As you know, matters have been hectic in the financial world of late. Herein are some brief updates on recent topics I’ve covered.
The price of gold has been stronger than that of platinum, and gold now trades $80 above platinum. This is a very rare occurrence. It suggests to me both that gold is clearly trading as a currency rather than as bling, and also that platinum at some point has more snapback potential, as well as more short-term downside risk. We can put palladium in with platinum, as well. “Doctor copper” stinks, as well; it, however, is showing accumulation by commercial hedgers, a good sign that value is perceived at recent price points.
On the negative side, JPM stock (the high-quality bank bellwether) has a truly horrible chart. Along with continued strength in Treasury bond prices, with the 10-year bond having trouble merely making its way above a 2.00% yield, this factor plus the collapse in commodity prices speaks towards a recessionary environment, or more specifically, a liquidity-challenged environment.
We have seen this sort of stuff occur before in different circumstances and represent a buying opportunity. What I do not like at all right now is the fractious nature of comments back and forth between President Obama and Secretary Geithner criticizing Germany and Europe, with reciprocal criticism back pointing out the U. S.’s own debt problems. Then there is the tariff and currency war behavior coming out of Brazil. Parts of Europe continue to ban short selling of bank stocks. This situation occurred in 2008 in the U. S. when the wheels were coming off the financial bus. Too much of the world is working at cross purposes, and this would tend to occur when economic fundamentals are bad and getting worse. Of course, there’s no need to comment on how unified Washington D. C. is, correct? (Sarcasm on)
The U. S. stock market continues to hold above the early August lows, despite a general trend toward economic data missing expectations. Might there be an invisible hand at work, a/k/a the Plunge Protection Team? Stock after stock continues to show a deteriorating trend. If you are wondering about the free market at work, please look at a 3-month chart of IWM, which tracks the Russell 2000 index (small caps). Somehow every descent is, amazingly, stopped at 65. Meanwhile, industrial metals such as copper, platinum and palladium have collapsed far below their August lows. Go figure . . .
In the commercial real estate field, Trepp data as of Monday and Markit CMBX data as of today are consistent with the deteriorating trend we have been seeing for months on end. This in turn is consistent with the grinding lower of high quality municipal bond yields as well as liquid sovereign debt such as that of the U. S. and Germany.
All in all, I would repeat what I said in my last post about the relative attractiveness of cash right now. Nothing ventured, nothing lost.
For those who are celebrating Rosh Hashanah, best wishes for a happy and sweet new year. And, somehow, a prosperous one!
The price of silver and gold have risen dramatically over the course of QEI and QEII. This parallels the rise in other commodities by a simple survey of the CME group charts (copper, platinum, etc). There seems to be no special place afforded these metals.
One could assert that the fall in silver and gold is a direct result of the disappointment with operation twist. That being said, it would seem that silver and gold may continue to fall back to ‘pre-QEI’ levels (i.e silver below $20) due to hedge funds de-leveraging. Some have used the word liquidation to describe what’s happened with commodities.
There was no supply-demand dynamic acting to mitigate the fall of many commodities recently. The 200 day moving averages were just so much hot air.
It seems many may have missed the large leveraged contributions that hedge funds contributed to most commodities. It seems if you take away the speculative gamblers we have a much tamed market.
Seems cash is the best place to go mid term.
Well said, Shane. Agree.
Certain accounts may be well-suited for different flavors of exposure to the municipal bond market, some parts of which allow for capital gains as well as what passes for high income these days. Vehicles such as NIO and NVG come to mind, plus zero-coupon munis.
But soon enough, I anticipate rising price inflation to meet ultra-low interest rates, and for precious metals and vehicles such as GLTR to shine again (pun intended).