What you should be watching for in February
On our market wrap we touch on gold and the US dollar (more on those two asset classes tomorrow) and then move to some earnings released today. The overall takeaway is what technicals we will be watching as we make the turn into February.
Click download link to listen on this device: Download Show
Playing devil’s advocate, could you not argue that, after 18 months in a bear, CAT is approaching a point where it might be about to begin the upward leg on the constant rollercoaster ride that is the CAT share price?
Bob,
Here’s how I see things:
If you believe…
(1) a global cyclical recovery is at hand (in the next few months) and that
(2) CAT’s share price is now fully discounting the current cyclical slowdown,
…then it’s a buy.
My 2cts.
Best & hope all’s well.
LPG
Bob,
As an aside on CAT…
If you’re interested in the name, also take a look at
* the debt level,
* debt schedule and
* current cash levels + cash generation
—> just so that you’re “covered” on that front.
This remark goes for any large industrial company you might be looking at. Whatever the sector, whatever the country.
Hope that helps.
Best again,
LPG
I know why you have posted the above LPG, and I thank you for that, but, again playing devil’s advocate, does any of that truly matter in the markets that we now have?
From what I can see a great many stocks just reach a certain low point and then they get pumped, pumped, pumped and then dumped by the big boys. Then, after a period of decline, the pumping begins again.
The fundamentals of a company often no longer appears to play any part in whether a stock gets pumped or not – it appears to just be “OK, this stock has fallen so far that there is an oppportunity to pump it in, lure in retail and off-load onto them.”?
The only lesson that I have learnt from the QE years is that if we get QE4 this year that it probably will not matter which stock you are in as all boats will float. The real skill be finding the stocks that riser faster and further than all the rest.
Rant over.
There’s one thing I agree w. you Bob: it was a rant. 😉
Best,
LPG
LOL.
Kinder Morgan looks like it might have bottomed, as do some other similar pipeline companies.
I mentioned KMI, but that was not any recommendation; there are better stocks in that area…..DPM, ETP, ETD with higher dividends.
Thanks CFS. I also am watching Energy Transfer Partners, but was not following DCP Midstream Partners, so thanks for mentioning it. Who is “ETD”?
Marty Armstrong audio………..at FSN
Marty says…………Ted Cruz ‘s wife is a director at GOLDMAN SAKERS…
Not exactly new news
News to me………but, you are more politically connected……….lol
I sure if you took a count on this site………..many would be surprised.
Big Al you mentioned after hours for Apple, but it looks far lower than you mentioned falling -13.12%:
(AMZN) Amazon.com, Inc. – NasdaqGS
635.3552.00 (8.91%)
After hours: 552.02-83.33 (-13.12%)
Not Apple….Amazon. I posted the tickers for Amazon, but wrote Apple.
You get the idea though….. Here is how after-hours went. While I agree with Doc that the liquidity is not there in after-hours or pre-market, those trading sessions should definitely not be ignored, as they explain why gaps up or down happen in the first place on charts. Tomorrow will be a gap down in Amazon for example.
After hours: 550.00-85.35 (-13.43%) as of 7:59 PM EST
Yep Amazon had a big gap down today. This is the value of watching aftermarket & pre-market trading.
I have often maximized a trade and been able to squeeze out significant percentage point gains by utilizing a sudden drop in after hours trading and then selling into the snapback when the markets open the next day.
For example one could have bought Amazon at $550 in after-hours trading and sold it back today when it popped back up to $588 for a quick 7% gain. Just sayin’…..
Amazon is latest of top 2015 stocks in ‘FANG’ group to disappoint
January 29, 2016 – Aaron Pressman
Looks like the market took a Bite out of the FANGs lofty status.
Amazon just fell to $549 and should head to 500 at least and maybe to 400 but needs to get to around 300 to burst this recent bubble. Pays zero dividend and is really only worth about $100. 921 P/E. How much higher than they push it?
1001 P/E?
Maybe it will be a steal if the PE could drop to 500.
Paul,
If the share price reaches $100, that would be a $49bn market cap company.
TTM FCF is currently $7.3bn, after $4.6 bn of TTM capex.
Errrr…… Worth around $100/share you said ?
Tell you what: when it reaches $100, assuming the company is still the same – ie the only thing that has changed is the share price – please send me an email. I’ll buy boatloads of that “Zero dividend” paying stock.
Meanwhile – although I’m patient, I’m afraid I’ll be waiting for Godo if I wait for AMZN to reach $100 – I’ll continue to purchase “Zero dividend” PM stocks.
My 2cts.
LPG
Wow. Thanks CFS. There is a ton to dig through in there and it’s going to take some time for me to digest that one. Much appreciated.
Thanks for that CFS.
Best,
LPG
Excelsior,
Excerpt from Williams Equity Research:
includes: AMLP, BBEP, EPD, EQM, ETE, ETP, KMI, LINE, MEMP, MMP, PAA, VNR, WPZ
Disclosure: I am/we are long MCEP, MEMP, GST-A, LNCO, WPC, VTR, HCP, HTA, DOC, VNRBP, MAIN, BXMT, RY, BNS. (More…)
As outlined in Part I, several factors contributed to the collapse in the equity and debt prices of many master limited partnerships.
For much of the downturn in oil and gas prices midstream firms held up quite well. This has changed as of late with some household names down over 50%.
As we look deep into the midstream sector, we find a few names have implemented the right policies while others have adopted what is hurting the upstream segment.
As in Part I that focused on the struggling upstream sector, we’ll go through the main midstream players I follow and determine which are making the right moves based on what I believe to be the right parameters for these firms to survive the downturn. For those that missed it, Part I outlines the circumstances that led us to where we are now. Midstream MLPs face a different set of risks than their upstream counterparts. They have between little and no direct exposure to commodity prices. Their challenges are longer term.
There are tens of billions of oil and natural infrastructure projects in process across the nation. Going into late 2014, there was significant pent up infrastructure demand as production increases outstripped takeaway capacity. Some firms like Kinder Morgan (NYSE:KMI) had backlogs exceeding $20 billion. The question for the midstream sector is this: Will the sharp and sustained decrease in drilling activity and resulting decrease in production lower demand to the point today’s infrastructure goes from under capacity to costly under utilization?
OK you meant EPD not ETD. Got it. Thanks, I’ll look into the other names featured as well, and am familiar with KMI and ETP.
Listed at the top of that article:
AMLP, BBEP, EPD, EQM, ETE, ETP, KMI, LINE, MEMP, MMP, PAA, VNR, WPZ, MCEP, MEMP, GST-A, LNCO, WPC, VTR, HCP, HTA, DOC, VNRBP, MAIN, BXMT, RY, BNS.
Thanks again CFS for posting that excerpt.
It will be interesting to see if the Dow:Gold ratio can close January above its 150 month SMA and EMA.
Feeble SPY was unable to even stay above the 5 day MA today. All things considered, it’s pretty pathetic that it could handle such a low hurdle. Missed it by a cent.
Gold monthly:
Armstrong is so full of it with this “slingshot” move. He keeps guaranteeing there will not be another bear market and we will rocket to bubble highs. What a bunch of garbage. All the trend following newsletter peddlers missed this decline into January. It was SPX 2350 up up and away!
That is why it is important to do your own DD…………
Yes, avoid doggy doo doo to avoid doing dodgy due due – diligence, that is.
ddito
funny.
Dan,
I’ve been calling for a 7 year cycle low for months. But once it’s finished I’m also in the camp that QE4 will drive another bubble.
Gary,,,,what do you think of Armstrong’s comment,….. the reason for dow take off, will be because big money will be avoiding all govt bonds…..thanks
I know you were correctly calling for a crash in January. But you were still talking about the bubble phase in the fall. And I doubt QE4 will save the market this time. Deflation will take hold and we’ll blow through that 1550 long term support easily.
Where was the panic even at 1800 SPX? The average boomer is still buy, hold and hope, and collect dividends. Comparisons to 1987, 2008 or 1929 don’t work. Even case is different in history.
That’s what contrarianadvisor’s scenario makes sense. A steep swift deflationary bust faster than 2008, but not an all out, long depression. Fed will panic and the bubble in metals wll commence, but starting from $5 silver and $500 gold.
No one can figure out the FED……FOR they do not even know what they do…..
Gary,
I miss your comments and always have enjoyed them. You are spot on with the 7 year cycle. You have been the best at calling the conventional markets for quite a while. The 7 year low should hit late march or April. However, there will not be any QE to bring the markets back. You need to get that! Seriously
In all respect.
Chartster, the QE that has already happened is yet to be reflected in the real world. There is massive price inflation coming due to the massive inflation of the money supply that we’ve already had.
Matthew,
That is about to be off-set. The money supply and derivative exposure are at equilibrium. It’s just, no budy knows it , yet.
You’ll see.
Gold weekly:
Here’s 35 years of CRB:
And here’s 35 years of gold priced in CRB:
Gold beats everything when economies contract and debt deflates.
…………………..dividing by nearly zero can make anything look good!
The fact remains, the so-called deflationists are wrong to say that the dollar is the place to be. It hasn’t come close to gold’s performance overall.
*** WELL LET”S SEE IF THESE MARKETS ARE GOING TO END IN THE RED OR IN THE GREEN FOR WEEK NO.4 OF THIS PAIN GAME!
I just wanna sit back and watch at this point.
Mark…………looks like some great videos at sgtreport., I have not heard them yet, but, some new reports on LBMA…COMEX, thought you might be interested………
Just noticed on one of the reports…….GERMANY GOT BACK 366 TONS OF GOLD zerohedge 1-27-2016…100 tons from NY.
I’m back Frank………….will go there, thanks!
I’ll be back!
Yeah Frank, thanks again……….I will break all of this down in a new heading at the bottom of this page in ‘ The Real Wrap ”
Stay tuned!
Rob Mcewen on Palisade Radio this week….
Good interview with Rob McEwen. Argentina sounds hopeful in his opinion, and it was the #1 turnaround country he expects for the mining industry in 2016. Interesting.
Thanks, CFS. I own MUX and am waiting for gold@5k.
Let’s see if he MUX it up. 🙂
Ha. I think Rob is a good CEO and have had some good trades I made in MUX this year, and I missed a few great trades in MUX because I bet on other horses.
It seems like the Argentina worry is more off the table now, and their share price is making a gradual comeback. On the next downturn in PM mining stocks I made stash a little cheddar in the ole MUX master for a potential joy ride longer term.
Thank you for the link CFS,
I enjoyed listening to that interview.
Cheers.
Why should Saudi send out a lifeline to high cost producers?
Gold:GDX weekly:
Gold:GDXJ weekly:
Still waiting for the VIXY to come down so I an start adding from 16 down.
I’m watching volatility as well, but have been using TVIX lately over UVXY.
Silver bounced nicely after testing the 50 day MA today…
For those who can view a 2 hour chart, here’s GLD…
The young uptrend is not in any danger.
Bank of Japan goes negative on interest rates, Yen drops, Nikkei surges.
IMPACT Silver
-In 2015 production reached a record 950,059 silver ounces, an increase of 31% over 2014.
-Byproduct production in 2015 was 495 gold ounces, 450 tonnes lead and 266 tonnes zinc.
You forgot to mention it’s their 10 year birthday party for continuous production.
Honestly, I didn’t realize they have been a producer for that long. Thanks for the post.
The team there is competent and, to the best of my knowledge, honest. Unlike so many others, for example, they raise money when it’s best to, not when they have to. For instance, IPT raised $15M at ten times the current share price at the end of 2010. That’s how you protect shareholders from dilution when the inevitable downturn appears.
My main reason for holding it is the vast exploration upside that the next bull will unlock. It’s a great bonus that they have been able to fund the majority of that exploration without dilution or debt. This ability to self finance is probably the main reason they have chosen not to waste money on getting a big 43-101 done (which banks, that they don’t need, require).
(However, the coming bull market will be so strong that I bet they will consider it advantageous to put out an impressive 43-101 because so many potential new investors will want one.)
Great points about not diluting shareholders to get a big 43-101 completed, and on raising money at higher share prices, and not bargain basement prices like many poorly run companies have done.
This was actually my hope with Aurcana back in the day, because they were just going to mine the TX Shafter without a resource estimate and do that later when revenues were generated. Then the bottom fell out of the market, they did a terrible reverse split, and I exited stage left. Glad I did because they just nose-dived from there.
Have you looked into the balance sheet restructuring they are doing at Aurcana now? I am wondering if a phoenix will rise from the ashes?
AURCANA CORPORATION ANNOUNCES COMPLETION OF RESTRUCTURING TRANSACTION
January 7, 2016
Apparently Aurcana just did and estimated resource estimate for Shafter. Timely.
UPDATED RESOURCE ESTIMATE FOR AURCANA’S SHAFTER SILVER PROJECT
January 12, 2016
Vancouver, BC, January 12, 2016
Now that I read that closer only 155 out of 1,694 holes were from Aurcana, and the rest are very old drilling results from American Metal Co. back in 1942. So basically they are piecing together the framework of a resource. Regardless, I am starting to watch Aurcana again to see if they can reboot.
__________________________________________________________________________
“The Shafter drill-hole assay database contains 20,006 silver assays from 1,694 drill holes. Of the drill holes, 155 were drilled by Aurcana. The majority of drill holes (992 holes) in the database are underground core holes completed by American Metal Company (“Amax”) prior to 1942, followed by Gold Fields Mining with 403 holes.”
I got to give them this…..Aurcana’s website looks a lot better and is more informative.
Having said that…..their corporate presentation is from May of 2105, long before their restructuring process that started in October and has just finished up in January.
When they release their new corporate presentation or do some kind of overall update on the company in a press release it will be a better road-map of what to expect.
I did hold Aurcana briefly and got out with a gain believe it or not but I wouldn’t touch it now unless they got new people to run it. Even then, I would just consider it.
(For all I know, they do have new people. I have not followed it for quite awhile.)
Yes, they scrapped the old CEO Lenic Rodriguez and the management team that placed Shafter on care and maintenance in 2013, then did the terrible reverse-split, and then other temporary people came in.
Aurcana has gone through a full-fledged shake-out over the last 2 years, and spent the last 4 months restructuring (to avoid bankruptcy), and have rebooted as a company. I skipped out on the madness the last 2 years, but am curious because as of January 2016, they are not back in the marketplace, and still have both their mines, a workforce, and reasonable ounces in the ground. I’m wondering if most are unaware that they have resurfaced?
not to now…
Along the same lines….. Huldra Silver showed a great deal of promise and spent all this money on developing their mine and mill right as the prices when over a ledge. They nearly went bankrupt, restructured and merged with Nicola Mining (so now they have a copper deposit as well). It doesn’t seem anyone noticed they are back either…..
What is attractive to me about Aurcana and Nicola is that they already have their mines and mills built, so they aren’t really exploration plays, and all they are waiting on is higher priced Silver. If you have some time to review them at one point, I think they are both well-kept and underestimated “new” old companies.
Nicola Mining Website:
Thanks, I forgot about Huldra and sold it for a modest gain before the storm.
I’ll take a look at both.
Btw, I attribute my gain to luck more than great due diligence, in this case. 😐
Thanks. I’m just trying to figure out if they may be unrecognized Silver miners that come from out of nowhere and surprise everyone when pricing recovers.
I actually got burnt on both Aurcana and Huldra, so it was harder for me to forget about those 2. In this case, I legitimately think they may both relaunch and get their acts together for the next bull run in Silver miners.
One last one to consider is Arizona Mining. They were previously AZ mining, and before that Wildcat Silver. Our buddy Dan Calgary brought them up on here a few years back. I rarely hear anyone discussing them, but they are a near term producer. For some reason, I thought they already were producing Silver, lead, zinc.
(WLDVF) – Arizona Mining Inc. – Other OTC
0.23610.0261 (12.43%)
* The Real Wrap! ”
**** THE BALTIC DRY INDEX TELLS THE TRUE STORY AS THE CAN IS KICKED OFF THE CLIFF DOWN TO 325 PTS! ****
http://www.bloomberg.com/quote/BDIY:IND
Like I keep saying, these fools here in America are really waiting on the official word that the country and the world is in a Depression! Because I’m smarter than everyone else I know that THE GAME IS OVER!
” You can’t piss in my face and tell me that it’s rain! “
***** AS FOR THE FIX! ” THIS GAME HAS NOW BEEN FULLY EXPOSED, AND THIS GAME WILL SOON BE OVER! *****
https://www.youtube.com/watch?v=5GaSVJbGi4A
I have been saying on here for months that the whole game is rigged!!!!!!!!
They are doing anything and everything to survive at this point!
The whole system is falling apart!
Keep on stacking!
*** AND AS FOR THE DEBATE ON FOX NEWS TONIGHT! NOBODY WATCHED IT!
Only a few dumb a$$ Americans who will listen to the same lies from these clowns over and over again watched it!
Americans are suckers and the whole world knows it!
Donald Trump is THE MAN!
Not only are Americans suckers but they are also a bunch of criminals themselves!
Well they come from a history of criminals, why do you think that America has the largest incarceration rate in the world! This is why they play the criminal game on Wall Street each day! Nothing but lies, schemes and crime everywhere!
America is drunk on lies!
And now they are going to be shocked and wont know what to do when this fraud of a criminal system comes to an end……………..GAME OVER!
Did you read Bernie Sanders comment from his speech last night?
The government should begin massive work programs
And
Should have a mandatory 3 month paid maternity leave for the entire country.
Nice, who the hell is going to pay the bill for this?
Second, in my day you worked and built up a cash reserve for the rainy day, i.e. sickness, pregnancy, etc. You did not rely on a social program.
These are the dumb ass Americans. Lazy and what is ruining this country. But unfortunately, this appeals to many because it is just another “Free Lunch.”
Regarding the work programs, the government is the MOST corrupt when it comes to these things. It winds up costing 10X or more than the private sector while being 50% less efficient.
So again, look back on past history, THIS WILL BANKRUPT THE COUNTRY. Secondly, it is not the function of the government to collect taxes and spend on work programs.
You better believe it Americans love free hand outs!
Obama proved that!
+1 Richard
Those who fall for Bernie are economic dumb asses at the very least.
that is just the very least though….. : )
Lol, I was trying to be nice.
How about criminal. I think that sums it up.
That’l work.
** THE FED is now totally out of bullets and they don’t know what to do and as a result look at all of the chaos that they have produced!
********* BREAKING! JAPAN IMPOSES NEGATIVE INTEREST RATES! ***********
This will come to America!
What a bunch of damn criminals.
ditto…………..
America better wake up , because it is coming here…….BAIL INS for sure.
This afternoon the BOJ came out with a policy of NEGATIVE interest rates. Ho lee Fuk….Sum Ting Wong……..
This is really historic…..how will AU react? More to follow…….
* The people of Japan should be outraged by this! Now the people have to pay for the banksters of Japan’s criminal mistakes!
They should have been outraged, that they still have US TROOP on their soil……
add an S…..Troops
Well the timing was good. The yen has a big gap to fill and was heading down anyway…
Weekly:
Thanks for the chart Matt……….oh yeah, everybody could see it coming, but it’s really a damn shame! There are a lot of elderly people in Japan, and I know that this is not going to sit well with them………..sad!
* Oh yeah, Dow Futures are up 150 points………….happy days are here again!
Mark, the world didn’t end as predicted this week. Buy a call on something it will help settle your nerves
DUH…….I never said that the world would end!
You dummies are not paying attention……………listen the next time!
“The toxic pile of distressed corporate debt in the US grew to $285 billion in January, up 22% from a month ago and up 162% from a year ago, according to S&P Capital IQ. The number of distressed issuers ballooned to 324 US corporations, up 20% from a month ago and up 84% from a year ago.
The last time the total amounts of distressed debt and the number of distressed issuers had shot up to these levels was in October 2008, just after Lehman Brothers had filed for bankruptcy.”
http://wolfstreet.com/2016/01/27/distressed-us-corporate-debt-at-lehman-moment-levels/
Bingo!
Notice the pattern since 2000. Bubble in tech, real estate, blue chips, commodities, bonds (especially junk).
I agree with Morris, gold is looking good…
http://www.superforcesignals.com/video/2016jan28gold/2016jan28gold.html
Well Gold has gone down and bounced off that $1111-$1112 zone twice now and is currently hovering right above that support level at $1112-$1113. This is that rim of the saucer or the cup & handle pattern, and personally I don’t want to see a close below that level today. Hopefully it is just re-testing this support level and will surge from here. It would be very healthy for Gold if that happened.
BTW – Thanks for the Morris Hubbartt post. I always enjoy and generally agree with his analysis. Not only did he mention the bullish breakout potential of the cup & handle pattern or saucer pattern, but he highlighted that gold would lead the move out of the descending wedge and then silver would follow. He also outlined the turn about to happen where Silver would start to outperform Gold again. That is overdue, but will require Gold to make the move first to get the gears turning. Lastly, he mentioned the divergence between Gold (holding strong) and Oil (breaking down), that I have highlighted a few times recently. Why people think Oil and Gold always have to be correlated is a mystery to me.
I agree about oil and gold. Oil couldn’t be more correlated to the economy while gold is the most negatively correlated of any major asset.
Bingo. I believe this notion that some talking heads on main stream media or even economic “experts” postulate is that Gold and Oil are both “commodities” and thus they should travel together, and it should be inverse to the US Dollar is balderdash.
As we mentioned many times, Gold and the US Dollar quite often travel in the same direction and sometimes for long stretches. Their inverse correlation is only like 55% of the time, and that was my point to Gary the other day. Gold going up does not depend on the US dollar going down, and his video posted yesterday shows a “character change” in Gold since is it traveling in tandem with the Dollar lately. It does that about 45% of the time, so I wouldn’t say that is a radical new change for that pair.
I’ll concede that a weak dollar usually does help inflation in the overall commodity sector, and an increase in inflation while real rates are still negative is very bullish for gold. However, as we’ve discussed at length, Gold really isn’t like other commodities at all because it is not used and consumed by industry (other than some in Jewelry, electric, and aerospace). Gold has also outperformed the rest of the commodity sector in a major way as some of the charts you’ve posted illustrate perfectly.
Really Gold remains the “uncorrelated” asset for a reason, and is a hedge against the general markets, central banking mischief, spikes in the money supply, and whether people agree or not, the charts don’t lie that it has received a great deal of the safety or “fear” bid the last 6 months. Moving forward that role will migrate over to the hedge against monetary and economic uncertainty as simply a fantastic store of value. When that shift permeates the investing universe again, then the ole’ relic will be back in vogue, and the miners will be pulling something useful out of the ground again. (and then Silver will start screaming “Me Tooooo!”
Gold back up to $1116, so at least it did bounce off the $1111-$1112 “Cup & Handle” rim. That’s encouraging.
The yen is down 2.2% while gold is up today. It will only add power to the coming bull market for gold if gold can end its relationship with the yen. I think it will.
Yes, I saw that. One day doesn’t make a market, because Gold is also up with the strong dollar (again) today. Oil is also up with the strong dollar today.
However, Japan’s new negative interest rate policies are nuts and it may be exactly what Gold needs to decouple from the Yen (at least for a little while) and for Gold to blaze it’s own trail for a while.
It’s the same thing with the Loonie being down today with Oil being up. If those two could break up their dance and go separate directions it would be refreshing.
Yeup, and there have been days recently in which the dollar and the loonie were up together. When that happens, the loonie is stronger than the dollar.
In general I agree with that, but it really depends on the percentage of increase in the Loonie versus weighted percentage allocation inside the US Dollar index.
I have to disagree that it depends.
That’s ok. I like the discussion anyway.
I posted a bunch of thoughts up above under the Impact Silver thread on the restructuring and new resource estimate out of Aurcana. I’d enjoy hearing your thoughts on whether than can reboot this company.
Yeup, nothing wrong with disagreeing. That’s what makes a market… and life.
To me, gold up = weak dollar. So to have the dollar up while it is weak just means that the euro is weaker. Sorry to nit pick. 😮
Yeah it’s a semantic thang. (as for the intrinsic value I completely agree) However, the US Dollar Index is up primarily because the Euro, Yen, Loonie, Pound, and Franc are all down. Regardless, the US Dollar is up while Gold is up on the charts, and that is far as most of the knuckleheads on Wall Street will look.
Once the dollar does finally have a good correction and put in a low, it wouldn’t surprise me at all to see it rise with gold consistently.
Agreed…..around 45% of the time 🙂
Although, when that research was done on the correlation in the USD to Gold it was from when Gold was unpegged from the dollar in 1973 to 2013 or 2014 I believe. I think it was that their inverse correlation was 53% at that time. I have not seen updated statistics on USD to Gold inverse relationship from 1973 to 2016 so it could have changed a bit.
I just remember being shocked by the study because I assumed it was like an 80-90% inverse correlation, and it wasn’t even close to that.
The thing is, I don’t think we can look at the last 40 years for guidance. We are in a big bust that will keep gold in the #1 spot in the big picture and the senior reserve currency at #2.
John Exter’s pyramid is correct as long as the dollar remains the senior currency.
ditto …..on matthew…..”.on the last 40 yrs”………
I think the last 40 years in the Dollar versus Gold, as far as calculating the inverse correlation to a little over half the time is still quite relevant, and smooths out temporary peaks and troughs in the correlation. The whole point was that Gold:USD are not nearly as inversely correlated as people believe, and looking at all the changes that have hit the marketplace since 1973 when the Greenback was unpegged from Gold will give a clear picture of their inter-relationship.
Just today Cory was remarking in the Doc interview that it was odd that both the dollar and gold went down yesterday together, and up today together. On Gary’s video from yesterday he mentioned that this was a “character change” in Gold and the US dollar because they weren’t acting inversely. He had previously stated that for Gold to go up that the dollar must come down. I disagreed (and still do) because of this exact point. They are only inversely correlated a little over half the time (which means there is very little correlation). Again, as I stated above, “I’ll concede that a weak dollar usually does help inflation in the overall commodity sector, and an increase in inflation while real rates are still negative is very bullish for gold.” Other than that, I think too many economic “experts” put an over emphasis on the inverse relationship and seem to have amnesia about the fact that about 45% of the time the travel together in tandem. That is why looking back to 1973 to present is relevant…….perspective over short-term recency bias.
Yes, it’s relevant until it isn’t and I suspect that the next few years will be less and less like the last 40. In many ways, the last 7 have already been very different.
Regarding the rest of your post I’m with you, not Cory or Gary.
That makes sense. We have entered a Global economic period that is unprecedented over the last 7 years and there are a number of balls in the air that we’ve never even seen before. This time may really be different……
It’s time for a new paradigm to establish itself. (order out of chaos)
…this is what concerns me, because that happens to be a catch phrase of the global elites….
NEW GAME…….as I stated on Doc’s segment.(today)…….
I’m a firm believer in the view that “it’s never different this time.” Therefore, I make sure that I compare every “this time” to the appropriate last time. Since we haven’t had a time like the current one in the last 40 years, I can’t conclude that it’s “different this time” based on the events of that period. I’m glad about that because it would bother me a lot if my view did suggest that it is indeed different this time.
Ha! Yeup, I threw that line in there because I remembered you posting a number of times that it is “never different this time,” and I knew it would get your goat.
Touche though, there really is not a period in history to compare to the environment we find ourselves in today. Well maybe the fall of the Roman Empire…… : )
Ha ha. I want my goat back. 😉
Actually, despite being on a gold standard in the 1930s, I think that period tells us what we need to know about this one. Even then, the dollar was #2 as it had to be devalued versus gold. Remember, a gold standard is only as good as the people running it.
In fact, I think FDR stole the people’s gold because the Fed/gov went ahead and issued a lot more paper than they had gold to back it with. If they hadn’t outlawed the holding of gold, the people would have learned about the fraud and betrayal as they tried to turn in their paper to get their hands on the gold. Thousands of banks were going under and taking confidence with them so that’s exactly what the people were doing.
It just goes to show you, gold standard or not, paper=credit/debt. It always comes with counterparty risk.
Great point. It is avoiding that counter-party risk that has given Gold and Silver the role as money for so long.
Out of curiosity, how do you feel about crypto-currencies like Bitcoin trying to fill this same role? (Besides the obvious threat of an EMP wipeout of the electric grid)
There are some very smart people on both sides of the BC idea and both sides make good points but I am not interested in it. While I am possibly satisfied that it cannot be inflated away directly, It can lose market share to an unlimited number of competitors and that would have the same impact as inflating its supply. In addition, like small pieces of dirty, colored paper, BC is not an economic good whereas gold is not only an economic good, it is one of the most highly and widely valued goods throughout the history that we know and probably far beyond.
Referring to my previous comment in which I stated that paper=credit/debt, I want point out that I even look at shares in a company in that way. Yes, we are supposed to believe that stocks and bonds are as different as night and day, but it’s not true. A stock’s value is equally contingent on the trust that certain people will deliver on explicit or implied promises to perform in the best possible way for the issuing company. So when we buy a stock we are extending a form of credit. But rather than trusting that they will pay with cash at a later time, we are trusting that they will “pay” with their competence (in return for their pay).
Bottom line: Management is responsible for the value of both, a company’s debt and equity so the two assets are not as different as most think. Equity can be seen as similar to another unsecured debt.
So as we would expect, gold smokes both stocks and bonds when confidence collapses. Until the 1960s, gold had a place in every portfolio. It is the foundation of your financial house. When the roof blows away (stocks) and a wall or two comes down (bonds), a good foundation allows you to rebuild.
Yes, you raise a good point as far as competing crypto-currencies springing up that may compete and water down the Bitcoin movement, and there is not really a historical precedent like there is with Gold & Silver.
Also very good points about when purchasing a stock or bond that it is still extending a form of credit and confidence in the underlying edifice. The equities or bonds are just another unsecured debt as you mentioned, and only buoyed by the confidence from the marketplace. Yes, if that confidence fails, then Gold does rise to the occasion. That was my point lately about how Gold was acting differently since August when that confidence was starting to crack a little bit.
I think you’re absolutely right about confidence beginning to crack.
Big Al,
2 things on the earnings reports you mentioned:
1) CAT has had to deal w. slowing business globally since 2012.
Jim Chanos addressed that point back in 2012 when he mentioned he was short the stock.
Stock moved down, went back up to top again in mid-2014 and is off almost 50% since then. The stock has been in a bear market for 18mths.
Earnings report today is IRRELEVANT in the grand scheme of things, IMHO.
2) Re: AMZN:
To look at AMZN reported EPS vs. consensus is ALSO 100% IRRELEVANT.
AMZN EPS is always a miss.
Reason is that consensus is based on “clean” EPS while the reported EPS includes everything, incl. the expense of stock options – which is typically a big chunk of the expenses in the P&L for AMZN.
My 2 cts.
LPG