Gold Inflation

By Steve Saville

Here are two long-term charts illustrating the annual rate at which gold is extracted from the ground. The second of these charts shows why mine production can be ignored when trying to understand what happened to the gold price over the preceding few years or figure out what’s likely to happen to the gold price over the next few years.

The first chart shows the amount of gold produced by the global mining industry during each year from 1900 through to 2017 (data sourced from the US Geological Survey). The second chart shows the percentage increase in the world’s above-ground gold supply during each year (1900-2017) resulting from that year’s new mine production. In effect, the second chart shows the gold inflation rate.

Continue reading Gold Inflation

Back to Fundamentals

By Doug Noland

The Dow (DJIA) jumped 545 points (2.1%) in Wednesday’s post-midterms trading. The S&P500’s 2.1% rise was overshadowed by the Nasdaq Comp’s 2.6% and the Nasdaq100’s 3.1% advances. Healthcare stocks surged, with the S&P500 Healthcare Index up 2.9% (Healthcare Supplies index jumping 4.5%). Led by Amazon’s 6.9% (113 points!) surge, the S&P Internet Retail Index gained 6.1%. From October 29th trading lows to Thursday’s highs, the S&P500 rallied 8.1% and the Nasdaq100 jumped 9.6%.

The post-election bullish battle cry was a resolute “back to fundamentals!” With the market surging, analysts were proclaiming “reduced uncertainty” and “the best possible outcome for the markets.” The President and Nancy Pelosi both adopted restrained tones and spoke of efforts to cooperate on important bipartisan legislation. Prospects for a market-pleasing infrastructure spending bill have improved. What’s more, a positive spin was put on the return of Washington gridlock. Less Treasury issuance would support lower market yields generally, ensuring the U.S. economic expansion maintains ample room to run. The weaker post-election dollar was said to be constructive for global liquidity.

The EEM emerging market ETF rose 1.9% Wednesday, pushing the rally from October 29th lows to 11.0%. The South African rand and Indonesian rupiah gained 1.5%, as most EM currencies temporarily benefited from the weaker dollar.

Continue reading Back to Fundamentals

The Google Machine Inspires a Discussion about Inflation and Deflation

By NFTRH

The following is excerpted from the Opening Notes segment in this week’s edition of Notes From the Rabbit Hole, NFTRH 525 (out on Sunday, November 11). It pretty much came out of nowhere after I did a comparison of Google searches for “inflation” and “deflation” while checking Google Trends for another aspect of the report.

The Google Machine Inspires a Discussion about Inflation & Deflation

Switching gears, while I was in the Google machine I decided to compare two terms that are at the heart of our investment management going forward; Inflation and Deflation.

inflation and deflation

It is no surprise that inflation is always much more often searched for because well, they are inflating in one form or another constantly. Whether it is through outrageously experimental monetary policy under the Bernanke Fed or supposedly sound fiscal policy under the Trump administration, it is all designed to raise prices and enrich asset owners, while leveraging debt (which is where the potential for deflation comes in).

Continue reading The Google Machine Inspires a Discussion about Inflation and Deflation

Sector Shorts: Technology

By Tim Knight

Preface to all sector posts: I’m not going to dance around it: I am very short again. I have 99 different short positions and am aggressively positioned for the week ahead. I have gone through all my charts and have broken a portion of them into distinct sectors. Here is the next gallery, and as always, you can click on any thumbnail for a larger image. You can scroll left and right through the gallery.

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Excess Reserves Provide $38 Billion In Riskless Bank Profits A Year

By Anthony B. Sanders

No one was expecting any interest rate changes from The Federal Reserve yesterday, but I was hoping that The Fed was going to announce a reversal in their policy of paying interest to banks for depositing their excess reserves with The Fed as opposed to lending it out to businesses and individuals.

(Bloomberg) — The Federal Reserve left interest rates unchanged and stayed on course to hike in December despite recent jitters in financial markets and a critical president.

The U.S. central bank said “economic activity has been rising at a strong rate” and job gains “have been strong,” acknowledging a drop in the unemployment rate, while repeating its outlook for “further gradual” rate increases in its statement Thursday following a two-day meeting in Washington.

Risks to the outlook appear “roughly balanced,” the Federal Open Market Committee said, leaving that language unchanged from the prior meeting in late September. Inflation expectations, which have slipped slightly in recent weeks according to some measures, were described as “little changed, on balance,” the same as in the last statement.

feddotsnov18

Well, if risk is so roughly balanced, why do banks still have so much money parked at The Federal Reserve in the form of Excess Reserves?

Continue reading Excess Reserves Provide $38 Billion In Riskless Bank Profits A Year

A 20-Day Closing High On A Follow Through Day (FTD) Has Provided A Bullish Edge

By Rob Hanna

One notable bit of evidence that emerged on Wednesday was the fact that it qualified as an IBD Follow Through Day (FTD). I have done a lot of research on FTDs over the years. Much of that research can be found here on the blog. Unusual about this FTD is that it occurred in conjunction with SPX making a new 20-day high. This triggered the study below, which I last discussed in the 10/19/2011 blog.

2018-11-08-1

Results here are impressive over both the short and intermediate-term. To get a better feel for the short-term returns I have listed the instances below.

Continue reading A 20-Day Closing High On A Follow Through Day (FTD) Has Provided A Bullish Edge

EM vs. DM Manufacturing PMIs

By Callum Thomas

I thought this chart was really interesting and worth highlighting, particularly given I’ve been writing a lot about emerging markets recently.  The reason I highlight this chart is because in October the emerging markets composite manufacturing PMI rebounded to a 5-month high.  Now it is important to note that this is a relatively volatile index month-to-month and ideally we’d like to see another stronger or at least stable month to confirm… but this is a really promising sign.  The worst case scenario for EM from an indicator perspective would have been to see a precipitous and unabated decline and breakdown through the 50-point mark which delineates economic expansion vs contraction.  In short – it looks like EM has stopped slowing.

Continue reading EM vs. DM Manufacturing PMIs

The Daily Shot Brief – November 7th, 2018

By The Daily Shot

Greetings,

The United States: The US agricultural sentiment index (Ag Economy Barometer) improved in October on hopes that the NAFTA 2.0 deal will ease trade tensions.

Source: Purdue University/CME Group Ag Economy Barometer

 

China:Goldman’s money-supply indicator for China has diverged from the nation’s credit growth.

Continue reading The Daily Shot Brief – November 7th, 2018

The Daily Shot Brief – November 3rd, 2018

By The Daily Shot

Greetings,

The United States: This chart shows the difference between CEOs’ future expectations and their assessment of the present situation. The second chart has the same measure for the consumer.

Source: Gavekal

 

China: The Caixin/Markit Composite PMI (manufacturing + services) is approaching 50 (business activity growth is stalling).

Continue reading The Daily Shot Brief – November 3rd, 2018