Category Archives: Sentiment-Psychology

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.

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

Response to Kyle

[edit]  It’s a little promo-ish, but I did not solicit it and the whole back and forth is important IMO in delineating the boundaries between b/s and rationality…

Gary – I just wanted to say thank you for your very thoughtful public response to my email. I honestly don’t know of anyone else like you who would take the time to do that.

By the way, I like and appreciate your candid style of writing. I would be upset if you ever changed. Your willingness to call it like you see it is refreshing and why I became a subscriber.

You are right. There probably isn’t much on which we disagree, but certain things irk me and I feel the need to say something. I just can’t stand the emphasis placed on the dollar index, which is a completely made-up basket that essentially measures the “strength” of crappy green paper versus other colorful pieces of worthless paper. It’s silly.

That said, I do understand now what you were saying. Yes, people have been fooled into buying commodities and related equities in anticipation of a “dollar collapse.” That is true. Anyone holding coal, iron ore, copper, or oil stocks has been wiped out. And the Sinclair predictions for $50,000 gold and hyperinflation call from John Williams of Shadow Stats by such and such a date are quite lame and not credible at all.

Anyway, I hope you don’t change the way you write one bit. You are like a refuge for us in this age of non-stop BS propaganda.

As posted at NFTRH.com…

With his kind permission, I would like to publicly respond to a critique I got from subscriber, Kyle. This is not the first bone he has had to pick with me and if I am doing my job well, it won’t be the last that either he or others pick. Now, pissing off subscribers (my customers) is not something I want to do routinely, but I have a way of communicating that is just that, my way of communicating.

In that communication there are all kinds of buzz words and phrases I’ve made up, like Armageddon ’08, Inflation onDemand, Fiscal Cliff Kabuki Dance and probably 50 others over the years that just popped in my head and got popped right down into NFTRH, the websites or both. Then there is the Federal Reserve and the Outer Limits shtick and a hundred different ways to flog Fed officials (Good Cops/Bad Cops, etc.).

Those instances noted above don’t seem to upset people, but when I mention cults it starts getting dicey because so many of us identify ourselves, through ideology, to firmly held beliefs and cults well, they depend on an ideological grip on their members.  [edit] FWIW, I have my own firmly held beliefs, but I consciously try to make sure they don’t screw me up when managing the markets on an interim basis.

Continue reading Response to Kyle

This Guy Called Bonds in ’14. You Listening This Time?

Ha ha ha… this guy called bonds in 2014.  What a surprise Bloomy, the Great Rotation (out of bonds and into stocks) did not come to be as touted far and wide in the mainstream financial media a little over a year ago?  Remember some website coining the term the “Great Promotion”?

So the MSM is surprised that somebody actually made a good contrarian call on what was one of the most readable touts since, since… since Bill Gross called a breakout in yields in spring, 2011?  Too funny.

In December of 2013 I made one of my posts calling the Great Rotation hype into question, but not being a hog caller, I didn’t call a top in yields and then tout it far and wide. That is because people who believe other people have some magic formula in making their calls can get hurt if the caller is wrong.

I simply asked people to filter the hype of the day and do what the charts and macro indicators say going forward.  On December 12, 2013 the ‘Continuum’ © said ‘don’t bite on the Great Rotation story until the EMA 100 breaks’.  It never did.

Media hype sucks.  Why anyone even pays attention to it is beyond me.  I don’t necessarily mean the media itself.  Bloomy for instance is valuable to me.  But the hype, that stuff sucks, and it is in rotation at all times.

Contrary Indicator

I hesitated to post this because it puts an actual person up for ridicule, as opposed to the usual stuff I write about the “gold generals” or ‘stock market touts and trend followers’, etc.  A reader sent along an email containing this link (and its very bearish current view of gold) and the video below.

Daniela (Aug. 24, 2011): “…this [Fed’s Op/Twist.] would create a bullish gold scenario?”

Puru: “Absolutely…”

also… “on the cusp of a massive uptrend in gold…”

Puru (Nov. 15, 2014):  “We are not prophets, but we must admit that we called the entire bear market in the metals pretty accurately. You will recall that in late 2011, we opined that perhaps the metals had seen the secular top and we noted a massive distribution pattern in the Gold Bugs Index.”

As I love to point out I screwed up with an HUI 888 target myself.  But I admit it, move on and never speak or write as if I know what is going to happen in markets.  I hate it when people do that because it makes other people think they have some kind of learned perspective as opposed to a pitch, which is what 99% of the financial media is.

The subject strikes a chord with me because Mr. Saxena wrote a decade or so ago that manufacturing was dead in the US.  I of course was one of those dead manufacturers and really had to shake my head about how financial types tend to be abstracted from the real world.

How about writing ‘in 2004 we opined that manufacturing was dead in the US and not going to come back’?  How about that one Puru?

 

Negative Feedback 2; Points Proven

A couple weeks ago I wrote a post about some negative feedback (comes with the territory, if I am doing my job well enough) because I wrote about the very real economic performance that has so far come out of what I consider unsustainable and doomed to fail policy (and would be bullish for the gold sector I might add).

So I get to have some people call me a perma bear on one side and certain dogma defenders on the opposite side, both coming down on the writer who, right or wrong, is trying to clear out the b/s and just write the truth.

Now with the Gold Bug Psychology article I unsurprisingly I got the incoming from that camp as well.  Even though I am twice the gold bug some of the dogma defenders are because I am not threatened by my position and am willing to state the truth as I see it.  Nobody that I know of has put in the effort I have over the last decade in trying to describe gold as a value instrument and an insurance policy… and NOT a PLAY or a GAME.

Anyway, I give much credit to the gold websites (GoldSeek, 321Gold and Gold Eagle), each of which published or linked the article after it was submitted.  I’ll reserve comment on some of the readers though, because some of the responses have been all too familiar and are not bullish for gold either.

From GoldSeek comments, the same forum where above noted feedback on my supposed pro-economy stance came from…

The writer has the psychology of short-termism and of throwing in the towel.

The commenter obviously has not read me.  Throwing in the towel, eh?  I am waiting for him to do that and have been for years now.  I am going to become so bullish on the price of gold and especially gold stocks (for all the reasons this post doesn’t have the time to go into… again) when people stop defending their positions and when the macro funda that actually matter come fully in line (they are not).  I am already bullish on the value of gold.

I sum up the author as follows…

Incorrect Groupthink: Gold is money for the individual, and under the control of the individual

Correct Groupthink: Central Banking with paper money, for the greater good, decided by ivory tower wise men

What I find strange, is that he then comes across as being a part of the gold community…

***************************
“Current Situation

So where are we at?”
***************************

All after accusing the gold community of “groupthink”, and following pied pipers as if they were heroes.

This commenter actually thinks I am part of the evil conspiracy, ha ha ha… me!  Biiwii, a site that has proclaimed the virtues of gold’s value proposition for a decade+ and shit all over the Federal Reserve’s policy for that same duration.  Sum me up any way you want my man.  Then after doing so why not go back and read some of the millions of words I’ve written over the last decade.

“The precious metals bear market, beginning with silver’s blow out in early 2011 and the general top in the commodity and ‘inflation trade’ along with gold’s lesser blow out later that summer amidst Euro crisis hysterics, has been all about psychology”

Wrong because of one word. Change “psychology” to manipulation. It is manipulation that is the trigger, and psychology is only the reaction. The ignorant and biased author needs to learn the difference in cause and effect.

And his groupthink comment is just plain stupid. So are all people who do something, who buy the same thing, engaged in groupthink? Are all antique car buffs suffering from groupthink because they all like old cars? How about all the women who buy jewelry? Are all skiers under groupthink because they enjoy gliding down snow covered mountains on two pieces of wood (or fiberglass or whatever)? Or perhaps more relevant, are all homeowners who buy insurance even though their house has never burned down suffering from groupthink?

Terrible article, really written like a jackass.

Thank you for making my case.  When you stop calling names and when position defenders in general at least stop to consider that someone who is on your side (in your perceived war) is actually trying to help, we’ll be ready to move forward.

Sincerely,

Jackass.

 

Gold Bug Psychology Must be Neutered

The precious metals bear market, beginning with silver’s blow out in early 2011 and the general top in the commodity and ‘inflation trade’ along with gold’s lesser blow out later that summer amidst Euro crisis hysterics, has been all about psychology.  Well, every bear or bull market is about psychology, but the intensity of this dynamic has been something to behold in the gold sector over these last few years.

Psych 101

In early 2011 long-term interest rates were rising in response to inflationary pressures, ‘Bond King’ Bill Gross famously shorted the long bond, virtual mobs with pitchforks were storming the Fed’s castle calling for Ben Bernanke’s head and silver went to $50 an ounce, with calls for $100, $200, etc.  All psychology my friends.

While on the subject of the long bond, our ‘Continuum’ chart shows that players did not learn 2011’s contrarian lesson with respect to yields as they took Wall Street’s ‘Great Rotation’ hype hook, line and sinker in 2013.  What did the 30 year yield then do?  Why, it hit our long-term limiter (monthly EMA 100, red dotted line) and has dropped ever since.

tyx

Pigs on the Wing & Sheep

Continue reading Gold Bug Psychology Must be Neutered

Roubini Loses His Way

Was Nouriel Roubini ever on course or has he just managed to bottle up a lot of PR in attaining his ‘Doctor Doom’ descriptor?  I don’t recall too many times reading the Roub and thinking ‘man, this guy’s a groundbreaking thinker’, so I lean toward giving him his props as a great self-promoter.

Nouriel Roubin – AKA Dr. Doom – warns of rising risks around the world

Anyway, this MarketWatch article describe’s the Roub’s latest warnings on global markets, featuring these risks…

  1. Terror attack in US or Europe
  2. Russia-Ukraine or Syria conflicts could spread
  3. Hong Kong protests and more

Honestly, I have no clue how some people assume the mantle of mass appeal and respect.  The 3 headlines above are the most cartoonish and idiotic pap I have read all year in a mainstream media that is all about cartoons and pap.

Think about October, think about the media and its starring cartoon characters on the job getting people all worked up.  While I am enjoying this drop in the market so far, the word on October is probably that it will be an opportunity to get bullish one more time.  At least if the Roub Indicator (RI) is still functioning well.

Gross Hype of the Day

In a stunner, the bond and fund worlds go nuts as the Bond King moves from PIMCO to Janus and JNS rams upward by 32%.

jns

Wow, the man who almost single handedly installed the 2011 red arrow on our T Bond yield ‘Continuum’ amidst the most intense inflationary hype of the post-Greenspan era is going to Janus.  Hey, great.

tyx

Hulbert HGNSI and Gold

First off, I want to say that the plan explained by Steve Hochberg in the video associated with the previous post (free sign up required) meshes well with how I see gold currently.  The 1000 +/- level is very doable, folks.  Not a given, but quite doable.  That would close out investors’ fear from 2008 by having made a completed cycle on the rebound in greed.

In the short-term, gold was probably ready to bounce even before the war stuff hit the news yesterday.  Sentiment had become just deplorable, with gold bulls puking left and right.  The geopolitical thing is a negative, as it always is but the Hulbert HGNSI is quite a positive, as the gold timer community (ha ha ha…) plummets well into net short territory.

hgnsi

So, geopolitical aside (and I always take that seriously as a negative for gold because it gets the worst of the gold “community” back to pumping) gold can see some decent rally activity off of sentiment and the improved Commitments of Traders structure.  But I think more downside may follow over the next few months.  Then?  Cyclical bull.

Meanwhile, I am using gold as a macro tool; probably the best macro tool I have when comparing it to other assets that are positively correlated to economies.  Gold is just a tool around here after all; a tool for market evaluation and a tool for monetary value.  It’s not an idol.  When the ones who obsess about gold with wildly glaring eyes are back on the pump, take caution.

Separately, also at MarketWatch we see that the word is getting out that these ‘golden’ and ‘death’ crosses that inexperienced TA’s often get hysterical about are indeed opposite to the hype.  The supposedly bullish golden ones are more bearish than the death ones.  Too funny, and sadly all too true.

What I like about market management is that there is no shortage of bullshit out there to decode and debunk, but casual observers tend to take it seriously.

Gold is Finished!

Once again, clicking the graphic yields the article, which I am not going to bother to read.  The headline is all I need to put in the analytical blender with other factors that indicate a coming low (easy now, it could still be well lower) could be an important one.

headline2