Very nice snapback rally, and we very well could see a nice rally into the end of year with new highs.
I don't see anything really to kill this bull, unless buyers simply disappear.
But who could be buying? Big institutional money I have to suspect has replaced the common stock investor. I can't imagine tons o money from the 18 to 40 year olds pouring into the market.
As for Gold Miners, follow Chart freak through this, see what he says, now through the 30th may be interesting.
http://www.chartfreak.com/2014/10/23/look-dont-touch/
Thursday, October 23, 2014
Friday, October 17, 2014
Permabear says time to buy?
Its no secret, I tend to see reality wich is negative.
But that permabear slant ignores that rules and measurements change.
We have changed the measurements to make a better outcome. How unemployment was measured in 2007 is not the same criteria in 2015.
How we judge companies using accounting rules 1945 to 2008 is not the same since 2009.
So, is it time to buy? Without rules to judge something is wrong, really I can't wrap my head around how the market can make a move significantly lower. If you have faith in system to repair itself and move higher, YES!!!! BUY BUY BUY
Until we return to honest accounting, there is no neutral regulation its up to you the IGNORANT reader (due to lack of honest corporate reporting) to decide. Good luck
But that permabear slant ignores that rules and measurements change.
We have changed the measurements to make a better outcome. How unemployment was measured in 2007 is not the same criteria in 2015.
How we judge companies using accounting rules 1945 to 2008 is not the same since 2009.
So, is it time to buy? Without rules to judge something is wrong, really I can't wrap my head around how the market can make a move significantly lower. If you have faith in system to repair itself and move higher, YES!!!! BUY BUY BUY
Until we return to honest accounting, there is no neutral regulation its up to you the IGNORANT reader (due to lack of honest corporate reporting) to decide. Good luck
Monday, October 13, 2014
Market Returns vs Fixed Income
Today the S&P 500 took a 1.65% hit, which with current annual S&P 500 returns that is a major hit.
But lets take a look on how you fared if your money was in fixed 30 year US Treasury bonds vs the market, the ROI, assuming 3.25% fixed.
Over 5.5 years a return of 19.25 % vs 203% over the same period from S&P 500 low to high.
To put into perspective, lets look at the S&P 500 during that time period.
But lets take a look on how you fared if your money was in fixed 30 year US Treasury bonds vs the market, the ROI, assuming 3.25% fixed.
Over 5.5 years a return of 19.25 % vs 203% over the same period from S&P 500 low to high.
To put into perspective, lets look at the S&P 500 during that time period.
So almost any market correction will still put market investing ahead of fixed income investing over the same period. And that assumes all stocks owned give zero dividends. Therefore market correction of 4.8% over the last 3 days hardly puts this into a loss category.
GDX has been holding about flat over the same period, we will wait to see if it pans out to be a winner.
Please see post Possible Turning Point posted on October 8th before the 4.8% market correction began. If history holds true the market will rebound this week resuming the advance. Then again, market history is not a gaurantee rule of thumb. See post Market Dislocation if you place faith in history repeats itself in the markets. All I know is GDX has been beaten to a pulp, thinking it can't go much lower, and what won't go down will go up or sideways :) See Gold Miner Implosion, whats up with that?Wednesday, October 8, 2014
Possible turning point
Turning points are impossible to spot. Since 2008 my greatest fear is US over-reaction to financial crisis will spur an even bigger crisis. Since then some of my worst fears have come to pass including lack of law enforcement, fantasy accounting, and worst of all appeasement.
Some rule breaking in the depths of 2008-2009 was needed, best not to take all the medicine at once. But there has not yet been a time to knuckle down and return to normal law.
Today, the Federal Reserve bank released it's minutes and the International Monetary Fund warned the FED of possible trillion dollar losses.
Instantly, gold miners EXPLODED higher, as well as gold, and the overall market.
The 3x Junior miner ETF rose 43% in about 2 hours, quite insane.
Unfortunately, what this looks like combined with my other posts is a shift internationally.
First the FED basically announced more of the same, appeasement since 2008, easy money equals all is lookin great! I fear that once this buzz wears off we may see reality finally sink in that more of the same fixes nothing, combined with the world critiquing the Fed.
This fear may be unrealistic so we'll probably get our answer by February, if not earlier how this 'free money' announcement plays out.
Its hard to say if my post 'full route in gold before the going gets good' is now behind us. Every fiber of me says we saw the bottom and say its all good to buy GDX between 20 and 22 (probably will pull back from high today).
The post I did Sunday details how insanely low GDX is, how HEAVY buying was this past Friday, so buying at 'bottom 10% range' is all good.
Good luck out there, if what I think happens unfolds, gold and gold miners will have a VERY rough ride climbing the wall of worry from here to 5x higher. Once GDX hits 100 bucks a share we may start to see political bs appearing. This will not be easy money and will take until 2017 to reach a peak.
And of course, the USD has taken a hit.
Good luck out there, some charts!
USD
Some rule breaking in the depths of 2008-2009 was needed, best not to take all the medicine at once. But there has not yet been a time to knuckle down and return to normal law.
Today, the Federal Reserve bank released it's minutes and the International Monetary Fund warned the FED of possible trillion dollar losses.
Instantly, gold miners EXPLODED higher, as well as gold, and the overall market.
The 3x Junior miner ETF rose 43% in about 2 hours, quite insane.
Unfortunately, what this looks like combined with my other posts is a shift internationally.
First the FED basically announced more of the same, appeasement since 2008, easy money equals all is lookin great! I fear that once this buzz wears off we may see reality finally sink in that more of the same fixes nothing, combined with the world critiquing the Fed.
This fear may be unrealistic so we'll probably get our answer by February, if not earlier how this 'free money' announcement plays out.
Its hard to say if my post 'full route in gold before the going gets good' is now behind us. Every fiber of me says we saw the bottom and say its all good to buy GDX between 20 and 22 (probably will pull back from high today).
The post I did Sunday details how insanely low GDX is, how HEAVY buying was this past Friday, so buying at 'bottom 10% range' is all good.
Good luck out there, if what I think happens unfolds, gold and gold miners will have a VERY rough ride climbing the wall of worry from here to 5x higher. Once GDX hits 100 bucks a share we may start to see political bs appearing. This will not be easy money and will take until 2017 to reach a peak.
And of course, the USD has taken a hit.
Good luck out there, some charts!
USD
Sunday, October 5, 2014
Gold Miners IMPLOSION, whats up with that?
If you have anything in Gold Miners, it has really been destroyed last few months just as the market exploded higher.
The beating of gold miners is so severe, I feel like a truck ran over me.
The question is, what the heck is going on?
Gold miners profits are a combination of price of gold, production quantities, costs, perception, and politics.
I say politics because for better or worse Gold has an element of Politics in the mix.
First lets take a look at the price of gold, in the last 3 months, it has dropped about 7%
During the same period USD has EXPLODED higher by over 8%
The beating of gold miners is so severe, I feel like a truck ran over me.
The question is, what the heck is going on?
Gold miners profits are a combination of price of gold, production quantities, costs, perception, and politics.
I say politics because for better or worse Gold has an element of Politics in the mix.
First lets take a look at the price of gold, in the last 3 months, it has dropped about 7%
During the same period USD has EXPLODED higher by over 8%
The correlation of price of gold to USD valuation seems correlated. Thats because Gold like all commodities are priced vs demand, but the 'localized' cost is a reflection of each countries currency valuation. If Gold demand collapsed, I would expected much more collapse in price. Basically gold price is trading in a tight range for the same period.
Now lets take a look at USD over the longer haul, is 86 really out of line?
Still within reason, but it is amazing the market is at near highs and USD is also on a rocket ride up. We are fast approaching the panic levels seen in 2009, and levels not seen regularly since pre 2005. So from a near historical perspective, it is appears out of character.
OK, lets see what happend to Gold Miners (Brace yourself).
Holly hell, that can only be called an all out destruction of Gold Miners during the same period.
It can be partially explained that the change of Gold price down to US valuation combined with overall market strength and overall perception of low near term demand due to market stability. Throw on there any political games and its a recipe for destruction.
The question is, are we near a bottom?
Lets take a look at GDX over the long Haul.
From a HISTORICAL perspective Gold miners is near its all time low from the 2008 collapse. That is outright amazing! the worst collapse in modern history and GDX hit 16 bucks a share, and now we are at 20.6, amazing! The panic selling began in earnest when the trend line broke down Friday. This could be beginning of a freefall of GDX down to 16, or a final panic sell for a reversal. There is NO NEED to jump infront of this train by adding more that what you may already have, wait and see.
NOTICE that the trend lines still show GDX is on a BULL trend up, not down, read and watch the video for the longer term trend indicator described on When to buy and get out of the stock market.
But I can say, from a historical perspective, Gold miners are DIRT cheap. Gold was at 700 oz at the depths of 2008 collapse and GDX at 16, while now Gold is at 1150 with GDX at 20.6.
PLACE all of this into context with my post Market Dislocation to help gain perspective. (click to read)
So in the end, whats the deal? Frankly I am shocked at the beatdown Gold Miners has taken. I knew this would be the hardest trade of my life, but still nothing prepared me to see GDX at these levels.
The facts remain, GDX is near all time lows, and it is possible it breaks those lows. But as a logical guy, playing the odds, the odds in history say GDX will go higher than it is today. I really doubt gold miners en-mass go bankrupt or the Asian demand for gold evaporates. China loves gold, the greatest threat to gold is if China adopts Crypto-Currencies and runs from gold, a distinct possibility. They could announce their own Bitcoin as the new standard for China.
If so the I would expect gold to go lower than 700 an ounce quite quickly. Outside of such an event, Gold Miners are experiencing a panic sell off. Once all those who will sell, sell, the bottom will be in, its anyone's guess when that will be.
At this point I am watching like a deer in headlights. Once Call Options for 2017 for GDX are publicly tradeable, I may buy some at these depressed lows for the long haul.
I'll post when I do, for now its a watch and see.
I would expect if USD doesn't continue on a vertical line straight up, Gold price will stabalize.
I recommend checking out this blog for more frequent commentaries, Alex talks of any trading opportunities:
Thursday, October 2, 2014
The next currency
USA is the world currency barometer that all other currencies are measured against. As such, no one country wants their currency to value or devalue against the USD.
If a currency becomes more valuable, their exports will become expensive. If their currency devalues then imports become expensive.
This is simply because the other participants in the system will try to keep their currencies to be stable against USD while outlier countries fluctuate.
This system is freaking pure genius, the US can do whatever it wants and the world will react to ensure that status quo remains. This includes if the US issues 1 million, 1 billion, 1 trillion, or 10 trillion new dollars in any given year. The excess currency will be 'soaked up' by other countries preventing those countries from spending on local economies, but instead to buy US bonds to prevent currency fluctuation.
Think about that, there is NOTHING too outrageous the US can do without the world attempting to maintain stability of their currency no matter HOW BAD the impact is immediately to the country funds. Simply because the currency change could cause severe and lasting effects from current local economies.
I am in awe of how the US was able to put this together under Nixon and cut from the gold standard to rely on this model for stability.
This system is pretty awesome really. Lets ASSUME the US never abuses it's position and always does the right thing for everyone. In that world, the status quo compels everyone to moderation for self preservation reasons. And since fiat currencies can be created as needed, with almost ZERO cost, it serves as a very efficient value creation and maintainer.
So, whats the issue? For each country the currency creation is NOT done by governments, but instead is done by banks by 'lending' money to governments to create money. This in effect puts a tax on every single dollar every created with an annual tax paid to the banks. Don't get me wrong, I am not against banking, simply against an infinite fee for creating a dollar in 1945 STILL being paid to the banks through bonds.
Further the entire system is done behind closed doors. Banks today declare their asset values simply by fiat, before 2009 it was by market valuations. That's like someone in Detroit who's home is worth $1K declaring it is still worth 100K from 1980 prices. You can't get away with such a declaration, and neither should anyone. Currency and accounting must be equal from the lowest person to the richest person. The richest should have every single advantage money can buy, without special 'systematic currency' privileges.
Bitcoin's secret sauce is the block chain. Every single bitcoin is tracked and recorded publicly with millions of computers around the world. NO ONE PERSON owns the general ledger of who owns what. No one person can TAKE a single cent without the right key to prove ownership to transfer.
I have HUGE problems with bitcoin, but zero with the framework that Bitcoin brought to the world.
So when I see the graph below, I hope that when the USD finally loses it's status as the measurement of the rest, I hope a bitcoin-like public record replaces it. I suspect the Chinese Yuan or worse yet, gold, replaces USD before we can 'discover' the genius of an open corrupt-free general ledger system.
I know with every fiber of my being that a system controlled by people who 'declare' new rules, special privileges, insider knowledge, opacity for protection of questions, or any paradigm that relies on individuals to simply do the right thing daily for 100 years is subject to atrophy, corruption, and failure.
A system such as block chain that DOES evolve, with clear transparency to every single human on the planet, and does so with intense visibility and critique will be much more trustworthy and long lasting.
Further innovation is to take the smallest bitcoin unit and use it to track a myriad of other items, such as contracts using the blockchain.
Good luck!
If a currency becomes more valuable, their exports will become expensive. If their currency devalues then imports become expensive.
This is simply because the other participants in the system will try to keep their currencies to be stable against USD while outlier countries fluctuate.
This system is freaking pure genius, the US can do whatever it wants and the world will react to ensure that status quo remains. This includes if the US issues 1 million, 1 billion, 1 trillion, or 10 trillion new dollars in any given year. The excess currency will be 'soaked up' by other countries preventing those countries from spending on local economies, but instead to buy US bonds to prevent currency fluctuation.
Think about that, there is NOTHING too outrageous the US can do without the world attempting to maintain stability of their currency no matter HOW BAD the impact is immediately to the country funds. Simply because the currency change could cause severe and lasting effects from current local economies.
I am in awe of how the US was able to put this together under Nixon and cut from the gold standard to rely on this model for stability.
This system is pretty awesome really. Lets ASSUME the US never abuses it's position and always does the right thing for everyone. In that world, the status quo compels everyone to moderation for self preservation reasons. And since fiat currencies can be created as needed, with almost ZERO cost, it serves as a very efficient value creation and maintainer.
So, whats the issue? For each country the currency creation is NOT done by governments, but instead is done by banks by 'lending' money to governments to create money. This in effect puts a tax on every single dollar every created with an annual tax paid to the banks. Don't get me wrong, I am not against banking, simply against an infinite fee for creating a dollar in 1945 STILL being paid to the banks through bonds.
Further the entire system is done behind closed doors. Banks today declare their asset values simply by fiat, before 2009 it was by market valuations. That's like someone in Detroit who's home is worth $1K declaring it is still worth 100K from 1980 prices. You can't get away with such a declaration, and neither should anyone. Currency and accounting must be equal from the lowest person to the richest person. The richest should have every single advantage money can buy, without special 'systematic currency' privileges.
Bitcoin's secret sauce is the block chain. Every single bitcoin is tracked and recorded publicly with millions of computers around the world. NO ONE PERSON owns the general ledger of who owns what. No one person can TAKE a single cent without the right key to prove ownership to transfer.
I have HUGE problems with bitcoin, but zero with the framework that Bitcoin brought to the world.
So when I see the graph below, I hope that when the USD finally loses it's status as the measurement of the rest, I hope a bitcoin-like public record replaces it. I suspect the Chinese Yuan or worse yet, gold, replaces USD before we can 'discover' the genius of an open corrupt-free general ledger system.
I know with every fiber of my being that a system controlled by people who 'declare' new rules, special privileges, insider knowledge, opacity for protection of questions, or any paradigm that relies on individuals to simply do the right thing daily for 100 years is subject to atrophy, corruption, and failure.
A system such as block chain that DOES evolve, with clear transparency to every single human on the planet, and does so with intense visibility and critique will be much more trustworthy and long lasting.
Further innovation is to take the smallest bitcoin unit and use it to track a myriad of other items, such as contracts using the blockchain.
Good luck!
Market Dislocation?
For the last 2 major bull runs, the market ran about 5.5 years before a severe correction.
We are about 5.5 years in this bull run, the question is, what next?
I have been playing chess recently, and as such, I come to realize in chess, as in work, often it is all about positioning. The global economic control, power struggle, and what is next is about what next moves benefit the USA in what seems like the right path. More on this later.
Please look at picture below. Using history as a guide, we are in dangerous territory.
I honestly think we could have a 1-4 year parabolic run that explodes to the market of 2-5x current valuations. The byproduct would be a full on collapse of USD in the world, relegating USA to second tier status. The casualties of this would be severe in the world.
I am NOT saying likely, just that it is possible. The driver of course would be full crystalization of lack of law and currency injection. I give this a low percentage of possibility.
The 'Blame' of such an event would result in USA loss of global leader, hence, low probability, but possible.
What is more likely is for a correction to begin, we need to blame something. Right now we are full of excuses for the picking. We have Ebola in USA, ISIS, China, Russia, and a host of other challenges. One thing is certain, if we have a market meltdown the result cannot be its because of the current structure, blame must be assigned elsewhere.
Ignoring paranoia talk about USD collapse or a tense market waiting to be pricked by an excuse, one thing to ask yourself. Assuming USD and politics away, are stocks undervalued, equal value, or over valued. To me, they are NOT undervalued. At BEST equal value, but quite likely over valued.
Keep in mind that standard accounting in place since the great depression is STILL suspended, making valuations of financial companies truely a fantasy guess. Without mark-to-market accounting, its pretty much 'take our word for it'. With such loose standards, and a nice run up, I can't make a case for undervalued.
If there is a prick in the market, bonds should yet one final bull run, collapsing interest rates. Afterwards bonds would be the last place to be, as I expect we enter the final phase of this game.
For now, cold cash, debt payoff, and investing in yourself are best. Gold and Gold miners are pre-beaten up, but if a market correction happens tends to take all down with it.
In 2008, gold miners collapsed hard. But when the market hit low in March 2009, they where up quite nicely. Since miners are PRE-deflated, this time it may be a safe play. China is a backer of gold and as I posted in previous post, aligning direct currency trading to avoid USD. If they make a push with a crisis, I have to think gold atleast holds its own.
A mix of cash, stocks, and resources hopefully to weather what maybe a nasty turn.
Good luck!
We are about 5.5 years in this bull run, the question is, what next?
I have been playing chess recently, and as such, I come to realize in chess, as in work, often it is all about positioning. The global economic control, power struggle, and what is next is about what next moves benefit the USA in what seems like the right path. More on this later.
Please look at picture below. Using history as a guide, we are in dangerous territory.
I honestly think we could have a 1-4 year parabolic run that explodes to the market of 2-5x current valuations. The byproduct would be a full on collapse of USD in the world, relegating USA to second tier status. The casualties of this would be severe in the world.
I am NOT saying likely, just that it is possible. The driver of course would be full crystalization of lack of law and currency injection. I give this a low percentage of possibility.
The 'Blame' of such an event would result in USA loss of global leader, hence, low probability, but possible.
What is more likely is for a correction to begin, we need to blame something. Right now we are full of excuses for the picking. We have Ebola in USA, ISIS, China, Russia, and a host of other challenges. One thing is certain, if we have a market meltdown the result cannot be its because of the current structure, blame must be assigned elsewhere.
Ignoring paranoia talk about USD collapse or a tense market waiting to be pricked by an excuse, one thing to ask yourself. Assuming USD and politics away, are stocks undervalued, equal value, or over valued. To me, they are NOT undervalued. At BEST equal value, but quite likely over valued.
Keep in mind that standard accounting in place since the great depression is STILL suspended, making valuations of financial companies truely a fantasy guess. Without mark-to-market accounting, its pretty much 'take our word for it'. With such loose standards, and a nice run up, I can't make a case for undervalued.
If there is a prick in the market, bonds should yet one final bull run, collapsing interest rates. Afterwards bonds would be the last place to be, as I expect we enter the final phase of this game.
For now, cold cash, debt payoff, and investing in yourself are best. Gold and Gold miners are pre-beaten up, but if a market correction happens tends to take all down with it.
In 2008, gold miners collapsed hard. But when the market hit low in March 2009, they where up quite nicely. Since miners are PRE-deflated, this time it may be a safe play. China is a backer of gold and as I posted in previous post, aligning direct currency trading to avoid USD. If they make a push with a crisis, I have to think gold atleast holds its own.
A mix of cash, stocks, and resources hopefully to weather what maybe a nasty turn.
Good luck!
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