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Pater Tenebrarum  

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  • Gold Is Heading Lower [View article]
    I think that capitulation occurred in Late October/early November 2014, when trading volume in gold stocks soared in many cases above the highs recorded during the 2008 crash, the 5-day moving average of the gold futures traders DSI (daily sentiment index) collapsed to just 5% bulls, while small speculators in COMEX futures took on their largest net short position in 15 years. Concurrently, the discount to NAV on closed end bullion funds such as CEF and GTU for the first time went above the 10% mark. This was a rare climax in bearish sentiment, on a par with and partly even exceeding the most extreme data points in history.

    I've discussed the "anti-bubble blow-off" in gold stocks here (on November 3, 2014 - two days after the low): http://bit.ly/1eZeqw2
    and the anecdotal and quantitative sentiment situation a week later here:
    http://bit.ly/1eZetbe

    It can certainly not be ruled out that gold will still decline to the "technical price attractor" level of $1,040-1,050 (the March 2008 peak), but the climax in negative sentiment and capitulation-type waves of selling of gold investments have already occurred last year, so I put a somewhat higher probability on this not happening. This is further buttressed by the fact that gold looks very bullish in yen and euro terms, and the fact that time and again buying emerges when it dips below the 1200 level in USD terms.
    Jun 8, 2015. 10:31 PM | 5 Likes Like |Link to Comment
  • Netflix: Street Applauds Disastrous Financial Results [View article]
    Ah, the good old days of valuation by "eyeballs" are finally back....
    Apr 16, 2015. 07:52 PM | 1 Like Like |Link to Comment
  • Varoufakis And Fingergate - Euro Signaling Systemic Crisis Is Close [View article]
    First of all, the biggest euro banknote printed in Greece is the 10 euro note. Secondly, where banknotes are printed is completely irrelevant. The vast bulk of the euro area's money supply consists of deposit money, and one euro in deposit money is completely indistinguishable from another.
    Mar 20, 2015. 07:38 PM | Likes Like |Link to Comment
  • Tesla: Why So Bearish? [View article]
    re: "Most investors are simply not that frivolous with their money to buy investments on a whim."
    On the contrary, the vast bulk of investment decisions are based on emotions. The "data" that are used to justify the decisions are merely rationalizations in most cases. This is the reason why the prices of financial assets very often get strongly out of line with what would be widely considered their "fundamental" values. It makes financial markets remarkably inefficient and creates both great buying and selling opportunities. If not for the fact that emotions are a main driver of asset prices, it would be very difficult to make money in the markets.
    Oct 23, 2014. 02:42 PM | 4 Likes Like |Link to Comment
  • This Bubble Is 'Beyond 1929 And 2007' [View article]
    That is actually erroneous. There are studies that show that "bubble talk" in fact increases greatly as a bubble nears its peak. You can ascertain this yourself by taking a look at Google trends. I showed several examples here:
    http://bit.ly/1wtwwxb
    Aug 25, 2014. 05:54 PM | 1 Like Like |Link to Comment
  • Market Timing Report: Indicators Are Cued Up For A Bear Market [View article]
    In many European nations you can buy/sell gold coins at the branch offices of banks. Gold bars can be bought/sold directly from refineries.
    Aug 24, 2014. 04:03 PM | 1 Like Like |Link to Comment
  • Gold Actually Thrives In Rising-Rate Environments [View article]
    It all depends on why rates are rising. Nominal rates can be very high and still be low in real terms. The Reichsbank's 90% discount rate in 1923 was nominally high, but in real terms it was ridiculously low. High real rates on the other hand are deadly for gold.
    The one exception to this rule is if rates rise because there is fear of a sovereign default - then gold will tend to rise even if real rates are high.
    Aug 24, 2014. 02:31 PM | 1 Like Like |Link to Comment
  • BlackBerry's Smartphone Sales Are Set To Soar [View article]
    Research in Motion still exists? I'm genuinely surprised.
    Jul 17, 2014. 02:54 PM | 1 Like Like |Link to Comment
  • BlackBerry Is Now An Obvious Buyout Target, And 4 Other Reasons Not To Worry About The Apple/IBM Deal [View article]
    I may not be informed well enough on this. It sounds almost as if the economy of Canada is a Zwangswirtschaft, run by the State? Or does it actually have private property rights? Because if it does, then it would not be up to the government to 'allow' or 'disallow' actions of shareholders with respect to their property.
    Jul 17, 2014. 02:47 PM | Likes Like |Link to Comment
  • Will Gold Stocks And ETFs Save Us In The Coming Market Crash? [View article]
    As a general remark: the gold sector is currently positioned roughly the way it was in 1999/2000 relative to the stock market. It has already declined by more than 70% at one point (i.e., it went in the opposite direction of the stock market, just as in the late 1990s). When the market topped in 2000, the gold sector started rising a few months later, and its rally accelerated strongly as the bear market in stocks worsened in 2001 and 2002. Over the long term, gold stocks are the only market sector that is actually negatively correlated with the S&P (note the qualification 'long term' - there have been significant short to medium term stretches when they were positively correlated). There are very good fundamental reasons for this: most of the macro-economic data points that are bearish for stocks are actually bullish for gold. What's more, in the early stages of new gold bull markets, the real price of gold tends to rise more strongly than the nominal price, which is why gold stocks tend to vastly outperform gold itself in the early stages of new bull markets.
    If gold stocks had not already crashed, one would have to expect them to decline along with the stock market in the event of a crash/bear market. However, since they have in fact already crashed, they should indeed be expected to rise once the stock market stumbles.
    May 26, 2014. 03:09 PM | 1 Like Like |Link to Comment
  • Avoid GLD: Ukraine-Fueled Pop Is Unsustainable [View article]
    It is irrelevant to the gold price how much gold GLD or other gold ETFs hold. Their gold holdings are an effect, not a cause of the trend in the gold price. The total global supply of gold is approximately 180,000 tons. Since demand equals supply, the total global demand is also for 180,000 tons - the bulk of this demand consists of reservation demand. Whether a few hundred tons move in or out of GLD in the course of a year simply has no bearing on the price, it is a rounding error. GLD's authorized participants sell gold and redeem shares when the fund trades at a discount to spot and buy gold and create new shares when it trades at a premium to spot. That is all there is to it.
    Geopolitical events never create durable gold rallies, that is absolutely true (for the simple reason that they have nothing to do with the gold price, unless they lead to economic policy measures that do). The Ukraine rally has already come and gone - it amounted to approximately $60, when gold rose from $1300 to $1360 back in February/March.
    Gold is not an industrial commodity. The gold price is determined by macro-economic drivers: credit spreads, the steepness of the yield curve, real interest rates, money supply growth, the dollar's trend, faith in the monetary authorities, the propensity to save, etc. - it is therefore true that trends in the US economy are far more important to the gold price than what is happening in the Ukraine. We can make a few educated guesses about these trends, but they should not be based on the payrolls data (not only because these data will eventually be revised out of all recognition, but also because employment is a lagging indicator of the economy's trend). The most important thing to realize about the US economy is that the Federal Reserve has done substantial structural damage to it by blowing up the true money supply by almost 95% since September 2008. Price distortions all along the economy's capital structure are the result. This falsifies economic calculation and leads to malinvestment and the consumption of capital. These things cannot be discerned by looking at economic data superficially. After all, the economy 'looked good' in 2006 and 2007 as well - in reality though, malinvestment and capital consumption had already occurred, and all the accounting profits that were reported at the time were an illusion - a fact that the bust eventually revealed.
    As to how the gold price is formed, here is a guide that discusses the all-important factor of reservation demand:
    http://bit.ly/QGkyWd
    May 7, 2014. 10:36 PM | 7 Likes Like |Link to Comment
  • Does China Really Have 1,000 Tons Of Gold Locked Up In Shadow Financing Deals? [View article]
    All these reports about a few hundred tons moving from A to B are irrelevant to the gold price - as are in fact all of the statistics the WGC publishes. Apparently people will never learn to stop analyzing gold as though it were an industrial commodity. It is not. The total supply of gold is approximately 175,000 tons, as all the gold ever mined still exists. This amount increases by about 1.4% per year due to new mine supply. It matters not one whit if mining companies increase or decrease production, if China uses a 1,000 tons in financing deals, if COMEX inventories decline or GLD loses or gains a few hundred tons. The only way the gold price can be analyzed fruitfully is by watching the relevant macroeconomic drivers, such as e.g. the steepness of the yield curve, credit spreads, the trend of the dollar, money supply growth rates, faith in monetary authorities, trends in savings rates and market-derived inflation expectations. In other words, gold must be analyzed like any other currency or investment asset, not like an industrial commodity.
    Apr 22, 2014. 11:39 AM | 1 Like Like |Link to Comment
  • Tesla Needs To Capture 14% U.S. Market Share To Justify Valuation [View article]
    The alleged link between CO2 and 'warming' becomes ever more tenuous in fact. Temperatures have not risen in 17 years 5 months and counting, although carbon dioxide content in the atmosphere has increased by one third (from one tiny number to another) in the same span. Not a single CAGW model has turned out to be correct so far, in fact, the difference between the model predictions and reality is by now so huge, it is - or at least should be - a huge embarrassment for the climate scaremongers.
    Apr 4, 2014. 07:24 PM | Likes Like |Link to Comment
  • Get Out Of Bitcoin Now [View article]
    In fact, since Wells Fargo is a fractionally reserved bank, and 83% of all outstanding deposit money in the US consists of fiduciary media today (i.e., money substitutes theoretically available on demand, for which no reserves in the form of standard money exist), the money is indeed 'not there', whether they tell you so or not.
    Feb 27, 2014. 07:51 PM | 4 Likes Like |Link to Comment
  • How 2014 Could Be Like 1929 [View article]
    It should be pointed out though that not a single financial newspaper or major economist predicted anything but 'continuing prosperity' shortly before (and after) the crash of 1929 either. The view that 'recovery is just around the corner' was the predominant opinion throughout 1930 and 1931. The Harvard Economics Society's bulletins were the funniest in hindsight. Continually 180 degrees wrong, they were singing from their 'recovery will be here any moment now' hymn sheet even when unemployment soared above 20%, the money supply was in free-fall and thousands of banks were on the brink of insolvency. My point is not to assert any similarities about today and 1929 - it is only: you won't learn whether there is an economic downturn by reading predictions in Barron's or any other financial newspaper. All of them will miss the moment when the economy turns down. 
    Feb 22, 2014. 12:59 AM | 3 Likes Like |Link to Comment
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