Ritholtz on Gold

By Biiwii

I linked Barry Ritholtz’s gold bug swipe along with other items in an Around the Web post.  Anything linked (or republished from guests for that matter) on this site is to be taken as 100% their view, not mine.  You, the reader are tasked with using your own brain to consider, discount or ignore any of it as you see fit.

What do I think of Ritholtz’s view on gold, personally?  I think ole’ Barry is picking some easy, low hanging fruit to use up virtual ink over at Bloomberg, per his contract (real or implied).  I mean really, gold did not react to Greece and he takes that as a negative for the metal?

The fact that gold did not do what legions of promoters and fear mongering pitch men insist it is supposed to do is a positive, not a negative.  It brings us closer to the resolution of the bear market as opposed to delaying it with fear mongering promotions (ref. last summer’s Russia-Ukraine-Ebola triple play of unsound ‘fundamentals’).

Gold Shrugs Off Armageddon

“I thought gold was an investor’s best friend during Armageddon.”

Really Barry, I think that you have gotten caught up in a personal ‘back and forth’ with the more unsavory of the gold bug “community”, as Daddy Gold Bug Jim Sinclair calls it.  You are using the same cartoons in reverse that the worst of the “community” uses when it tries to stir fear and greed in naive cult members followers.

As those of us who actually care about reality (as opposed to media-driven hype) have tried to point out repeatedly over the years, gold is not about Armageddon (Bird Flu, Ebola, Cyprus, Greece, war, death, destruction or any of that crap).  Gold is simply a marker, a barometer showing the state of confidence in the financial system and its managers (Central Banks) at any given time.

“Further reducing enthusiasm for gold is the gradual improvement of the U.S. economy. Despite forecasts of imminent collapse, the major economic data — including employment, wages, spending, housing, autos and consumer sentiment — have all trended higher over the last five years. Tales of an impending depression were greatly exaggerated.”

I could not agree with you more, Barry.  Back in 2012 we began gauging big breakdowns in the technical case for precious metals and by January of 2013 we (well, NFTRH) cross referenced the ratio of Palladium (cyclical) to Gold (counter cyclical) with a ‘channel check’ of the Semiconductor Equipment industry to put forward a view that an economic bounce – beginning in manufacturing and later to spread out to the services sectors – was likely to come.

I am a gold bug.  I saw the “improvement of the U.S. economy” when it was appropriate to see it, ahead of time.  When you obsess on the other kind of gold bug, the media star with the Armageddon-like predictions and inflammatory ‘analysis’, or Kool-Aid drinking hate mailers, you do a disservice to your readership because you only present the other side of something that is not real to begin with.  You in essence stand up a Straw Man and periodically set fire to him, really to no one’s benefit.

“Regardless, gold seems to [be… jeez msm, edit much?] going nowhere fast. Feel free to send me an e-mail explaining how wrong and stupid I am. I have an archive of all the messages warning me that gold would teach me a lesson in humility. “You’ll see” these e-mails smugly assure me, “your comeuppance will be here any day now.” My plan was to respond to each on its fifth-year anniversary with a chart showing the performance of gold versus all other asset classes and the details of how much money has been lost.”

Gold is going to be relevant again when confidence wanes and the current boom cycle starts to show its age and reveal its unsound origins.  Until then, gold is a dumb rock that people can hold as insurance and nothing more.  That is all it ever was, anyway.  But that does not sell in the mainstream media to mainstream people.  Cartoon-like depictions of half insane Luddites clinging to that dumb rock do.  Media stars lampooning those Luddites do too.

GDX and GDXJ

By Biiwii

While remaining bearish based on incomplete sector and macro fundamentals and technicals, I only pressed the short side the other day after making this GDXJ bounce post.  GDXJ was do or die and I thought it was worth a shot since, as was noted in the post “Gold stocks (as a sector) are bearish until initial resistance is cleared and then bigger picture bearish until the declining 200 day moving averages are cleared (and held).”

And that was not even including the incomplete fundamental picture.

At that point I added a short against 3x Junior Miner bull JNUG, to go with the existing short against Senior Miner 3x bull NUGT.  Today I covered the NUGT short quite profitably and continue to hold short against JNUG.

Don’t get me wrong, NFTRH’s stance has been to leave the sector the hell alone because I am not a day trader and will not pretend to be one, potentially to other peoples’ harm.  I am just a risk-o-phobe trying to call the turns in the markets, short and long-term.  Traders can do what they wish off of the analysis.

So the NUGT short, which was leveraged against the likes of GDX is covered right at the next support level we have been tracking since way back before the “drop dead gorgeous bull wedge” (that wasn’t) was even a glint in its promoter’s eye.  When this thing lost the MA 50’s in May it was cooked, especially after retesting the EMA 50 and failing on a bear flag at the beginning of June.  GDX had better bounce here or the decline is going to wipe out those who buy promotions instead of reality.

gdx

As for the Junior ETF, it looks much worse as the breakdown continues, but support is well lower.  Since my area of interest in buying the washout is in the junior and exploration space, I retained the JNUG short without as much worry about its profitability, which is good now, could get much better or could put a hurt on with the next sector hype operation.  It does not matter because barring an outright crash to our most bearish levels for the sector, in which case I’d book a great profit, short positions may well be there to oversee a coming acquisition process, assuming fundamentals look like they will come in line. *

gdxj

Regardless, those in cash and looking to buy the sector may finally get the chance fairly soon.  However, it may come from well below the support levels shown above.  Only week-to-week development of the plan will provide answers on that.

* Funda are not nearly all in line, but using the Palladium-Gold ratio as one example, something is beginning to happen on the macro and while the summer can get woogley for bulls and bears (regular stock market bulls and bears, that is), it now seems to be a matter of months before changes will be apparent. 

Around the Web

By Biiwii

Market analysis and news from around the web…

  • All Greece, All the Time…  –Bloomberg (click graphic to get more than you ever wanted – or needed – to know)

bloomberg

 

Got to run out, so that’s it for now!

No Fear, Yet

By Steve Saville

[biiwii comment: in the relative lack of greece-induced fear resides the potential for the summer correction to dig deeper, since a decent correction was due, greece or no greece]

In reaction to the ECB cutting off financial support to Greece’s banks and the resulting closure of all banks in Greece, the Global X Greece ETF (GREK) plunged 19% on Monday 29th June to a new bear-market low.

GREK_300615

However, apart from the assets most directly affected by the goings-on in Greece there are currently no real signs of fear in the financial markets. For example:

Continue reading No Fear, Yet

GDXJ Bounces

By Biiwii

For all you gold stock sports fans…

GDXJ is bouncing, but has a lot of work to do.  I have marked that neckline as resistance, but actually it is support to a very not bullish looking pattern.

gdxj

GDX is similar.  Gold stocks (as a sector) are bearish until initial resistance is cleared and then bigger picture bearish until the declining 200 day moving averages are cleared (and held).

I continue to look for some combination of sector funda, macro funda and technicals as a buy signal.  Alternatively, if the gold stock sector tanks badly and the macro funda come in line (ala Q4 2008), that’s a buy opportunity as well.  Patience my friends.

Hype in the “Community” is Always Punished

By Biiwii

IKN has been pointing out the stupidity of some Apple Watch gold consumption hype and most recently, the non-flight to quality amidst Greece blah blah blah… He is at least as sensitive as I am to this stuff.  More so, maybe.

While I have personally tried to tone down the criticism of the cartoons in the gold “community”, I find it difficult with one writer in particular leading the naive into the GDX (with its “drop dead gorgeous bull wedge”), into the Indian Wedding and China demand stories and as a topping on the cartoonish cake, the ‘US jobs will drive inflation so make like the smart money and BUY GOLD before the big institutions do!’ garbage.

I get irritated by this stuff.  Some people call me sanctimonious (while cherry picking and misinterpreting a chart I put up) and I call myself judgmental, for sure.  That is not really a great trait to have, but at least I know who and how I am.  Speaking for the defense, this is mostly applied when I think that people are being misled to their potential harm by stuff that they are reading and assuming is authoritative.

News flash:  Nobody writing on the internet in general and the financial media in particular, is authoritative.  Present company included.

Last year at this time Ukraine, Russia and eventually Ebola were stoking up.  NFTRH kept a constant warning in force that the rally in the precious metals complex was happening for the wrong reasons (i.e. trade it, but don’t bite on the b/s).  Right out front beating the bull drum were some of these entities about which I am highly critical today.  The result for last summer’s unsuspecting true believers?  New freaking lows in gold, silver and the miners.

It was interesting because last summer NFTRH experienced a temporary net decline in subscribership.  I thought it was just a typical summer drop off, but I also could just feel certain gold aficionados in the base getting fed up with me.  You can always sense when gold bugs start dropping off.  It tends to happen when I don’t tell them enough of what they want to hear.

This summer (so far, anyway) there has been no drop off and indeed there has been a slight increase in net subscribership.  The only way I can explain it is that we have been fully prepared every step of the way for the bearish things happening to gold, silver and the average* miner.  That along with the fact that we have been bullishly managing markets that have deserved to be managed, unlike the precious metals to this point.

In other words this summer I am not being punished for being negative because precious metals prices are not running upward, making charlatans with nicer things to say look like gurus.  People are valuing what is, as opposed to what they ideally might want to be.  Oh and also I think that the last several years have been a process of winnowing the real hard ass gold bugs out of the base and leaving a group of well rounded market participants.  I like that.

This is not a ‘trash the precious metals’ post.  Changes are coming, but first you need to be intact, have several macro fundmental and technical indicators cross referenced and in line and be prepared to be brave when the sheep (funny how the most dogmatic “community” on earth calls regular people “sheeple”, isn’t it?) are being sheared.

* I am fully aware that there are standout exceptions, which is why I currently hold 3 junior gold stocks (alongside a short against NUGT).

2 Birds

By Biiwii

I posted this last year some time, when it only had 3 of us recorded.  Today I got a mix that is closer to what it will finally be (with the other git fiddler) if we ever get our heads out of our butts and get these things finished.  Our 2nd gig of the year is coming up in late July.  Yey for the mid-life crisis!

2 Birds (mp3)

Okay, so it’s a lot of birds and there’s no wire and no stone.  I like the image.

birds

ECB, Monetarism and a Greek Half-Decade

By Alhambra Investment Partners

Greece really should not matter, at all, outside of the tragic plight of the Greeks themselves. You’ll see that message echoed particularly inside the US where the status quo takes a contradictory turn toward reasonableness in order to justify further what isn’t. This is all about asset prices and how they have been so skewed almost everywhere that when one part of that systemic imbibing threatens to pull back the curtain the rest works overdrive to convince that it doesn’t matter.

Just fourteen months ago, then-Prime Minister of Greece, Antonis Samaras, went on Greek television and confidently proclaimed, “Today, Greece took one more decisive step to exit the crisis. Confidence in our country was confirmed by the most objective judge – the markets.” Going further, then-Deputy Prime Minister Evangelos Venizelos objected to any other interpretation, “The bond issue proves the debt is sustainable, otherwise the markets wouldn’t have bought it.”

Obviously, those were political statements intended to send a political message in that the “objective” market was on the side of that current Greek political makeup and the “austerity” track into which they proclaimed to be amalgamated, inextricably within the euro currency. Under rational expectations theory, of course, the price with which the Greeks floated that bond was believed to be “correct” and thus efficient. The 4.95% yield at the auction, 20 times oversubscribed, certainly seemed to suggest that it was “market clearing” in at least that respect.

ABOOK June 2015 Greece GRE 5s Continue reading ECB, Monetarism and a Greek Half-Decade

SPY, Short Profit

By Biiwii

Well, I have held a short position against the SPY for weeks and weeks now.  It flashed profitable once or twice but has mostly sat there at a loss.  It is a straight out short with no leverage, so it has been easy to hold.  Today it’s actually pushing its way nicely into the green.

After discussing the potential that the Dow and S&P 500 bounces were just breakdown tests in a mid-day update on Friday, I decided to leverage up and buy the 3x inverse fund SPXS.  I am now taking profit on that because the market has taught me that gains from the short side, especially when using leverage and they come on hype-filled events, should be respected, cherished and taken!  I’ll continue to hold SPY short, however.

Here is the ugly SPY chart at a point that could be considered minor support.  But we have better support for the S&P 500, which would still not threaten the bull, significantly lower.  This chart says SPY 200 is doable if the current level is lost.  But again, I don’t really trust this Greece hype as a bear motivator.

spy

Dumb & Dumber

By Biiwii

This morning we had run of the mill Mainstream Financial Media hype, with MarketWatch predictably going all Greek all the time.  CNBC show’s ’em how it’s done however, layering in alongside Greece sides of Puerto Rico default talk, China stocks crashing and a Fed rate hike Jawbone.

If you know me you know that I just love this stuff.  The MSM falling all over itself to a) state the obvious and b) over amplify it 100x beyond its relevance.

For Stocks – the Four Horsemen of the Apocalypse? 

Ooh, a scary title.

Horseman 1:  Greece is little more than a flash point.  ECB is going to inflate to beat the band and as it sees fit in order to paper over any short-term fallout.  Dominoes?  That can be evaluated later.

Horseman 2:  Using the FXT (FXI) we gauged the breakout and targeted the mini bubble well.  Now we are watching key support and will evaluate whether it is at a buying opportunity at such time.  No theatrics, just market management.

Horseman 3:  Puerto Rico?  Really?  There are a lot more Puerto Rico’s (and Greece’s) lurking out there globally.  But as long as global CB’s keep printing, we keep playing this game of macro Whack-a-Mole.  Meanwhile this has little to do with US stocks.

Horseman 4:  Dudley jawbones a rate hike.  Ha ha ha…

CNBC has taken over the lead in the Dumbass Olympics from MarketWatch today.

All Greek to Me

By Biiwii

And it’s all Greek to the financial media as well.  MarketWatch‘s lead:

headline

US stocks were in need of a correction of some sort and on Friday at mid-day we had an NFTRH update showing the degrading state of US stocks (including the Dow rising hard to test a breakdown while leadership indexes signaled short-term bearish).  The Greek Debt Theater is a good accelerant, but that is all it is.

I’ll just ask you to remember that these inflammatory news events never but never have lasting impact.  They may be a trigger event, but they are not the reason for anything other than temporary emotional turmoil.  The media love that stuff because the media have to print something eye catching every day.

The US market is not bearish at this time*, but it was in need of getting bonked.  Well, bonk – either mini or maxi – in progress.

* Subject to change, as is everything in the macro markets.