Category Archives: Notable Posts

Previous articles and posts of interest.

More Ritholtz on Gold, and Another Response

By Biiwii

Anyone who has been bearish on gold for the last 4 years has been right.  They have been right in Euros and though the trend appears to have been gently changing over the last year or two, they have been right in Canada & Aussie (i.e. commodity currencies) dollars as well.  Certainly, they have been right that gold as measured in most global stock markets has been (and remains) bearish.

They have also been right in that gold as a hedge against the kind of inflation that global policy makers have promoted non-stop for years now, has utterly failed.  And for gold as an insurance and value asset, a small phase like 4 years is like a blip.  Yet still, so many people throw their hats into the ring on gold, constantly micro-managing its every twist and turn.

In 2011 it was what we used to call the “Gold Generals” touting hyper inflation, even as the second to last arrow was about to be inserted on our ‘Continuum’ © chart, indicating that anyone taking an aggressive inflationary stance in their investments was also taking a big chance that it would be different this time and the Continuum would break the limiter AKA the 100 month EMA.  It wasn’t and it didn’t.

tyx

This brings me to Barry Ritholtz again.  His piece at Bloomberg titled Good Luck Bargain Hunting for Gold Miners at Bloomberg is more about the valuations of the miners vs. the metal, but it is some of the wording that I want to address here.

The primary reason is straightforward: Gold is bought and sold based on a narrative that has turned out to be patently untrue. As we move further away from the great credit crisis of 2008-09, the global financial system has stabilized, undercutting the appeal of gold as a hedge against catastrophe. The U.S. economy is improving, as are those of many other countries. The wild inflation and collapse of the U.S. dollar that was going to lead to the demise of civilization and make gold an essential for investors? None of that has happened. Instead the world has low inflation or even deflation and the dollar, the world’s reserve currency, has risen to multiyear highs.

He is right to criticize the hyper inflationist ‘death of the dollar’ contingent of the gold bug “community”, itself a word that belies group-think and susceptibility to bias reinforcement by the group.  Did you catch the little ‘Overt Inflationary Effects’ planet in our handy Macrocosm graphic (don’t take its planetary guide literally, it was mostly for fun) from last weekend?  There is a reason that I assigned that gold input to the second tiniest planet in the Macrocosm; because it was a wrong headed thesis when Uranium, Crude Oil, Copper and Silver were proven to be bubbles (with relentless inflationist touting of the ‘resources’ and ‘hard assets’ sectors in each case) and it is obviously still wrong now.

macrocosm

This is not to say that inflation cannot be a fundamental input for gold.  It has often been a major input.  But on this cycle the inflation is not manifesting in rising prices, at least not in relation to the stock market, investment in which can be seen as a ‘hedge’ against price inflation bubbling up in certain services sectors of the economy.

The commodity bubble is all done.  The inflation, with the aid of a persistent and powerful global deflationary force, is working in a ‘Goldilocks’ manner and flowing into risk ‘ON’ speculation in paper of all kinds and in some hard assets, just not the kinds that traditional commodity and resources gurus had foreseen.  Mainly, the public is doing just fine buying and selling appreciating homes.  Who needs several tons of Copper sitting in the garage?

Anyway, back to Barry Ritholtz…

“Gold is bought and sold based on a narrative that has turned out to be patently untrue”

Agreed; the majority of gold bugs have believed the wrong narrative.  It was wrong in 2008 and it was wrong again in 2011, and you are using an incorrect narrative as the foundation of your stance in these mainstream media articles that are so cartoonish even the public can understand it.

“the global financial system has stabilized, undercutting the appeal of gold as a hedge against catastrophe”

Again, agreed.  The system has stabilized but how many times do we have to review this chart before we can all agree that it has taken extraordinary (and incredibly, ongoing) measures with the implication being that neither you Barry, nor I, know how the fallout is going to go based on embedded distortions that no one can fully understand?  You call gold a “hedge against catastrophe”.  I have never called it that because I don’t see it that way.  I have always called it monetary value (which can fluctuate depending on market sentiment) and insurance.  Period.

irx.spx

“The wild inflation and collapse of the U.S. dollar that was going to lead to the demise of civilization and make gold an essential for investors? None of that has happened.”

Barry (not that you read this little out of the mainstream website, but work with me here), do you see the larger planets in the Macrocosm above?  They represent the kinds of things that drive people to liquidity and a risk ‘OFF’ stance.  What is the ultimate risk ‘OFF’ hard asset in a monetary world that while still working fine, has gone utterly mad in its pushing of traditional policy boundaries?  Why, it’s gold.  But what is the first and most intense repository of that liquidity?  It is none other than dear old Uncle Buck, for US citizens and the way things are currently structured, much of the rest of the world as well.

I have criticized the ‘death of the dollar’ and ‘hard assets/resources’ promotions every which way from Sunday for years now and it is due to a view that before the US dollar falls apart it is likely to totally annihilate hyperinflationists first (per Prechter and Hoye to name two).  Hence the big planets above are economic contraction, gold rising vs. stock markets, confidence declining and yield spreads indicating systemic stress (inflationary or deflationary).  This is why I have remained completely out of the way of the gold sector destruction for 4 years now, with my market report well in tune with that stance.

So yes Barry, “none of that has happened”; thankfully, or I’d have been wrong in my own thinking (always a possibility).  But I have seen nothing to dissuade me yet that I am, as a once and future gold bull (and constant valuer of gold as insurance), on the right course.  Several macro fundamental aspects need to come into line and we need to find a bottom technically, sure.  But your article adds another input to the bullish camp because you are teaching people who should not be in the gold market (mainstream public) at a real bottom lessons based on the same incorrect assumptions made by the Gold Bug “community” that you seem to provoke.

Maybe you even enjoy stirring the pot and getting the hate mail.  I can relate to that.  While he did not give me permission to reprint his email, a long-term gold bull emailed me the other day noting my “subjective, gold bashing rhetoric” and my “delusional, fiat money bliss” (ha ha ha).  This despite the fact that he and I are of the same long-term orientation.  It’s just that our inputs are different and so he sees me as basically one step above Satan (what does that make you Barry?  Just kidding, but  you get my point).

Misconceptions are everywhere and the stuff you base your articles on do not help that situation.  I write that as the other side of the coin that gives much critique to misconceived pro-gold promotions.

The ‘Real’ Reason the Fed Wants to Raise Rates

By Biiwii

In case you thought you were smart enough to know why the Fed wants to do what it supposedly wants to do [1] MarketWatch sets you straight with the real scoop.  We’ll use this as a talking point and see what comes of it…

Here’s the real reason the Fed wants to raise rates

Policy makers want to give themselves some room to maneuver

That is the commonly held belief and who am I to dispute it?  A big part of the problem is and has been their refusal to begin a journey toward normalization 2 years ago, when the economy began to visibly (we noted the seeds of that improvement in January of that year) improve.  They had no confidence and I was left to wonder (aloud here, frequently and I am sure, sometimes obnoxiously) why Grandma [2] (and her 0% savings account payout) had to continue to bear the brunt of this non-action despite a recovering economy.

Continue reading The ‘Real’ Reason the Fed Wants to Raise Rates

Precious Metals Extremis?

By Biiwii

The precious metals, which happen to be my anticipated next big macro (long) trade have been bearish since HUI lost 460 for the last time back in oh, what, 2012?  And that was being lenient.  Not being a cycles guy, I was not able to time the top.  I merely observed support parameters and informed NFTRH subscribers of technical violations first, and early eLetter readers subsequently as well (the eLetter was launched after the bear market began).

So now here we are, with the precious metals doing what they usually do when looking to end a bear phase; they are becoming extreme, as in waterfalling…

gdx

There is a solid contingent of analysts and writers now bearish on the precious metals.  There are also the perma-pom poms and idiotic hallucinations like the “drop dead gorgeous bull wedge” on GDX above (it failed as expected about 15% ago).  There have still been too many of these guys out there, obsessing on the precious metals every step of the way calling play-by-play for transfixed gold bugs.

Anyway, what there also is is an HUI target from 2012/2013 of around 100, based on the old monthly H&S top.

hui.mo

This is cross referenced with a gross looking pattern on the weekly chart.  Below is the blown up view of a more detailed chart, showing the pattern.  Here’s the NFTRH 351 excerpt that went with it…

Below we blow up the above chart (no pun intended) to show the breakdown.  The little pattern measures roughly 210-150 = 60; 160 (breakdown point)-60 = 100.

 What I find interesting here is that for years now, the big H&S top on the monthly chart has had a target of 100 (+/-).  While nothing in TA is set in stone (it’s an art based on probabilities, not a science), confluence adds to the probabilities.  The weekly and monthly charts each have independent patterns indicating the same general target.

hui.wk

For years now the sector has been bearish, but at the same time, being a macro trend trader (i.e. my desired mode is not this daily and weekly trading I have had to do in the mature stock market bull, it is to try to anticipate a big new trend or macro theme and be positioned for it) I am thinking like a predator or hunter, as has been advised in NFTRH.

In a situation like this, all you can do is have patience and your best laid targets and plans.  I hold exactly 5 junior miners (as of this writing), all of which have charts that are vastly better than HUI and GDX (and GDXJ for that matter) above.  I also have been shorting NUGT and holding JDST for full protection against what has been an uninterrupted bearish technical view and an incomplete macro fundamental view.

I know that NFTRH subscribers are prepared and hope that eLetter readers and website readers are prepared as well to the extent they have been able to read gain information and between the lines.

While I have conflicts going on (like the still <barely> intact Semiconductor market leadership vs. the deplorably bearish looking Palladium-Gold ratio) I think we are heading into Extremis, Q4 2008 style.  Timing?  Not sure.  Only regular work will help tell that story.  A short-term bottom could come about in the PM complex at any moment, before THE bottom.  However, THE bottom could come sooner rather than later if that waterfall continues to spill.

Regardless, whether it is measured in hours, days, weeks or even months still, it is time for the real gold bugs (the ones who long ago tuned out the cartoon characters the sector holds aloft) to be ready to act.

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.

Bernanke on Warren-Vitter & Last Resorts

By Biiwii

Ref. Warren-Vitter and the lender of last resort

[edit] I have had some complaints about writing that I “like” Bernanke and Obama.  That is telling of how divisive today’s financial and political climates are.  I did not write ‘I like the jobs they have done’, after all.  I have not “liked” the job a Fed chief or President have done since I can remember.  It was wording in a post simply implying that I think they are probably nice men.  Sheesh… it would help if some people would actually make the effort to pick up on nuance.  It’s a post answering the assertions of a former Fed chief destined to see the annals of history one day revoke his “Hero” status.

I have always liked Ben Bernanke, in that I think he is a soft-spoken, nice guy who took the hand off from Alan Greenspan in stride, heroically making chicken soup out of the chicken excrement he was left with.  He kept his dignity and calm demeanor during the days when inflationist gold bugs codified the term “Helicopter Ben” and turned it into just another accepted way of saying “Ben Bernanke”.

Mr. Bernanke met the impossible challenges left him by the Greenspan Fed and the Bush White House, and being a scholar of the Great Depression and an intellectual Keynesian, did what he was always meant to do.  He employed tried and true Central Bank policy-making against a natural bust (i.e. reaction to Greenspan’s policy-induced 2003-2007 inflationary boom) of the system.

Continue reading Bernanke on Warren-Vitter & Last Resorts

Gold, Ideals & Management

By Biiwii

49erGiven its ancient history as money and jewelry, its religious connotations, the fact that it is both beautiful and laborious to dig out of the ground, process and store, gold is an asset that promotes strong and often emotional views and so it is the perfect central figure for this thought exercise.

I want to be careful in criticizing fellow market participants because as a lowly human myself, I am subject to the same pitfalls as anyone else.  But being an advocate of the sound reasons for owning gold, even through a violent bear market, I have learned a lot over the last few years about how many market participants think.  That includes myself, which I will address first.

Management

I have learned that I am able to compartmentalize my ideals, biases and beliefs in service to simply being in alignment with what is going on in the greater financial sphere (e.g. the bubble in governmental credit/debt as a stimulant for asset market appreciation), regardless of whether or not I agree with its origins or believe in its sustainability.  I have only firmed on the idea that I am a manager as opposed to promoter of my most closely held beliefs.  Inflationary monetary policy is working exactly (I would assume) as officials have intended as the right assets, equities, have been rising on this cycle.

As part of that management and compartmentalization process, I have kept the idea that gold is long-term and eternal monetary insurance and not an asset to game or speculate upon.  This view is unchanged from when Biiwii.com and NFTRH warned about the speculative blow offs most notably in silver, but soon to follow, also in gold.  I state clearly that I for one had no idea how bad the ensuing reaction would eventually become (and made no predictions thereof), but also as a manager I did not need to know.  Part of management is discipline and the tools of discipline are parameters and indicators.

So I have been able to function well with the idea that gold is insurance and in this phase a payout from insurance has not been needed.  It’s a concept everybody is familiar with; you pay your Homeowners’ insurance every year and hope that those premiums remain dead money.  That is a healthy way to view gold.  When the effects of official financial wrongdoing do crop up again, you suddenly place value on that insurance premium.  It’s not rocket science.  These concepts are as old as the hills but they are critical to adhering to healthy behaviors within the gold market.

Promotion of Ideology

Which leads to the unhealthy stuff.  Even back when when I was bullish not only on gold’s value proposition, but also its price, I used to try to include words about value and long-term reasons for holding gold.  That is because even in the first phase of its bull market being a gold bull was akin to being at war (an ideological one).  In a war you get killed if you are not 100% buttoned down in your defensive postures.

Defensive posture in this case was the above noted view of the actual metal as insurance, a long-term holding of value, which fluctuates over various market price cycles and investor confidence cycles.  Another defensive posture is to tune out wrong-headed ideas long-since proven to be illegitimate, like buying oil and copper and silver and gold and other ‘natural resources’ as protection against the evils of inflation.  Finally, the most defensive posture possible is probably the most difficult to attain; remembering and respecting but not being controlled by your beliefs.

I have watched certain entities not change their tune when it comes to using the usual hooks to pull in readers, followers, subscribers, customers, etc. (i.e. humans).  Apparently there are tried and true methods that work on the maximum number of marks, that is, people.  These usually involve establishing an easy to understand narrative, promoting it through thick and thin and when things get rough, accenting its ‘us against them’ and/or ‘you are one of the few who really understand’ components.

What it actually is though, is b/s.  Fear, greed and even religion and political agenda can be used as tools for tending the gold herd.  Recently we noted one entity going on about “so much money” it has made in ‘resources’ (seen the CRB lately?) and how in-the-know investors are going to get rich in the coming Asteroids and Nanotech booms; after the next big run up in resources, of course.  This garbage, which I’ll not identify (it was posted at Biiwii, readers may recall) here was actually packaged in a mocked up interview/infomercial with a commodity and resources guru of prominence.  NFTRH has had several subscribers over the years note to me that they were refugees from this entity.

A more personal instance happened last week.  I often selectively reproduce posts at various LinkedIn groups that I feel are relevant to the groups’ agendas.  A Biiwii ‘guest’ post about governmental debt expansion was sent to a group formed to talk about Austrian Economics.  “What does this have to do with Austrian economics?” responded one disgruntled member.  Apparently, to the letter of the law he is expecting an inflationary ‘Crack Up Boom’ and any talk of a deflationary debt unwind simply will not do.  <insert here obligatory joke about ‘Crack’ use>.

I moved on from the group-thinking group.  Like the political war of cartoons that will array in the United States over the next 1.5 years, it seems all too many supposed investors are aligned to their caricatures and speech balloons.  And the real pros who work the crowd know this all too well.  They also know that gold, with ancient historical, religious and ‘good vs. evil’ mythologies all rolled up into it, is well suited for the old ‘Heart Strings’ play.

Friends Like These?  Tune Them Out

You don’t need friends in this realm.  You need your own two feet and you need to stand on them.  Your ‘friends’ are often trying to sell you something, or sell you on something.  I am trying to sell you something too.  With this simple post I am trying to sell you on deprogramming and understanding all aspects of your investor-self.  With NFTRH I am trying to sell you on letting me do the work of deprogramming, managing and macro positioning.  But there is only one thing that people really need in the investment world and it is internal confidence born of education and perspective; their own perspective, not confidence bought or consumed from someone else.

goldGetting back to gold, I would be wary of those telling you how bearish or bullish gold is and realize that gold as a monetary ‘asset’, just is.  It just was when it was rising from 600 to 1900 and it just was when it was dropping from 1900 to 1100.  It is the value assignment toward insurance during a time of high investor confidence that changed.  Gold did not change.

The best part is that when you have your ‘insurance vs. speculation’ or ‘value vs. asset price’ ducks in a row then you can go forth and speculate – in any market, including the gold sector – to ‘make some coin’ as casino patrons like to say.  But the bedrock idea is to understand what is value and what is price speculation.  That takes management, not only of assets, but also of one’s own psych profile.  Only an individual can manage her own psych profile and ideology.

US Should Recognize 1st Genocide of 20th Century

By Biiwii

It is disgraceful.  Every time Bob Dole would introduce legislation that would have America simply acknowledge the atrocity that was the 20th Century’s first genocide (of the Christian Armenians by the Muslim Turks) it would get shot down.  Bob kept trying and other voices cried out but America – across generations and political parties – just continues to put its fingers in its ears and go ‘la la la la la… I can’t HEAR you… la la la la la…’

US should recognize Armenian genocide  –Boston Globe

The sheer scale of the murders in Turkey was so overwhelming that Polish lawyer Raphael Lemkin later devised the word “genocide” to grapple with the carnage.

The genocide was used by Hitler as a blueprint for the Holocaust.  How many mass exterminations followed in the 20th century?  Each time a coordinated mass murder of thousands, even millions of human beings is perpetrated the world looks on in horror.  It is in that horror, with an almost hard to believe possible quality to it, that the hope lies.  Because if the world were to take the position of Turkey (not only denying the events, but reprogramming its whole society by teaching school children revised versions of history) or disgustingly enough, the US, then the quote widely attributed to Hitler still applies today (in official circles, at least):  “Who speaks today of the extermination of the Armenians?”

Among the many public events, memorial services, and awareness campaigns that mark the genocide of 1915, Pope Francis gave a spirited speech during a Mass earlier this month to commemorate the scars on Armenia’s national memory. “It seems that the human family has refused to learn from its mistakes,” Francis said, decrying “the complicit silence of others who simply stand by.” Most notably, and not for the first time during his papacy, Francis called the events of 1915 what they are: genocide. The address sparked outrage from the Turkish government, whose foreign minister fired off tweets lambasting the Pope’s message as “unacceptable” and “out of touch with both historical facts and legal basis.” But on April 15, the European Parliament joined Vatican City and 22 other nations in recognizing the Armenian genocide and called upon Turkey to do the same.

I am ashamed of the US Federal Government for standing on the side of wrong for political reasons.  Turkey is considered an ally in a troubled region.  Meanwhile the Pope and 22 other countries (and the EU) have acknowledged the genocide because if you don’t have some grounding in truth you are lost.  That applies to whole societies.

I thoughtlessly put up a guest post the other day with the word ‘Genocide’ in its title, as applied to currencies.  That was me, who grew up with a coffee table book right there in the open showing the graphic photos of slaughtered women and children taken and verified by a German military officer.  If that could happen to me, a person of Armenian decent, desensitized by being a 3rd generation American, what will history end up saying; dustbin or front burner?

I felt ashamed after the fact in realizing that I allowed that post’s title to be published (it’s still there, as I’ll not revise history) just before the commemoration of 100 years of genocidal action and subsequent denial by a rotten to the core Turkish government.  Rotten to the core?  That may apply to America’s federal government as well because you sleep with evil you pay a price in some manner, over time.

In 1915, the Turkish government began mass extermination of around 1.5 million men (targeting the intellectuals and business people), women and children.  It happened, period. Turkey’s government is thus evil, because denial and sanitizing of truth (false narratives) are elements in human evil.

Today the supposed greatest country on earth (how many times over can America destroy the planet with its out of control weapons programs?) officially (the people though, are smarter) lays with this evil.  Not to veer this post too far astray, but I once read a book about collective human evil and its premise was that like Hitler’s Germany, whole societies can become catastrophically destructive under the influence of lies and denial.

So beyond the question of the Armenians, think about this little cocktail… Mix 2 parts optically guided weapons (clean and sanitary) with 1 part revisionist history and 1 part new narrative born of revisionist history.  Add essence of nuclear threat, stir, don’t shake, and enjoy.  What other kinds of stories does America tell itself that it is too subjective to see from the inside out?

History is Fact, Part 1

By Biiwii

In writing this post I came to realize that its subject matter is too expansive for any single post.  So consider this an introduction to a series of posts that I’ll probably do in the coming months, as facts come to the fore and lend themselves to historical analysis.  Two examples are presented below.

You might not be the type who needs or cares to subscribe to commercial market commentary/advice/trading/management services, but one thing we all can do is work through the freely available stuff calling itself ‘analysis’ flying around out there at warp speed and cull what is based on facts or honestly produced analytical work from the other garbage that is all too often based on ego, bias or agenda.

Most weeks you are able to download a time-delayed version of Bob Hoye’s Pivotal Events newsletter right here at Biiwii.com.  While Bob has certainly got his opinions and biases (as we all do, let’s be honest), he is the most historically learned commentator I have read.  I enjoy the old and not so old news article quotes from bubbles that culminated in 1873, 1929, 2000 and 2007.  Reading Bob’s history lessons is like hitting a ‘Refresh’ button on personal perspective each time.

This is not a promo of Hoye’s service and Institutional Advisors are not even aware of this post.  Hoye is simply one of several influences on my own market management methods, and probably a reason the words “patience” and “perspective” show up so often in my own writing.  It is vital to keep frames of reference and perspective at all times, no matter how long things that we view each day with our own two eyes take to play out as noisy short-term components of a longer-term process.

It used to be easy to skim Bloomberg or MarketWatch (or in the old days when people actually knew it existed, Thestreet.com) and pick out ‘bubble head’ headlines during bull markets, but the current phase is complicated by the fact that these services, especially MarketWatch, seem to ‘day trade’ the news based on what is happening on any given day or over night action.

Taking the likes of MarketWatch seriously can induce a whipsaw like you read about (literally) to an investor’s frontal lobe.  I know for a fact that there are some sharp commentators there (as I have interacted with some of them elsewhere and found them to be very forthright and intelligent) but there are dullards as well and more than the actual writers, I think it is the editorial staff that is responsible for selecting and presenting content each day and creating a noise level that can literally scream ‘Market Crash Imminent!’ one day and ‘Here’s Why You Need to be Fully Invested in US Stocks’ the next.  It’s like a sick joke.

Moving on, let’s use a few pictures to illustrate some historical facts.  From a post yesterday (Looking for Your MoM?), the S&P 500 is happily climbing despite a gathering of economic data that has gone negative by MoM change as it did in the last two recessions.  The facts are that this condition actualized the implied risk to equity investors in both previous examples but on this occasion has not yet done so.

I have marked up @dv_dend‘s graphic to better illustrate how in 2000 the market topped out and began to turn down as a group of economic indicators turned down and how in 2007 the market began to turn down before the indicators went negative.  Then… the whole ball of wax nearly collapsed.  The current cycle sees the economic indicators in a danger zone and the stock market – which should have topped – has not.  That (the stock market intact, technically) is a fact and it needs to be respected every bit as much as the implied risk to today’s confident bulls.  Hence, NFTRH, while working this market happily and gainfully, continues to advise the only rational orientation for this circumstance; when in doubt the default is CASH, not heavy long and not heavy short… CASH.

mom

Another picture comes from China.  We have charted FXI and its parent FXT for years in NFTRH, and over the last several months followed its progress in attacking and surmounting long-term resistance.  We have assigned targets and I have had the pleasure of having a subscriber tell me he is getting nervous about his profits in FXI (after buying in the 41’s based on NFTRH’s charting) and would like to know a good selling point.  It was advised that rational measured targets are being registered now and that profit is good… consider taking some of it…

fxi

…because history is littered with examples like this.

silver

The ‘We Are Here’ reference was from NFTRH 318, which introduced the above chart to talk about a historical precedent in Silver for the current stock market mania and the potential that the October 2014 market correction was just a pause to refresh prior to a manic blow off.  Here the post loops right back to the first graphic above.

For perspective and reference, here is the excerpt from NFTRH 318, dated November 23, 2014 that accompanied the above historical Silver chart:

“Just a month ago market players were barely recovering from their knee jerk puke fest kicked off by a negative projection by one semiconductor company and a pig pile of media hype that was something to behold.  We called it hype then and conveniently enough, there is the SOX at a new recovery high.

So two momos (BTK & SOX) are bullish and threatening accelerating upside.

And yet nothing about the market is healthy.  Nothing about silver and commodities in general was healthy in early 2011 either.  I find myself using the silver example repeatedly in discussing the US stock market, so let’s dial in its bull market blow off.

Understand that human behavior does not change, however it does tend to herd and gravitate to whatever is giving the good feelings. 

Let me ask you, in early 2011 what was the average silver bug’s sentiment profile?  Sure, there had been a 5 buck setback in the silver price in late 2010 and early 2011.  What did that serve to do?  It fueled the final phase of the bull by taking out some of the already embedded over bullish sentiment and clearing the pipes for a massive blow off amidst hysteria about $100, $200 an ounce silver and touting about how the Silver-Gold ratio still had a long way to climb.

In short, it killed silver; but not before silver killed a hell of a lot of shorts.”

History is a ‘probabilities and perspective’ guide… always.  It is also fact.  It is a time in history now to play what the market gives, sure.  But it is also a time to manage risk and default to cash.

Peak Fed

By Biiwii

clowncar

While we’re on the subject of Mr. Bullard, the opening segment from this week’s NFTRH (#335) had a little fun with the Fed.  Serious multi-market and economic analysis came later, but sometimes you just need to shake your head in awe and wonder.

Peak Fed

The Fed is important because millions of market participants believe it is important and a critical mass of people are under the illusion that its policies have put the “Great Recession” in the past and laid a path for a sustainably good economy going forward.  In short, confidence in the Fed has never been more pervasive as it reaps the reward (the respect and confidence of the majority) for a job well done.

Never mind for now that previous Fed policy is what fomented the “Great Recession” (i.e. a near liquidation of the system) and the supposed remedy has been similar but more intensive policy using official credit as opposed to commercial credit as the stimulant.

Through this cycle I have watched Gold Bugs that used to rail against “Helicopter Ben” fade to black, the Bond Vigilantes who would short the long bond (including one over exposed Vigilante, formerly of PIMCO) get their hats handed to them and the general backdrop of distrust and revilement toward the Fed simply get erased somehow.

It’s as if a majority of market participants are little more than black boxes with certain coding for certain cycles.  Today the code might look something like this…

<style=”subservient”>

<caption>Sit quietly and we will control all that you see and hear</caption>

Continue reading Peak Fed

Gold Sucks!

By Biiwii

[edit] a quick look around the interpipes tells me that there are people watching gold with no sense of humor, taking the title of this post literally or as a contrary indicator.  sometimes i just don’t know.

Ben Kramer-Miller, a fundamental gold stock analyst who I keep an eye on, recently had an article at SeekingAlpha called Gold’s Bull Run Has Not Yet Begun.  I remember taking note of the title when it came out, but as is usually the case I did not have the time, nor the inclination to read it.  I like to keep my own thoughts square and balanced and don’t need other peoples’ thoughts on gold clouding my own.

But as I was fooling around over at the St. Louis Fed’s website (it is recommended that geeks register for a free account) doing the following charts I remembered ‘oh jeez, I think somebody’s already on this topic’.  So I checked it out and sure enough he did gold vs. the Monetary Base using a graphic from the also-recommended MacroTrends website.  Anyway, preamble behind us we move on…

The long-term chart of nominal gold, anyway, has not done so bad.  Boy, this bubble from 2001 to 2011 sure was a humdinger.  It must have so much further to fall.  Look how much higher gold went this time compared to the bubble that blew out in 1980.

gold

Oh wait, this bubble was actually not as bad as the 1980 bubble when CPI adjusted.

gold.cpi

Oh wait again, gold is and has been in a bear market in Monetary Base units ever since the US dollar was freed from its shackles in the early 70’s.

gold.base

Bottom Line

  1. Either gold sucks
  2. …or its bull market has not yet begun

…and may never begin if confidence remains intact in policy makers conjuring up digital funny munny units out of thin air while holding our trust in their stewardship.

Stewardship is defined here as blatant manipulation of things that used to mean something, like the rates of interest on loans to be paid back and the productivity that would spring forth from savings, capital deployment and investment.  You know, hokey old fashioned stuff like that.

But this is a world where large entities, including governments, don’t need to be responsible for the ‘paid back’ side of the deal and so, gold has sucked because there seem to be no repercussions for it to protect people from.  They are creating debt and confidence money and this stupid rock is below the pre-Bretton Woods levels in Money Supply terms.

All the more reason that the ‘gold is not about price, it’s about value’ mantra holds up just fine.  It’s price sucks and its value in a traditional sense measured by out of control governmental money creation, has never been better.

Tilting at Golden Windmills

By Biiwii

dq.windmillsThere 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 its tenets until it was too late.

Continue reading Tilting at Golden Windmills