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Recapping The Worst Day For US Markets In 8 Months

Cory
October 10, 2018

With US markets down across the board there is a lot for Chris Temple and I to chat about. We look at why this was expected but also why it is not yet a time to panic.

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Discussion
38 Comments
    Oct 10, 2018 10:42 PM

    A lot of miners were up nicely today despite the selloff in stocks. After being conditioned by the action in 2008, not many have been expecting such a divergence.

    It’s too soon to say that the miners are finally ready for a real move up, but today’s action adds to the possibility that the low is in place…
    http://schrts.co/XB8Efm

      Oct 10, 2018 10:46 PM

      Matthew, your point of divergence is a good one. You are right, many have become conditioned from what happened during the GFC. Whilst history may rhyme, it is said it never repeats. What we are witnessing may just simply reflect the difference in economic landscape between 2008 and 2018. Some factors still remain from those times but many have changed also.

      Interesting to see if there is going to be some follow through in this paniced selling or if it is just another flash crash moment like many that have taken place over the last 2-3 years.

        Oct 10, 2018 10:44 PM

        One of the easiest differences to notice between 2008 and today is that gold hit a new all-time high that year and the PM stocks had been in a bull market for many years. So plenty of large and small investors had significant exposure to the space and therefore plenty to sell when their margin calls (and/or fear) came.
        An outright crash in stocks would still be bad for the PM miners but bear markets in stocks are historically very good for them.

          Oct 10, 2018 10:49 PM

          In other words, probably more limited downside potential for both miners and physical due to the current beat up condition they find themselves in.

          Another big difference to note that relates to the broader global economy is the increase in overall debt the world is exposed to now compared to 2008. Whilst still extremely high in 2008 it has apparently grown another 50%+ currently. The chickens will come home to roost eventually, it is inevitable.

            Oct 10, 2018 10:09 PM

            Yes, the day of reckoning is inevitable and so is a raging bull market in the gold and silver miners.

            Oct 11, 2018 11:36 AM

            This was a good thread and I agree the points made on the difference between 2008 and 2018 if there was to be a broad market selloff and how the PMs and mining stocks are in a much different position today, than then, and they would stand to do better as money rotated out of expensive general equities into the much better valuations in the commodity & precious metals sectors.

            Oct 11, 2018 11:04 AM

            Here’s a HUI chart to watch:
            http://schrts.co/zkfkFf

            Oct 11, 2018 11:09 PM

            Nice pop and bullish candle in the HUI.

    Oct 10, 2018 10:49 PM
      Oct 10, 2018 10:38 PM

      I hope your right about another PM bull.

    Oct 10, 2018 10:57 PM

    Sugar Rush: Breakout on big volume…
    http://schrts.co/Fappk9

    BDC
    Oct 10, 2018 10:56 PM

    Salient comments from both. Powell will unlikely weaken.

    Oct 10, 2018 10:38 PM

    Matthew, after watching Hickok45 on the LCR .327 mag I think I have finally found the best small carry revolver for me. It weighs 17 oz vs 15 oz for the .38 and 14 oz for the .22 It holds 6 rounds instead of 5 for the .38+P, but is better for defense than the .22LR. Have you any experience with the .327 magnum? Do you prefer a concealed hammer for pocket carry? Thanks.

      Oct 10, 2018 10:55 PM

      Bonzo, I’ve had no experience with the .327 mag but I think it’s safe to say that it would make a great defense round. As for the hammer, I think it makes perfect sense to go with the slickest gun possible but I still like the exposed hammer.

        Oct 10, 2018 10:20 PM

        Thanks, Matthew. I also like an exposed hammer which gives you the option for single action, but it might snag while pulling it out in the heat of action. This gun has many options of ammo. The Federal .327 mag is more powerful than 9mm+P; the .32 H&R is similar in kick to the .38 special; the .32 S&W long is similar in power to a .22 mag; the .32 S&W short is similar in kick to the .22LR . It also can shoot the .32 ACP which is what James Bond shot in his Walther PPK. “M” called it a manstopper. Very tempting…

          Oct 10, 2018 10:13 PM

          Plenty of power + low recoil; what’s not to like?

            Oct 11, 2018 11:14 AM

            The downside to the LCR .327 is that it costs about $200 more than the LCR .38 or the LCR .22LR, and the ammo is harder to find. But I still want one, although the LCRX .327 with exposed hammer is tempting too.

      Oct 11, 2018 11:15 AM

      For what it’s worth, I was always taught never keep a round behind your hammer. That way in an accidental fall, pulling the fire arm out…shit happens, you don’t blow your leg off. Unless your hammer acts like a safety. Half cocked, then the hammer isn’t close primer. Like a good saddle rifle….always half cocked. ☺

        Oct 11, 2018 11:47 AM

        That’s good advice for a lot of guns but the transfer bar system found on most modern guns eliminates the danger of an accidental discharge.

          Oct 11, 2018 11:42 AM

          Matthew, about when did manufactures start adapting the transfer bar system.

            Oct 11, 2018 11:25 AM

            I think Ruger has been using the transfer bar for 40 or 50 years and am pretty sure Smith and Wesson’s equally safe hammer block design has been used on all S&W revolver for 20 years or so. I think the N-frame had it in the 1930s.

            Oct 11, 2018 11:43 AM

            Much obliged for that info. I have a few that have it, and a few that don’t.

            Oct 11, 2018 11:24 PM

            This video might be of interest to you:

            Hickok45 Was WRONG! (Hammer Blocks and Transfer Bars)
            https://www.youtube.com/watch?v=CqypovuFS2A

            Oct 11, 2018 11:15 PM

            Very nice…. I have a hand full of colts and rugers I’m gonna sit down and check out.

    Oct 10, 2018 10:49 PM

    Today might be part of a process of correction and it may take a while before the process is complete. There is much debt, greed and corruption to purge. Capital preservation should be a priority.

    Oct 10, 2018 10:59 PM

    Interesting to note bitcoins fall off a cliff today. It seemed to follow the dow to an extent. The most popular crypto has been doing alot of muddling throughout the year, especially compared to last year. Would todays slide indicate its sentiment has somewhat moved away as an alternate safe haven investment and more towards the conventional markets?

    Oct 11, 2018 11:23 AM

    Crypto We are Officially at war with China and Russia. Stock market drop 800 points Bitcoin

    https://www.youtube.com/watch?v=9z0qe9PkClE

    Oct 11, 2018 11:13 AM

    So theres an article on kitco claiming gold rises on the back of lower than forecasted inflation… this is either a complete bulls*!t article or gold is no longer an inflation hedge???

      Oct 11, 2018 11:42 AM

      It is a confusing point of view, but I went and found that article you were discussing and it appears their rationale is that lower inflation = weaker dollar = stronger metals prices and fixed income assets.

      Here is that article and passage that gets into their thinking on the potential effects:

      _____________________________________________________
      Gold Rises Firmly Above $1,200 As U.S. Inflation Undershoots In September
      Anna Golubova – Thursday October 11, 2018

      “Analysts said the September CPI report showed another “soft” month for inflation, adding that the data should be negative for the U.S. dollar and thus benefit gold prices.”

      “Core CPI inflation is now tracking 2.2% which likely implies a tick down in the Fed’s preferred measure of inflation, core PCE, to 1.9%, a touch below the central bank’s target. As a result, the slight downside miss should be moderately negative for the US$ and positive for fixed income,” CIBC World Markets senior economist Katherine Judge wrote in a note to clients.”

      http://www.kitco.com/news/2018-10-11/Gold-Rises-Firmly-Above-1-200-As-U-S-Inflation-Undershoots-In-September.html

        Oct 11, 2018 11:47 AM

        I personally agree with you Ozibatla, traditionally higher inflation = lower dollar, and lower inflation = higher dollar.

        Also, Jim W. seemed to get at the real reasoning for the quick jump in gold and metals prices in his comment in that same article:

        “Prior to the release, gold was already trading solidly higher, supported by safe-haven demand amid steep sell-offs in world stock markets overnight, said Kitco’s senior technical analyst Jim Wyckoff.”

        _____________________________________________________________

        Basically, when the poop hit the fan in the stock markets, Gold and related securities got a bid as protection. So much for those claiming the PMs are no longer safe havens, or that Cryptos would steal all the safe haven appeal (because they were a big nothing burger during the last 2-3 days during the uncertainty, and actually sold off a bit).

          Oct 11, 2018 11:51 AM

          I also saw the VIX surged 43% yesterday, so in the panic, the right assets acted as safe havens.

          Oct 11, 2018 11:47 PM

          This was my point in my rant the other day about gold and silver being stuck between rock and a hard place these days. Higher inflation in the ideal world would be gold friendly yet it is also associated with a higher dollar and vice versa. So perhaps in todays crazy world, the inflation hedge theory doesnt carry as much creedence as yesteryear.

          In light of todays big surge in gold, we are seeing its safe haven influence coming to fruition. Yet I have also witnessed people viewing other assets as a better safe haven in the past ie: the dollar and bitcoin.

          What is different this time? It is possible that the masses out there are starting to realise that deficits and debts are becoming unfeasible as interest rates continue to climb. This idea was originally swept under the carpet when rates initially started climbing back in 2015 because they were rising from next to zero and the perceived threat was still far enough away in the future to not worry about. Now as we approach what is deemed the neutral range for interest rates, all of a sudden this problem is now in the foregeound. This is validated by Trumps hissy fit about the Feds interest rate hikes making it harder for him to control the governments deficits.

          Funnily enough, the dollars decline didnt match golds rise so the inverse relationship wasnt really in play on todays basis. Everything is skewiff!

            Oct 11, 2018 11:37 PM

            Yes, well people forget that both the Dollar and Gold can move in tandem during true safe haven plays, so there isn’t always an inverse relationship. The other thing to clarify is that the dollar actually falls in value during inflationary period, because it takes more of them to buy the same goods or services. The dollar increases during deflationary periods where it takes less of them to buy the same goods. That is why I disagreed with that article suggesting:

            “Analysts said the September CPI report showed another “soft” month for inflation, adding that the data should be negative for the U.S. dollar and thus benefit gold prices.”

            That is ass-backwards, as soft inflation is positive to for the dollar and negative for the metals. The metals do better in mildly inflationary periods where the fed is behind the curve, and where the dollar is falling, so their rationale was wacked out.

            I’ll agree that people didn’t rush into cryptos during this panic attack, because this was sudden and scary, and so they bought something they can count on Gold/Silver or the VIX as a hedge. This may be fleeting if there isn’t continued pressure and uncertainty, but the reaction from the PMs was exactly what one would expect to see in such a scenario.

      Oct 11, 2018 11:50 AM

      Yup, complete bullsh!t.

    Oct 11, 2018 11:55 PM

    I agree wholeheartedly Ex. I suppose the point I was trying to make is that fear seems to override rationale when sh*t hits the fan and therefore fundamentals sometimes fall by the wayside. So yes the dollar and gold can move in tandem together, especially during safe haven plays. On the premise of yesterdays action alone, one could surmise that gold is a better safe haven bet than the dollar.

    Like you accurately point out, this could just be a fleeting panic and the status quo resumes soon enough. Gold has given back some gains already.