Stocks & Equities

Warning with a Capital “W”

Posted by ohn P. Hussman, Ph.D.

on Tuesday, 16 February 2016 15:47

We continue to classify the prospective equity market return/risk profile within the most negative climate we identify. The basis of this classification is fairly straightforward. Historically, once an extended speculative period of extreme overvalued, overbought, overbullish conditions gives way to increasing risk-aversion, as indicated by deterioration in market internals (and particularly in the presence of hostile yield trends in the form of widening credit spreads), the stock market has become vulnerable to vertical losses. Though not every instance of this syndrome has been followed by a market collapse, every notable panic and market crash across more than a century of data has featured that basic setup.

…..read more HERE

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Seasonal gold correction on the way

Posted by GoldVybe

on Tuesday, 16 February 2016 15:44

Not much has changed since our gold correction commentary post on the 10th (here) except that gold had spiked up to $1263 on Thursday after global equities weakness and continued fears about European banks.

The fib retracements have stayed pretty much the same except now moving up a bit. For the most part, our analysis has not changed as we still anticipate a move lower from the seasonal February high into a seasonal low (March-April) of between $1130-$1150.

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…..read more HERE

Feb 16, 2016  

  1. Led by oil, the world’s risk-on assets are beginning what could be a fairly significant bear market rally. Bear market rallies tend to be quite violent. They often end very quickly, without warning.
  2. Please  click here now. Double-click to enlarge. There’s a double bottom pattern in play on this daily bars oil chart. 
  3. Oil is one of the world’s great risk-on assets, and its price action can be a good lead indicator for other risk-on assets, like the US dollar and the Dow.
  4. Please  click here now. While production quotas may do more long term harm than good, in the short term, they are fuelling a strong rally in the price of oil.
  5. Basis Dow Theory, the US stock market fell into a bear market last week. The Dow Industrials closed below their August closing low. The Industrials could stage a dramatic rally now, but unless the Transports stage an even better performance, a bear market rally is all this will be.
  6. Please  click here now. Double-click to enlarge. Recently, this daily bars chart of the Dow has shown great similarity to the oil chart. 
  7. It’s hard to know exactly how high the Dow could go on this rally, but it would not surprise me to see the Industrials make a marginal new high, while the Transports fail to do so.
  8. Please  click here now. Most analysts are very concerned about the Chinese economy, but I think some of those concerns have been created by predatory hedge funds who have made large bets against Chinese markets. 
  9. The Chinese economy is suffering “transition pain”, as it moves from an exports-oriented theme, to one of domestic consumption. Growth may be less than what is officially stated in China, but bank loans are strengthening, and that’s adding fuel to the global markets risk-on rally.
  10. Please  click here now. Double-click to enlarge. That’s the daily bars chart of the US dollar against the Japanese yen. The US dollar is the world’s largest risk-on market, and it is currently rallying towards the neckline of a huge and bearish head and shoulders top pattern.
  11. Most amateur investors think the US dollar is a risk-off trade, but major FOREX players know it’s part of the risk-on sector. Japan is the world’s largest creditor, and its savvy citizens are phenomenal savers. In contrast, the United States is the world’s largest debtor, and the citizens tend to embrace excessive debt as a kind of “moral good”.That’s not a good thing, to put it mildly.
  12. As professional investors try to get in on the risk-on assets rally, that’s putting some pressure on gold, which is the most important risk-off asset. 
  13. Please  click here now. Double-click to enlarge. That’s the daily bars gold chart. The power uptrend line was snapped by the surge into risk-on assets, and the decline may be forming the elusive right shoulder of large inverse head and shoulders bottom pattern.
  14. Please  click here now. Top analysts at Deutsche Bank have the same view I do about the bear market in most global equity markets. If the Fed hikes 3 – 4 times this year, as I’m predicting, risk-on assets could begin to stage a bear market meltdown that is reminiscent of 1929.
  15. Goldman’s top commodity economist is Jeff Currie. He’s also predicting 3 rate hikes this year. He argues that will pressure gold to the $1000 area before a major upcycle in oil begins later this year. He believes that upcycle would unleash a major rise in almost all commodities, following oil’s lead.
  16. I understand Jeff’s viewpoint. I have tremendous respect for his abilities, and for the liquidity flows he can create with his statements, but he thought gold would tumble when the Fed raised rates. Instead, exactly as I predicted, rate hikes created a panic out of lead risk-on markets like the Dow and the dollar. That created a huge surge into the lead risk-off markets of gold and the yen.
  17. Please  click here now. I don’t think Bloomberg has all the facts about what is happening in India. There is a lull in buying, but the gold price rally is only part of the reason for that lull. In the bigger picture, the national budget is scheduled for release within about two weeks. Most jewellers expect the gold import duty to be cut from 10% to the 2% – 4% range.
  18. Against the background of a serious rally in the gold price and the prospect of a duty cut, most Indian buyers have ceased their buying, and they will stay in “cold” mode, until that budget is released.
  19. Tactics? The Western gold community needs to prepare for the unexpected, and gold certainly could trade in the $1000 area, as Jeff Currie predicts it will. In the current situation, put options on gold, bought as portfolio insurance, are a fearful investor’s best friend.
  20. If Janet Yellen raises rates repeatedly and relentlessly, like both Jeff Currie and I are predicting, he may be correct that gold declines to $1000 before moving higher, or I may be correct that risk-on assets resume their bear market, and gold and the yen stage powerful rallies. Put options keep the investor protected, yet in the upside game, regardless of whether Jeff’s scenario or mine is the one that happens.
  21. Also, my GDX and gold trading service at  www.guswinger.com has performed spectacularly well during the “gulag” action of the past year, as well as during the huge rally of 2016. Send me an email to stewart@gracelandupdates.com and I’ll send you the track record in Microsoft Excel format. A trading account is not a replacement for physical bullion and quality gold/silver stocks. It is a good way for the investor to diversify their tactics, in the world’s greatest asset class.
  22. Please  click here now. Double-click to enlarge this phenomenal GDX daily bars chart. I suggested that GDX would stage a violent upside rally from the wedge pattern, and that has happened. 
  23. A budding major uptrend is now in play, and so is a potentially very bullish inverse head and shoulders bottom pattern. To view that scenario, please  click here now. Double-click to enlarge. The price action is superb, and as more right shoulders are formed, GDX should move steadily higher.
  24. Gold stocks get a “bad rap” from the mainstream community (MC), but the reality is they are part of the risk-off gold market. Gold mining itself is inherently risky, because the product mined is so difficult to find. That doesn’t change the fact that the gold sector is a risk-off market, and gold stocks will be bought as institutions pour out of risk-on markets like the dollar and the Dow!  

Feb 16, 2016
Stewart Thomson  
Graceland Updates
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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

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The Negative Rates Club

Posted by Jack Crooks - Currency Currents

on Monday, 15 February 2016 18:36

BRUSSELS – For the better part of a decade, central banks have been making only limited headway in curbing powerful global deflationary forces. Since 2008, the US Federal Reserve has maintained zero interest rates, while pursuing multiple waves of unprecedented balance-sheet expansion through large-scale bond purchases. The Bank of England, the Bank of Japan, and the European Central Bank have followed suit, each with its own version of so-called “quantitative easing” (QE). Yet inflation has not picked up appreciably anywhere. 

Screen Shot 2016-02-15 at 10.33.54 AM….read more HERE

Silver, Gold, the Argentina Peso, and Exponentially Increasing Prices

Posted by Gary Christenson - The Deviant Investor Deviant Investor

on Monday, 15 February 2016 15:45

The exchange rate between the Argentina Peso and the US dollar in January 1945 was 4.17 pesos to one dollar.  Like the United States, Argentina created substantial price inflation – devaluation of their currency – in the 1950s – 1990s.

According to Wikipedia Argentina devalued their currency by a factor of 100 in 1970, by another 10,000 in 1983, by another 1,000 in 1985, and by another 10,000 in 1992.

From Alan Greenspan in 1966:  “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.”

In summary the 1945 peso was devalued by 10 trillion to one between 1945 and 2015.  Imagine what that did to the poor and to the saving of anyone who left that savings or retirement in pesos!

The compounded average rate of increase in the number of pesos per dollar from 1945 to 2015 was about 55% per year, every year.  The devaluation was worse than average between 1975 and 1995.  Gold in 1945 pesos increased at a compounded average rate of 63% per year since 1945.  (Store of value!)

Y-Arg-Peso

 

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Suppose your savings in Argentina pesos had been valued in gold.  Take the peso to dollar exchange rate and multiply by the price of gold in dollars and we see the price of gold in 1945 pesos.THE POINT OF THIS IS:

Argentina devalued their currency from 1950 onward and more aggressively in the 1970s, 1980s and 1990s.  The difference between Argentina and the United States (and Japan, the EU, the UK, Australia etc.) is mostly a matter of degree.

The US benefitted from the dollar’s “reserve currency” status plus the US military, but the devaluation process has been similar, though less devastating.  In 1971 the US dollar bought approximately 0.03 ounces of gold.  By 2015 the US dollar bought less than 0.001 ounces of gold – a devaluation of over 30 to one.  More devaluation is coming.

EXPONENTIAL INCREASES HAPPEN HERE:

The global financial system is based on exponentially increasing debt, currency in circulation, and devaluations.  Examples:

 

  • Official US national debt: Approximately 9% per year exponential increase since 1913. (Consumer price inflation is alive and well.)
  • Gold price increase in US dollars since 1971: Approximately 7.8% per year exponential increase since 1971.  (Increases coming soon.)
  • Silver price increase in US dollars since 1971: Approximately 5.5% per year exponential increase since 1971.  (Big increases coming soon.)
  • Shanghai Index from June 2005 to October 2007: Approximately 217% per year exponential increase for 2.3 years.
  • Shanghai Index from March 2014 to June 2015: Approximately 216% per year exponential increase for 1.3 years.
  • Crude Oil price increase from December 1998 to October 2000: Approximately 196% per year exponential increase for 1.8 years.
  • Crude Oil price increase from January 2007 to July 2008: Approximately 203% per year exponential increase for 1.5 years.
  • NASDAQ Composite price increase from October 1998 to March 2000: Approximately 257% per year exponential increase for 1.4 years.
  • Nikkei Index price increase from July 1984 to December of 1989: Approximately 129% per year exponential increase for 5.4 years.
  • Silver price increase from August 1977 to January of 1980: Approximately 276% per year exponential increase for 2.4 years.
  • Adjusted US monetary base per Federal Reserve Bank of St. Louis increase from 2008 to January of 2015: Approximately 24% per year exponential increase for 6.5 years.
  • Exponential increases have also occurred in student loans, sub-prime auto loans, military expenditures, SNAP program (food stamps) expenses, media expenses to help purchase US Presidential elections, donations (pay-offs) from Wall Street to Presidential candidates, and many more.

 

CONCLUSIONS:

The Argentina peso was aggressively devalued over many decades due to excessive government spending, corruption, stupidity, and “central bank printing.”

The US dollar was aggressively devalued over many decades due to excessive government spending, corruption, stupidity, and “central bank printing.”  The rate of devaluation was substantially less in the US, but the basic concept and result were the same – higher prices.

Since the US dollar is backed by “full faith and credit” and not by gold, oil, diamonds, or anything real, exponential increases (since 1971) in public and private debt, expenses, loans, currency in circulation, and prices for most items have been typical.

Exponential increases are occasionally not managed or controlled and increases of 25% to 250% per year occur, as per the above examples.

Such parabolic spikes usually correct in a nasty crash and people invested in those spiking “assets” typically lose money, whether it is the NASDAQ, Nikkei, gold, crude oil, or many others.  Imagine the impact from a crash in the US dollar – it might happen.  (Some suggest it is inevitable.)

Pesos, dollars, yen, euros, pounds, and other fiat currencies will continue to be devalued since we live in a devaluing world.  Backing the US dollar with the military will help, support from petro-dollars will help, “reserve currency” status will help, but the trend is the same – fiat currencies always devalue and gold, on average, holds value.  Examine again the chart of gold prices in Argentina pesos for an extreme example.

Do your own research, but in my opinion, gold and silver bottomed in 2015, the S&P 500 Index topped in 2015, and the next several years will see much higher gold and silver prices, and considerable trauma for stock prices.

Interesting Reading:

Clive Maund:                  Gold Market Update

Bill Holter:                       You are Watching It

Dave Kranzler:              Global Economic System is Crashing

King World News:         Dire Warning to the World

 

Gold Thrives, Paper Dies!

Silver Thrives, Paper Dies!

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