Timing & trends

Silver… Light at the End of the Tunnel?

images

Silver’s year-to-date performance has been the worst among all commodities, falling 35% from January to June 30th this year. It’s been a rough ride for those who have held on, but recent news should give silver investors a reason for some renewed optimism.

The news relates to recent filings that have revealed a dramatic change in the positioning in the silver futures market and ownership of the iShares Silver Trust (SLV).

 

……read more HERE

Market Insight: The Coming Demographic Bombshell

It wasn’t just “credit-boosted phony growth” that caused the big spurt in growth…

A demographic “sweet spot” also provided a highly favorable tailwind.

According to a recent study in the Financial Analysts Journal:

Favorable trends in the size and composition of populations have helped to fuel the rapid economic growth experienced in the developed world over the past 60 years, and their reversal plays a crucial part in the current rapid deceleration in developed world growth.

The problem, say authors Rob Arnott and Denis Chaves, is that these tailwinds are about to turn into headwinds. This will push growth rates into negative territory in 12 of the world’s biggest economies: the US, Canada, Australia, Britain, France, Germany, Italy, Japan, India, Russia, China, Brazil

The problem is aging populations…

More specifically, something called the “dependency ratio.” This measures the non-working age population compared with the working-age population.

Dependency ratios of the world’s major economies (both emerging and emerged) are spiking, as you can see from the chart below, which looks at the US, Britain, Canada, Australia and New Zealand.

20130710bfochart1

And as you can see from the chart below, the situation is worse in the other major developed markets, Japan, France, Germany and Italy.

20130710drechart2

And here are the growth projections of the study, based on this big demographic shift.

20130710bfochart2

This is a major structural headwind facing the US economy. And the Fed is acting as though it didn’t exist. It is pumping stimulus to bring growth back to its “normal” 3-4% range. But “normal” ain’t coming back.

It was a fluke. A one-off. A happy coincidence.

Why Growth Must Fall

Fertility rates in the major global economies simply aren’t keeping up with replacement levels (roughly 2.1 children per woman of childbearing age).

GDP growth is mainly a function of two things: productivity and output. And since output growth is basically a function of population growth (unless the new workers are highly unproductive), population growth is a huge boost to economic growth.

When you break it down, countries with older populations and lower fertility rates tend to grow slower than countries with expanding workforces and higher productivity rates.

This is why, for instance, Japan grew so swiftly in the 1960s-1980s… and why it started to slow in the 1990s, as legions of Japan’s boomer population hit retirement age and started to become a negative influence on GDP.

It’s also the major reason why we got a burst of growth from the 1980s onward. The fall of the Iron Curtain opened up massive new labor markets as well as consumer markets… and millions of new workers joined the labor forces of the world’s emerging markets. And in the US, the population grew from about 200 million at the end of the 1970s to about 300 million today.

These powerful demographic forces shape the world… and long-term asset prices. But as investors, we sometimes don’t see them. That’s because we are vulnerable to something called “recency bias.” We’re inclined to use our recent experience as our template for what will happen in the future.

When it comes to investing, this is a disaster. Because instead of thinking about the trends shaping the future, we extrapolate past trends out into the future. This is one of the biggest mistakes you can make as an investor, because markets are cyclical… and often follow a boom-bust pattern.

Stimulus has a powerful effect on US stock prices. We’ve seen a nearly 90% correlation between the rise in the S&P 500 and the expansion of the Fed’s balance sheet. But long term, fundamentals matter.

Combine these demographic headwinds with current valuations, and the major US indexes look overpriced. I am certainly not a buyer at today’s levels.

Chris Hunter

Chris Hunter 
Investment Director
Bonner & Partners Family Office

Today’s Market Wrapup & Forecast

STOCKS: There wasn’t a lot of news to account for the rally on Tuesday. Some are suggesting that earnings will be better than expected. There was a release of funds to Greece and Chinese inflation was in line. 

It’s kind of hard to imagine investors saying, “Hey Chinese inflation is not too bad. Let’s buy”. I think this is all part of a rise from a very oversold condition as we’ve been pointing out for the past couple of weeks. 

GOLD:  Gold was up $12. This still doesn’t break the pattern of declining tops that has dominated the yellow metal for so long. 

CHART: I hate to keep showing essentially the same charts, but right now the message is pretty convincing and we need to remember it. There is a lot of bearishness right now. The current 20 day moving average of the CBOE put call ratio is still above the levels of the last three trading bottoms. This tells us that the rally has further to go on the upside. This message is much more important than  Chinese inflation.  

Screen shot 2013-07-09 at 2.37.57 PM

 

NEWS AND FUNDAMENTALS: There were no important economic releases on Tuesday. On Wednesday we get the release of the FOMC minutes and a speech by Bernanke.   

Michael Campbell’s interview of Timer’s Digest #1 Market Timer Stephen Todd about the markets on July 6th Money Talks. Michael starts out at the 3:25 mark asking Stephen about his perspective on the overall Stock Market, followed by Gold, Silver, Currencies, Interest rates and more: 

{mp3}mtjuly6hour1{/mp3}

 

 

RANKED # 1 BY TIMER DIGEST

Timer Digest of Greenwich, CT monitors and ranks over 100 of the nation’s best known stock market advisory services.           

Once per year in January, Timer Digest publishes the rankings of all services monitored for multiple time frames.

   For the years 2003, 2004 and 2005, The Todd Market Forecast was rated # 1 for the preceding ten years. For the year 2006, we slipped to # 3 and in 2007, we were ranked # 5.

Our bond timing was rated # 1 for the years 1997, 2007 and 2008. 

Gold timing was rated # 1 for 1997 and # 2 for 2006. Late word! We were rated # 1 for 2011.

We were # 1 in long term stock market timing for the years 1998 and 2004 and # 4 in 2010. 

To subscribe go to Contact Us.

 

  1. For decades, the American “paper gold” market (the COMEX) has been the primary market for determining the POYG (price of your gold). 
  2. Most analysts in the gold community believe that demand for physical gold will somehow overwhelm the COMEX, and “liberate” the POYG. They predict vastly higher prices are coming, when that happens.
  3. I disagree. I believe paper gold markets will continue to be the primary price setting mechanism for gold, but Asian paper gold markets will be where most of the action is.
  4. Like the COMEX, the Shanghai futures exchange (SHFE) is a paper gold market. Yesterday marked the beginning of extended trading hours (night trading) for the SHFE, and volume was superb.
  5. The average trading volume during the day is about 90,000 contracts. The first night session saw more than 220,000 contracts change hands.
  6. Slowly, Shanghai’s paper gold market should begin to rival the COMEX. That’s excellent news for bullish gold investors in the West!
  7. Public investors in Asia are generally “pro-gold”, while Westerners are generally “pro-fiat”.  Institutional paper gold investors in Asia are more reluctant to sell into price declines than their Western counterparts, and they can be eager buyers of size!
  8. Also, when analysing the gold price, the market actions of Japanese investors should not be overlooked. “Assets held by Mitsubishi UFJ’s gold ETF reached 24.58 billion yen ($243 million) on July 5, compared with 25.86 billion yen at the end of last year, Hoshi said. About half of the assets are held by individual investors, with the rest owned by financial institutions, pension funds and corporations and foreigners, Hoshi said. Trading value in Mitsubishi UFJ Trust’s gold ETF on the Tokyo Stock Exchange amounted to 7.23 billion yen in May, becoming the most-traded commodity fund listed in Japan, according to data compiled by the bank.”–Bloomberg News, July 9, 2013.
  9. The rise of Eastern paper gold markets will be a process, rather than a one-time event, so patience is required. Japan’s paper gold markets are still very small, but they are gaining popularity. The trend is definitely your friend.
  10. SPDR Gold Trust, the world’s largest gold ETF, said its holdings fell 1.56 percent to 946.96 tonnes on Monday – the lowest since February 2009.” –Reuters News, July 9, 2013. 
  11. SPDR is a Western gold ETF. In the big picture, the West continues to bail out of gold, and the East is an eager buyer of all that is offered.
  12. The banks are also substantial buyers, as shown by recent COT reports. To view the latest one, please click here now .
  13. You can see that the commercial traders’ long position is growing nicely. The gold community is not alone; powerful banks and many types of Asian entities are buyers now. 
  14. Please click here now . That’s the hourly bars chart for gold. It shows the trading on the COMEX. 
  15. It will be interesting to see if the SHFE night session traders can put a bit of a scare into COMEX pit traders this week.
  16. Regardless, my suggestion to both Eastern and Western gold traders is to be a light seller in the $1255 – $1275 range, and a buyer at $1175 – $1225.
  17. Please click here now . That’s the daily gold chart. No significant rally has occurred yet, but a number of bank analysts have suggested the decline is nearly finished.
  18. Note the position of my stokeillator. A buy signal is in play, and I don’t like to bet against it. Longer term investors should book some profits in the $1280 – $1320 zone, if the price gets there. Hold the rest as a core position.
  19. Chinese inflation is apparently on the rise again, as are Chinese gold imports from Hong Kong. 
  20. Please click here now . You are looking at the GDX daily chart. It’s an appalling picture, but I’m a buyer anyways. From a tactical standpoint, I recommend adding short positions or put options with every purchase of gold stock, to maintain some semblance of emotional sanity.
  21. One reason that I’m now focused on gold stocks more than bullion, is because I believe that gold stocks outperform in an inflationary environment. Since 2008, deflation has been the main investment theme, but I think there is a transition to inflation, in play now.
  22. Also, there’s a lot of talk about owning gold bullion as a “growth with safety”play. I believe in “safety first”, not “safety after I’ve blown up in gold stocks”. Gold bullion is arguably the safest asset in the world, so it should be the first item on every investor’s buy list, not one that is bought in hindsight, after a portfolio wipeout occurs. It’s too late to transition to bullion from gold stocks now, and it’s the wrong play, in my professional opinion.
  23. Silver investors should click here now . That’s the daily chart for silver. I prefer to own silver stocks, rather than bullion. Buyers of silver stocks should already own silver bullion, as your “safety first” play. The red supply line on this chart is a pesky one. The stokeillator is flashing a buy signal, but the silver price still can’t break above that annoying trend line. Patience is the virtue that is required here.
  24. Please click here now . That’s the daily chart of SIL-NYSE, which is a silver stocks ETF. I own it, and I want to own a lot more of it. Will you join me today, in a small way, and show the East… how the West was really won? Hi, ho, silver!

Jul 9, 2013
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com 
email to request the free reports: freereports@gracelandupdates.com

Jim Rogers Current Forecast on Gold

jim-rogers-13“Mark Twain said the definition of a gold mine is ‘a hole in the ground with a liar standing at the top of the hole’ because there’s just so many of them. Somebody once did a study and I think he determined that more money has been lost in gold mining shares than any other industry in America including airlines and railroads at one time.” – Jim Rogers 12:04 pm July 8th/2013

Here are Jim’s comments on Gold in the last 24hours:

Jim Rogers Destroys The Last Argument Of The Gold Bugs

 

Jim Rogers correctly predicted gold would fall to $1,200; now he thinks it could go as low as $900

 

Gold correction is over, suggests Deutsche Bank, but Jim Rogers disagrees

 

Gold Mining Stocks: Many Other Easy Ways For People To Buy Gold

 

Jim Rogers Warns “We’re All Going To Suffer From This Crazy, Crazy Money Printing”

“We’re getting to that point where either one of two things are going to happen; either central banks are going to stop all this [money printing], or the market is going to force them to stop it. It looks like we may be having a juncture of both… where the Fed is getting worried… and at the same time, the market is jumping in and saying, ‘Yes, it’s insane what you’re doing, and this has to end.’ And if it’s not ending now, it’s going to end sometime in the next year, because this cannot go on – it’s too insane.

“There are a lot of leveraged players who are now being forced to sell [gold]. Usually when you have this kind of forced liquidation, you’re getting closer to a bottom, maybe not the final bottom, but certainly close to a bottom.”