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.
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.
This is odd, but not illogical, given the dynamics in play for the gold and silver CoT data and a possible counter-trend setup we have been watching for in the ‘inflation trade’.
Here is the CoT chart for silver that was used in NFTRH 348. Not so bad is it? The extreme was set at the first set of arrows, but Silver CoT has improved greatly over the last couple of weeks.
Silver would likely lead gold if a bounce in commodities and certain global markets were to take place. Meanwhile, the actual bullish stuff is elsewhere as the US stock market has re-found its momentum leaders and Europe declines to the upper end of its buy range.
Hey, I know I always seem to need to give these things nicknames (Armageddon ’08, Fiscal Cliff Kabuki Dance, etc.). Maybe that is a reflection of how non-seriously I take modern finance on a fundamental level. What we have here are policy and media driven hysterias, both to the positive side and the negative, swaying an emotional collection of players to and fro. It is more of a game than a science or well heeled, buttoned down profession.
So currently, on an interim basis we are working the ‘Anti-USD inflation trade’ (a bounce in inflation expectations and associated ‘hard’ assets) and the Euro QE ‘Me Too!’ trade, with its template being the US QE that has worked to hyper boost (stock) asset prices.
It appears that the mealy mouthed Fed, still refusing to bail out any savers that are left (both of them), has kicked another leg out from under the US dollar, which had for some reason been discounting a Fed that would begin raising the Funds Rate by now like a normal entity in a normal post-crash bailout environment would have done upon achievement of its objectives.
‘But no, we just need to tweak a few more positive data points out of it or wait until we see the white’s of inflation’s eyes’ implies the Fed. Whatever, the dollar is down this morning and the anti-USD inflation trade should get a bounce in its step, in line with one of our main themes. If the May low is violated, Uncle Buck could take a pretty deep correction.
Mortgage Rates at 35 Week High but Purchase Applications Picking Up–GaveKal[biiwii comment: a rush to ‘get in’ before the big bond bear (interest rate rise)? but this is the public we are talking about (the same public that was convinced about $200 oil). that could be bullish for bonds (bearish for interest rates) after our target of 3.6% to 3.7% on the 30 year is registered on the ‘continuum’, though there’s a 1st time for everything, so we’ll avoid overly rigid thinking…]
Stepping away from the stupid noise that the media inject each and every day, there is a tie-in between the US dollars’s resumed correction, a speculated upon ‘C’ leg up in commodities, the fact that silver vs. gold has room to bounce (but is big picture bearish) and oh yes, this chart’s all-important message…
‘Inflation expectations’ appear to still be well in play. But at around the time the ‘Continuum’ above reaches the limiter (AKA 100 month EMA), other indicators should also be at potential termination points. We finely detailed the plan in an NFTRH update this morning, but for our purposes here, we’ll just note that all of this is counter-trend as it stands now. So don’t get lost along the way. Stay on your indicators.
Worry About Capital Controls, Not Gold Confiscation
Due to the confiscation of gold by the Roosevelt Administration in 1933, there remains an undercurrent of concern among gold owners that the US government or another major government will confiscate gold in the future. However, the risk of this happening is presently so low as to not be worth taking into account. Of far greater risk are capital controls and the confiscation of cash.
Gold confiscation is not a realistic threat under the current monetary system, because under the current system gold isn’t money. To further explain, the reason that gold was confiscated in the US in 1933 was that gold, at that time and place, was money, with the dollar essentially being a receipt for gold. Consequently, the amount of gold in the banking system placed a limitation on the quantity of dollars. By making gold ownership illegal the US government not only prevented the public from removing gold from the banking system, thus eliminating one of the superficial deflationary forces, it also pushed additional gold into the banking system and paved the way for greater monetary inflation.
Going Bust for Growth (PDF)–Raghuram Rajan (to the Economic Club of NY)[biiwii comment: my personal central banking ‘hero’ speaks: “The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector. It is not an industrial country problem, nor an emerging market problem, it is a problem of collective action. We are being pushed towards competitive monetary easing and musical crises.”]
Avago to Buy Broadcom for $37b–Bloomberg[biiwii comment: why again have we been interested in the semi’s since january of 2013? beuller? here’s the chart of former NFTRH+ highlight BRCM; not that that long-ago update had anything to do with this. that target was reached and exceeded a year ago… ]