Current Markets and thoughts on deflation from Rick
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Today marked a 42 year low in jobless claims and yet prior to the Fed announcement the markets are not appreciating as one would think they might.
Saw it. Worst interview EVER. When Hunter starts putting on people wearing balaclavas and sitting with their back to a bright light so they are anonymous he has lost all credibility. Any hack could have gone on the show and made the same ridiculous assertions but it does not make any of it true. Greg repeatedly asked the guy what his “sources” were saying yet the guy just kept giving his personal opinion with no substantial supports at all. Ordinarily when one has a guest who has inside information there is a better connection with the real world. For example, he can name a time, date and place in reference to a real event or person to give evidence he was actually present when certain statements are made. But this guy….totally useless. Any nut job can come on a show and say that 50 million will diee in 90 days if the system breaks down. Oh really? Why not 100 million? Why not a nuclear holocaust to follow it up? Such a bunch of blather.
Sprott, as usual, bullish on precious metals:
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/sprott-asset-management-diversifying-away-from-gold-and-resources/article26644552/
I found Sprott to be very ill-advised, since mining stocks are rallying and commodities aren’t ‘crashing lower then you thought possible.’ Very short-sighted.
But not on presious metal/commodity stocks.
I’m sure every trader agrees with you Rick about the Feds but unfortunately those that trade the volumes that change the price values follow and react off the feds.
If the minutes suggest the FOMC was going to pull the trigger on a rate hike only holding back off global worries the spin could suggest a Dec rate hike (laughter) we trade the latest market spin.
Rick, agree global deflation will send capital into the US$ index chart
http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=1&mn=0&dy=0&id=p05021014467&a=426647089&listNum=1
Hey Al/ Rick
I think that lady means Lehman Brothers event. There were rumors that Deutsche Bank was having problems and could fail. I remember seeing the article a few weeks ago on Jim Sinclair’s site.
Deflation or liquidity trap. Looks more like the latter, since there’s no real data you can rely on to wave that bogey man around. Liquidity trap? We’re soaking in it, Madge.
Don’t worry. It’s Palmolive.
I could not decide whether I wanted to average down on ECA or RUSL. Picked ECA for the long play but had I used this powder on RUSL I could have taken profits today. RUSL is up $5 for the month and ECA is up about $4.
Just a correction on the conversation with Rick today. Al mentioned that I felt all asset classes were ready to move much higher. I believe he meant Gary’s feeling about the “emminent” future. If you’ve followed what I’ve been saying recently, I’m not in that camp at this point. I just wanted some clarification on that point. In fact most of you know I’ve been saying right along that the PMs are not ready to take off yet and that there will be pressure on them going into December. As for the conventional markets I also don’t think they’re going to “sky rocket here but will trade sideways with January being a pivotal month. I agree with Rick’s assessment that we’re probably still in a deflationary environment for a lot of the asset classes.
Don’t worry Doc. We only held it against you for a few minutes before you were able to clarify it with us.
We look forward to your segment later today.
Here in Thailand we are seeing a big meltdown of the Property bubble. Rick is calling this right. Everyone here will get monkey hammered. People are hoping for a recovery but with the Russians gone there are NO BUYERS. Yes deflation is real and it’s slow. Think the debt bubble is bad in the U.S. ? Every Thai is up to their ass in personal debt.
Rick is getting the whole picture. DEFLATION learn, live and love it.
So what you are saying is when I go there in the Spring I will be dodging bullets while vacationing.
Vacationing? Which particular radiation soaked wasteland are you thinking of visiting? The plutonium fields of the East Coast? The caesium-137 beaches of the west coast? The crater rim of Europe perhaps?
Rick is right on with his deflationary scenario. A global commodity bust is coming. There is too much debt out there.
DWTI is considered a buy under $85 if you want to get on the coming bust bus.
I think it has mostly been done already.
DID THE DOVE GET OUT OF THE FOMC CAGE……….
The dollar appears to be headed to 88. The 50 day is close to crossing below the 200 day. That should help commodities.
I dunno/ Don’t you quite often get dead crosses in bull markets just before the next move up?
Not to say I disagree. I just don’t know. It seems to me that it’s impossible to know right now because the markets are hostage to policy and seem to be trying so far unsuccessfully to break free.
Oil is about to breakout above 50.
Looks like it did Paul. There is a candle just pennies above the 50 mark but if you look at the hourly chart WTI might be putting in a double top.
Copper price low very apparent with a strong rally in the mining sector:
Al, I thought the question submitted by Sarah Lampert expressed a very reasonable concern and maybe should not have been dismissed without any good attempt to address it.
Since you brought it up you were obviously looking to hear Ricks opinion. I was surprised he did not offer anything more substantial especially as he said later in the show that he expected a “catastrophic” global deflation.
That remark is completely at odds with his comment directed to Sarah that if we keep fixating on a collapse scenario that none will ever happen. I think all of us understood, or should have understood, what she meant when she wrote the term “Lehman Event”.
She is asking what should we expect if a systemically important bank or insurance company were to fail how that would affect the markets and our lives. There is probably not a better question that can be asked right now, especially if we do indeed believe that a global asset deflation is impending.
What such a deflation outcome implies is that collateral will become seriously impaired and that will factually impact on the financial system (banks and insurance companies) as debt finally becomes unpayable.
And it is not as if we have not seen exactly this kind of event take place before. Our economic history is rife with institutional and bank failures caused by a mismatch between debt and the underlying asset whose values are subjective even at the best of times.
A catastrophic deflation such as happened in the 1930’s (and many times prior to that) resulted in sovereign level defaults as even countries were unable to make good on their obligations.
So why is it so preposterous that a major bank might fail?
In fact, banks did fail at that time. Thousands of banks failed. The risk today is that some of our banks are just so large that their collapse would have repercussions around the world. It is why we call them systemically important.
I addressed a question to Rick a few days back that he has not had time to answer. What I was wondering was what might happen to the derivatives we all use if a bank such as Deutche were to fail since they are both the counter-party and liquidity source for a wide range of products such as Exchange Traded Funds.
Well, the answer to that question is that stock markets in the US and Europe would most likely close for a holiday as hundreds of derivative instruments representing billions of dollars of daily trades were priced down to zero on news of the failure of the instruments host and liquidity provider.
Maybe Rick is in denial about this because his specialty is in the use of options trades and those are without question derivatives. I would just point out again that if anyone here truly believes that we will have a derivative meltdown one day that they should not doubt any of us will be spared. We all use these things to play the market.
And none of them represent a real claim on anything other than fresh air and the confidence that the issuer is solvent and still in business. If a “Lehman event” were to occur again the only assets that will have value once the curtain comes down are those we hold a direct ownership over.
Like cash in the bank for example.
NOT a quick bet on TLT……but ownership of the Treasury note itself.
NOT holdings of an ETF or ETN but actual stock certificates of real companies.
NOT on options contract or directional bet in a zero-sum casino but *real* claims on the assets themselves whether that is a contract on gold, copper, wheat or coffee.
If a deflationary expectation is in the cards then it is the collateral itself we must be concerned with as debts go unpaid or are defaulted upon. Either you own the stuff or you don’t when the unwind happens so we had all best be advised to start knowing the difference between owning an ETF on sugar versus an actual sugar contract!
And since most here do in fact believe that we are at the conclusion of a multi-decade credit cycle does that not warn us we should prepare by ensuring we are the true owners of the collateral that underlies all the fantasy derivatives so many seem to think are real?
Sarah had an excellent question Al. Would you mind looking at it again?
I know I would appreciate hearing what the guys have to say.
Note to Bob Moriarty……Bob, can you chime in on this since I know you have insights related to futures that others are less familiar with and I have no doubts at all that you would add some valuable comments to the conversation. Maybe Al can get you on the show sometime soon.
very good point A. L…..and I agree that Sarah had an excellent question…….
Thank you Frank. I know you get this because you are a real estate guy. Its like what is the difference between owning a fully paid-up farm or owning an interest bearing instrument that is a claim on farm debt? Worlds apart. One day soon people are going to again learn the differences between the two. And most are going to have a lot of regrets as they finally understand it is the physical land that matters, not the piece of paper that says you have some kind of an abstract interest in land.
Just to be clear….I was pretty disappointed with the comments from both Rick and Al on this show. They are both very bright guys but they are wrong in what they said today in their initial commentary and so they are not off the hook on this topic.
We expect better from them.
Rick, you are one of the top people in the world!
Al, Eric King would be proud of you! 🙂
Actually I agree. I love these guys. Should not have left that last comment but for some reason it was really bugging me yesterday. Can I retract it?
Rick and other guys. What would happen to the US dollar index if there was a hyperinflation in one of the other currency areas, let’s say in Japan or even in Europe or one of the smaller components?
Since the USDX is weighted geometric mean, if there is a zero on the bottom line the index would go to infinity as far as I can see.
That would mean if one of the components went berserk to the downside, the USDX could easily to to 160 (as in 1985) or beyond since it already broke out above the upper line of the falling wedge that was in place since 1985.
That’s not saying I think the USDX will go to 160. It could. It could however already have topped though all these currencies are relying on confidence and with the Russian incursions into Syria and the no interest rate hike in the USA it seems possible that confidence in the USA could take a downturn and with it the US dollar, deflation notwithstanding. (After all there has been more or less deflation in the Eurozone for years and the Euro has been weak for years – I know it isn’t the reserve currency but it is used as a reserve asset).
http://usawatchdog.com/we-are-entering-the-time-of-financial-collapse-point-v-the-guerrilla-economist/