Gold miners (GDX -3.2%) take another beating as gold continues to lose its allure amid disclosures of reduced bets by hedge funds, a World Gold Council report showing gold demand at a three-year low, and a surging dollar. For the miners, it's an ugly world of lower production, higher costs and falling prices. At least nine miners hit 52-week lows: NEM -3%, GG -2.7%, AUY -4.8%, HMY -6.3%, AU -2.5%, BVN -1.1%, ANV -7.4%, NG -2.7%, GSS -5.8%. [View news story]
Gold is still a store of value...in Zimbabwe
No wait...they use the USD in Zimbabwe...
scratch that about gold...
Gold falls due to USD and US economic strength. Lower fiscal deficits, lower trade deficits in the US. All hurt gold.
It's Official: Gold Is Now The Most Hated Asset Class [View article]
I love Gold bugs. They never cease to amuse.
I usually like gold when it is priced in dollars at less than 10% of the Dow. Feels about right. But it is just a feeling and that's the rub. There's no real way to value the stuff. How do you value an ounce of gold?
To say it is a store of value and insurance makes sense but you are still left with the dilemma. What will you pay for the stuff?
and all of this prattling on about money supply is just that...prattle...the fact is that the USD is strong and getting stonger and that is what is driving gold. the US just agreed to let LNG exports start - that plus the reduced oil imports turn the USD into a petrocurrency. bad for gold.
that said everyone should own a little. emphasize a little
Market recap: The familiar buy-the-dip trade was back in action, and a bigger than expected rise in consumer sentiment plus a gain in leading economic indicators bolstered the view that maybe the economy isn't so bad. All key S&P sectors were in the green, led by energy and industrials. The dollar index jumped to its highest since July 2010, one of the factors behind gold's seventh straight losing session. [View news story]
we are 1000 points from the March 09 low. it is amazing to consider.
CAPE is about 22. In 1999 it was +40 as I recall. We are from the danger zone on valuation in terms of that metric
In any case in a zero rate environment how do you figure a PE? using the 10 year at about 2% - the implied market multiple should be about 22. My guess is that as Fed policy normalizes this comes back down to about 15. Right now the market is trading at about 14 to 15 times - the lower number is if you back out net cash. So it feels like the market anticipates the Fed move and rightfully so - rates must normalize at some point.
bottom line. we will go higher from here another 15 to 20% as thhis cycle fully unfolds - reach PE's of 18 to 19 and then correct back to the 15 range as Fed policy normalizes.
USD will march up for a good few years now Improved balance of payments from lower oil imports will take the supply of dollars down. This is a long run trend that is only beginning Also - as the Fed normalizes policy post 2016 that will also impact. Both are are powerful forces that will drive USD up. P
The Fed hasn't lowered "real" interest rates enough, says Minneapolis Fed chief Kocherlakota, not disappointing his new fans. Somewhat hawkish until a near-religious conversion last year, Kocherlakota is now the most dovish on the FOMC (though not a voter this year) and fond of making statements like that. [View news story]
yes. they could and it would be stimulative to lending it should be done. P
Stocks at all-time highs aren't reeling in too many investors to the bullish side on the AAII Investor Sentiment Survey which shows a 2.3 point decline in bulls to 38.5% - just below the long-term average of 39%. Bears gained 1.9 points to 29.3%. also just under the long-term average. [View news story]
I like those odds.
Completely remarkable how hated this Bull market has been and continues to be dismissed.
compared to last year - where we stand today - we have no sequester to come and no tax increase - that's all done.
junk bond yields are low - because defaults are not happening - and that's a good thing.
employment growth is steady and housing -
the other big net worth driver of household wealth is up - first of all housing which used to be a negative is now neutral or positive but since housing represents the asset that stands behind much small business lending - we should see more credit creation in this sector. The latest surveys confirm this
I would flip your thesis around - over the next 24 months there is potentially another 20% to 25% of upside from here. You can sell today in the hope of a 5 to 10% correction and then swoop back in and get the upside. That's about 3 to 1 upside to downside ratio. I would wait until that ratio is closer to 1.5 - about 10% from here around 1800 to 1820 on the S&P.
But if you do sel today you have the opportunity to be wrong twice - when you sell and when you buy back. If you hold you can only be wrong once. Which is riskier and is it worth it to you?
not so extreme and not all that uncommon I have plenty of stuff I have owned since the 90's and even some from the 80's. They could drop 30 to 50% and it just would not matter - indeed I have seen that already happen twice and come back - it was a great chance to buy more which I did - but taxes are certain and there is also the problem that when you have the money you need to do something with it and the chances are that if you put it in something else the falling tide will take it just like everything else.
Time horizon and tolerance for risk are important and highly personal issues - impossible to generalize
Market Running On Fumes, Prepare Your Exit Strategy [View article]
there are some critical links in the chain of causality that you are leaving out
in 2008 credit dried up because counterparties lost faith in each other - post Lehman
when credit dries up - short term credit espeically companies need to use cash to fund working capital when that happens they get squeezed
the market reacts to tis quickly and sells off - the next thing you see is a jump in jobless claims - they go up -huge and they stay up until credit comes back
as for the now - I am not clear on why banks reduced willingness to lend now is different to last month - especially in the light of continuing QE. the bigger issue on this score is not interest paid but capital requirments which are higher than they were - this hurts lending but also safeguards the system and provides confidence
the world is quite different now to 2008. balance sheets are different and there is no Lehman or AIG out there spooking the lenders and the market.
the market goes up from here - 1800 to 2000 is where it is heading by 2016 - after which we will have a short bear market bottom line though - by 2020/21 you could see 3000 on the S&P so any dip down in 2017 will be another buying opportunity.
At S&P 1600, Prices Embed High ROIs, Low Growth - Exactly What Firms Plan To Do, Nothing More [View article]
Let me be of service.
He says the market is pricing in a normal level of return on investment ROI on a level of investment that is not unlike what we have seen in the recent past.So no heroics are needed.
Further he says companies are not overconfident and he puts up some interesting and novel data to support this point. That's important since the business cycle is usually peaking when companies are over exuberant.
Bottom line with ROI, investment and confidence where it is the market is safe to buy into at these levels and will go higher until these things change.
The Obama Administration's Natural Gas Policy Is Tragically Misguided [View article]
Stunningly wrong headed.
I am glad you said you were non-partisan. But I doubt it, you have to be a Democrat; no free enterprise, market loving Republican could concoct such load of statist dirigiste economic nonsense.
If the export market values nat gas at $10 MMbtu and in the US it is valued at $4 then that arbitrage will drive a lot of export and value creation in the US with resultant employment growth. Let the market and the owners of the gas decide what to do with it. Or are property rights also not in your lexicon?
"Peak gas" is absurd as peak oil. Statements like " you can only burn it once" are as stupid as they are banal. Thanks Professor, very insightful. Demand will drive supply. The truth is nobody knows how much energy resource there is in the US. But one thing is certain - whatever is now known and discovere is just the beginning. Exports will drive production just as high prices drove fracking.
I know that there are companies such as Dow Chemical lobbying against this. If they care so much let them invest in Nat gas production - rather than lobbying for state control of somebody else's property.
Gold miners (GDX -3.2%) take another beating as gold continues to lose its allure amid disclosures of reduced bets by hedge funds, a World Gold Council report showing gold demand at a three-year low, and a surging dollar. For the miners, it's an ugly world of lower production, higher costs and falling prices. At least nine miners hit 52-week lows: NEM -3%, GG -2.7%, AUY -4.8%, HMY -6.3%, AU -2.5%, BVN -1.1%, ANV -7.4%, NG -2.7%, GSS -5.8%. [View news story]
No wait...they use the USD in Zimbabwe...
scratch that about gold...
Gold falls due to USD and US economic strength. Lower fiscal deficits, lower trade deficits in the US. All hurt gold.
P
It's Official: Gold Is Now The Most Hated Asset Class [View article]
I usually like gold when it is priced in dollars at less than 10% of the Dow. Feels about right. But it is just a feeling and that's the rub. There's no real way to value the stuff. How do you value an ounce of gold?
To say it is a store of value and insurance makes sense but you are still left with the dilemma. What will you pay for the stuff?
and all of this prattling on about money supply is just that...prattle...the fact is that the USD is strong and getting stonger and that is what is driving gold. the US just agreed to let LNG exports start - that plus the reduced oil imports turn the USD into a petrocurrency. bad for gold.
that said everyone should own a little. emphasize a little
P
Market recap: The familiar buy-the-dip trade was back in action, and a bigger than expected rise in consumer sentiment plus a gain in leading economic indicators bolstered the view that maybe the economy isn't so bad. All key S&P sectors were in the green, led by energy and industrials. The dollar index jumped to its highest since July 2010, one of the factors behind gold's seventh straight losing session. [View news story]
CAPE is about 22. In 1999 it was +40 as I recall. We are from the danger zone on valuation in terms of that metric
In any case in a zero rate environment how do you figure a PE? using the 10 year at about 2% - the implied market multiple should be about 22. My guess is that as Fed policy normalizes this comes back down to about 15. Right now the market is trading at about 14 to 15 times - the lower number is if you back out net cash. So it feels like the market anticipates the Fed move and rightfully so - rates must normalize at some point.
bottom line. we will go higher from here another 15 to 20% as thhis cycle fully unfolds - reach PE's of 18 to 19 and then correct back to the 15 range as Fed policy normalizes.
P
Are We Close To Selling The USD? [View article]
Improved balance of payments from lower oil imports will take the supply of dollars down. This is a long run trend that is only beginning
Also - as the Fed normalizes policy post 2016 that will also impact.
Both are are powerful forces that will drive USD up.
P
The Fed hasn't lowered "real" interest rates enough, says Minneapolis Fed chief Kocherlakota, not disappointing his new fans. Somewhat hawkish until a near-religious conversion last year, Kocherlakota is now the most dovish on the FOMC (though not a voter this year) and fond of making statements like that. [View news story]
it should be done.
P
Stocks at all-time highs aren't reeling in too many investors to the bullish side on the AAII Investor Sentiment Survey which shows a 2.3 point decline in bulls to 38.5% - just below the long-term average of 39%. Bears gained 1.9 points to 29.3%. also just under the long-term average. [View news story]
Completely remarkable how hated this Bull market has been and continues to be dismissed.
Better for the dumb money like me.
P
It's Now Safe To Sell [View article]
compared to last year - where we stand today - we have no sequester to come and no tax increase - that's all done.
junk bond yields are low - because defaults are not happening - and that's a good thing.
employment growth is steady and housing -
the other big net worth driver of household wealth is up - first of all housing which used to be a negative is now neutral or positive but since housing represents the asset that stands behind much small business lending - we should see more credit creation in this sector. The latest surveys confirm this
I would flip your thesis around - over the next 24 months there is potentially another 20% to 25% of upside from here. You can sell today in the hope of a 5 to 10% correction and then swoop back in and get the upside. That's about 3 to 1 upside to downside ratio. I would wait until that ratio is closer to 1.5 - about 10% from here around 1800 to 1820 on the S&P.
But if you do sel today you have the opportunity to be wrong twice - when you sell and when you buy back. If you hold you can only be wrong once. Which is riskier and is it worth it to you?
P
Western Union: ROIC Substantially Above Peers And Shares Undervalued [View article]
thanks
P
A Rising Tide Lifts All Ships [View article]
I have plenty of stuff I have owned since the 90's and even some from the 80's. They could drop 30 to 50% and it just would not matter - indeed I have seen that already happen twice and come back - it was a great chance to buy more which I did - but taxes are certain and there is also the problem that when you have the money you need to do something with it and the chances are that if you put it in something else the falling tide will take it just like everything else.
Time horizon and tolerance for risk are important and highly personal issues - impossible to generalize
P
Market Running On Fumes, Prepare Your Exit Strategy [View article]
in 2008 credit dried up because counterparties lost faith in each other - post Lehman
when credit dries up - short term credit espeically companies need to use cash to fund working capital when that happens they get squeezed
the market reacts to tis quickly and sells off - the next thing you see is a jump in jobless claims - they go up -huge and they stay up until credit comes back
as for the now - I am not clear on why banks reduced willingness to lend now is different to last month - especially in the light of continuing QE. the bigger issue on this score is not interest paid but capital requirments which are higher than they were - this hurts lending but also safeguards the system and provides confidence
the world is quite different now to 2008. balance sheets are different and there is no Lehman or AIG out there spooking the lenders and the market.
the market goes up from here - 1800 to 2000 is where it is heading by 2016 - after which we will have a short bear market bottom line though - by 2020/21 you could see 3000 on the S&P so any dip down in 2017 will be another buying opportunity.
Bernanke for President (of the World)
P
The Obama Administration's Natural Gas Policy Is Tragically Misguided [View article]
idiotic
completely idiotic
P
Linn Energy: Don't Believe The (Negative) Hype [View article]
Do believe the negative hype
Do sell and do not buy LINE
Barrons is highly respected and authoritative market analysis.
Where they say there is smoke, there is surely fire.
Please heed their warnings and run for your lives. Save yourselves.
P
At S&P 1600, Prices Embed High ROIs, Low Growth - Exactly What Firms Plan To Do, Nothing More [View article]
He says the market is pricing in a normal level of return on investment ROI on a level of investment that is not unlike what we have seen in the recent past.So no heroics are needed.
Further he says companies are not overconfident and he puts up some interesting and novel data to support this point. That's important since the business cycle is usually peaking when companies are over exuberant.
Bottom line with ROI, investment and confidence where it is the market is safe to buy into at these levels and will go higher until these things change.
Another good and thoughtful piece of work.
P
The Obama Administration's Natural Gas Policy Is Tragically Misguided [View article]
I am glad you said you were non-partisan. But I doubt it, you have to be a Democrat; no free enterprise, market loving Republican could concoct such load of statist dirigiste economic nonsense.
If the export market values nat gas at $10 MMbtu and in the US it is valued at $4 then that arbitrage will drive a lot of export and value creation in the US with resultant employment growth. Let the market and the owners of the gas decide what to do with it. Or are property rights also not in your lexicon?
"Peak gas" is absurd as peak oil. Statements like " you can only burn it once" are as stupid as they are banal. Thanks Professor, very insightful. Demand will drive supply. The truth is nobody knows how much energy resource there is in the US. But one thing is certain - whatever is now known and discovere is just the beginning. Exports will drive production just as high prices drove fracking.
I know that there are companies such as Dow Chemical lobbying against this. If they care so much let them invest in Nat gas production - rather than lobbying for state control of somebody else's property.
P
EU Is Still A Basket Case [View article]
P