It’s a new year and we’re already starting to see brand new trends emerging. One area that I’ve preferred to stay away from for a long time has been the energy and natural resource space, which just so happen to be 2 of my favorite areas to be long heading into 2018. Today I want to point out the major reversal in Natural Gas stocks that I believe will catch many by surprise as we progress into the first quarter and likely beyond. [Read more…]
This is a new year with fresh opportunities to buy some things and short others. It’s a two way market. Anyone who has been sitting in Gold over the past 4 years is frustrated. If you’ve been in Gold the past 18 months, it must feel even worse. You could have pretty much bought anything else and done well: Stocks, Energy, Crypto. There is a lot of pent up pressure in the Gold market.
I’ve been in the camp that Gold has either been a stay away or a short. This has gone on for the past 18 months since our upside targets were hit. It’s worked out relatively well for a long time, particularly the stay away from piece of that. The opportunity costs of being involved in this space has been off the charts.
I have to weigh all of the evidence as it comes in and isolate only the best risk vs reward opportunities regardless of the direction. Based on the overwhelming amount of positive momentum in gold, other metals and mining stocks, combined with the recent breakouts in Canada and Australian stock markets, it’s hard for me to be bearish metals in general, precious or otherwise. Copper and other base metals continue to make new highs as well, but that’s nothing new.
Today I wanted to share with you what I thought is probably the most interesting, and bullish Gold chart I’ve seen. Here we’re looking at Gold priced in Emerging Markets Currencies. Rather than pricing Gold in traditional US Dollars, I always like to approach it from different angles to a get a better true value perspective. In this case I equally-weighted China, Mexico, South Korea, Turkey, India, Russia, Brazil and South Africa and used this basket as the denominator: [Read more…]
One thing I feel has gotten lost in the whole “Stocks and Bitcoin make all-time highs every day” rhetoric is the overwhelming weakness in precious metals. Gold, Silver, Platinum and Gold Mining stocks are all making new lows, resuming their trend of lower lows and lower highs.
We’ve been aggressively bearish Gold, Gold Mining Stocks and anything precious metals really since October. Based on what we’ve seen since then, I see no reason to change our approach towards this market. To the contrary, I think the selling we’ve seen come in confirmed everything we had been seeing in September – a bunch of people getting caught long in a bull trap. It was classic. [Read more…]
We look to Financials as a leader. We’ve never had a bull market in US Stocks without participation from the banks. They don’t necessarily need to be leading but they do need to participate. When we see the S&P Financials Index going out at new 10-year weekly closing highs, it’s hard to be bearish stocks as an asset class. This has been a big part of the aggressively bullish case I’ve been making since the summer of 2016. Meanwhile, the Broker Dealers Index is holding above its former all-time highs from 2007 and just beginning a new leg higher.
These are not bearish characteristics for stocks as an asset class. [Read more…]
It was Thanksgiving last week and the hot topic all over dinner tables throughout the world was about Bitcoin. Older relatives asking younger nieces and nephews to explain crypto-currencies was probably something pretty hilarious to watch by being a fly on the wall of many households.
In the spirit of the holidays, I thought I would post a couple of charts that I think are worth sharing with those family members and friends who are coming out of the woodwork asking about the not so new asset class. While I don’t particularly care about the actual technology behind blockchain, I do think it’s important to focus on the behavior of these markets. This is how we can responsibly calculate risk vs reward propositions. That’s what this is about at the end of the day right? We’re here to make money. [Read more…]
One thing that often gets forgotten is that we don’t live in a vacuum. Life in the market is not just about absolute performance, but about how assets behave relative to their peers. The stock market isn’t the biggest game in town, it’s the bond market. But let’s not forget about metals either. When stocks are in bull markets, they’re not just going up as a group, they are also outperforming the alternatives.
Today we’re taking a look at stocks, not just on their own, but relative to the other assets. We know that on their own stocks are making new all-time highs. This is happening all over the world. Stocks in the U.S. aren’t up because of what’s happening in New York or Washington DC. Stocks in the U.S. are up because stocks all over the world are going up, both in developed and emerging markets, despite of what is happening in New York and Washington DC.
Some people have this misconception that stocks are in the later innings of this uptrend. I’ve been arguing, almost religiously, that they are probably much closer to the beginning of the bull market than near the end. So no, this is not the 9th year of a bull market, I think we’re probably early in the second year. [Read more…]
The noise machines are getting louder these days with Junk Bond Funds falling to levels not seen since March. You have the frustrated stock market bears data mining the heck out of everything trying to find something to justify their losing positions, or lack of winning ones in many cases. Remember it’s not just about the money they’ve lost trying to short the stock market, it’s the overwhelming amount of opportunity cost already incurred by simply not being long enough. It’s double the frustration. I’ve noticed these bears turning to the bond market for guidance.
While the yield curve continues to fall, we’ve actually found that historically the stock market does the best when the yield curve is exactly where it is today (2s-10s specifically). But today I want to talk about the spreads between Junk Bonds and Government Bonds. When the stock market is showing plenty of evidence of risk appetite, we want to see the bond market confirming that as well, not diverging from it. [Read more…]
We don’t have to complicate things. It’s very simple. If there is actual risk appetite for precious metals, then Silver would be outperforming Gold, not the other way around. The Gold Bugs have little to say at this point, so some of them irresponsibly cherry-pick year-to-date returns to pretend Gold is in an uptrend. Some of them do it out ignorance while others need help selling whatever product preys on the poor souls who believe their conspiracy theories and end of world stories. There’s a huge market for that kind of stuff. But for the rest of us who are humbly just trying to turn a profit in the market by managing risk responsibly, we need to look at things objectively.
Today we are taking a look at one of my favorite gauges of risk appetite vs risk aversion for one of the most important asset classes in the world: Gold. We’re in a current market environment where stocks are making all-time highs. We’re not just talking about U.S. Stocks, but all over the world. Meanwhile, Gold would need to rally 50% from current levels just to get back to where it was in 2011. Silver would need to rally 190% just to get back to those former highs. And these clowns have the audacity to suggest precious metals are in an uptrend? Come on! Some of these crazies were carried out in stretchers after 2011 and we’ve never heard from them again.
Here is the ratio chart I’m referring to. The counter-trend rally in Gold that we saw throughout most of 2017 has not been confirmed by Silver. If there was real risk appetite for Metals, like in early 2016, or throughout 2010, for example, Silver would be outperforming Gold, not the other way around: