The news media and the pundits flailed around over the weekend trying to come up with reasons why the broad averages have rallied to within 10%-20% of record highs even though the global economy could be headed into a depression. ZeroHedge is usually able to provide plausible answers to such questions, but here’s an attempt that fell short. It places commodity trading advisors at the center of the action: “CTAs, which are computer-driven models, do not care about such trivial facts as mass layoffs, millions of people infected with a deadly virus, and instead they only care if others are buying at which point they too join the buying frenzy.”
This ageing bull market may soon face the third market collapse since the year 2000. Nobody can predict the exact starting date of its decline—but either a recession or stagflation will surely be its catalyst. During the next debacle, the typical balanced portfolio designed by Wall Street, which consists of approximately 60% stocks and 40% bonds, will no longer provide much protection at all. In fact, that type of portfolio construct has become downright dangerous.
The simple reason for this is that for the first time ever both stocks and bonds are in a massive and unprecedented bubble; and are therefore both vulnerable to significant selloffs. Bonds will no longer provide a ballast or offset to your stock portfolio once reality hits both of those asset classes. If a bond has a 5% yield and has 30 years left to maturity; that holder would lose 25% of his principal if interest rates rise by just 2%. Given the fact that bond yields are the lowest in history, an increase of 2% is certainly not out of the question; and is in fact most likely inevitable.
[The latest week, reported after this essay was written, makes this case even more bullish. -Bob]
By Adam Hamilton – Re-Blogged From Gold Eagle
Gold and silver were thrashed this past summer, relentlessly pounded to deep new lows. That has fueled extreme bearishness, with traders convinced the precious metals’ fundamentals are rotten. But epic all-time-record futures short selling by speculators was the real culprit. These unprecedented shorts must soon be covered with proportional buying, which is super-bullish for gold and silver prices in the coming months.
Traders generally assume fundamentals drive short-term price action, that real imbalances in supply and demand push prices to market-clearing levels. Unfortunately these core underlying dynamics are heavily distorted in gold and silver. Futures speculators who never own these precious metals are able to wield wildly-disproportional outsized influence over their prices. The main reason is extreme leverage inherent in futures.
By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com
Gold weathered the Federal Reserve’s 7th rate hike of this cycle this week. Gold-futures speculators and to a lesser extent gold investors have long feared Fed rate hikes, selling ahead of them. Higher rates are viewed as the nemesis of zero-yielding gold. But contrary to this popular belief, past Fed rate hikes have proven very bullish for gold. This latest hike once again leaves gold set up for a major rally in coming months.
By Michael Ballanger – Re-Blogged From http://www.Gold-Eagle.com
- “secret or dishonest activity or maneuvering.” as in “widespread financial shenanigans had ruined the fortunes of many”
- “silly or high-spirited behavior; mischief.”
To start off, I find it astounding that of all the ways that dictionaries might cite the usage of the word “shenanigans”, they elected to discuss it in its context to the financial industry and how shenanigans have “ruined the fortunes of many”. To wit, as we move into the month of May, we are entering the six-month period during which stock prices have historically faltered, setting up the old saw that one should “sell in May and go away”.
By Michael Bllanger – Re-Blogged From http://www.Gold-Eagle.com
There is a famous quote about short-selling that comes from Olde English business folklore that goes something like this:
“He who sells what isn’t his’n.
Must deliver or goes to prison!”
That old horse chestnut was used to frighten the Rothchildian short-sellers that used to hang out on the old New York “curb” back before governments and influence- peddling lobbyists conspired to change the rules. I used to love to find overvalued stocks or commodities and get our trading desk to call over to the loan post to see what it would cost to borrow a few thousand shares of some pumped up bowser of a stock and then attempt to catch it on an uptick in order to sell it. The entire concept was rather civilized because everyone would know that there was a highly visible bear out there trying to get short something and invariably, the principals like the CEO or CFO would find out and then the ancient game of cat-and-mouse would begin.
By Bullion Vault – Re-Blogged From http://www.Silver-Phoenix500.com
SILVER TRADING among hedge funds and other speculators last week stepped back from the most bearish position on record, but the metal remains “oversold” and “vulnerable” to a swift jump in price according to several analysts.
Betting on metal prices by trading silver futures and options contracts at the Comex and ICE exchanges, speculators in early April held a net negative position equal to a record 6,159 tonnes.
By Michael Pento – Re-Blogged From Pento Portfolio Strategies
The prevailing fiction pervading Wall Street right now is that economic growth is picking up in a sustainable fashion and that interest rates will merely rise slowly. Then, soon level off at historically low levels. In other words, they are selling a fairytale; and a dangerous one at that.
This premise is blatantly false. The Fed’s reverse QE program, Government debt levels and Nominal Gross Domestic Product, all dictate that the 10-year Note Yield should be now swiftly on its way to at least 4.5%, from the artificial level of 1.4% found in July of 2016.
I invest in Gold & Silver, mostly miners.
Most people, I expect, are unwilling or don’t have the temperament to put all their eggs in one basket. The most familiar of the highly liquid investments is stocks – shares of most of the companies you know and love plus many that you’ve never heard of.
But, by pretty much any objective measure, stocks are in Bubble territory today, and the FED has started a tightening cycle – and has promised major tightening leading up to the mid-term elections this November.
I suggest that you still can make money in stocks today, using a strategy that Hedge Funds originally were designed to use – buy stocks that you think have the brightest prospects and sell short stocks that likely will be dogs (by comparison). If your ‘good’ stocks indeed do better than your ‘bad’ stocks, then you’ll make money. It matters not whether they both go up, both go down, or the ‘good’ is up and the ‘bad’ down, so long as the ‘good’ does better than the ‘bad.’
By Ted Butler – Re-Blogged From http://www.Silver-Phoenix500.com
News reports this week indicated that the Bank of Nova Scotia (ScotiaBank), Canada’s third largest bank, had put its precious metals operation, ScotiaMocatta, up for sale. Various sources said the unit had been for sale for a year or so and it was thought or hoped that Chinese interests might buy the business. It was also reported that the Bank of Nova Scotia would shrink the unit if no buyer could be found. The impetus for the sale was said to be a scandal involving smuggled gold from South America to the US. Somewhat ironic, and interesting, was that the sale “listing” agent was none other than JPMorgan.
By Ted Butler – Re-Blogged From http://www.Gold-Eagle.com
I’d like to share what may be a different way of looking at the gold and silver market, but still remain focused on what has been the primary driver of price – changes in the COMEX futures market structure. It has become fairly common knowledge that prices rise when the managed money traders buy and prices fall when these traders sell. So great is the effect on price of this COMEX derivatives positioning that it is discussed in more commentaries than ever before. And that is due to what has become a clearly observable pattern of cause and price effect.
By Adam Hamilton – Re-Blogged From http://www.Silver-Phoenix500.com
Silver has suffered a lackluster year so far, really lagging gold’s upleg. Sentiment is still reeling following silver’s crushing selloff from mid-April to mid-May. But that plunge was largely driven by extreme silver-futures selling by speculators, including a blistering spike in short selling. The resulting excessive shorts have left silver with excellent near-term potential for a short squeeze, which would catapult it rapidly higher.
Technically, silver ultimately acts like a leveraged play on gold. The yellow metal has long been silver’s dominant primary driver. Investors and speculators alike flock to silver when gold is rallying, forcing this tiny market to surge dramatically. But when gold sentiment is weak due to lackluster price action, silver demand from traders dries up. Thus silver drifts listlessly or grinds lower, compounding bearish psychology.