What is the investing climate if the USD breaks to 120?
This morning we address a couple comments and a discussion that occurred under Rick’s interview yesterday. I get Rick to detail why he thinks the USD will eventually get to 120 on the index. We then detail the impact of the strong dollar on gold. Finally Rick outlines why he thinks bonds will be the play in a capital gains sense when investors understand we are in a deflationary realm.
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Hey Confused. Yes, I was following along and getting the turns right in the US Dollar in 2014 and early 2015, but about midway through 2015 I gave up trying to figure out the USD.
It’s been in a sideways consolidation channel and stuck in a range for the last 2 years. It will definitely break hard, but I’m willing to admit I have no idea which way. (coin-toss). I’d recommend using an American Eagle 🙂
As for the Precious Metals and other commodities, I do like looking at the CRB index for the larger trend, but really look at each asset individually. The USD will have an impact on “stuff” or “crap”, but as discussed in the past Gold, Silver, Platinum, Zinc, Copper, Oil, or Soft Commodities (ie…food) can move up in tandem with a strengthening dollar, and don’t have to be strictly inversely related. They have their own unique drivers, and I look at them one at a time.
Thanks for the imput EX.
In case you missed it, I replied under yesterday’s Daily Market Wrap.
Having said that, Rick’s logic makes a lot of sense.
You can keep your bonds. I bought back the SSRI@10.7 today which I sold earlier this summer for over 15. And with SSRI you also get Claude Res. and a chunk of PVG.
Bonzo Barzini – on yesterdays “Market Wrap” I posted the news on Hecla and they have righted the ship as it relates to Silver, and had much better results than in the previous few quarters, and better input from their newest mine. Their Gold & Zinc inputs slipped some, but their Silver and lead were up substantially. I noted over the weekend their growth has been on the Gold side of the equation, but their Silver finally caught back up this quarter. Hi ho Silver…… Away!!!
I like HL too, but never sold any. I thought I’d better buy back the SSRI I sold a couple of months ago. PAAS, SLW, AG, MUX, AXU, EXK, etc. are good too.
Good work re-balancing the Bonzo Barzini Filthy Rich Mining fund. (BBFRM)
It’s hard work, but someone has to do it!
I’d be better off if Matthew ran the BBFRM, but this has been a fantastic year, even with the recent correction.
Yes, I believe he runs (MFRM) Matthew’s Filthy Rich Miners fund. It’s a closed-end fund.
That’s right, the sign on its end says do not enter. 😉
The sign on my fund says, “Abandon all hope ye who enter herein.”
I’m actually running a the Pirate Fund (PIRIT)
The sign on my fund says “Take what you can, give nothing back.”
If you would care to notice, there’s positive divergence all over the UVXY daily chart and little or no downwards momentum. There’s also an island reversal bottoming process. Peopke believe tgat stock markets are efficiemt to the upside but don’t seem to realize that markets can be just as efficient on the downside.
That gnat is a gnu!!!!!
FranSix – do you expect that UVXY is getting ready to spike due to this lack of downward momentum?
I can’t say for sure, because the volatility index is less aggressive this week. I depend more on the index than the leveraged ETFs. That being said, entry points early were a kick in the pants, but that leverage volatility ETFs are depressed and don’t trade like the index gives me some trepidation. But should markets come off here leveraged ETFs are so heavily shorted that their gaons aught to out pace the volatility index as the S&P comes off. I’m thinking that a bigger correction is in store than August 2015, which has by now been much delayed. Leveraged ETFs were much higher at the time and had just gone through a reverse split.
Gaons and gaons. Who’d a thunk it?
I knew you meant their “gains” ought to outpace the volatility index if they catch the short “goons” offsides 😉
Good points, yes it is better to watch the VIX itself over the leveraged ETF for the cues. Yes I had done well on several volatility bursts during the year, but did get kicked in the pants hard the last time I played the volatility game. My thinking was along the same as you just mentioned; that these ETFs are so heavily shorted at present, that it may be a fun ride if it goes pop!
Thanks.
I don’t know where I’ve seen such volume and no price change before. But the lveraged ETF will gap and then gap again on moving averages,mwhich I believe to be appropriate under the circumstances.
I mean make me a samwich.
Hey! No porn google images search! I like it!
Ha!
I got into UVXY about two weeks ago, seeing the same divergence Fransix is talking about. I also follow $VXO, as the leveraged ETFs are inferior for charting, due to their decay.
I was feeling pretty pleased last week. Taking it in the shorts today. Still holding, but wondering if I should have just figured politics outweighs charts, even a really nice set up, for the short term.
We are, perhaps ‘down to the wire’
Bullish divergence between $VXO & UVXY. Such divergence seems typical of big moves. Sure seems like it will happen after the election, if not sooner.
http://stockcharts.com/h-sc/ui?s=UVXY&p=D&yr=3&mn=4&dy=0&id=p50867606752&a=482334351
Good spot on that one.
So AUY is now spinning off its sub Brio Gold. Is this management the dumbest most risk averse management in mining? This marks the second major divestiture of mining property this year for AUY. The market is duly punishing AUY.
Why would you sell gold in the ground (at generational lows, to borrow a phrase from Dick Bove) to raise cash???
Yamana Gold – Brio Gold Ready To Fly – A Good Deal For The Company And A True Disappointment For Shareholders
Oct. 18, 2016
IDM mining game plan,
http://www.mining.com/idm-minings-game-plan-cash-flow-now-expand-later/
Pete – scan down this properties page for Teuton Resources and check out the great maps for their land package encircling the IDM property. (about 2/3 down the page as the maps at the top are the properties around Seabridge and Pretium)
_________________________________________________________________________
Properties South and East of IDM Mining’s Red Mountain Gold Property
Summary — Teuton owns a number of properties situated to the east and south of IDM Mining’s Red Mountain Gold property, currently being readied for production in 2018. The most prospective of these is the Del Norte property, lying along the drainage of three-gold bearing streams flowing east out of the Cambria icefield. Over $5million has been spent to date disclosing many gold-silver bearing zones. The Del Norte is scheduled for drilling in 2016, along with the property adjoining to the south, the Konkin Silver.
I do like IDM’s plan to start small, get revenues and then grown organically. There are a few companies using this strategy, and I think given the uncertainty at present, that this approach makes more sense to me and is more balanced than trying to raise 2-4 billion dollars to do a mega-project. Those kinds of projects are few and far between now, and most of the larger Majors and Mid-Tiers got burnt bad biting off those kinds of costly projects at the end of the last cycle.
Yes,i agree
Thank you,Excesior ,i have seen the properties map and i find it interesting…
Alot of the guys follow IDM over at CEO because Rob McLeod posts on their regularly. I figure the better IDM does, the better that land around their project is going to start looking as they’ve had great drill intercepts on the Teuton and Silver Grail properties as well.
Here’s the Rob McLeod room for grins and info:
Thanks,Excelsior for posting the grins and info
Check out those photos that Tommy posted. 🙂
Very nice photos,
Eric Coffin looks like he mean business
Yeah, he get’s down to it. Eric calls it like he sees it, and I respect that.
Excelsior,typo
Just came home from travelling,and had a glass of
auchentoshan,tired. 🙂
Were you traveling in Scotland or just enjoying their beverages?
I have a question for Rick and fellow posters, if The US dollar goes to 120 wouldn’t the Rupee and the Yuan experience a lot of depreciation. There are 2.5 billion people living in Chindia, their form of protection is buying gold. That should give gold a big boost. DT
Thank you very much for covering the gbpusd yesterday Cory, Al and Rick.
Just enjoying their Beverages 🙂
Well done sir. I really enjoy the Glenmorangie lineup personally. My buddies rip on the name until they try it.
Glenmorangie extremely rare,
A lovely nose of mocha coated Oloroso dried fruit and liquorice. Lightly herbal with hints of Assam tea, prunes and plum. The fruit has a delightful syrup coating and becomes quite jammy with time as some dusty, sweet spices come through. Opens with the soft and jammy red fruit, followed by hints of toffee and chocolate. The sherried dried fruit comes through on the middle but the syrup coated fruit is the focal point. Long and mouth-watering with cleansing citrus and stony notes.
Nice
Delicious.
Excelsior,
IF you would make a “wild guess” would you say that the junior miners have bottomed,(for this correction) or are you in the “onemoreflushcamp”
I’m in the 3rd camp – “partially positioned @60% in case they bottomed and ready to deploy 40% more if they get one more flush”.
🙂
Yes,always good to have some dry powder,i have about 30%
You are doing exactly what savvy investing is all about.
Just saying,i have not researched this.
It suggests that lithium could have its well-known therapeutic effect on patients with bipolar disorder by changing the stability of spines in the brain.”
Yes, they still use Lithium in treating bipolar disorder, because my brother-in-law and an old sales rep that worked for me both took it. Sounds very extreme though. That guy was a veteran with PTSD, and I he didn’t like the Lithium and opted for other treatment.
I wouldn’t think that would be a key demand driver though – nothing like Ceramics, Glass, Lubricants, or batteries.
If gold was worth $50k, why couldn’t you convert it to FRNs then go buy all the farmland or apartment buildings that you like?
Confirmed bull flag on the monthly on ASM.
Insiders Snapping Up Low Priced Gold Shares
http://www.howestreet.com/2016/10/18/insiders-snapping-up-low-priced-gold-shares/
Im thinking that we go to ca25 on the GDX and then drop to ca19?
Just guessing of course.
Rick, you are obviously going to dig your heels in.
The more you speak the more your true colors are revealed.
There were so many incorrect statements and assumptions in this interview I don’t know where to begin.
Let’s start with your first off the wall statement…
“The US$ is the only game in town”
WOW what a whopper.
The US$ is NOT the only game in town.
Far from it.
Then you say “The $ suits the worlds needs perfectly”
Where have you been living these last 8 years?
Haven’t you’ve seen the havoc the US $ has caused the world that they are finally ready to get rid of it?
The inflation that was exported all over the world that caused everything from an Arab spring, to Occupy Wall St.
Then you say another bombshell “No currency will ever substitute for it”
I think you need a history lesson.
Why dont you go back through history and look at all the currencies of the world that are extinct.
I know this time it’s different.
This time is NOT different.
Then you say “Who would want it” (talking about reserve status)
Obviously the United States does so they can continue their $ hegemony.
Then Cory asks you if this brings into play a PRIOR TARGET You had.
I’ve been saying all along you made an $850 gold call, but I was lambasted for it.
You had a prior target of much lower gold prices you had to do an about face on.
It was very humorous listening to you trying to reconcile a 120 $ call and still pretend that that wouldn’t imply an $850 gold call. Trying to explain how they could both be strong together. It was hard for you to get the words out of your mouth.
It gets better.
Then you say “You have trouble seeing some of these fantastic numbers some of the gold Gurus bandy around”
When gold was $250 17 years ago did you have trouble seeing gold at $1900?
Or was that another fantastical number the gold gurus bandied around?
The fact that you don’t see it doesn’t not make it so.
And why are they gurus?
Can’t they be legitimate analysts with a different opinion?
Then it comes out “Ive been a HARD CORE DEFLATIONIST since the late 1970s ever since reading CV Myers the coming deflation”
CV MYERS was right on some things, including his GOLD BULL call.
His deflation call was a complete bust.
You have been waiting 40 years for that call to come true and you missed out on the greatest STOCK BULL MARKET IN HISTORY.
Then Cory chimes in “if gold is $5000 it is a completely different financial system”
Really? Why?
Gold at $5000 is only roughly four times higher than it is today.
When gold went from $250 to $1900 that was almost an 8 fold increase.
We are still living in the same financial system.
Then you say “the government would never enforce the contracts so you won’t get the short squeeze”
IT MAKES NO DIFFERENCE
IT MAKES NO DIFFERENCE
Then the final anti gold straw man argument is played..
“You are not going to be able to eat gold”
Can you eat a share of IBM stock?
Can you eat a diamond?
Can you eat a Honus Wagner baseball card?
Can you eat your granite countertop?
This is the typical talking point all the anti gold bugs use.
It is a completely erroneous argument.
Yes you are indeed a died in the wool deflationist.
You’ve been a deflationist since the 1970s and you are still waiting for your incorrect world perspective to come true. But it never will!
I will repeat once again
Your 120 $ call goes against all of history and is very dangerous.
As long as they can hit the enter key and create $s out of thin air there will never be deflation, regardless of your deflationist fantastical dreams are telling you!
A lot of valid points, James. But very entertaining, coming from the guy who’s been pounding the table that gold and silver get an “F”.
And in an argument for a little bit of humility, regardless of his strange view on deflation, I would be willing to bet that Rick is a far more successful investor than you.
My last one for today, Marc Faber
Thanks for the update from Dr. Doom.
Oil finally broke out around 4:30 pm. I have been waiting patiently buying more USO on dips.
Good to hear, Paul, as I’m long GUSH. Are you still thinking this run will go to $60?
WTIC weekly:
http://stockcharts.com/h-sc/ui?s=%24WTIC&p=W&yr=20&mn=0&dy=0&id=p21343279176&a=482407704
Seems likely to top 62.58 on this weekly cycle, at which point the declining 200 week moving average will likely send it down into an intermediate cycle low (using Gary Savage’s terminology).
I would think it would get hit hard at just under 60 by the shorts.
Thanks Cory for doing this.
I agree w/Rick on the $USD. Good point on the derivative market shell game, too. One of the things I really like about Rick is he’s all about facts, and he’s practical. And on his point on oil, are we going to use the Euro? Yen? SDR’s? Not for 10 yrs or more, if ever.
RIck is correct again that the $USD and $GOLD are not always correlated.
And I agree w/Rick that $GOLD is going to hold it’s purchasing power, whether in a deflationary or inflationary world.
And I agree that a short squeeze could be one of the primary drivers for gold to move higher. And also i agree that the regulators will never force big bullion banks to cover.
On bonds, what I learned here from Rick is that, if everyone is selling stocks etc, then where will all the money go? It has to go somewhere. And to that his answer is bonds. Again we see the practical side of RIck. And this makes 100% sense to me now.
Thanks again Cory for this discussion w/Rick.
I didn’t see Matthews comments from yesterday yet, so I’ll read those next.
Just found and read Matthew’s comment on bonds from yesterday. It’s a good one, so I reprint here. Thanks Matthew!
————-
On October 17, 2016 at 9:13 pm,
Matthew says:
Bill, bonds can (not will) continue higher by simply outperforming the debt that it is denominated in: the U.S. dollar, aka: the Federal Reserve Note. So “higher” will most likely not be higher at all in real terms. Gold, commodities and necessities in general will continue to go up more than bonds.
If we use real money, gold, as our numeraire, we have seen a lot of price deflation since the real peak in the economy and the stock and bond markets 16 years ago. Gold is worth a lot more of just about everything today than it was in 2000. We have just the opposite situation when we price everything in the Fed’s fiat debt money. This makes sense when you consider the creditworthiness of the U.S. and the fact that it is in the middle of a long default via the proverbial printing press.
This is worth a look:
The Pyramid of Real Wealth
http://www.dailyreckoning.com.au/the-pyramid-of-real-wealth/2012/11/21/
“Gentlemen prefer bonds.” – Andrew Mellon
The only problem is, bonds also collapse after major (debt fueled) market tops. It happened 85 years ago…
http://2.bp.blogspot.com/_P6hcLu1z9Nw/SgXfDAEepnI/AAAAAAAAAeE/LB0Z7TPU92M/s1600/bond+crash.png
…And it happened 15 years ago:
http://stockcharts.com/h-sc/ui?s=%24USB%3A%24GOLD&p=W&st=1998-03-13&en=2016-10-18&&id=p63615511971
Yes, that’s the long bond priced in gold but it was priced in gold 85 years ago as well.
So Bill in Tokyo is not wrong. Debt is not the best place to be during a once-in-a-lifetime debt bubble.
+1!!!
I agree with Stewart Thomson:
“In the big picture, inflationary pressures are rising significantly, and in 2017 a divergence in the gold-bonds relationship may start to manifest itself.”
http://www.321gold.com/editorials/thomson_s/thomson_s_101816.html
Axel Merk today on the dollar:
Matt+Ex,
Every day I read one “great economic mind” after another telling us that the U.S.D is headed to the moon, also know as 110-125 level. They all make it sound like it’s the “no-brainer” investment of the century. Is this the kind of sentiment that marks a bottom in the other “crap” currencies or are these salespeople right? I’m sure there are a couple of smart people taking the other side of the trade. Unfortunately, they seem to not exist right now. At least according to the MSM-ers.