The Tightening Lead (Pb) Market (from IKN459)

By Otto Rock

This was part of last weekend’s edition of The IKN Weekly. Just one small edit, the name of a company at the end.

More on Lead (Pb)

It was hectic and a bit of a squeeze to get the edition out on time last week, since then I’ve had time to fill in some blank spaces and none more so than the intriguing situation in the lead market. What I’ve found by checking the data is that there’s every reason to suppose an acceleration in the demand for lead that justifies the current voracious appetite of smelters for product.

The place to go for reliable supply demand data is the International Lead and Zinc Study Group (ILZSG), based out of Portugal and comprised of a selection of industry experts from all corners of the sector. We’ve made use of their database (22) on these pages previously for the zinc exercise which showed in 2016 the rise in demand (that’s worked out very nicely thank you) and it’s now time for its ugly sister, known in Latin as plumbum and the reason we call out the plumber who’ll often bring his plumb line. This chart derived from the data shows the supply make-up of Pb and the first thing to note is the high percentage of end user supply that comes from the re-cycling business. There are well-established firms that do this and as much as 97% of the lead used in car batteries is scavenged and sent back to battery makers to use again. However, mined supply is also on the rise and with 11 months of data for 2017 already published, our estimated as seen in the charts is likely to be within a tight margin of error and shows supply expanding again after a couple of stagnant years.

Continue reading The Tightening Lead (Pb) Market (from IKN459)

3 Amigos of the Macro, Updated


You thought I was done with the Amigos shtick, did you? Not by a long shot ma’am. They are the happy-go-lucky riders in play as the stock bull market churns on. They are the rising SPX/Gold ratio and stocks in general vs. gold (Amigo #1), rising US 10yr & 30yr yields (Amigo #2) and the flattening 10-2 yield curve (Amigo #3). On their current trends these goofy riders have signaled “a-okay!” to casino patrons playing the stock market and other risk ‘on’ items.

Taking our macro indicators out of order, let’s start with Amigo #2, who we have been noting to be bracing for something…

What is that something? Well, it is the targets for 10yr & 30yr bond yields we laid out 4-5 months ago in a bearish case for bonds; you know, back when everyone didn’t hate bonds as is currently the case under the much more recent expert guidance of Bill, Ray and Paul? It might as well have been Ringo, George and Paul making the call.

Another Heavy Hitter Calls Bond Bear

I am not trying to come off as a contrarian bond bull, deflationist. There are very valid reasons to be open to if not expect a new and secular bond bear market. But with the yields at our targets, which were established for a reason (being caution) and with the financial eggheads fully in unison, it has come time for caution on the bond bear stance and at least some aspects of a stock bull stance.

Continue reading 3 Amigos of the Macro, Updated

“The Last Great Myth of Every Financial Euphoria”

By Elliott Wave International

Beware of the “New Normal” in the Stock Market

The January 2018 Elliott Wave Financial Forecast put it this way:

After two decades of Mania Era asset bubbles and sentiment extremes, what now seems normal to many investors is actually highly abnormal.

That’s right — many investors no longer fear asset bubbles. That is why too many will be caught off-guard when the Mania Era inevitably ends.

Many investors are not frightened by the phrases “stock market bubble,” “housing bubble” or any other type of financial bubble.

Because, by the time the talk of a bubble makes it into the news cycle, investors perceive the long rise in asset prices as the norm and “today” as “different.”

A classic Elliott Wave Theorist made the point this way:

It’s never irrational exuberance in the present, only in retrospect or in the future. To quote the White Queen, “The rule is: jam tomorrow and jam yesterday–but never jam today.”

For example, even as the bull market in stocks celebrates its 9th birthday, read these headlines:

  • There Is No Bubble: Why Stock Bears Continue To Cry Danger — Seeking Alpha, Feb. 7, 2018
  • There’s no reason to run from the stock market — CBS Moneywatch, Feb. 7, 2018
  • Stock market fall looks like a correction, not a crash — The Guardian, Feb. 6, 2018

Also think back to 2005, when housing prices were soaring and house flipping was the rage. In November of that year, the Elliott Wave Financial Forecast mentioned another fatal assumption about bubbles:

Continue reading “The Last Great Myth of Every Financial Euphoria”

A Follow-up on 3 Charts

By Tom McClellan

DJIA In a Rogue Wave
March 08, 2018

We are at a fascinating turning point in the market’s path, and it is worth reviewing some recent Chart In Focus stories to see how they turned out, and to look at what might lie ahead.  I usually refrain from doing reruns, but in each case there is new information that I find interesting, and which I have already shared with our McClellan Market Report and Daily Edition subscribers.  I hope you will find them interesting too.  So here goes.

Back on Feb. 15, I wrote about “Stock Market In a Rogue Wave”.  Rogue waves are a rare and peculiar phenomenon, both in the ocean and in other areas involving flow.  The main points are that a rogue wave borrows energy from adjacent waves to build to a much greater height than the surrounding chop.  And the height of the crest tends to be matched by the depth of the adjacent trough.  After the rogue wave goes by, the fluid returns to the nominal level, or “sea level”, which in the stock market is harder to discern.

Continue reading A Follow-up on 3 Charts

S&P 500 Sector Situation

By Callum Thomas

We often hear about what’s happening with the S&P500 – for the smarter people you hear the S&P500 is up or down X%, for the not so smart ones you hear the S&P500 is up or down XXX points (usually with some added hyperbole, etc).  But what’s often not talked about as much, is what’s going on below the surface… not down to stock level, but at the sector level.  This article sheds light on trends in sector performance and weightings that have meaningful implications for investors.

Aside from the observations around winning vs losing streaks on the sectoral performance rankings (it’s rare to see a certain sector at the top or bottom of the performance ranking table for more than a year or 2 – contrarians take note!), the change in market capitalization rankings is profound.  Around 1995, the sector weightings of the S&P500 were fairly evenly disbursed, with the top sector at the time (consumer discretionary) at 15% and the bottom (utilities) at 5%… this contrasts to now IT at the top with 25% and telecoms at the bottom with 2%.

Basically there has been a fairly steady and systematic shift in the make up of the market.  You can see this in the performance attribution chart, where the bulk of returns in the last few years has been accounted for by financials and IT.  Most people will dismiss this as just a feature of the markets, but for the passive investor, or the active allocator who opts for passive exposure, investing in equities today has become a different bet.

The key takeaways from this analysis are:

Continue reading S&P 500 Sector Situation

Gold – The Next Big Surprise

By Kevin Muir

It’s been a while since I have written about precious metals. To some extent, this has been on purpose. I am a long-term fan of our little yellow friend, but there are definitely periods when I am more bullish than others. Over the past half year, my enthusiasm for precious metals has been tempered by one important chart…

During this period, the yield on the US 5-year TIPS (Treasury Inflation Protected Security) has been steadily rising. It’s not a perfect comparison, but you can think about this as the risk free real yield – the yield you will earn after inflation.

Many market pundits mistakenly believe inflation is the most important determinant of gold’s price level. That’s simply not the case. Although the great bull market of the late 1970’s was accompanied by high inflation, the 2005-2011 rise was in the midst of tame inflation, with CPI even ticking below zero for a period.

Continue reading Gold – The Next Big Surprise

The Inflation Scare of 2012

By Kevin Muir

I would like to take you back to 2012. Just a few short years after the soul-searching-scary Great Financial Crisis of 2008-9, market participants had finally given up their worry of the next great depression enveloping the globe, but had replaced it with an equally fervent fear that inflation would uncontrollably explode. The Federal Reserve had recently completed their second round of quantitative easing, much to the chagrin of a large group of distinguished economic thinkers who had gone as far as writing an open letter to the Fed Chairman pleading he reconsider the program.

Continue reading The Inflation Scare of 2012

Really Looking for Inflation, Part 2

By Jeffrey Snider

Continued from Part 1

What these unusually weak productivity estimates lean toward is, quite simply, the possibility the BLS has been overstating jobs gains for years. In early 2018, there is already the hint of just that problem in a 4.1% unemployment that doesn’t lead to any acceleration in wages and labor income. What it does suggest is that something (or several somethings) in these estimates is off somewhere.

For the unemployment rate, that already includes the participation problem in its denominator, but, again, that is not mutually exclusive of problems in the numerator (the increase in the number of payrolls). As nothing more than a rhetorical exercise utilizing nothing more than back-of-the-envelope counterfactuals (so take it in that spirit), if productivity had been more balanced and thus more consistent with how an economy actually works over the intermediate and long terms (not transitory), that would have meant by simple arithmetic either output was much higher or labor input much lower.

The Household Survey gained 1.44% per year during those same years, a lower rate than total hours worked reflecting the increase in full-time jobs as some part-time positions were converted back to the former pre-crisis status. Reducing the total gain in hours worked by more than a third (as shown above) would have lowered the increase in the Household Survey by more than 5.2 million at the end of 2017, leaving out how in every likelihood the reduction would have been more severe factoring less part-time jobs conversions.

Continue reading Really Looking for Inflation, Part 2

Really Looking for Inflation, Part 1

By Jeffrey Snider

Most people have been looking at Jerome Powell’s Chairmanship of the Federal Reserve as continuity, a comprehensive extension of Janet Yellen’s (and therefore Bernanke’s). This would by nature include all the nasty habits Chairman Yellen had picked up during her one term. At the top of that list is the word “transitory”, particularly how it came to be used during her tenure in a manner wholly inconsistent with its meaning.

This expression she applied mostly to inflation, or as if somehow a valid excuse for the central bank missing its inflation target (mandate) for the last half of Bernanke’s second term as well as the entirety of her own. Six years cannot fall inside the definition of transitory. But when you have no other alternate theory?

At his Humphrey-Hawkins mandated testimony last month, Jerome Powell briefly mentioned the other undershoot. This one happens to be the very factor that policymakers are counting on for transitory to end. Alongside a great many economic problems, worker wage rates have remained stagnant in nominal terms, and atrocious in real terms even with low calculated inflation.

Powell, however, is upbeat (when is he not?) Wages, he told Congress, “should increase at a faster pace as well,” for one because inflation has been “as likely reflecting transitory influences that we do not expect will repeat.’’ Weak wages are transitory, too?

Continue reading Really Looking for Inflation, Part 1

Navarro Says He’d Short Navarro In Cohn Replacement Race

By Heisenberg

Well, you can rest (a little) easier because according to Peter Navarro himself, Peter Navarro is not likely to replace Gary Cohn:


That soundbite comes from a cameo he just made on Bloomberg TV and to be clear, it was the only positive part of the brief interview.

Markets seem to have pared losses once Navarro claimed he wasn’t in the running for Cohn’s vacated position, which should be a sign to the Trump administration about what investors think about Peter. Of course that nuance will be completely lost on them.

Again, the rest of the interview was a shitshow. Navarro parroted his own talking points that cast America as a victim of globalization and continued to push the absurd narrative that U.S. allies are somehow conspiring to take advantage of us on the way to impoverishing industrial workers and bankrupting American industry.

“Even bigger tariffs imposed on solar panels and washing machines earlier this year have already boosted those domestic industries,” he claimed, before insisting that “all we’re trying to do with the steel and aluminum tariffs is to defend America.”

Obviously, that’s fucking absurd. America is not under attack and thus there’s nothing to “defend” it from. Globalization just is. It is a phenomenon and a consequence of humanity’s advancement away from nationalism and inward-looking policies towards a future where everyone shares a common destiny.

Try as he might, Peter isn’t going to reverse that, and neither is Trump, and neither are you, and neither is Wilbur Ross, who showed up on CNBC this morning as part of the administration’s all-hands damage control effort.

If the best thing Peter said was that he wasn’t in the running to take Gary’s position, the worst thing he said was this:

There you go, allies. Take that.

Oh, and hilariously, he also claimed he’s “going to miss Gary Cohn,” who Peter says he “loved” having conversations with.

We wonder if the feeling was mutual.

Global Equity Winners and Losers

By Callum Thomas

For anyone who has been looking at the detail across sectors, factors, and styles in global equities, there have been a couple of peculiar and extreme standouts.  Relative performance across a select few factors and styles seem to have accounted for much of the new bull market in global equities, and what’s interesting is, the February correction did little-to-nothing to change this stark trend.

The chart comes from a recent edition of the Weekly Macro Themes report, which looked in detail at relativities in global equities, and how the extremes may resolve.

The chart in question shows the average relative performance across momentum, low dividend yield, growth vs value, and cyclicals vs defensives.


 The line in the chart is a simple average of the aforementioned styles and sectors.  So basically, it’s high growth, high momentum, low dividend yielding, cyclical stocks that have performed the best, and been the major drivers of the global equity bull market.

The growth/cyclicals aspect probably makes a degree of sense, given how widespread and substantial the acceleration in global growth has been.  But even so, the performance since early 2017 has been simply extreme.

When you see extremes in markets you ought to pay attention. If there’s a rule of thumb that stands the test of time in markets, it’s that extremes don’t last.  Indeed, often times extremes can unwind faster and further than you expect.  I would say there has probably been substantial flows chasing these styles and sectors too and that his remains a key vulnerability for stocks, and a potential nasty surprise for those who jumped on the bandwagon.

This article originally appeared as a submission at See It Market. Follow us on:




By Tim Knight

Well, the world seems to be treating it as a huge surprise that Gary Cohn is ditching the White House, even though he’s been dropping broad hints about it for a while now. Sadly, the marvelous plunge we saw instantly when trading opened Tuesday night has been cut about in half. The markets are still down, sure, but not nearly as much as before.


Although, let’s face it, Mr. Cohn is a shrewd man. In exchange for his brief stint in Washington, he was able to:

  1. Dump his quarter-billion dollars in Goldman Sachs shares tax free (ostensibly to avoid “conflict of interest” – – uh-huh)
  2. Push through a tax bill to permanently give him and his cronies a greatly-reduced tax liability.

I wouldn’t be surprised if he performed his “public service” career with the intent of making it brief and self-serving. If so, mission accomplished on both fronts.

Or maybe it was out of selfless love for his country, right? Right?