Hour 1 – Breakouts In US Markets and The USD, Gold Bounces At An Important Time
It was another good week for US markets and the US Dollar both breaking higher. At the same time we saw money flow into bonds and precious metals. Friday gave us Q1 GDP data of 3.2% that blew away estimates but digging into the numbers saw a much more mixed picture. I discuss all of these topics as well as loom ahead to some key data and news events of next week.
Please keep in touch by emailing me at Fleck@kereport.com. Also please listen to the Company updates for the week that are linked below.
- Segment 1 – An extended interview with Jesse Felder, Founder of The Felder Report. We discuss the FOMO in the US markets and the breakout in the USD with gold holding in its range.
- Segment 2 – Raghee Horner, Director of Risk Management at Simpler Trading takes a look at the relatively low volume in the US markets.
- Segment 3 – Marc Chandler, Managing Partner at Bannockburn Global compares the US to Europe while digging into the Q1 GDP number. We also look ahead to some key events of next week.
- Segment 4 – Chris Temple wraps up the first hour by recapping the moves in the US markets and risk off assets.
Exclusive Company Updates This Week
- Riverside Resources – Overview Of The Project Portfolio, Partner Funded Programs, and A Company Drill Program Being Panned
- Miramont Resources – Where The Cerro Hermoso Project Goes From Here
- Irving Resources – Updates On The Financing With Newmont Goldcorp and Ongoing Omu Exploration
- Liberty Gold – A Comprehensive Overview Of The Projects And Strategy moving Forward
- Novo Resources – Moving The East Pilbara Assets Forward and and Update On Egina
The markets are going up because:
Very accommodative Fed.
Appearance that the economy is strong……
The economy appears strong because the US is HIDING REAL INFLATION.
By lowering the inflation rate applied to Statistics to less then 0.5%, the GNP appears to be increasing much greater than it actually is.
There’s statistics; damn statistics……and the TRUTH.
Hedge Funds Are Shorting the VIX at a Rate Never Seen Before
By Sarah Ponczek – April 26, 2019
Correction. I erred in saying less than 0.5% inflation used by BLS.
“Surprising real GDP growth rate of 3.18% is a contrived illusion. – BEA used a unique inflation deflator of 0.64%! More commonly used deflator BLS CPI-U inflation rate 2.27%. If BLS deflator used, GDP growth rate 1.56% (Half BEA #). Setting aside trade and inventory build (goods produced but not bought), BEA says growth rate of real final sales of domestic products was 2.53%, but if BLS CPI-U deflator used real final sales was 1.0%. “Goldilocks” moment was achieved through growing inventories, increased governmental outlays, crashing import values and materially understated inflation.”
Harald Malmgren
Nevertheless, the economy will be kept out of recession much longer than most think possible, by the accommodative Fed.
I do not doubt the Federal Reserve will lower interest rates as necessary, even if they need to go to negative rates.
Gary Savage:
https://blog.smartmoneytrackerpremium.com/2019/04/gold-correction-complete.html
The share buy-backs are concerning to me, because of the level of corporate debt.
Corporations are using short term date quite often.
I do not expect interest rates to rise and cause problems.
BUT, I DO EXPECT LIQUIDITY PROBLEMS WITH AVAILABILITY of money for refinancing debt.
oops ….replace” date” with “debt” above.
Thanks Cory. Always enjoy Jesse’s comments and I particularly like his thoughts on PMs. He was off a shade on his expectation of 2% quarterly GDP but it will probably pull into line next quarter when it is adjusted. Raghee is becoming a staple and seems to have a good grasp on various components of markets.
And……….Chris always has a lot to say that is worth one’s time.
Agreed Silverdollar. Jesse’s comments were definitely food for thought regarding the breadth of the general markets getting thing, and more stocks starting to make new lows, versus the few still making new highs (even though the markets did climb to new highs this last week).
I also thought Raghee’s points about market highs coming in on significantly lower volume divergences is worth noting as that is generally what happened the last two times before the markets rolled over and corrected.
Mr T and Marc C. always have good macro thoughts on the markets to mull over.
Great weekend show Cory, Big Al, and the KER Crew!
Cheers!
Breadth of the general markets getting THIN (not thing). 🙂
Although it really is some-thing watching retail pile on to the general markets at new highs. We know how that typically works out…
Personally, I’ve loved the rally in my retirement account from 2008 to 2019, but have been gradually adjust allocations in it the last 2 years to be less aggressive and more diversified and conservative.
In my trading account, it got hit like most investors over the last year, but I like about 85% of the companies I hold for the medium term, so I’m happy riding out the boring sideways period just trading around the positions and have made up some of the dips by swing trading a few winners, and repurchasing them lower with larger share counts now. Now we just need the rising tide to come in over the next year or so and I’ll go buy an island and sip on boat drinks to the sound of the surf…. thinking about those poor serfs that piled into the highs of the general markets and abandoned the resource and energy markets at the exact wrong times.
Ever Upward!
Correction: I didn’t start liking my retirement account until mid 2009 (2008 was still smack in the middle of the chitshow).
I just went back and checked in and I actually tripled my allocations back in 2009 expecting things would recover with all the bailouts and TARP and QE back then. At the time, in a previous life, I was helping people with retirement planning and almost everyone was wanting to pull their money out of the markets at the exact wrong time and stash it in banks, and I said, no, now is the time to get agressive. Few listened….
I put a few folks in Variable Annuities where their capital was protected, but the funds could grow over 7+ years based on the markets. A few of those folks called me to thank me long after I had left to say they had 30%-40% gains when all they were hoping for was 4%-7% at the time because of how dire things were back then.
People have amnesia about how their emotions are during bad corrections, and have recency bias at all times.
Currently that bias has shifted to a pompous and cocky approach to investing in the general markets where they assume things only go up…. A day of reckoning is coming soon to a global financial theater near you.
The Perils Of Pursuing Monetary Policy That Explicitly Makes The Economy ‘Reliant On Bubbles’
Jesse Felder – April 24, 2019
“Somehow we need to go to an economy that is using its resources, operating at full employment, but doing so in a way that isn’t reliant on bubbles.” –Janet Yellen
“This quote, uttered before she became Fed chair, is worth studying for at least a couple of reasons. First, because it demonstrates just how easy it is to see the problem from a distance and also how difficult it becomes to address once you become deeply involved with it. And second, because it underscores the limitations of monetary policy and the fact that central bankers, even though they are cognizant of these limitations, continue to try to defy them.”
As my friend Dr. John Hussman adroitly discussed last week, “Extraordinary monetary policy has one function, and it is to amplify yield-seeking speculation when investors are inclined to speculate. That and that alone, is how quantitative easing has impacted the economy in recent years.”
“The Fed influences the financial markets by controlling short-term interest rates, via the Fed Funds rate, and the supply of risk-free securities, via Quantitative Easing. When they took the former to zero for the better part of a decade it inspired investors to reach for yield they could no longer get from a savings account or something similar. And when the Fed also started buying up risk-free treasury bonds, it forced investors to move into corporate credit and other risk assets.”
Putin speaking about Chinese trade:
Russia is recognizing the fact that China is using its exports to buy up foreign resources and foreign ports.
Putin is advocating free trade.
He also realizes US capability against Rocket attacks, which is now circumvented.
https://www.thedrive.com/the-war-zone/27629/analyzing-the-first-images-of-russias-huge-doomsday-torpedo-carrying-special-missions-sub
Putin is limiting production of oil in agreement with OPEC, but expects to increase oil production in July to replace iranian oil.
WCU: Tight supply commodities reign
Ole Hansen – Head of Commodity Strategy 2019-04-26
“With the jury still out on the direction of global growth, and with that the future demand outlook for commodities, investors have instead been taking their cue from the outlook for supply across the different sectors. Due to voluntary and not least involuntary production cuts, crude oil been the star of this show so far while ample supplies have kept several key agriculture markets under pressure.”
“The table below shows the year-to-date performance across different asset classes. The continued rally in global stocks and riskier assets such as corporate bonds together with renewed strength of the dollar has (for now) once again reduced the appeal of gold despite an increasingly dovish shift from global central banks.”
“Investors seeking general exposure to commodities have so far witnessed very different returns depending on which vehicle they have chosen. Commodity index funds are easily accessed through exchange-traded funds or notes and for comparison we have highlighted two of the most popular below.”
https://www.home.saxo/insights/content-hub/articles/2019/04/26/wcu-tight-supply-commodities-reign
Art Berman @aeberman12
“WTI vs comparative inventory decreased -3.8 mmb to – 0.6 mmb week ending April 19.”
“This week’s C.I. vs WTI is at the 5-year average implying that $64 is mid-cycle price
and that WTI is correctly priced based on C.I. yield curve”
#oilandgas
Matt Geiger – A Long Term View is Needed for Uranium
by @PalisadeRadio – 26 Apr 2019
“We talked about why investing and speculating in the resource space will be a great place to be over the coming decades, the recent movements for the uranium spot price, and why insider ownership is so important when looking at companies to invest in.”
https://ceo.ca/@palisaderadio/matt-geiger-a-long-term-view-is-needed-for-uranium
Dollars Fly as Utilities, Miners Brawl over Uranium Quotas
Timothy Cama, E&E News reporter Energywire: Wednesday, April 24, 2019
“Uranium companies and electric utilities are locked in a lobbying battle over a proposal to protect American uranium miners from foreign competitors by mandating trade quotas.”
“Energy Fuels Inc. and Ur-Energy Inc. are asking President Trump to limit imports of uranium — fuel for nuclear power plants — with a 25% quota for domestically derived fuel.”
“The miners are backed by a few similarly situated companies like Uranium Energy Corp. and the Uranium Producers of America that either fully or partly support the call for quotas.”
“But those relatively small companies face strong opposition from major utilities like Exelon Corp. and Xcel Energy Inc. that run nuclear power plants and want to avoid increased costs.”
Putin Flags Wider Investigation Into Contaminated Russian Oil
April 27, 2019 – Reuters
The Staggering Amount Of Gold & Silver Investment Since The 2008 Financial Crisis
Posted by SRSROCCO – March 24, 2019
“I wanted to say a few things about precious metals sentiment and the disillusionment, and at times, the outright disgust, by a percentage of former gold and silver investors. ”
“And… for those few who still believe in the “Crypto Miracle,” to overtake 2,000+ years of gold and silver as money, you have my sympathies. I am not going to get into any details, but just to say… don’t count on High-Tech to solve our problems in the future. High-tech only creates more problems. So, if you believe high-tech is going to solve problems, then you don’t understand the historical record on the “Collapse of Complex Societies.”
“Regardless, I believe part of the reason the “once” precious metals bugs, have now become quite frustrated, is that they have been taken in by the Mainstream Financial Koolaide. And why shouldn’t they? Stocks and real estate prices have been going up and up, until recently, for the past seven years while the metals peaked, declined, and have been virtually flat.”
“Yes, it’s frustrating to see the value of precious metals underperform the market while everything else seems to be heading toward the moon. But, that in itself should give anyone with a decent amount of intellectual know-how the ability to sniff out that… SOMETHING JUST AIN’T RIGHT. For some odd reason, all the negative aspects of the economy, the massive debt, derivatives, and leverage are all but forgotten when all we do is focus on the highly inflated stock, bond, and real estate asset values.”
World’s Central Banks Want More Gold
By Ranjeetha Pakiam and Swansy Afonso – April 23, 2019
“India’s central bank is likely to join counterparts in Russia and China scooping up gold this year, adding to its record holdings and lending support to worldwide bullion demand as top economies diversify their reserves.”
“The Reserve Bank of India’s purchases are part of a wider picture across developing economies that are looking at de-dollarizing their foreign-exchange reserves, according to Ross Strachan at Capital Economics Ltd. The RBI’s buying trend can be sustained for a number of years in relatively small quantities, as part of a long-term diversification, he said.”
Why The United States Needs To Encourage Americans To Hold Gold
The Federalist – April 25, 2019 – Sean Fieler
“Foreign central banks are acquiring gold at the fastest pace in 50 years, and their purchases are not driven by investment considerations alone. The Central Bank of Russia, 2018’s largest official sector buyer of gold, wants to reduce Russia’s dependence on the dollar, while the Hungarian National Bank noted gold’s increasing strategic importance as underlying their recent purchases.”
“America cannot stop foreign central banks from buying gold or reintroducing gold into the international monetary order. We can, however, adopt policies that will attract more of the world’s gold to the United States and position ourselves to deal with the remonetization of gold from a position of strength.”
https://thefederalist.com/2019/04/25/united-states-needs-start-encouraging-americans-hold-gold/
Gold Worth Billions Smuggled Out Of Africa
High prices are luring Africans into prospecting for gold. But huge volumes are smuggled out through the Middle East.
By David Lewis, Ryan McNeill and Zandi Shabalala – April 24, 2019 – Reuters
https://www.reuters.com/investigates/special-report/gold-africa-smuggling/
Ira Epstein’s Metals Video (4/26/2019)
Technical Analysis, Gold, Silver, Copper, Platinum
Gold Price – Silver – US Stock Market & Freedom Interview – Francis Hunt
iGold Advisor – Christopher Aaron – Apr 24, 2019 #VIDEO
Gold Stock ETFs: I See Green Shoots!
Morris Hubbartt – April 26, 2019
Super Force #PreciousMetals #TechnicalAnalysis #Video
Solid Performance in Precious Metals Pricing Indicates Price Support
April 26, 2019 – Gary Wagner #TechnicalAnalysis #Charts #VIDEO
https://thegoldforecast.com/video/solid-performance-precious-metals-pricing-indicates-price-support
In 2018, central banks added 652 tonnes of gold to their reserves, with the Russian Central Bank accounting for 274 tonnes of that total.
By contrast, the U.S. treasury officially added no gold. The Federal Reserve has not owned gold since the 1934 Reserve Act, and U.S. citizens themselves only bought about 28 tonnes of gold in 2018.
SerialBrain2: Michelle Obama in Paris during the Notre Dame fire: connection to Sri Lanka attacks
Swamp Watch: Joe Biden
Apr. 28, 2019 – 15:18 – Steve Hilton reveals the swampy tendencies of ‘Uncle Joe.
‘https://video.foxnews.com/v/6030898854001/?playlist_id=5452746184001#sp=show-clips
Shipped-through-the-mail-60-minutes-2019-04-28/
Deadly fentanyl bought online from China being shipped through the mail
Fentanyl is 50 times more potent than heroin and is now available on the internet and can be delivered through the mail
https://www.cbsnews.com/news/deadly-fentanyl-bought-online-from-china-being-
3M looks ready to plunge again…
http://schrts.co/rvNRbrny
Today’s drop in the miners has been a gap-filling exercise so far. The gap is clear on the intraday charts and GDX has filled it while GDXJ, SIL, and SILJ have not.
IPT’s action on Friday seems to have predicted this as it didn’t do much while the sector was generally rising.
/Es…Time to add another third to spxs…..2952 is stiff resistance…I know…but, shorting is twice as hard as going long at turns
Thanks for show