By Bob Hoye
By Bob Hoye
By Bob Hoye
 Upon re-reading, it’s another of those posts I sometimes receive critiques about. Few conclusions and no clear direction. Maybe that is just the point though.
And there they go, conventional lemmings jumping from the frying pan, into the fire, soon to realize the fire is way too hot, and heading for that cliff over there.
(B)ut (i)t i(s) (w)hat (i)t (i)s and (N)otes (F)rom (T)he (R)abbit (H)ole are so named because we are all about anti-convention, as global markets have not been comfortably conventional since the late 1990’s, I think. This most recent cycle has existed to put all of us malcontents, cranks and alarmists back in a box under the bed, if not into the dustbin of history.
Well today, conventional sheep are flocking to conventional positions. “Bond safety” is what they run to when they are afraid of stocks. Of course, with gold now showing strength, the promoters over there are retooling their former “China/India demand” and “employment growth will spur inflation, which will drive people to gold” pitches to something more appropriate for the times, when global economic contraction comes to the fore and deflation is front page news.
Imagine that, investors flocking to bonds while DEFLATION! is all up in the headlines. Reminds me of Q4 2008, just before the next INFLATION.
This market is now officially fun again after the post-October drudgery that last month forced me to admit that my trading sucks and that I needed to take a time out and sit on my hands (as the market’s swings became too frequent and too contracted).
Do you see? Investors are seeking safety in bonds. Media are managing a global stock crash. Bull trend followers’ heads are spinning (‘Am I still a brave, resolute, trend following stock bull? Should I keep posting as such or is my inner fear barometer stronger than my resolve?’) and oh yes, the precious metals are bouncing while commodities continue to tank.
There are only a few entities who have called this environment. One is an influence of mine, Bob Hoye (decisively, but on what some might find an inconveniently long time frame). Another is NFTRH (less decisively, but on a very tight time frame). This is a market that is going to put all the carnival barkers (including gold touts) in their rightful places because now changes are happening and it will not be so simple as ‘stocks are tanking, buy bonds!’ and obviously, the whole ‘economy brings inflation, buy gold!’ promo.
Tops are spinning on the table and it all makes perfect sense. And I am not even a stock market bear. I just do not buy or hold tops. I look forward to a real bull market in the gold sector, but there is yet work to do folks. The US market’s big trend is still up and gold’s is still down. Not saying change is not in the offing, just saying trends have not yet changed.
With respect to gold, this summer’s event is so much more in line with fundamentals that matter than last summer’s Ukraine→Russia→Ebola pitch that was nothing more than promotion. But there remain some rocks beneath the surface.
As to the article linked above, this certainly does put Martin Armstrong front and center, with his ‘final flight to the safety of the government bond bubble’ analysis…
LONDON (Reuters) – Equity outflows hit a 15-week high of $8.3 billion in the past week, with fears of a China-driven global economic crisis pushing investors towards safe-haven money-market funds and Treasuries, Bank of America Merrill Lynch said on Friday.
I have not really known what to make of Marty and his computer, but this is 100% in line with his forecast.
I just love a market where things are in motion. Robo market was a dead thing, momentum waning and hopes fading. Now resolution is to the downside. From this point, it is now time to throw out the easy analysis and be prepared for the counter-cyclical environment we have expected upon completion of the post-2008 economic recovery (and all that paper and all those digits behind it).
Now you do not get points for just showing up and following the trend. Now you find out if that which you hold true actually is.
By Bob Hoye
I really enjoy reading, and listening to, Rob Arnott of Research Affiliates. He is one of those few people – Cliff Asness is another – who is both really smart, in a cutting-edge-research sense, and really connected to the real world of investing. There are only a handful of these sorts of guys, and you want to align yourself with them when you can.
Rob has written and spoken a number of times over the last few years about the investing implications of the toppling of the demographic pyramid in developed markets. He has made the rather compelling point that much of the strong growth of the last half-century in the US can be attributed to the fact that the population as a whole was moving through its peak production years. Thus, if “natural” real growth was something like 2%, then with the demographic dividend we were able to sustain a faster pace, say 3% (I am making up the numbers here for illustration). The unfortunate side of the story is that as the center of gravity of the population, age-wise, gets closer to retirement, this tailwind becomes a headwind. So, for example, he figures that Japan’s sustainable growth rate over the next few decades is probably about zero. And ours is probably considerably less than 2%.
By Bob Hoye
It’s been a while since we went around the intertubes for some market analysis…
By Bob Hoye
This week, I am participating in a school-style debate at the Global Fixed Income Institute’s conferences in Madrid where the question before the house is whether or not inflation will resurface in major world economies in the next five years. As you might imagine, I feel that my part of the debate is the easy part, especially as inflation is pointing higher in the US and core inflation just surprised higher in Europe. However, I am sure the other side feels the same way.
The Institute is interested in this discussion partly to illuminate the question of whether the substantial rise in yields over the last three months or so in all developed bond markets (see chart, source Bloomberg, showing 10y yields in US, UK, Germany and Japan) is indicative of a return of fears of inflation.