Oct 31

Tea Leaves & $2000 Gold

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Yes, some people are still forecasting $2000 gold by year’s end…
 

BOB and BARB Moriarty launched 321gold.com over 10 years ago, adding 321energy.com the better to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy as well as precious metals.
 
Previously a US Marine fighter pilot, and holding 14 international aviation records, Bob Moriarty here tells The Gold Report why he’s 100% certain that a market crash is looming… 
 
The Gold Report: Bob, in our last interview in February, we had currency devaluation in Argentina and Venezuela, interest rate hikes in Turkey and South America, and a cotton and federal bond-buying program. Just eight months later in October, we’ve got Ebola, ISIS and Russia annexing Crimea plus a rising US Dollar Index. We’ve also got pullbacks in gold, silver and pretty much all commodity prices. With all this news, what, in your view, should people really be focusing in on?
 
Bob Moriarty: There is a flock of black swans overhead, any one of which could be catastrophic. The fundamental problems with the world’s debt crisis and banking crisis have never been solved. The fundamental issues with the Euro have never been solved. The world is a lot closer to the edge of the cliff today than it was back in February.
 
About ISIS, I think I was six years old when my parents pointed out a hornet’s nest. They said, “Whatever you do, don’t swat the hornets’ nest.” Of course, being six years old, I took stick and went up there and swatted the hornets’ nest, which really pissed off the hornets. I learned my lesson.
 
We swatted the hornets’ nest when we invaded Iraq and Afghanistan. What we did is we empowered every religious fruitcake in the world. We said, “Okay, here’s your gun, go shoot somebody. We’ll plant flowers.” We are reaping what we sowed. What we need to do is leave them to their own devices and let them figure out what they want to do. It’s our presence in the Middle East that is creating a problem.
 
TGR: Will stepping back allow the Middle East to heal itself, or will there be continued civil wars that threaten the world?
 
Bob Moriarty: We are the catalyst in the Middle East. We have been the catalyst under the theory that we are the world’s policemen and that we’re better and smarter than everybody else and rich enough to afford to fight war after war. None of those beliefs are true. The idea that America is exceptional is hogwash. We’re not smarter. We’re not better. We’re certainly not effective policemen.
 
The Congress of the United States has been bought and paid for by special interest groups: part of it is Wall Street, part of it is the banks and part of it is Israel. We’re just trying to do things that we can’t do. What the US needs to do is mind its own business.
 
TGR: You’ve commented recently that you’re expecting a stock market crash soon. Can you elaborate on that?
 
Bob Moriarty: We have two giant elephants in the room fighting it out. One is the inflation elephant and one is the deflation elephant. The deflation elephant is the $710 trillion worth of derivatives, which is $100,000 per man, woman and child on earth. Those derivatives have to blow up and crash. That’s going to be deflationary.
 
At the same time, we’ve got the world awash in debt, more debt than we’ve ever had in history, and it’s been inflationary in terms of energy and the stock market. When the stock and bond markets implode, as we know they’re going to, we’re going to see some really scary things. We’ll go to quantitative easing infinity, and we’re going to see the price of gold go through the roof. It’s going to go to the moon when everything else crashes.
 
TGR: How are you looking at the crash – short term, before the end of this year? How imminent are we?
 
Bob Moriarty: Soon. But I’m in the market. Not in the general market, but I’m in resources. There’s a triangle of value created by a guy named John Exter: Exter’s Pyramid. It’s an inverted pyramid. At the top there are derivatives, and then there are miscellaneous assets going down: securitized debt and stocks, broad currency and physical notes. At the very bottom – the single most valuable asset at the end of time – is gold. When the derivatives, bonds, currencies and stock markets crash, the last man standing is going to be gold.
 
TGR: So the last man standing is the actual commodity, not the stocks?
 
Bob Moriarty: Not necessarily. The stocks represent fractional ownership of a real commodity. There are some really wonderful companies out there with wonderful assets that are selling for peanuts.
 
TGR: In one of your recent articles, “Black Swans and Brown Snakes“, you were tracking the US Dollar Index as it climbed 12 weeks in a row, and you discussed the influence of the Yen, the Euro, the British Pound. Can you explain the US Dollar Index and the impact it has on silver and gold?
 
Bob Moriarty: First of all, when people talk about the US Dollar Index, they think it has something to do with the Dollar and it does not. It is made up of the Euro, the Yen, the Mexican Peso, the British Pound and some other currencies. When the Euro goes down, the Dollar Index goes up. When the Yen goes down, the Dollar Index goes up. The Dollar, as measured by the Dollar Index, got way too expensive. It was up 12 weeks in a row. On Oct. 3, it was up 1.33% in one day, and that’s a blow-off top. It’s very obvious in hindsight. I took a look at the charts for silver and gold – if you took a mirror to the Dollar Index, you saw the charts for silver and gold inversely. When people talk about gold going down and silver going down, that’s not true. The Euro went down. The Yen went down. The Pound went down and the value of gold and silver didn’t change. It only changed in reference to the US Dollar. In every currency except the Dollar, gold and silver haven’t changed in value at all since July.
 
The US Dollar Index got irrationally exuberant, and it’s due for a crash. When it crashes, it’s going to take the stock market with it and perhaps the bond market. If you see QE increase, head for your bunker.
 
TGR: Should I conclude that gold and silver will escalate?
 
Bob Moriarty: Yes. There was an enormous flow of money from China, Japan, England, Europe in general into the stock and bond markets. What happened from July was the equivalent of the water flowing out before a tsunami hits. It’s not the water coming in that signals a tsunami, it’s the water going out. Nobody paid attention because everybody was looking at it in terms of silver or gold or platinum or oil, and they were not looking at the big picture. You’ve got to look at the big picture. A financial crash is coming. I’m not going to beat around the bush. I’m not saying there’s a 99% chance. There’s a 100% chance.
 
TGR: Why does it have to crash? Why can’t it just correct?
 
Bob Moriarty: Because the world’s financial system is in such disequilibrium that it can’t gradually go down. It has to crash. The term for it in physics is called entropy. When you spin a top, at first it is very smooth and regular. As it slows down, it becomes more and more unstable and eventually it simply crashes. The financial system is doing the same thing. It’s becoming more and more unstable every day.
 
TGR: You spoke at the Cambridge House International 2014 Silver Summit Oct. 23-24. Bo Polny also spoke. He predicts that gold will be the greatest trade in history. He’s calling for $2000 per ounce gold before the end of this year. We’re moving into the third seven-year cycle of a 21-year bull cycle. Do you agree with him?
 
Bob Moriarty: I’ve seen several interviews with Bo. The only problem with his cycles theory is you can’t logically or factually see his argument. Now if you look at my comments about silver, gold and the stock market, factually we know the US Dollar Index went up 12 weeks in a row. That’s not an opinion; that’s a fact. I’m using both facts and logic to make a point.
 
When a person walks in and says, okay, my tea leaves say that gold is going to be $2000 by the end of the year, you are forced to either believe or disbelieve him based on voodoo. I don’t predict price; I don’t know anybody who can. If Bo actually can, he’s going to be very popular and very rich.
 
TGR: Many people have predicted a significant crash for a number of years. How do you even begin to time this thing? A lot of people who have been speculating on this have lost money.
 
Bob Moriarty: That’s a really good point. People have been betting against the Yen for years. That’s been one of the most expensive things you can bet against. Likewise, people have been betting on gold and silver and they’ve lost a lot of money. I haven’t made the money that I wish I’d made over the last three years, but I’ve taken a fairly conservative approach and I don’t think I’m in bad shape.
 
TGR: Describe your conservative approach.
 
Bob Moriarty: The way to make money in any market is to buy when things are cheap and sell when they’re dear. It’s as simple as that. Markets go up and markets go down. There is no magic to anything.
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Oct 31

King Dollar in a Bull Market

Gold Price Comments Off on King Dollar in a Bull Market
But change your goggles and hey! Commodities in AUD not too bad…!
 

BORING as it sounds, I want to talk a bit about the end of US QE today, writes Greg Canavan in The Daily Reckoning Australia.
 
Because it’s very important to how markets are going to behave over the next few months.
 
As you probably know, yesterday the US Federal Reserve voted to end its policy of quantitative easing. But it will still be reinvesting the interest payments from its $4 trillion plus portfolio and rolling over any maturing treasury securities, so it’s balance sheet will continue to grow, albeit much more slowly.
 
On the surface, US markets didn’t seem too fussed about the end of an era. Shares sold off around the time of the Fed’s statement and then rallied towards the close. Probably a case of “algo’s going wild” as automated high frequency traders tried to make sense of the Fed’s statement.
 
And the Fed did its usual job of promising to hold rates as low as they possibly could, which markets seemed happy enough with.
 
But the real action took place under the surface. That is, the US Dollar spiked higher again. This is an important point because when the US Dollar rallies, it usually signifies tightening global liquidity.
 
Think of it as liquidity returning to the source (US capital markets) and drying up…or disappearing. That’s certainly what has been happening these past few months. Since bottoming in May, the US Dollar index (which measures the greenback’s performance against a basket of currencies) has increased by nearly 9%.
 
That might not sound like a huge spike, but in the world of currency movements, it is. Imagine if you’re an exporter and your product just became 9% more expensive…chances are it will lead to a drop in sales as customers look for a cheaper substitute.
 
This is the problem with the end of QE. It leads to liquidity evaporation as ‘punt money’ returns home…which leads to a strengthening US Dollar…which hurts sales of US multinationals.
 
It’s not going to happen right away though. Most companies have hedging strategies in place that protect them from sharp moves in the FX markets. But if Dollar strength persists…and the chart above says that it will, then you’ll see the strong Dollar hitting companies’ revenue line in the coming quarterly reports.
 
Not only that, but the evaporation of liquidity in general could lead to another bout of selling across global markets. QE is all about providing confidence. Liquidity is synonymous with confidence. Take it away and you’ll see the mood of the market change.
 
Getting back to the Dollar strength…it’s a headache for Australia too. It’s smashing the iron ore price, and the Aussie Dollar isn’t falling fast enough to keep up. In terms of the other commodities though, things aren’t quite so bad.
 
All you seem to hear lately is negative news about commodities. That’s because the world prices commodities in US Dollars, and as you’ve seen, the US Dollar is a picture of strength. But if you look at commodity prices in terms of Aussie Dollars, things look a little better.
 
The chart below shows the CRB commodity index, denominated in Australian Dollars. It’s a weekly chart over the past five years. And y’know what…it doesn’t look that bad! Since bottoming in 2012, it’s made considerable progress in heading back to the 2011 highs.
 
But you’ll want to see it start to bottom around these levels. If it doesn’t, prices could head much lower.
 
 
The thing to note about this chart is that it doesn’t include the bulk commodities – iron ore and coal. These commodities tend to dominate the headlines in Australia. Things like nickel, tin, copper and oil don’t get much of a look in.
 
Which reminds me, in case you missed it, Diggers and Drillers analyst Jason Stevenson recently released a report on some small Aussie oil ‘wildcatters’. With the oil price low, now could be a good time to sniff around the sector.
 
You could say that about commodities across the board. In the space of a few years, they’ve gone from hero to zero…or the penthouse to the…
 
That usually means there could be some good value around. One thing you need to look for in the current environment is a decent demand/supply dynamic. Iron ore in particular is heading towards massive oversupply next year. I reckon that makes it a poor investment choice for the next few years.
 
You’re better off to wait until the China slowdown and supply surge knocks out the juniors and all the marginal producers….leaving the market to BHP and Rio. You’ll then probably be able to pick these mining giants up at much lower levels.
 
Once you find a commodity with good supply/demand fundamentals, you need to make sure the producer is low cost. That protects it against further price falls…or a rise in the Australian Dollar.
 
It also protects it against foreign competition. One of the issues with the Aussie resources sector in recent years is costs. Other countries have much cheaper capital and labour costs and can therefore get stuff out of the ground cheaper than us.
 
That brings me to a final issue: Australia doesn’t really invest in its own resource sector. Via superannuation, we have a huge pool of capital. But this mostly goes into the banks or the major miners. Superannuation capital is not high risk capital.
 
That means a lot of the capital that flows into the resource sector is foreign. And when global financial conditions change…like the end of QE and the strengthening of the US Dollar…that capital departs.
 
This will create problems and opportunities for the sector. But given the bearishness towards commodities in general, it’s probably time to start getting interested again.
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Oct 31

China Probing Leap in Precious Metals Exports

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Bloomberg reported that China has sent investigators to Guangdong to look into a “seven-fold surge” in precious metals exports. The team includes Ministry of Commerce and General Administration of Customs staff.

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Oct 30

Peak Oil? How About Peak Oil Storage?

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Here’s how cheap US energy promises an ‘epic’ turnaround in the US economy…
 

MATT BADIALI is editor of the S&A Resource Report, a monthly investment advisory focusing on natural resources from Stansberry & Associates.
 
A regular contributor to Growth Stock Wire, Badiali has experience as a hydrologist, geologist and consultant to the oil industry, and holds a master’s degree in geology from Florida Atlantic University.
 
Here he tells The Gold Report‘s sister title The Mining Report that cheap oil prices and the economic prosperity they bring can make politicians and investors look smarter than they are. Hence Badiali’s forecast that Hillary Clinton…if elected in 2016…could go become one of America’s most popular presidents. Yes, really.
 
The Mining Report: You have said that Hillary Clinton could go down in history as one of the best presidents ever. Why?
 
Matt Badiali: Before we get your readership in an uproar, let me clarify that the oddsmakers say that Hillary Clinton is probably going to take the White House in the next election. Even Berkshire Hathaway CEO Warren Buffet said she is a slam dunk. I’m not personally a huge fan of Hillary Clinton, but I believe whoever the next president is will ride a wave of economic benefits that will cast a rosy glow on the administration.
 
Her husband benefitted from the same lucky timing. In the 1980s, people had money and felt secure. It wasn’t because of anything Bill Clinton did. He just happened to step onto the train as the economy started humming. Hillary is going to do the same thing. In this case, an abundance of affordable energy will fuel that glow. The fact is things are about to get really good in the United States.
 
TMR: Are you saying shale oil and gas production can overcome all the other problems in the country?
 
Matt Badiali: Cheap natural gas is already impacting the economy. In 2008, we were paying $14 per thousand cubic feet. Then, in March 2012, the price bottomed below $2 because we had found so much of it. We quit drilling the shale that only produces dry gas because it wasn’t economic. You can’t really export natural gas without spending billions to reverse the natural gas importing infrastructure that was put in place before the resource became a domestic boom. The result is that natural gas is so cheap that European and Asian manufacturing companies are moving here. Cheap energy trumps cheap labor any day.
 
The same thing is happening in tight crude oil. We are producing more oil today than we have in decades. We are filling up every tank, reservoir and teacup because we need more pipelines. And it is just getting started. Companies are ramping up production and hiring lots of people. By 2016, the US will have manufacturing, jobs and a healthy export trade. It will be an economic resurgence of epic proportions.
 
TMR: The economist and The Prize author Daniel Yergin forecasted US oil production of 14 million barrels a day by 2035. What are the implications for that both in terms of infrastructure and price?
 
Matt Badiali: Let’s start with the infrastructure. The US produces over 8.5 million barrels a day right now; a jump to 14 would be a 65% increase. That would require an additional 5.5 million barrels a day.
 
To put this in perspective, the growth of oil production from 2005 to today is faster than at any other time in American history, including the oil boom of the 1920s and 1930s. And we’re adding it in bizarre places like North Dakota, places that have never produced large volumes of oil in the past.
 
North Dakota now produces over 1.1 million barrels a day, but doesn’t have the pipeline capacity to move the oil to the refineries and the people who use it. There also aren’t enough places to store it. The bottlenecks are knocking as much as $10 per barrel off the price to producers and resulting in lots of oil tankers on trains.
 
And it isn’t just happening in North Dakota. Oil and gas production in Colorado, Ohio, Pennsylvania and even parts of Texas is overwhelming our existing infrastructure. That is why major pipeline and transportation companies have exploded in value. They already have some infrastructure in place and they have the ability to invest in new pipelines.
 
The problem we are facing in refining is that a few decades ago we thought we were running out of the good stuff, the light sweet crude oil. So refiners invested $100 billion to retool for the heavier, sour crudes from Canada, Venezuela and Mexico. That leaves little capacity for the new sources of high-quality oil being discovered in our backyard. That limited capacity results in lower prices for what should be premium grades.
 
One solution would be to lift the restriction on crude oil exports that dates back to the 1970s, when we were feeling protectionist. It is illegal for us to export crude oil. And because all the new oil is light sweet crude, the refiners can only use so much. That means the crude oil is piling up.
 
Peak oil is no longer a problem, but peak storage is. If we could ship the excess overseas, producers would get a fair price for the quality of their products. That would lead them to invest in more discovery. However, if they continue to get less money for their products, investment will slow. 
 
TMR: Is everything on sale, as Rick Rule likes to say?
 
Matt Badiali: Everything is on sale. But the great thing about oil is it is not like metals. It is cyclical, but it’s critical. If you want your boats to cross oceans, your airplanes to fly, your cars to drive and your military to move, you have to have oil. You don’t have to buy a new ship today, which would take metals. But if you want that sucker to go from point A to point B, you have to have oil. That’s really important. There have been five cycles in oil prices in the last few years.
 
Oil prices rise and then fall. That’s what we call a cycle. Each cycle impacts both the oil price and the stock prices of oil companies. These cycles are like clockwork. Their periods vary, but it’s been an annual event since 2009. Shale, especially if we can export it, could change all of that.
 
The rest of the world’s economy stinks. Russia and Europe are flirting with recession. China is a black box, but it is not as robust as we thought it was. Extra supply in the US combined with less demand than expected is leading to temporary low oil prices. But strategically and economically, oil is too important for the price to get too low for too long.
 
I was recently at a conference in Washington DC where International Energy Agency Executive Director Maria van der Hoeven predicted that without significant investment in the oil fields in the Middle East, we can expect a $15 per barrel increase in the price of oil globally by 2025.
 
I don’t foresee a lot of people investing in those places right now. A shooting war is not the best place to be invested. I was in Iraq last year and met the Kurds, and they’re wonderful people. This is just a nightmare for them. And for the rest of the world it means a $15 increase in oil.
 
For investors, the prospect of oil back at $100 per barrel is not the end of the world. With oil prices down 20% from recent highs and the best companies down over 30% in value, it is a buying opportunity. It means the entire oil sector has just gone on sale, including the companies building the infrastructure.
 
As oil prices climb back to $100, companies will continue to invest in producing more oil. And that will turn Hillary Clinton’s eight-year presidency into an economic wonderland.
 
TMR: The last time you and I chatted, you explained that different shales have different geology with different implications for cracking it, drilling it and transporting it. Are there parts of the country where it’s cheaper to produce and companies will get higher prices?
 
Matt Badiali: The producers in the Bakken are paying about twice as much to ship their oil by rail as the ones in the Permian or in Texas are paying to put it in a pipeline. The Eagle Ford is still my favorite quality shale and it is close to existing pipelines and export infrastructure, if that becomes a viable option. There are farmers being transformed into millionaires in Ohio as we speak, thanks to the Utica Shale.
 
TMR: What about the sands providers? Is that another way to play the service companies?
 
Matt Badiali: Absolutely. The single most important factor in cracking the shale code is sand. If the pages of a book are the thin layers of rocks in the shale, pumping water is how the producers pop the rock layers apart and sand is the placeholder that props them open despite the enormous pressure from above. Today, for every vertical hole, drillers create long horizontals and divide them into 30+ sections with as much as 1,500 pounds of sand per section. A single pad in the Eagle Ford could anchor four vertical holes with four horizontal legs requiring the equivalent of 200 train car loads of sand.
 
Investors need to distinguish between companies that provide highly refined sand for oil services and companies that bag sand for school playgrounds. Fracking sand is filtered and graded for consistency to ensure the most oil is recovered. Investors have to be careful about the type of company they are buying.
 
TMR: Coal still fuels a big chunk of the electricity in the US Can a commodity be politically incorrect and a good investment?
 
Matt Badiali: Coal has a serious headwind, and it’s not just that it’s politically incorrect. It competes with natural gas as an electrical fuel so you would expect the two commodities would trade for roughly the same price for the amount of electricity they can generate, but they don’t. The Environmental Protection Agency is enacting emission standards that are effectively closing down coal-fired power plants. And because it is baseload power, you can’t easily shut it off and turn it back on; it has to be maintained. That means it doesn’t augment variable power like solar, as well as natural gas, which can be turned on and off like a jet engine turbine. So coal has two strikes against it. It is dirty and it isn’t flexible.
 
Some coal companies could survive this transition, however. Metallurgical coal (met coal) companies, which produce a clean coal for making steel, have better prospects than steam coal. Along with steam coal, met coal prices are at a six-year low. 
 
Generally, I want to own coal that can be exported to India or China, where they really need it. Japan has replaced a lot of its nuclear power with coal and Germany restarted all the coal-fired power plants it had closed because of carbon emissions goals. We are already seeing deindustrialization there due to high energy prices. Cheap energy sources, including coal, will be embraced. I just don’t know when.
 
TMR: Thank you for your time, Matt.
 
Matt Badiali: Thank you.
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Oct 29

QE Finished, Gold Fans Clearly Crackpots

Gold Price Comments Off on QE Finished, Gold Fans Clearly Crackpots
The US Fed just ended quantitative easing. Anyone thinking history or gold worth a look must be a crackpot for worrying…
 

TIME WAS the Gold Standard simply existed…like rain or snooker tables, writes Adrian Ash at BullionVault
 
Zero rates and quantitative easing are the monetary equivalents today. Doing anything else puts a cental bank into the “hall of shame” according to Bloomberg. The Financial Times gasps that today the US Fed’s “grand experiment is drawing to a close…”
 
Oh yeah? The world hasn’t yet seen the last of US quantitative easing, we think. Not by a long chalk. QE is getting new life after 15 years in Japan, the world’s fourth largest economy, and it has barely begun in the single largest, the Eurozone. 
 
Only China to go, and the QE Standard will be truly global. But financial markets and pricing mechanisms the world over are already through the looking glass. After $3 trillion of US Fed asset purchases, climbing back to the other side will take more than a month’s rest from extra money printing. 
 
The Gold Standard, meantime, now exists only to fill space when financial hacks run out of other silly things to talk about. 
 
Take this classic Phil Space nonsense, for instance, from the Washington Post.
 
To recap… 
 
Over a week ago, billionaire tech-stock investor and former PayPal boss Peter Thiel appeared on right-wing shock jock Glenn Beck’s TV show. He mumbled something about the value of money…reality…and the virtual world of monetary politics we’ve all lived in since 1971. 
 
Nothing to see or hear in that. Even the laziest gold bug can see US president Nixon’s decision to end the Dollar’s gold link changed nothing and everything all at once. Metaphysical mumblings are the best anyone’s since managed in trying to understand how humanity got beyond itself in that moment.
 
Yet on Friday, Thiel’s comments were picked up by a right-leaning think tank blogger…and finally last night, this “unthink” piece appeared at the Washington Post online. 
 
So what? Well, George Selgin, new Cato Institute director, said earlier this month that anyone challenging the way money currently works must do better if they want to be taken seriously. Amateur bug-o-sphere stuff only makes things worse.
 
But Selgin underplayed the task ahead, I fear. QE, zero rates and unlimited money-supply growth are big, important issues. Today’s US Fed meeting proved that once again. 
 
On the other side of the debate however, even the most qualified and serious economist daring to doubt the sanity of printing money to buy up government debt, mortgages, stocks or other nation’s currencies now looks like a “crackpot” to most politicians, financiers and reporters today.
 
Because, hey! Nothing bad has happened. No inflation, currency destruction or financial apocalypse fuelled by money-from-nowhere. 
 
Not yet. And now the Fed is turning off the taps. For now.
 
What could possibly go wrong? We must be crazy to bother owning gold as financial insurance, never mind worrying about how money itself…as basic to civilization as the written word…is being bent and remade in the latest central-bank experiments.
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Oct 29

Don’t Get Bullish on Gold Below $1350

Gold Price Comments Off on Don’t Get Bullish on Gold Below $1350
This month’s “triple bottom” is not, repeat NOT, confirmed says this technical analyst…
 

WAYNE KAUFMAN is chief market analyst at Phoenix Financial in New York.
 
Regularly quoted in the media and interviewed on Fox, CNBC and the BBC, Kaufman produces a daily report for Phoenix, is a member of the Market Technicians Association, and has taught level 3 of the MTA’s three-level online course for Chartered Market Technician candidates.
 
Here Kaufman speaks to Mike Norman on behalf of Hard Assets Investor about how he sees the big picture right now…
 
Hard Assets Investor: We’ve seen some crazy gyrations in gold, in the Dollar, in oil, even in stocks. Summarize how it looks to you.
 
Wayne Kaufman: In terms of US equities, we’ve been watching a deterioration of underlying market breadth, that hasn’t shown up, or had not shown up in the major indexes until the last couple of weeks. But for the last three or four months, we’ve been watching small-caps get decimated. And then the midcaps followed. And then the large-caps, S&P 500, had a peak recently. But the breadth was terrible.
 
And now the stocks have rolled over. It’s to the point where you’ve only got about 18% of S&P 1500 stocks over their own 50-day moving average, less than one in five. About one in three are still over their 200-day moving average. So that underlying deterioration came through and pulled down the majors.
 
HAI: Now with small stocks weak like that, wouldn’t that suggest general economic weakness, or at least a tipoff to that effect, that we’re seeing basically small, medium-sized businesses not doing very well?
 
Kaufman: Definitely. You’re right. You’re talking about changes taking place. The question in the mind of investors right now is, we’re seeing the weakness in China, in Europe, in Germany suddenly rolling over. You’ve got the price of oil. It’s all of these things that are turning dramatically. Is this a long-term trend change? Or is this just going to be short term? Is it just typical October stuff, in the case of equities? That’s what we’re going to find out over the next few weeks.
 
HAI: But is there really a downside, when people know the central banks are going to be there, push comes to shove?
 
Kaufman: There, at a point, is only going to be so much that the central banks can do. I was recently asked by a news outlet to give my projections for the S&P, and my reasoning. My No. 1 reason for being bullish is central banks around the world will do everything possible to prevent a global recession. Are they really able to do much more? We know they’ll try. Are they going to wait too long before they do? How effective can they be?
 
HAI: Last time you were here, you were negative on gold. And that play worked out pretty well. How do you see things panning out from this point?
 
Kaufman: I see short-term, over-sold and over-bearish sentiment. So a bounce is definitely in the cards, especially if there’s some short covering by people who are short the futures. But when I was here last time, I said I couldn’t get bullish unless gold broke $1400 or so. Now that number is a little lower.
 
HAI: Where is it?
 
Kaufman: $1300. I need to see $1350 at least, because you do have a potential triple bottom. A lot of people say, “Oh, triple bottom.” It’s a potential triple bottom that doesn’t get confirmed until you break unimportant resistance. Unless we can get above $1350, I’m not going to start thinking about getting bullish, except for oversold, over-bearish bounces.
 
HAI: We had a guest recently talking about the death of gold. Reminds me of the death of equities back on the infamous 1979 Business Weekcover. What do you make of that?
 
Kaufman: I agree. That’s why I’m saying I could see a bounce here, because it’s oversold, and it’s over-pessimistic. Levels of pessimism are extreme. And when you see that, that’s a good time to take the other side of that trade. The question is, how much staying power? You’re talking about commodities going down. The Dollar has been strong, which is a little too much bullishness in the Dollar. That certainly can be capped here.
 
But oil is just amazing. For years, you always said that the Saudis controlled the price of oil. You were 100% right. Because they’re the only country that really has significant excess capacity. Right now, are the Saudis purposely trying to drive the price of oil down, so that they can try and put a cap on fracking and energy exploration and production here in the States?
 
HAI: The shale guys, the shale producers.
 
Kaufman: Potentially an amazing tactical war going on between the Saudis and the US, in terms of oil production.
 
HAI: I saw an example of that back in the ’80s, when I was an oil trader on the floor of this very exchange, when they crashed the price down. That was a message sent to the non-Opec producers, the North Sea guys in particular. So I think you’re absolutely right. 
 
You mentioned the Dollar. That was a surprise to most people, because we had this narrative, for a long time, about money printing, and central banks, and quantitative easing, and hyperinflation and the Fed doing all this. Yet, look at the Dollar.
 
Kaufman: I don’t want to seem like I’m complimenting you because you’re the host, but you said this a long time ago.
 
HAI: Don’t hold back…
 
Kaufman: You said a long time ago, all the inflation guys, that they were wrong, they were going to be wrong. You were 100% right. So it was a big surprise. Now, as a technician, I called the Dollar going up at a point when I saw it giving me buy signals. I don’t do it the intuitive or the economist way. It’s extremely overbought. And it’s extremely over-bullish. It has been taking a pause. I think it’ll continue to pause here. It’s just too many people on that side of the trade at this point.
 
HAI: We heard comments recently from New York Fed President William Dudley, to the effect that a Dollar that’s too strong might hinder our ability to achieve our goals. Hint, hint, a little bit of code words there…
 
Kaufman: You’re right. But the problem they have is that the strong Dollar is going to hurt exports, obviously. But you’ve got S&P 500 companies due in the neighborhood of 40% of revenues, 50% of profits overseas. So, whether it’s from the strong Dollar or just because the economies overseas are very weak right now, no matter how you go on that, it’s going to be a problem. And the world economy needs to clear up. We’re not an island unto ourselves; it will affect us. And I think that’s what equities are starting to show.
 
HAI: Good points. Wayne, always great to have you here. Thanks very much.
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Oct 27

Gold as Investment Insurance

Gold Price Comments Off on Gold as Investment Insurance
Just how much is enough? It depends on how you judge the risk of a serious stockmarket crash…
 

YOU WAKE UP in the morning, turn on the news, and get a sick feeling in your stomach, writes Brian Hunt, editor-in-chief at Porter Stansberry’s research group, Stansberry & Associates.
 
The stock market is crashing again. Another big Wall Street bank has failed. Your 401(k) has lost another 25%. It’s bleeding value every week.
 
Your dream of early retirement is history. You’ve lost so much money in stocks that even a “regular” retirement is in jeopardy. If you live a long life, there’s no way you’ll have enough money.
 
This is the financial disaster scenario that terrifies a lot of investors. It’s what kept people up at night during the 2008 credit crisis.
 
Could it happen again? Could another crisis cause the value of the US Dollar to collapse? Could the stock market suffer another epic decline?
 
Many people say the answer to these questions is “yes”.
 
Fortunately, I don’t need to know the answer to these questions…and neither do you.
 
The good news is that it’s very easy to buy insurance against financial disasters like these. I personally own this insurance. Many of the smartest, wealthiest people I know own it, too. It could mean the difference between a comfortable, early retirement…and just barely getting by.
 
First, it’s important to agree on what “insurance” is. In my book, buying insurance comes down to spending a little bit of money to hedge yourself against a disaster.
 
Throughout our lives, we spend a little bit of money on insurance and hope we never have to use it. For example, home insurance costs a small fraction of your home’s value. Buy it and hope you never have to use it. Same goes for car insurance. It costs a fraction of your car’s value, so you buy it and hope you never have to use it.
 
It’s the same with investment insurance. You can buy “investment insurance” and hope to never have to use it.
 
There are hundreds of wealth and investment insurance policies out there. They involve intricate details, lots of forms to sign, and payment of big fees to advisors and salesmen (which are often the same thing).
 
I’d rather keep things simple and keep money in my pocket instead of a salesman’s pocket. Here’s how you can do it…
 
Put a small portion of your wealth in gold bullion.
 
That’s it.
 
That’s all it takes to insure yourself against a financial disaster.
 
No complicated insurance products. No big fees to pay. Just pay a small commission to a gold seller, store the gold in a safe place, and you’re done.
 
Here’s why this “insurance” is important…
 
Some popular market gurus are predicting a global depression, a collapse in the Dollar, and a huge increase in the price of gold. The chances of them being right are relatively slim. People have been predicting the “next depression” for 30 years. The world just has a way of not ending.
 
However, the “doom and gloom” gurus bring up some good points. They aren’t crazy. There are some big risks to our financial system. The US government is spending way too much money on wars, Obamacare, welfare, and other programs. Europe and China’s economies could decline and trigger a global recession. These are all real risks to your retirement account.
 
I’m no doom-and-gloomer. I think the economy will deal with these risks and keep growing. Again, the world just has a way of not ending like so many people believe it will. That’s why I want to own stocks, bonds, and real estate. These assets will do well if the crap doesn’t hit the fan.
 
However, I also want insurance in case I’m wrong and the potential disaster that some are predicting takes place. People would likely flock to gold in a global financial disaster…and cause its price to soar.
 
That’s why it makes sense to buy gold as a form of insurance.
 
The good news is that you don’t have to buy a huge amount of gold to have a good insurance policy. You can place just 5% of your portfolio into gold.
 
Let’s say you have a $100,000 portfolio with 95% of it in blue-chip stocks and income-paying bonds. You place the remaining 5% of your portfolio into gold. This gives you $95,000 in stocks and bonds and $5,000 in gold.
 
If the predicted financial disaster doesn’t strike, your stocks and bonds will increase in value. Your gold will probably hold steady in price or decline a little. Since the bulk of your portfolio is in stocks and bonds, you’ll do just fine.
 
But what if the financial disaster strikes? I’ve heard some top financial analysts say gold could climb to $7,000 an ounce in the financial-disaster scenario.
 
Let’s say a financial disaster sends the value of your stocks and bonds down 50%. That would be a massive decline. Throughout history, only the worst, most severe bear markets sent stocks down this much.
 
This epic financial disaster would cut your $95,000 stock and bond position by 50%, leaving you with $47,500. But let’s say this disaster also causes gold to rise to $7,000 an ounce. Right now, gold is $1,230 per ounce. A rise to $7,000 would produce a more-than-fivefold increase in the value of your gold. It would cause the value of your $5,000 gold stake to rise to about $28,455.
 
Post-financial disaster, you’re left with $75,955 ($47,500 from stocks and bonds + $28,455 from gold). The disaster still hits you, but not nearly as hard. Your insurance played a big role in limiting the damage.
 
But what if you think the chances of financial disaster are higher than “unlikely”? What if you’re more worried than the average Joe?
 
If you are, simply increase the “insurance” portion of your portfolio. Instead of a 5% position in gold, you could increase it to 20%.
 
If the previously mentioned financial disaster were to strike your $100,000 portfolio weighted 80% in stocks/bonds and 20% in gold, the math works out like this:
 
The 50% decline in your $80,000 stocks/bond position leaves you with $40,000. Gold’s increase to $7,000 an ounce makes your $20,000 gold position increase to $113,821.
 
Your large gold insurance position actually produces a net gain in this scenario. You’re left with $153,821…an increase of more than 50%.
 
As you can see, the larger your gold-insurance policy, the better you do in the financial-disaster scenario. But if the financial disaster doesn’t strike, you won’t benefit as much because you hold less money in stocks and bonds, which do well if the economy carries on. And keep in mind…it would take a serious financial disaster to send stocks down by 50% and gold to $7,000.
 
Depending on what you think the chances of financial disaster are, you can adjust your gold-insurance policy. It all depends on your goals and beliefs.
 
Think the chances of disaster are slim? Consider a gold-insurance policy equivalent to 1%-5% of your portfolio. Think the chances of disaster are high? Consider a gold-insurance policy equivalent to 20% of your portfolio.
 
Are the “gloom and doom” gurus right? Is financial disaster around the corner? I don’t know the answer. Nobody does. But if you buy some “investment insurance” in the form of gold, you don’t need to know the answer. It’s simple. It’s easy. It’s low-cost.
 
You buy gold and hope to never have to use it. You’ll do fine if things carry on. You’ll do fine if the crap hits the fan.
 
And the peace of mind you get from owning gold “insurance” is worth even more than the money it could save you.
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Oct 24

Silver Buyers "Not Investing, But Stacking"

Gold Price Comments Off on Silver Buyers "Not Investing, But Stacking"
Silver investing analyst “gets why people are buying”, forecasts record-high prices…
 

SILVER INVESTMENT demand has receded since 2011, according to a detailed new report, but it remains “the single most important driver of prices” and is set to return, perhaps with force, over the coming decade.
 
On “current trends”, says the new Silver Investment Demand report from US consultancy the CPM Group – commissioned by the Washington-based Silver Institute –  investors worldwide could grow their aggregate holdings by 50% between now and 2024.
 
This level of investing “would be expected to push annual average silver prices to a fresh record high further out,” says CPM Group’s managing director, Jeffrey Christian.
 
Relaying an overview of silver’s historical use as reliable money, notably in China for 400 hundred years to the mid-20th century – as well as across the United States before the 1913 foundation of the Federal Reserve – Christian recounts a modern silver investor’s comment to him regarding what many chatrooms call “stacking”.
 
“With due respect,” the investor said, “you need to know that we do not invest in silver. We stack it.”
 
What the comment means, says Christian, is that silver investors in the developed West – whose demand has surprised analysts and defied the metal’s 60% price-drop since 2011 – “[do] not see silver as an investment, but as a store of wealth, an alternative to holding one’s wealth in a nationally issued currency such as the US Dollar.”
 
Instead of viewing silver as a speculative or short-term investment, Christian goes on, these buyers see the metal “as a core part of their long-term assets, the base in some cases of the individual’s wealth…much more meaningful and visceral to the owners than shares in a stock or a series of bonds they may hold for a period of time.”
 
Weighing against the silver stackers, however, other more “short-term” investors have driven the metal’s sharp price falls since it hit near-all time highs in spring 2011, CPM Group’s Silver Investment Demand report explains.
 
So-called “trend followers”, as well as “opportunistic” traders switching into equities, have added to sales from disappointed investors who had “over-blown expectations” that the bull market of 2006-2011 would continue. And because net investing demand shows what CPM Group calls “a strong 59.1% correlation” with real silver prices (after accounting for inflation), this sell-off by shorter-term money drove the crash.
 
Ultimately, the report for The Silver Institute concludes, future net investment demand “can only be guessed [and] will depend on how investors view the world around them.” But investors “may begin to increase their net silver purchases in the years ahead.” Because with Western economies failing to redress their financial imbalances since the 2007-2012 crisis, the concerns over inflation and credit-default which “motivated” the surge in demand from 2006-2011 could soon return.
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Oct 19

I See Two Horsemen

Gold Price Comments Off on I See Two Horsemen
Patience needed, but the Dollar has been rising with the Gold/Silver Ratio…
 

The BLACK LINE is where we have been, writes Gary Tanashian in his Notes from the Rabbit Hole. The blue line is a projection of what a typical correction (whether a healthy interim one or a bear market kick off) might look like.
 
 
We used real charts of the Dow, S&P 500 and Nasdaq 100 to gauge the entry into the current correction and now the resistance points to the expected bounce off of the US market’s first healthy sentiment reset in quite some time. But our cartoon above gives you the favored plan on how the correction could play out.
 
Last week, the market bounced on what can only be viewed as a sad attempt by a Fed member (a perceived Hawk, no less) to jawbone a stop to the impulsive bearishness. The strength of the US Dollar and first decent correction since 2011 seems to have spooked the folks over at Policy Central and suddenly they are talking QE again. That does not inspire confidence, if you are a bull.
 
Be that as it may, we have been due for a bounce to clean out the over bearish and over sold conditions. We are making no claims to know whether or not this is a bear market kick-off because when the process is complete per the sketch above, a trade-worthy rally should materialize when a notable low is ground out.
 
An impulsive straight line drop, to support though it is in many cases (ref. the real charts of the Semiconductors and the Banks), and recovery on policy makers’ jawboning is not usually a path to sustained recovery.
 
NFTRH is managing a bounce (the first ‘up’ phase of the blue line above) until/unless it proves it is more than that. Traders should be nimble. If the projection proves out, a renewed decline into November could follow, which should come out of a good setup for bearishly inclined traders.
 
Moving on, volatility is back and while it seemed to come out of nowhere, it was easily readable in advance by steadily declining junk vs. quality bond yields spreads, declining index and sector participation rates and of course, the strong US Dollar (which is decidedly not on the favored agenda of asset-friendly policy makers), among several other indicators we tracked into and through the first part of the correction.
 
Per the scenario above, in the likely event a bottom has not yet been registered, one will eventually be ground out and it should be good for a trade at least. Personally, I have positioned for a bounce right here but that is not recommended for anyone who is not willing to trade on a dime, in-day and in-week. The answer to the question ‘cyclical bull ender or not?’ does not need to come yet, but there is going to be data galore going forward. We’ll work the data as it comes in. Meanwhile, an intermediate bear trend is in force.
 
We had gauged the outperformance of the Emerging Markets (EEM vs. SPY) for much of this year, but when the ratio broke down we noted it in real time. So we shorted the EM’s and prepared for coming bearishness in US markets. We have been charting Europe’s decline for months now, initially shorting Spain, which had previously been our guide to the upside speculative impulse that took hold in Europe.
 
Global markets are nearly but not yet broken with Europe and the World index at key big picture support, the Emerging Markets having made a false breakout and failure, China actually looking interesting here, Japan playing the ‘push me, pull you’ game with its currency and Canada doing some bearish things as the TSX not only loses its blue sky breakout, but starts snapping support levels. The TSX-V (CDNX) is leading the way down and is flat out destroyed right along with any speculative spirits in the world of scammy little Canadian ‘resource’ plays.
 
Early in 2014 we charted the CCI index of commodities, and its hold of critical support at 500 as well as its resistance to the breakout and rally that followed. More recently we managed the decline to and through that support level while maintaining a “not interested” stance the whole way. Commodities can bounce with any ‘inflation trade’ bounce (watch TIP-TLT and other inflation expectations indicators) that may manifest.
 
We were not interested in commodities because we were given no reason to have a favorable view of inflation expectations, which through the TIP-TLT ratio were gauged to be burrowing through the floor week after week. This was also another negative for the US stock market, which had been feasting like Goldilocks on the bears’ porridge.
 
Foremost among the indicators have been Yield Curves generally favoring US stocks and hurting gold, until the curve burst upward beginning last week. This has not surprisingly come with the US stock market correction. If the market bounces, the curve can decline and junk-quality bond spreads can bounce. Also, the VIX needs a rest.
 
The big daddy of indicators however, has been the Two Horsemen, i.e. the Gold-Silver ratio and the US Dollar rising together. This was an indicator of failing liquidity which NFTRH and indeed our public website, noted in real time.
 
It is the indicators even more so than straight up technical analysis that will help us decide whether or not the bull market has ended as we move forward through coming data points.
 
Deflationary and economic growth troubles across the globe are blamed for the recent strength in the US Dollar and to a degree that holds merit. The other support has been the very real economic recovery in the US (beginning with the Semiconductor sector) born of very unreal (i.e. unnatural and unsustainable) policy inputs.
 
Naturally, it stands to reason that if Dollar compromising policy is promoted to keep assets aloft, then a strong Dollar is unwelcome. Because not only would it begin to eat away at exporting sectors like manufacturing, but it would also make assets less expensive. But that should be a good thing, no? Declining prices in things like oil, food and services? Not on the one-way street that is our current system of Inflation onDemand.
 
The Yen is strong lately and the Euro can gain a bounce bid. This means that the USD can continue to weaken from its impulsively over bought and over loved levels. But on the big picture USD has been moving upward from a long-term basing pattern.
 
Gold is meantime favored over silver, given the move in the Gold/Silver Ratio and diminishing global liquidity. Beyond that, gold’s fundamentals have not been constructive for some time now, no matter how often idealists click the heels of their ruby slippers.
 
That was then, this is now. Gold is counter cyclical per the Gold-Commodities chart in this post. This one chart is the very reason that NFTRH never did take its focus off the biggest picture view of an ongoing global economic contraction in progress. This would be the gateway to a real bull market in gold mining stocks, but it is also the more difficult pathway because the inflationists get weeded out along the way as silver does not go to the moon and lazy analysis gets punished, not rewarded.
 
Gold stocks are counter cyclical and macro indicators, and they say we may be at the start of grinding out a counter cyclical phase. But note the word grind. That’s what it has been and what it could continue to be for a while yet. As gold slowly asserts itself vs. cyclical commodities, cost-input fundamentals gradually improve in the industry and as gold slowly asserts itself vs. stock markets an important component of investor psychology slowly comes into place.
 
Patience…the macro does not pivot over night.
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Oct 15

What the Bond Crash Will Look Like

Gold Price Comments Off on What the Bond Crash Will Look Like
A lot of very discontinuous action to the downside ahead…
 

“WHEN sorrows come,” wrote Shakespeare, “they come not single spies, but in battalions,” says Tim Price on his ThePriceOfEverything blog.
 
Jeremy Warner for The Daily Telegraph identifies ten of them. His “biggest threats to the global economy” comprise…
  1. Geopolitical risk;
  2. The threat of oil and gas price spikes;
  3. A hard landing in China;
  4. Normalisation of monetary policy in the Anglo-Saxon economies;
  5. Eurozone deflation;
  6. ‘Secular stagnation’;
  7. The size of the debt overhang;
  8. Complacent markets;
  9. House price bubbles;
  10. Ageing populations.
Other than making the fair observation that stock markets (for example) are not entirely correlated to economic performance – an observation for which Eurozone equity investors must surely be hugely grateful – we offer the following response.
 
Geopolitical risk, like the poor, will always be with us.
 
Yes, the prices for oil and natural gas could spike, but as things stand WTI crude futures have fallen by over 15% from their June highs, in spite of the clear geopolitical problems. And the US fracking revolution, in combination with fast-improving fundamentals for solar power, may turn out to be a secular (and disinflationary) game-changer for energy prices.
 
China, however, is tougher to dismiss. If we had any meaningful exposure to Chinese equity or debt we would be more concerned. But we don’t, so we aren’t.
 
Five of Jeremy Warner’s ‘threats’ are inextricably linked. The pending normalisation of monetary policy in the UK and US clearly threatens the integrity of the credit markets. It’s worth asking whether either central bank could possibly afford to let interest rates rise.
 
This begets a follow-on question: could the markets afford to let the central banks off the hook? Could we, in other words, finally see the return of the long absent and much desired bond market vigilantes?
 
That monetary policy rates are so low is a function of the growing prospect of Eurozone deflation (less of a threat to solvent consumers, but deadly for heavily indebted governments). Absent a capitulation by the Bundesbank to Draghi’s hopes or intentions for full-blown QE, it’s difficult to see how the policy log-jam gets resolved. But since all German government paper out to three years now offers a negative yield, it’s difficult to see why any Eurozone debt is worth buying today for risk-conscious investors. Cash is probably preferable and gives optionality into the bargain. ‘Secular stagnation’ is now a fair definition of the Eurozone’s economic prospects.
 
But all things lead back to Warner’s point 7: the size of the debt overhang. Since this was never addressed in the immediate aftermath of the Global Financial Crisis, it’s hardly a surprise to see its poison continue to drip onto all things financial. And since the policy response has been to slash rates and keep them at multi-century lows, it’s hardly a surprise to see property prices in the ascendant.
 
Complacent markets? Check. But stocks have lost a lot of their nerve over the last week. Not before time.
 
Ageing populations? Yes, but this problem has been widely discussed in the investment community over the past two decades – it simply isn’t new news.
 
We saw one particularly eye-catching chart last week, via Grant Williams, comparing the leverage ratios of major US financial institutions over recent years (shown below).
 
  
The Fed’s leverage ratio (total assets to capital) now stands at just under 80x. That compares with Lehman Brothers’ leverage ratio, just before it went bankrupt, of just under 30x. Sometimes a picture really does paint a thousand words. And this, again, brings us back to the defining problem of our time, as we see it: too much debt in the system, and simply not enough ideas about how to bring it down – other than through inflationism, and even that doesn’t seem to be working quite yet.
 
In a recent interview with Jim Grant of Grant’s Interest Rate Observer, Sprott Global questioned about the likely outlook for bonds:
“What would a bear market in bonds look like? Would it be accompanied by a bear market in the stocks?
 
“Well, we have a pretty good historical record of what a bear market in bonds would look like. We had one in modern history, from 1946 to 1981. We had 25 years’ worth of persistently – if not steadily – rising interest rates, and falling bond prices. It began with only around a quarter of a percent on long-dates US Treasuries, and ended with about 15% on long-dated US Treasuries.
 
“That’s one historical beacon. I think that the difference today might be that the movement up in yield, and down in price, might be more violent than it was during the first ten years of the bear market beginning in about 1946. Then, it took about ten years for yields to advance even 100 basis points, if I remember correctly.
 
“One difference today is the nature of the bond market. It is increasingly illiquid and it is a market in which investors – many investors – have the right to enter a sales ticket, and to expect their money within a day. So I’m not sure what a bear market would look like, but I think that it would be characterized at first by a lot of people rushing through a very narrow gate. I think problems with illiquidity would surface in the corporate debt markets.
 
“One of the unintended consequences of the financial reforms that followed the sorrows of 2007 to 2009 is that dealers who used to hold a lot of corporate debt in inventories no longer do so. If interest rates began to rise and people wanted out, I think that the corporate debt market would encounter a lot of ‘air pockets’ and a lot of very discontinuous action to the downside.”
We like that phrase “a lot of very discontinuous action to the downside”.
 
Grant was also asked if it was possible for the Fed to lose control of the bond market:
“Absolutely, it could. The Fed does not control events for the most part. Events certainly will end up controlling the Fed. To answer your question – yeah. I think the Fed can and will lose control of the bond market.”
As we have written on innumerable prior occasions, we wholeheartedly agree. Geopolitics, energy prices, demographics – all interesting ‘what if’ parlour games. But what will drive pretty much all asset markets over the near, medium and longer term is almost entirely down to how credit markets behave. The fundamentals, clearly, are utterly shocking. The implications for investors are, in our view, clear. And as a wise investor once observed, if you’re going to panic, panic early.
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