By Alhambra Investment Partners
So far the heavy buying after yesterday’s FOMC admission has held on the eurodollar curve. Most of the contracts along the curve have only given back a few bps after the 15-25 bps moves everywhere yesterday afternoon. The salient interpretation of trading along these lines is one of deep and abiding concerns over “dollar” liquidity and the economy. With the eurodollar curve back closer to the bottom of the last event, it would be fair to say that economic strength, as policymakers are attempting to call it, is totally absent from trading.
That creates a very interesting contrast to the behavior in crude oil prices. The WTI curve had been pummeled the past week or so as the “rising dollar” prominently returned to alter the prior bounce back in the $50’s. However, the FOMC’s announcement instead of furthering such pessimism immediately reversed it!
Continue reading Cliffs
By Michael Ashton
That’s Not How Any of This Works
I wonder how many times the Fed needs to be more dovish than expected before investors realize that this is a dovish Fed?
It may indeed be the most dovish Fed ever, judging from Dr. Yellen’s prior statements and history. And yet, investors seemed to have convinced themselves that with core inflation measured in the Fed’s preferred way far below its target (to be sure, it’s not the right way to measure it, but they’re not looking for excuses to hike), with structural unemployment still high (see chart of “Not in Labor Force, Want a Job Now,” source Bloomberg, below), with other central banks aggressively easing so that our dollar is aggressively strengthening, and with recent economic indicators surprising on the low side at the most-rapid pace since 2011, the Fed was going to put itself on a track to start hiking rates by early summer.
Continue reading “A Dovish Fed”
Our pals at NFTRH.com noted the move in USD/EUR, with the FOMC acting as an accelerant to already likely short-term events.
We, I mean they also babbled a bit about the gold miners.
But the following chart of hedged Europe fund HEDJ and three unhedged Euro items shows why I got rid of the way over crowded ‘currency hedged Europe’ trade. If a Euro bounce and USD drop were likely, that hedge no longer made sense.
Note HEDJ negative while EZU pops.
I currently hold the last two items in the panels below per ongoing analysis about European exporters (a big pharma and a diversified industrial/manufacturer). So far so good. Not sure yet if I am going to take these profits. I have to run, but need to think about the markets tonight (and I am sure NFTRH will have an update in the morning).
Speed readers everywhere see “does not mean that that the Committee has decided on the timing…”
And they’re off to the races!
 Okay, so they dropped the word “patient” that everybody was hyperventilating about. What did they replace it with? That gobbledeegook above. It really is unbelievable how so many take this so seriously. Folks, we are in Wonderland…
Of course, at 2:01 US Eastern time the market could get very actionable, but for right now it is a ‘close to the vest’ market. This means no big bets and no strong leans in one direction or the other.
Everyone Hates US Stocks –Bloomberg
If that’s true, that ain’t bearish.
Hedge Funder Dalio Thinks the Fed Can Repeat 1937 All Over Again –Bloomberg
I researched this gentleman and I love what he is all about, philosophically and in the way he views life as it relates to his vocation in the markets. i.e. it’s not just some MSM b/s. He is to be taken seriously IMO, in his knowledge of the markets but even more, as a respectable human (something lacking in this sphere, again IMO).
So here is the Fed’s idiotic Dot Plot that we are all supposed to be transfixed by.
The stock market took a hit, bounced and now by my eye anyway, is not at all cut and dry. Sentiment became toxic to the over bullish side a couple of weeks ago. Then the market dropped and bounced. This should not be an end to the downturn given the former sentiment profile that has not been nearly fixed yet.
But the leadership items we follow (esp. Biotech, Small Caps and Banks) are stable to good and then there are the AAII Individual Investors having been spooked, which is short-term positive (though the longer-term trend is over bullish and so, not healthy).
There’s lots more to the picture that can’t make it into a simple post. But it is best to check assumptions at the door and let’s all just be prepared for what is on the other side. It’s not so much the FOMC I am concerned about as my fellow market participants. That’s why I have remained in a comfortable position and recommended the same in NFTRH. It’s the ‘no strong leans’ market at the moment.
By Steve Saville
Ignore per-ounce valuations for gold deposits
During 2001-2011, buying exploration-stage gold stocks with large in-ground resources at low per-ounce valuations worked well. It worked well because ‘the market’ was often more concerned about leverage and quantity than economic viability and quality. Since 2012, however, buying an exploration-stage gold-mining stock on the sole basis that owning the stock gave you relatively low-cost exposure to a lot of in-ground gold has generally not worked well, to put it mildly. For the past three years, one of the most important rules to be followed by value-oriented speculators in gold-mining stocks has been: if it ain’t economic, it ain’t worth anything. This rule will probably apply for at least two more years.
Here’s a specific example to illustrate how the per-ounce market value of an exploration-stage gold-mining stock can be very misleading.
Continue reading Gold Deposit Valuations…
Call it an NFTRH promo if you’d like, but the view played out…
When hyped up momentum plays really get going it sometimes frustrates me that being a contrarian sort, I have to go sidelines due to a momo-phobic nature and watch while new heroes – trend followers – cement their viewpoints and reputations.
As an example, I don’t think
you’ve [edit: a case of typoitis lately, sheesh] you’d view me as a US dollar bull right now. But last summer we (NFTRH and possibly NFTRH.com and Biiwii.com to a degree) were 100% on the bottoming and upturn in USD. Today, legions of wise guys, geniuses and deep thinkers are schooling us on the fundamental reasons for the strong US dollar.
For another example, Europe and in particular Germany was noted
at [edit: wow, i really need to slow down] as being an out performance play back in Q4 2014 due to the currency dynamics in play. Here’ DAX now.
Continue reading What NFTRH Said on 12/7
Since Mr. Draghi Jawboned the ECB’s coming QE actions we have had Europe on a ‘me too’ QE play to the US (asset price appreciation Über Alles). While I took my marbles and small profit and went home on the European index ETFs, the big picture view of the Euro 50 continues to be a good one after holding lateral support and breaking above key lateral resistance. The downtrend line could be another matter, however (but it’s popping through that too, as of now).
Continue reading Euro STOXX 50: Me Too!
Biotech, a sector who’s bullish upward arc we have been tracking for about a year, is still going up. Here is today’s momo, Amgen (AMGN). I don’t own it and have no plans to, but I thought the chart was pretty cool. There’s the S/T target if the break holds.
By Steve Saville
Interesting US Oil Production and Price Inflation Charts
An article by Wolf Richter contains some interesting charts showing the response of the US oil industry to the huge decline in the oil price. Two of these charts are displayed below.
The first chart shows that there has been a collapse in the rig count (the number of drilling rigs in operation), which is not surprising considering the magnitude of the price decline. It also shows that the daily oil production rate has continued to climb and has just hit a new all-time high, which is a little surprising.
The second chart shows that with flagging oil demand and the on-going upward trend in oil supply, the amount of oil in storage in the US has moved sharply higher and is now about 21% above the year-ago level.
Can the oil price bottom while supply/demand fundamentals are becoming increasingly bearish? The answer is yes, because the market is always trying to look ahead. However, at this time there is no evidence in the price action of a bottom.
Continue reading Oil Production & Price Inflation Charts