There is a writer we’ll call Don Quixote who is tilting at something that no longer really exists… the evil gold promoters that used to be taken seriously by innocents to the tune of near total destruction of their portfolios.
Don once went on about the gold cult and I even highlighted his post because I had been going about the gold cult as well. The cult-like aspect of the gold “community” (← a dead giveaway) was real, and the group-think that the 2001-2011 bull market fostered was very strong and really damaging to those who did not question it tenets until it was too late.
Is Japan Zimbabwe? How preposterous: Japan is an advanced economy that cannot possibly suffer the same fate as Zimbabwe. Right? Or could Japan get hyperinflation? Below I explain why Japan, and with it investors’ portfolios, might be at risk.
The other day, when I was on a panel discussing unsustainable deficits in the U.S., Eurozone and Japan, the risk of inflation and Zimbabwe style hyperinflation came up. When asked about the difference about Japan and Zimbabwe, I quipped that there isn’t any. My co-panelists were all over me, arguing Japan is different. Notably that Japan could not possibly go broke because, unlike Zimbabwe, it’s an advanced economy. The argument being that Japan produces goods the world wants.
The confusing nature of the PBOC’s actions in the past year or so has led now to publications of theories over a potential power struggle at the central bank. While finally acknowledging that last year was all about “targeted” approaches to monetary “guiding” economic reality, this year is about to explode in personnel changes and therefore, supposedly, a reactionary course to more familiar “flooding” of broad-based approaches. Curiously, unlike last year, there is no contention about the state of China’s economy as it is now-universally accepted as foundering badly.
The last two “rate cuts”, including the one just conducted this weekend, are being listed under that paradigm, though I don’t know how there is any way to reconcile them without including currency moves. The PBOC may have reduced its benchmark rates, but has simultaneously also moved to a higher fix on the currency. The latter is far more important and is perfectly within the “reform” paradigm as such a move is most likely (nobody will ever know for sure) aimed at speculative “dollar” financing of all China’s problems – bubbles.
The Semiconductors, which has been my favorite sector both for trading and for market indications (with the Biotech a close second) is merrily on its way to the 750 target. This chart and its target were created as the Semiconductor index was consolidating a ‘Handle’ out of the ridiculous October hysterics (cue Microchip Semi with its idiot management… ‘errr, we are a bellwether and we see a Semi slow down’… FF 2 mos… ‘oh, never mind, business is great!’). Amazingly, there are only 20 points to target.
 I heard myself say “take profits!” so I did on the 2nd half of the TTNP position. No worry though, there’s another one dropping toward my buy point. Reap and re-plant…
The play has been to use the weekly Biotech index as a backbone. As long as it is on this firm trend, the sector is okay.
With the above backbone in place the area I (in temporary Casino Patron mode) have been working is in the more speculative Biotech stocks that had formed basing patterns. This was originally a seasonal (tax loss/Jan. effect) play but now it appears to be morphing into a latter stage sector play as the speculative stuff starts jumping well beyond January. Last week we looked at TTNP, which I de-risked by taking half off the table. Also, profits were taken on CUR and OMED. As these things bounce up and down, some provide buy back opportunities as well.
This post is a slightly-modified excerpt from a recent TSI commentary.
Gold tends to fare relatively poorly during the booms, which are periods when confidence in central banks and the economy rises at the same time as mal-investment is setting the stage for a future period of great hardship, and fare relatively well during the busts, which are periods when the investing mistakes of the past come to the fore. Be aware, though, that the word “relatively” is critical to understanding gold’s relationship to the boom/bust cycle, because the relationship often doesn’t apply to gold’s performance in US$ terms.
To show what I mean I’ll begin with a chart of the US$ gold price covering the past 20 years. There were booms and busts during this period that are not evident on this chart. In particular, 2001-2011 contained huge booms and busts, and yet the gold price trended steadily upward throughout. How could this be?
332 is a good one. They all have been lately in my opinion. I know that because each week doing the work in these reports (and in-week updates) helps orient me and keep me cross-referenced and double checked in my own assumptions.
Frankly, I feel as though I am seeing the markets well this year. It’s sort of like conducting an orchestra and having all pieces playing to perfection. While patience is a key word, markets are moving along and making wonderful sense. To boot, even individual stock charts are working well and more often than not doing what I want them to do. Go figure.
The market manager side of me (as opposed to the idealist human side) is in control and pleased with how things are going. This manager does not care what the market does as long as we are on the right side of it. The idealist may need to find a hobby for a while.
NFTRH 332 carries the narrative up to today. It’s out now and you should check it out with an affordable subscription. I realize that everything on the internet is supposed to be free, but you know you ultimately get what you don’t pay for. We’re talking less than 4 Fidelity trade commissions a month for a weekly report and multiple updates.
One winning trade or avoided loss can pay for 5 or 10 yearly subscriptions (depending on trade size of course). When it comes time to manage the next macro turn? That could be a life changer. That’s what 2008 was after all. NFTRH will be there.
Long winded promo, every word of which I believe in and stand behind, ends now.
Rummaging for financial news and analysis from around the Web…
Gold-CCI & GDX and Gold CoT Improving, But…–NFTRH[biiwii comment: hey look, a fledgling rally appears to be getting started, but with PDAC next week the gold bug dream machine could get a bump up again and the sailing beyond the near-term is not yet indicated to be ‘all clear’]
Healthcare/Biotech Names Still Dominating–B.I.G.[biiwii comment: don’t I know it… did some profit taking last week but also a little replanting within the Bio’s. The weekly BTK chart has been bullish and until that changes, it’s on a trend]
Periphery Fragility List–Credit Bubble Bulletin[biiwii comment: i just found doug noland again, so CBB will be back either in ‘around the web’ format or directly published]
Despite all evidence to the contrary, an imbalanced ledger of data that grows more imbalanced by the month, commentary continues to describe QE as pro-growth stimulus. As usual, the purest form of rebuke to that sentiment can be found in Japan where QQE has performed a global service just not in the way its theorists and practitioners had envisioned. The Bank of Japan may well be proving beyond a doubt just how and why QE of any form is depressive, hopefully at some point freeing people to actually investigate alternatives (most especially stop doing more and more).
Despite GDP that was positive in Q4, there is absolutely no indication that it was anything but a positive number. Redistribution is supposed to benefit someone somewhere, but it is clear from the data that any such “winners” are not among the vast majority of Japanese people themselves. Instead, by inference, if there are Japanese enjoying QQE they are certainly located within the financial sector alone. Japanese households continue to get the QQE hammer:
Why, there will even be experts talking about expert things for attendees to consider and be enlightened with, including… “Top newsletter writers present their charts, thoughts and ideas on how to select good investments in the resources sector.” Ha ha ha. Otto’s not even going (I assume).
Anyway, it is time now to manage the fledgling bounce in the gold sector and to tune out the hype with extreme prejudice.
The gold sector, which is the only mining sector I am interested in right now, has been screwed every which way from Sunday for the last 3+ years and no amount of over intellectualizing or important sounding presentations will change the fact that it needs its macro fundamentals in line or else it will stay in Palooka Ville.
I wrote back in 2011 that the Fed could do a lot better with interest rate policy if the FOMC would just outsource the decision making task to the bond market, specifically the 2-year T-Note yield. The point is still the same, and the FOMC is still seemingly unaware.
To review briefly, this week’s chart shows a comparison between the 2-year Treasury Note yield and the target rate for Fed Funds, which is set by the FOMC. The NY Fed is then tasked with adding or withdrawing money available to loan to eligible depository institutions so that the “effective” rate of such loans is close to the target set by the FOMC. Read more about that process here.