Doc’s comments on the markets
Doc joins us today to chat about the conventional markets as well as the Chinese markets. He continues to see weakness which could lead to much something big happening later this year.
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If the folks take to the streets, those bonds could get interesting.
Bonzo,
This is what Bloomberg is showing on the matter:
http://www.bloomberg.com/quote/GGGB10YR:IND
Best to you,
LPG
Thanks LPG. We shoulda bought last week!
No pb Bonzo.
Now, I understand this is not what you have in mind when u mentioned buying last week… but here’s my self-question re: 10 yr Greek Bonds… – DISCLAIMER: just as a mental exercise:
Over the next 10yrs, which asset is gonna perform better ? Gold or 10yr Greek bonds ?
I know the question seems futile/stupid, but now here’s the angle, for me.
1) Gk 10yr bonds at 12 means they’d multiply by 8x if they go back to par….
2) some pundits such as Avi Gilburt say “gold 10x higher in 10 yrs”.
Personally, I would suspect I’d elect for gold just because I’m not sure the Gk bonds woulld even go back to 60cts on the Euro… i.e quote 60… so I’m not sure I’d be able to make 4x my money as a profit.
Conversely, Gold at 5000-6000 in 10 yrs doesn’t shock me as a figure… although I have no idea where it’s gonna be by then.
In terms of risk/downside, I can’t VALUE greek bonds… especially in a change of currency scenario, which is still a solid possibility over the next 10 yrs, IMHO. Conversely, for gold, I’m very happy to put a VALUE floor not too far from the $1000 mark, fwiw.
So for me, I’ll choose gold. Wether it’s last week, today, or next week. ๐
But this doesn’t mean $$$ can’t be made in greek bonds. ๐
As I said, it’s just a mental exercise ๐
Best to you,
LPG
LPG – Great points on the difficulty in valuing Greek Bonds over a 10 year window, especially considering the currency fluctuations, or their potential non-involvement in the Euro in 10 years. As you say, there is not guarantee that gold would magnify its value 10-fold as Avi predicted, but we know Gold won’t be trash. The Greek bonds are a much bigger risk.
A greek bond………will need to return 7.2% for 10 yrs. in order to double, ……
RULE OF 72…….
GOLD……..DOUBLE from here ……..in ten yrs…..is $2400….
I WILL take the GOLD………
๐
Agreed FFM – I’ll take the Gold over the 10 year Greek bonds as well.
I would not touch Greek bonds or any bonds. I’m a goldbug.
Hi Doc, during the first webinar you indicated that the Snipp chart did not look good at all. Based on recent fundamentals however, it has turned around the MACD is now improving. Is a turnaround in the cards or is this just a dead cat bounce since fundamentals don’t seem to working these days. Would appreciate your comments as I’m looking to add. Thanks for your time.
DGHH; it appears we’re in the midst of a short term bounce but the weekly and monthly would tell me the odds are for a further downturn and there is no hurry to take a position. Usually when stocks get crushed like this one, the bottom forms over time and it gives you a better chance to buy them near the lows. LPG and I were just talking about this stock on Skype.
Doc,
Personally, I wouldn’t pay too much attention to what LPG says… Especially on Skype…
My 2cts.
Doc ! I’ve learned a lot more listening to you than in reading so many newsletter advocates in the past 15 years. Thanks so much for your contribution to the KER.
What etf prefer you for shorting the chinese market ?
FXP; the government will try to continue to prop up the stock market but I don’t think they will be successful. I’m going to wait a little while to let FXP settle down and then decide when to short. Not investment advice.
Marathon, Vale and Teck all doing well today!
I was hoping that they went quite a bit lower first.
Bob, the odds are you get your wish.
Thanks Doc.
Had a bit of a bounce in Rio Tinto and BHP Billiton – but, like Teck, I am hoping that these will also go down much further first. The commodities they mine – coal, iron, copper, etc – look like having much further to fall… especially as there appears to be no sign of upturn in demand from China.
I think I will go back and look more closely at the biotechs… but I am taking very much on board your warnings of staying out of the markets currently.
Good discussion on the larger commodities companies guys. I also expect them to still fall a little further over the mid-term, but it was a nice counter-trend rally that some of them had today from an oversold situation.
Vale S.A. (VALE) -NYSE
5.90 Up 0.47(8.66%) 4:00PM EDT
Teck Resources Limited (TCK) -NYSE
9.50 Up 0.61(6.86%) 4:00PM EDT
Rio Tinto plc (RIO) -NYSE
40.68 Up 1.54(3.93%) 4:00PM EDT
BHP Billiton Limited (BHP) -NYSE
40.51 Up 1.04(2.63%) 4:03PM EDT
Glencore Plc (GLNCY) -Other OTC
7.75 Up 0.25(3.27%) 3:59PM EDT
Is Dr. Copper Warning Of A Global Downturn?
Friday July 10, 2015
http://www.kitco.com/commentaries/2015-07-10/Is-Dr-Copper-Warning-Of-A-Global-Downturn.html
Dr. Copper certainly is showing a Chinese slowdown… and if the Chinese markets do crash then I imagine all the big ore miners will see their share prices crash also… and the Australian economy probably would go into meltdown also.
Agreed Bob UK. This present weakness in the Chinese economy could be the final impetus needed to get the bottoming of the CRB index and the commodity sector.
We’ve talked all year on this blog about commodities putting in their lows in late summer (July/August) and we are getting into that window over next month or so. If this Chinese weakness is prolonged though, and if the dollar strengthens any further, then we may be putting in the commodity lows later in 2015 or early 2016 as Doc has stated.
We’ll have to see how low and how long this commodity rut gets drawn out, but this will be big buying moment many have been waiting years for, so having some cash reserves to buy into the upcoming weakness will be the key.
For me there is no real rush to get into companies like Teck, Vale, BHP, Glencore, or Rio Tinto, because their bottoming will likely be a process not an event, and there will be plenty of time to build positions once the indicators signal that the bottom is in and the ship is slowly turning direction back up in the sector.
I think it all depends on how the Greek people react in the coming days.
If they lie down and ‘take it’ then the markets could rally considerably IMPO… but if the Greeks, as I suspect, take to the streets in numbers it could set off all sorts of rammifications… Might even result in others in Portugal, Spain, etc, rallying to their aid.
There is a lot of anger over here about Germany. Lots of wounds are being re-opened.
Bob, you’re in Greece? Which part? Just came back from there last week. Might go again in September.
Bob, a military coup is not out of the question as well. The reason it hasn’t happened yet is because the military is not on the same page. The Greek military is controlled by two factions: 1) those who want to stay in the EU 2) those who still sympathize with the Greek junta circa 1967. They either get on the same page or one faction goes at it alone.
I’m glad I traveled around Greece in 1973 when the colonels were running the place. You could live well in Greece and Turkey on 2 or 3 dollars a day! And under Generalissimo Franco Spain was just as cheap back then. So was Ireland.
My father and two of my uncles took part in the 1967 coup. They all remember that day fondly. And Uncle Sam was generous enough and paid those who took part in the coup $200.
And $200 was a lot of money for my father and uncle who were in their late teens.
*uncles
*Late twenties instead of teens. Sheesh, my mind is not working properly today.
As someone who spent many a summer in the sixties near a Spanish beach, with the smell of pine trees, olive oil and cheap wine, I’m sometimes surprised I’m still alive.
In those years if you had US dollars on you, you were considered royalty. I grew up in Piraeus during the late 60s (came to the US in 1970) and US tourists were always pleasant and appreciative of the country. But let me be honest, Americans had the worst summer attire I had ever seen.
Chris,
I love the Mom and Pop restaurants around the fishing boat harbor in Piraeus. Great food.
No, I am not in Greece Chris – not at the moment, but I am thinking of going on holiday in September.
Close friends of mine got back on Saturday from a fortnight in Corfu. They told me that all the Greeks they met were very anti-austerity and anti giving in to the German / EU demands.
I am amazed that there is not rioting yet in Athens. Very hot there at the moment apparently… so maybe later on.
If you’re thinking of going back to Corfu, for relaxation, you might look up Messonghi Beach Resort, quiet and relaxing compared to staying in Corfu Town.
Thanks CFS.
I was basically going to use Gerald Durrell’s ‘My Family And Other Animals’ as a guide ๐
Let me also comment; there is a lot of anger in Germany where the Greeks are thought of as free-loaders.
Thanks Doc for your comments on Snipp.
Forget Greece, my Russian position is up 7% since last week. I am holding for 10%.
Saudi Arabia has to borrow 4 billion dollars from the market to subsidize it’s spending. If Saudi can take this price in Oil, what is the point to borrow money.
If Saudi cannot self sustain at this price, who else can?
Bank of Canada Stephen Poloz believes Canada will come out just fine, thank you very much. I’d like to have what he is smoking.
He can devalue the Cnd$ to 50 cents and come out just fine. ๐
I have read that Saudi Arabia needs $80-$90 / barrel to cover all of their social spending (i.e. keep a lid on discontent). But even if that’s true, might it not be worth it for them to drive it under that price for a while in order to increase their market share over the long term?
Their debt-to-GDP is extremely low, so they can afford it…
I think so but they have to get US support. Otherwise, a coup can happen tomorrow.
That’s the strange thing. The damage to the US fracking industry must be severe, no?
So it makes me wonder. It does not make sense. You don’t cut off the hand which feed you, right?
Lawrence,
I don’t think Saudi Arabia “HAD to borrow” $4bn.
I think a more appropriate way to put it is that they elected to borrow instead of taping into their reserves for covering some expenditures.
Saudi Arabia can “take” this price in oil… but at the current price and given their current expenditures plan… they will likely run a decent/material budget deficit this year…and put a decent dent to their FX reserves.
My 2 cts.
Best to you,
LPG
However, it does not make sense for price to go under all producers’ cost. In order for producers to break even, at least half have to be lower than the current price. It is reported from IEA that US production has peaked in April and down on May. Since US are mostly tight oil, decline is 50% a year. So without drilling (which is over 60% down from the peak), the old wells will not produce anything in 3 years. Overall production has to fall as it is an engineering issue not market issue. From China’s trade data, its oil import is up significantly from last year. The supply and demand has to match in medium and long term.
What I mean is that a commodity price can stay bellow some producer’s cost all the time and stay bellow the cost of all the producers some times, but it cannot stay under all producers’ cost all the time.
Lawrence,
A commodity price being below its cost of production…
… and a commodity price being below the price necessary for the country (which owns it) to balance its budget…
… are two very very different things.
Depending on the level/amount of expenses it decides to engage in, the price of oil required for KSA to balance/bk-even its budget varies. Could be $80,90,100/bbl…whatever. And if tomorrow KSA decides to double gvt spending, the required oil price for budget bk-even will shoot up. However (everything else being equal) the cost of production doesn’t change, irrespective of budget expenses, and therefore, irrespective of required bk-even price for budgets.
When people discuss US production costs vs. bk-even required for oil for KSA or Iran, or Russia…in my view it is a bit like comparing apples and oranges.
To illustrate and be clear, what i mean is that w oil at $35/bbl, US producers are operating at a loss. In KSA, meanwhile, production at $35 is still quite profitable and brings plenty of cash… yet it does not bring ENOUGH cash to balance the budget GIVEN the planned level of expenditures by the gvt.
My 2cts
LPG
You are right LPG, oil price required to balance budget may not play much a role. A better measure is what is average cost for producers to break even. As I know of it is above 75 in US. In Canada it is around similar number prior to cnd $ was devalued. When the price goes under the production cost , companies will cut cost or go broke. However cutting cost will impact longer term production. Government will have to deal the price slump by borrowing or increase royalties. At same time demand will grow. It is quite complex.
Rhodium is up 20$ today. It looks like it has bottomed. It leads me to believe that gold is only 2 or three months from the bottom.
***** SEE THIS IS WHY THE PRICE ACTION IN GOLD AND SILVER HAS TO BE TAKING OUT OF THERE HANDS *******
All they are doing in gold is ruling in their own interest, so gold and silver will stay down for now……………………………………………BUT WAIT TIL OCTOBER!
Once the phyz market takes over, the comex is gone.
Bye bye vapor paper caper…..
I like the ring of that “vapor paper caper”. That about sums it up.
YES……………NOW THE CHINESE might have milked their stock market just like the west dose everyday (note: futures are up everyday) but they have a firm hand on the physical market to come…………AGAIN…………..THOSE WHO OWN ALL THE GOLD MAKE THE RULES!
YOU BETTER BELIEVE IT……………………..AND IT’S COMING SOON, THEY ARE OUT OF GOLD, ESPECIALLY SILVER!
GOOOOOOOOOOOOOOOOD
I LIKES THAT!
Maybe when we are all old and greyer….
My gosh, how over sold will gold get?!
I see 1225 this week.
Good job Doc! Agree completely!
Let these PM stocks continue to move down and let gold continue to deteriorate. I have zero problem with any of it because its only temporary. Personally I like buying best of breed assets at fire-sale prices.
As for the Chinese markets……….. by the time the full washout and bottoming of those markets complete its cleansing phase that will take place and cannot be stopped, it will likely result in an additional 30-50% haircut when all is said and done.
The stunner of the day from a funny perspective has to be people trying to argue against empirical evidence that clearly shows that Chinese are some of the most hardcore gamblers anywhere on the earth.
Just another pickle jar moment when the truth gets in the way of a uncomfortable reality. Got to love it.
Good points on the PM stocks and Chinese markets Vortex.
Seems to be less than 50% bulls out there and almost %40 bears. This tells me that we are probable not far from a new leg up the NYC exchanges.
The US neo-nazi’s fascists have already destroyed the free market ecosystem of the world. That’s what they wanted, so that’s what they have done.
The NWO eco-nazi’s will never let the stock market in the US go down to any extent. They have repeatedly told the public taxing units this time and time again.
Any periodic weakness that does arise from time to time is just a PPT planned and scheduled fleecing program giving the privileged connected bankers a chance to reload at the bottom and to continue the insider wealth transfer of whatever remaining wealth is left.
When all of the remaining wealth has been extracted, then and only then will the markets be allowed to implode.
I don’t what difference there are with China except China just started boosting market recently and US has been doing it for years and decades. However, people seems so easy to bash China even before they know anything
Doc, I wonder how those 10 year Greek bonds are doing today?