity easier to invest in than retail gasoline, an ounce of gold will currently purchase 17.1 barrels of crude oil (Cushing, OK). Since the start of 2000, that number has averaged 10.8. (Interestingly, it average 18.6 from 1983 to 2000, but that was before China and others made themselves felt as growing global consumers of oil.) More importantly, oil is a key consumable of the growing global economy. Unlike gold, it is easy to point to fundamental economic activities that are likely to continue to drive demand and price for oil up regardless of market vagaries."
If there is real and sustained economic growth you are right sir, gold will underperform; as it should. Is there real and sustained economic growth? Again, see China, see copper, see oil (all of which will rebound and decline within an overall deceleration of economic activity before the next inflationary growth spurt.
"One strange correlation that has crept up in the last 15 years that might continue to support gold prices is the relationship between the direction of gold prices and the direction of US debt to GDP. US debt to GDP peaked in 1995-1996. When it began to turn down after that, gold prices headed down as well. When debt to GDP bottomed in 2001 and began to trend back up, gold turned as well. Both have been on a steady march up since then. Unfortunately, the Obama 2011 budget has debt to GDP steadily increasing over each of the next 10 years.Nonetheless, with a growing global economy and current relative prices, oil is likely to be a better returning investment over the medium to long-term."
A lucid and sane paragraph is followed by more convolution. A "growing global economy" owing to $Trillions in unpayable - short of default/devaluation - debt will contribute to the sustainable economic growth that things like oil, industrial metals and the stock market will need to outperform gold?
I have heard this all before; at 350, 420, 600...
Notes From the Rabbit Hole
Wednesday, May 19, 2010
Then there is the nice look of this ultra gold (UGL) ultra silver (AGQ) chart that got me thinking "say, gold got hammered today... should I buy a price tracker?"
I bought UGL based on this chart. Yes, it's an inverted H&S that correlates to the would-be bottom making one shown here previously on the standard gold-silver ratio. I do not want to pretend to be overly brave right now. I'll sell this gold price tracker tomorrow if need be. But then again I was not overly anxious either due to the cushioning of the short positions.
The whole ratio comparison exercise was put in motion by an email from a subscriber - a fund guy - who advised he was buying AGQ heavily. Silver will likely outperform short term if a rebound visits, but I am an old fashioned fuddy duddy; I like relative stability.
Hmmmm, I wonder.
Gold and to a lesser degree silver have been safe havens. Will they continue to drop if Uncle Buck does so? What, for a day or two? It says here that a euro reversal (if it manifests and you can't get much more bad news baked into that cake short term, can you?) is likely to bring very short term pressure after which gold will prove why it is the preferred asset in all currencies in a world dependent on inflation onDemand.
- HUI is fooling around with critical short term support noted in an email update yesterday. Hence, I have dumped some non core stuff and am looking to add a few gems getting puked up.
- Not to practice after the fact reporting, but ZSL was added back late yesterday before being dumped this morning for 8% gain. For a good analysis of silver as a monetary metal, check out subscriber Monty's blog. I don't wish to fool w/ the silver bugs too much.
- I remain short markets via EEV, SRS, SKF, TWM and an outright short on the SPY, but am on the lookout for bulls who want to come out and play. Meanwhile, much of the risk is being taken out of the gold sector and the early stages of looking for golden opportunities are upon us. That will become the focus rather than managing the top in the markets, which I have done for far too long and which really sucks.
- I have a much sunnier personality when I am able to do positive, proactive things as opposed to worshiping pain and destruction.
Hey, have a great day.
Edit (1:00) SKF +12% realized. Thank you. More money for PM opportunities. Edit (1:25) SPY short covered +3% and change. Real Estate (SRS), emerging markets (EEV) and small cap (TWM) ultra shorts still held for now. Edit (1:54) EEV (12%) and TWM (5%) gone. With the PM's so well corrected here, the risk is just not what it was a couple weeks ago. Why not book profits from bear positions and look to add back later? SRS still held for now. Edit (3:41) Okay, I am a bull...or at least not a bear. SRS booked for 9%.
This dynamic is why the recent flirtation with the big picture 'line in the sand' on inflation fear tolerance was so important and potentially alarming; how the hell would they have funded operations if the inflation bulls had broken down the barn door? How?
Here's our old Treasury fund chart, steaming right along. I own SHY & IEI (1-7 year); too chicken to buy longer term debt of the inflator, however.
China this, inflation that... what happened to the story? So Europe is melting down, causing the predictable flight to USD. Surely the commodity wise guys couldn't have packed it in just because of a little turbulence on the global financial landscape.
Is the much maligned Prechter actually taking center stage for a while? Nah, can't be; everybody knows he's full of it.
To the chart... here is the good doctor on a weekly view. He has come to what had better prove to be support, and commodity and inflation speculators had better hope support holds. Prechter is coming; he is always there, waiting; fright mask at the ready even as copper sits near support, remains AROON weekly trend up and appears ripe for relief. But there is a target down below, at around 2 bucks a pound. Don't think it can get there? Think again.
This blog and especially its resident newsletter state firmly that our future is an inflationary one. But they also state that there will be interim deflationary impulses; in fact, under the current system of inflation-on-demand, these episodes are necessary to promote the next round of inflationary effects so vital to the current system. It will not be surprising to see this chart break that 'copper roof' at around $4/lb. at some point in the next very few years, but the technical bearish divergence and the macro fundamental unwinding currently in play argue that it may see half that level first.
Tuesday, May 18, 2010
Monday, May 17, 2010
It appears that our previous look at the correlation between the new high into October 2007 and the new high into April 2010 - both with negative divergence by MACD - will prove fruitful. Add in data points like the achieved measured target off of the inverted head & shoulders built during Armageddon '08 and the case is firmer still.
Finally, there is all that overhead resistance the market has had to deal with. Do you remember just how strong and how pervasive negative sentiment was back in late '08, early '09? Hmm? Well, that has translated into a solid wall of resistance for the broad market SPY along with many other global markets. At the very least this has argued for a cautious stance for quite some time now, especially when factoring in the extremely unhealthy sponsorship this market has 'enjoyed' for months now.
So, NFTRH85 is out now and it stays on theme because managing the markets is not about writing something alarming or profound every week; it is about staying on theme and progressing through stages in a rational manner. We are on a continuum which encompasses not only the nominal cycles in markets, but as policy makers attempt to blow a gasket to save the fading system, the ratios of different markets - monetary metal gold especially - are where the strong clues are.
I felt like I fought the reactive hope rally for months on end and am sure some of that seeped into the newsletter, which had quite frankly become a grind. This was great experience for a newer NL writer; sort of like how John Hussman runs his mutual fund - with a view over entire cycles - so too must an ultimately successful market writer (and market participant for that matter) view the bigger picture.
I have also gone through a stage where some people asked me to "dumb it down", "write at a 10th grade level" and not write in "riddles". Well, they are not riddles; they are what I consider important points of analysis and they are ultimately understood by people who have been around the financial markets. They are not well understood by the public, so NFTRH will never become the mass accepted financial market entity like the ones that put out easy to understand cartoons for mass consumption.
The markets are not easy to understand; that is the whole point. The markets are difficult and to avoid being part of the herd, you must do difficult work. So, my decision is to keep writing as I write, be 100% me and let the chips fall where they may. The subscriber base has a healthy proportion of financial professionals in it along with some really hard core 'regular folk' who have either 'gotten me' from the beginning or have 'gotten me' over time. Others fall by the wayside and I have come to accept and even look forward to that, because I want to find the base to whom I am speaking and no one else.
Things are once again getting loud... just like a ball game; "hey batter batter... SWING batter!". The markets are stirring and various media are competing to pull in the herd to their particular view, competing to BE RIGHT as always. I will just sit this one out, keep the hyperbole on mute and let the bull or bear heroes manage the masses. I want readers who will think for themselves to carry forward their individual plans.
Thanks for listening and have a great market week.
Friday, May 14, 2010
Well, you're right sir. I'll hold onto my dollars alright because they'll come in handy soon. But I have been bullish the gold sector for nearly a decade with no end in sight. So I'll hold onto my dollars, my PM's, my short term treasury bonds and my market short positions.
Why is it that gold bugs tend to get emotional when someone writes something not even anti-gold, but pro-dollar based on technicals? The bottoming dollar foretold the onset of the acute phase of the Euro debt/default crisis. What's the big deal? Do you think I write about a big, fat, global macro casino year after year for the fun of it?
We'll it's not fun. It just is.
Zero Hedge reproduces an email from a former Wall Street insider that attempts to get into the mind of Geithner and his steroidal approach to market management:
Insights From an Ex-Wall Street CEO on Market Manipulation
Fighting Ben & Timmy is exhausting, but somebody's gotta do it. The herd is tended by the sweet sound of nothingness, a rising market on low volumes. Then, the introduction of volatility and the realization that these people's control really is an illusion, an ephemeral thing.
Thursday, May 13, 2010
Wednesday, May 12, 2010
Would-be bears must realize that these manic upswings are part of the package when you are betting against powerful greed. It is also part of the package in the making of a top; and it is volatile in both directions.
If the bulls break the GSR down, break the VIX down and manage to put the put/call ratios happily to sleep once again, we will go back into suspended animation mode. But that has not happened yet. We are simply reacting to the running of the manic idiots last week.
We have been here before; those of us who have been around the precious metals markets throughout the current, ongoing secular bull. We have been through the extended periods of questioning by 'the faithful' as to why the ancient monetary relic does not keep up with more heavily gamed assets, which are not coincidentally positively correlated to the inflated economy.
Technically, gold has come to NFTRH's near term target, recently revised from 1225 to 1240. But what is that but a number? There is a higher target of 1300 off of the 1.5 year long consolidation pattern beginning in early 2008. Then there is the longer term target of 2200. These are all just technical mumbo jumbo my friends because gold is only ever about value in a monetary world gone insane. Gold is anti-casino, anti-speculation and anti-risk no matter what the mainstream media would have you believe. I always get a laugh out of MSM headlines along the lines of 'Gold Declines in a Flight From Risky Assets'.
In phases where the global printing press is on auto-pump and hope, if not economic activity, gains traction gold can underperform the gamed mainstream plays like copper, oil, high yield bonds and the stock market in the short term. But few plays are at new all-time highs. Gold remains so, even after spending the last year in downward consolidation vs. the stock market, many commodities and the assets of positive economic correlation.
'Armageddon 08' saw the real price of gold explode to unsustainable highs and 'Hope 09' has simply been a corrective measure. Gold investors who know the value proposition of real money in a time of scarcity of same, just yawned while gold stock investors and traders - those who know the play - look forward to the next leg up in gold mining fundamentals, which grow by leaps and bounds as the real price of gold increases; in other words as gold resumes its outperformance mode vs. the things of hope, of positive correlation. The gold-oil, gold-industrial metals and gold-stock market ratios all factor in as gold miner costs decline in relation to their product.
I have been using this chart to gauge the coming of the next phase of the rise in gold's real price. It is a simple chart noting a similar consolidation structure to the one that held sway in 2006-2007 as the gold sector was cleaned out in preparation for the coming events of the outwardly obvious credit contraction and resulting market crash.
Gold as measured in the S&P 500 has much higher to go now that the consolidation appears to be ending right at the uptrend line drawn on this weekly chart weeks before it was finally hit. Blog readers may recall the original post showing this chart from March 18th, Anything Look Familiar?
As signs of frothy sentiment that the gold sector is noted for get whooped up again, remember that if you trade the sector, you generally sell the euphoria and buy its polar opposite condition, despair. I am more of an investor due to current fundamental views, so I will probably continue to hold many or most positions indefinitely (likely with the protection of broad market short positions, which the above chart says is a good strategy).
With the none-too-subtle degradation of the global monetary system and gold bullish or rising in all major currencies, there is also a chance for a major spike here. In the markets in general, noise levels have increased markedly off of the dull rise to a likely top in prices and positive sentiment in April. We will keep a filter on this noise and keep an eye on a real bull market's progress. This would be the bull market in gold's real as well as nominal prices.
Meanwhile, in the background the struggles between the inflation and deflation stories play out short term. We are on the way to an inflationary future, but gold alone is proving itself of value during both conditions. The system is trying to deflate; this is being fought tooth and nail as currency is burned in the battle. Regardless of further upside or a sharp correction to support around 1000, gold is front and center and value will be retained until such time as the system is overhauled.
Some people bemoan that I do not make predictions. This is not the blog for them. A target has been hit; there are several more targets higher and one lower. These are the markets and you need to be ready for anything, including the possibility that things are becoming unhinged here and now. Years ago I started my simple web presence with a simple thought; be prepared. It still applies.
Tuesday, May 11, 2010
Keep your heads screwed on straight out there. Things are getting wild.
So, I guess ZSL did its job in losing me a little money but firming up the backbone so I could keep holding First Majestic, which is now on its way back above the breakout line.
I also noted in #84 that I do not fight the silver bulls or the oil and commodity/inflation bulls for that matter. That is because my big picture is one of an inflationary future. Still, I often feel funny running with the silver bugs. Not sure why... must be a strict purist view of precious metals and gold, or something.
Gold in Aussie, Canada and Yen are joining the gold explosion in BP's and Euros. US Dollar? Ha ha ha... don't make me laugh.
Protect yourself from global monetarists who pretend to be in control.
Stock futures fall as volatility remains
As the trend changes, we can expect some grinding up of both bulls and bears. Caution is the best stance as we transition into something quite different than the fare served up in the March 2009 to March 2010 false dawn.
Monday, May 10, 2010
This is a pretty good lesson on why I always hold a good amount of these things, at least as long as I am big picture bullish. Just wish I had done so w/ Sabina and let one of the duds go that I am currently holding onto. Funny thing about PM exploration duds though; they tend to get very exciting very quickly.
As for Sabina, I will have zero problem buying it higher (than it was sold at) once it settles down, if it settles down. Dohhhh. This is the markets, and they don't give a shit about you or me. Sometimes you get stung, but you get right up the next day and you go to work.
"Technically, crude oil is attempting a bounce (with the broad markets) from the bottom of an uptrend channel measured over the last year. This was probably due to happen regardless of Euro debt relief.
A supportive short term signal for crude and other commodities has been the bullish pattern that developed in the Baltic Dry Index over the last week, despite the market panic.
On a more intermediate picture, if we have a deflationary impulse - which I expect prior to the next inflationary upsurge - oil is going to decline. There is support in the 55-60 area but 35-40 is very doable as well, with strong support there.
The time frame is the balance of 2010. 6-10 months or so, after which we may expect inflationary boats to be lifted again, including and especially in things like crude oil."
So the next time some central banker tells you his or her job is to maintain price stability, you can laugh and go about the job of protecting yourself... from a) the short term deflationary destruction these people create and b) the longer term 'baked in the cake' inflation they promote all in the name of maintaining the illusion of control, of power.
The $CAC sports a potential reverse sym-tri which is a reversal pattern (up to down). The fact that the most recent high did not hit the top line argues against new highs as relief courses through the market's veins. Although creepily enough, the measured target of the bottoming pattern was never registered and corresponds with the top of the sym-tri.
Creepy yes, but look who is in charge of global market manipulations. Anything is possible when desperation meets powerful policy making ability, no matter how destructive it may be beyond the short term.
Stock futures surge on central bank actions
"Europe has unequivocally said, 'We will defend the euro's integrity,'" said Oliver Pursche, executive vice president at Gary Goldberg Financial Services in Suffern, N.Y.
What kind of hair-brained commentary is this Oliver? Think about what you are saying. You state that European counterfeiters are defending the currency's integrity by printing more of it and sending it down a black hole that will never offer re-payment. All it will do is amplify the current problem and increase its velocity.
An old friend, Chris Martenson used to talk of "hockey sticks" in his crash course. People, this is how hockey sticks (actions of exponentially increasing velocity) are made. These pigs - in the interest of keeping up appearances - are making desperate attempts to paper things over but in reality, for patient people anyway, are creating their own eventual demise.
For it's part, NFTRH84 had this to say (among a heck of a lot of other things):
Despite the wrong-headed advice likely to keep coming from the mainstream, and considering the reversal of sentiment as indicated by the VIX and the equity put/call ratio, it is time to talk of potential short-term rebound.
The VIX shows a clear picture of the manic and unhealthy investment atmosphere that the conventional advisers would have the public buy into. How does a rational or healthy market go from extreme complacency to extreme fear in just a week?
Whatever, the VIX has come to a resistance level from which it may be repelled. The conventional swamis will use the mini-recovery to sooth-say the herd. One can easily read a reverse symmetrical triangle into the weekly VIX structure. A reverse sym-tri is a reversal pattern (to up in this case). Any market recovery is to be sold, shorted into or resisted in my opinion. The market top is very likely in, as has been our theme of late, even before Thursday’s theatrics.
Caveat (because there usually is one): I was looking at a historical chart of the SPX last night and considering the power of last week's manic downside and the power of desperate hope, and based on what has happened during the making of previous MAJOR tops, we cannot rule out new highs before this thing takes the dirt nap.
It's just the way it goes. A lot of tests of discipline are upcoming.
Sunday, May 9, 2010
In fact, in a sort of stream of consciousness way a major gold bug rant spontaneously erupted. It basically encompassed a lot of my personal fundamental view of this often hyped, often misunderstood, but oh so critical asset market during a time when nations are compelled to competitively go about the destruction of their currencies as functional stores of confidence.
I think #84 may be a bit of a hard read for casual observers and more and more I am coming toward the conclusion that the newsletter "speaks over many peoples' heads". This, according to a former subscriber. I would love to write something accessible to more people, while at the same time keeping it true to its mission. But it ain't happening.
To win in the financial markets you have got to be hard core. I am, and there is not much I can do about it. #84 if anything, makes the free giveaway #83 look like a walk in the park. ;-)
Hey, thanks for listening and enjoy your Mother's Day all you moms out there!
Friday, May 7, 2010
Besides, what am I protecting? Precious metals stocks with an emphasis on gold. It's not like I am hedging regular bull stocks.
Incidentally, since they were first mentioned on the blog I have a wrap up on the 'bull' stocks SIGM and FTEK. SIGM was sold last week for a modest profit of around 4% or something like that. FTEK was forced out of my hands a couple days ago on lousy price action for a loss that more than wiped out the SIGM profit. FTEK then grossed out the market with underwhelming Q results and forecast, and dropped some more.
Dat's da mahkits, and we move on.
But I am reluctant to frequently give away content that subscribers are paying for, even at the expense of promo. It's just the way it is I guess. Instead I try to create new content on the blog independent of NFTRH. Anyway, now that the initial break has come I thought I would join the giveaway parade. Here's NFTRH83 for your reference. A risk table appears weekly near the end of the report as a handy reference. As you can see, we are prepared for some err, negative events. Just as we were prepared for positive ones a year+ ago.
NFTRH was ready for yesterday as well as for what is upcoming. Here is an email from a subscriber:
Major tip of the hat to you... You've provided real help to me and my family. I was pretty well protected today and your news letter had a lot to do with me being properly positioned. Thank you. Monty High, World of Wall Street.
NFTRH83 is available here (left side bar)
Note the risk table near the end. It is a handy reference updated weekly as to the risk/reward ratios of various markets.
Thursday, May 6, 2010
EWI is Johnny on the Spot (Bobby on the Spot?) with a free issue of Prechter's most recent Elliott Wave Theorist (dated April 16) out today directly after the market tankage. I have not read it but sure plan to before markets open tomorrow.
Go get it. Sign up for the free Club EWI if you have not and read it. And I assure you that EWI is not a spammy kind of thing. Not at all. In fact, this is not a pitch. I earn a commish on any EWI sign ups through this link (free blog and all). But all I am telling you to do is go get the Theorist. The rest is up to you.
I am not a true deflationist after all; just a guy who has been patiently awaiting the impulse for many months.
Here is the pitch in EWI's own words:
"A Deadly Bearish Big Picture"
That's the headline Robert Prechter gave to his just-published Elliott Wave Theorist. You can read that entire 10-page issue right now -- for FREE!
Continue reading to learn more or get it now.
Headlines are usually about what happened already, but Prechter's headline is about what happens next. It goes beyond providing information. Yes, he wants you to see what he sees -- but Prechter's purpose is to provide you with a forecast so that you'll be prepared.
So please consider the top headline once again.
If you've read any of Prechter's books or heard him in an interview, you know that overstatement is not his style. When he says the "Big Picture" is "Deadly Bearish," that is exactly what he means.
This issue of the Theorist shows the depth of Prechter's recent research into what that "Big Picture" includes. The array of time cycles he explains is nothing short of amazing; each one is relevant to the how and when of what stock market prices will do from now until the year 2016.
And make no mistake, this April issue of The Elliott Wave Theorist fully recognizes the extraordinarily optimistic sentiment that now blankets the financial world. Truth is, the evidence is everywhere -- you just have to know where to look. Did you know that Time magazine quotes two professors who are telling 20- and 30-year-olds to use ALL their retirement savings to buy stocks on margin?
This is exactly the type of one-sided evidence that covered the financial world back in February of 2009 -- except, of course, the extreme then led to a "deadly bullish" conclusion. Yes, that was precisely the month when Bob Prechter's Elliott Wave Theorist told subscribers to expect the stock market to turn bullish.
Once again, find out why investors turn to EWI for a different perspective. It's better to be with it than without.
Is this a picture of impatient, momo following, non-perspective-having dumb money getting played yet again? All the while, gold has been in consolidation of the unsustainable upside it experienced in ratio to everything the last time we had the running of the bull herds.
I wish I could say I have sympathy for these players but I don't. It has been difficult writing a blog and especially a grounded, common sense based newsletter during all these euphoric months where everybody was on the bull.
Now it is our turn; with 'our' meaning straight-minded, sane and patient people who care about the important turns, not chasing momentum in a way that a dog chases its tail when it has nothing better to do.
Bulls will spin this as a hammer, but there is no relative downtrend in any kind of proper proportion. So, if the market rebounds here it will more likely provide a retest and opportunity to put on additional shorts.
The whole world are PIIGS. This is the interconnected paper-over global financial system we have. The ticky toc clock hath struck midnight me thinks.
Got to love the herds. No patience, no foresight, no nothin' really. The herd just is.