LR European

Sentiment Overview: A Scarcity of Bulls

Excellent piece, drawing a lot of relevant information together without bias. Thank you.

China: Is This Classic Post-Bubble Price Action?

That is precisely what is exciting about China's prospects. As the 3/4 of the population is lifted out of extreme poverty they start to be able to afford the non-essentials. Growth from zero to 1 is an infinite percentage move!

The recent data on car sales and white good sales in China bears out this dynamic.


On Nov 05 05:11 PM untrusting investor wrote:

> True, but how much can the average Chinese consumer purchase with
> an average per capital income of something like $6K? One has to guess
> that most of that per capita income would barely provide for subsistence
> living. Saw the statistics on China per capita breakdown and it was
> something like 3/4 of the entire population is $6K or less in annual
> income. The other 1/4 is of course doing better but much of that
> was at about the $20K annual level.

Gold Prices: A Familiar Trend

Your chart shows that gold corrected sharply after its accelerated peak in the early 80s and then proceeded to form an extended base from which it has finally broken up decisively.

Why do you not think that is a screaming buy signal?

Before worrying about the price action wait for an acceleration such as shown on the chart from the late 70s - a rate of change which is obviously unsustainable. We are not there yet on the basis of the chart you show.

New 'Crash' Warnings for U.S. Markets

I take it you're not long the market then?

An more nuanced report of Marc Faber's recent comments would mention that he sees a crash coming BUT is uncertain as to the timing. It could be a few days or weeks or it could be in several years, but given the vast imbalances in the global economy when it comes is may well rock the foundations of capitalism!

Colourful, eh? I guess if you can afford to stay out of the market you probably could. Otherwise, keep working it, but stay frightened.

Gold: Who's Left to Buy?

Who's left to buy? You give the answer yourself when you say that 'every trader category is getting shorter'. Sooner or later investor allocations to gold will increase/ broaden and sooner or later there will be a short squeeze in gold as 'every trader category' scrambles to buy. Here's hoping! :-)

Gold: What Professional Futures Traders Think

While true that the main driver for gold at the moment is the US$, the price is currently rising in most currencies. A quick scan through the charts shows that although not hitting new short-term highs (yet?) in many of the stronger currencies gold's trend of more than a few months looks consistent in every mainstream currency.

Precious Metals: Breakout, Fakeout or Shakeout?

A beautifully argued article. Thank you. However, I think you are wrong on a number of counts.

1)You suggest that gold has not performed in a year of financial crisis. There are few assets close to their all time highs apart from gold, so....

2)You suggest that everyone who could possibly want to be in the trade has been brought in to gold. Actually the allocation to gold among the big funds (pensions, general mutuals etc.) remains close to zero and the same applies to the major wealth managers. Gold remains a minority interest among private investors, albeit with a widening circle, but we have not begun to travel the slope of broad acceptance.

3)You suggest that a shake out is needed before gold can take off. Possibly, but I think you overstate this. Gold's consolidation over the past year has been one of the lengthiest in the current bull market and sellers have been thinned out already. We may well see what lies behind door #3, but I suspect it will be a small room that no one wants to remain in for long...

Has Gold Finally Broken Out?

...or, more frequently, "investing".


On Sep 04 10:45 AM Graham and Dodd Investor wrote:

> People want to buy gold, but not "sell" it by giving it away as a
> present. This is called hoarding.

Gold Remains Rangebound

It would be worth checking (eventually!), but my impression is that the PMs have been making something of a habit over the last several years out of giving a dull mid section of the year before settling in to a trend in September which lasts through the end of the year...

My expectation is for strength and I am positioned accordingly. Unpleasant though the current churning activity is, it provides the resilience underneath the coming trend by shaking out nervous/ weak holders who will more than likely be back to buy at higher levels once trends are in motion.

Gold and Silver Facing Resistance Levels

"Disclosure: No positions" Why on earth?

Promising Signs for the Economy and the Equity Markets

Excellent, well balanced article. Thank you.

Defensive in Short Term; Intrigued About Japan

Not sure why the sarcastic comment on Saut's statement about China pulling the world out of recession.

I am sure you too must have noticed that China has been emerging as a significant sized economy. Sure, it is premature to talk about it being the largest economy in the world (though it will be soon enough), but it is certainly already large enough and integrated enough in the global system (trade, money flows) to be able to pull (or push for matter) the global economy.

Jeffrey Saut's article is a good read and well argued on uncontroversial facts. Thank you.

On Jul 14 05:40 AM whidbey wrote:

> One would never know you sell stock. China pull the world out of
> recession? Were these comments written late at night? Your advice
> is to be taken very lightly and disregarded at every turn. But you
> may be right about this week. Bradley and Phi Mate turn dates are
> due and they may be up, for a while.

Will India's Changes Bring Headwinds for Gold?

"the success of this venture would, I think have an effect on the price of gold, even from a purely psychological standpoint."

I wonder if you think the effect would be positive or negative on the price of gold.

Some of the arguments in your article seem to suggest that this development will provide an exit route which Indians will leap on and presumably depress the price by flooding the market.

On the other hand, improving the liquidity of an asset almost invariably increases its appeal. If Indians discover that their investments in a store of wealth are now more readily converted to cash than before, surely they are vindicated?

The problem would come only when India faced a time of hardship leading to forced sales, but it is a myth to suggest that Indians have only ever been buying gold, so what changes there?

Sounds to me like the positive effects overwhelm the negative.

Saut: Buying Stampede Could Break in Early June

Well, okay let me understand, you say we have had a surging market without pause or correction. Except, you say, the market has not done anything since it peaked on 17 April. Seems like a decent pause to me. You say it is the market topping out. I say it is the market pausing. We could go to and fro all day on arguments like that.

The Fallacy of Cash on the Sidelines

Nice little argument that sounds cleverer than it is.

Think about the mechanics of the market where most investments are managed by 3rd parties (hedge funds, through mutual funds, charities and pension portfolios). Having been an 'institutional manager' covering each of these underlying investor groups, I can confirm that 'cash on the sidelines' is an absolutely valid concept.

Specifically, the person managing the portfolio day to day follows a 'model portfolio' usually agreed by an investment committee. The model will state allocations to cash, fixed interest, equities (and details within each sub division) and will be constructed with reference to an allocation 'benchmark' agreed with the client at the outset. The manager will be expected to follow asset allocation models to within a specified tolerance.

Within the models cash is cash held in a bank account. If cash levels have been allowed to build (eg. 5% cash becomes 7% if the other assets have fallen by 30%), or intentionally built (eg. increase target to 10%), there is 'cash on the sidelines'. If the client's benchmark index (agreed with the manager) against which performance is measured, includes a 5% target weighting to cash, for example, then holding 7% or 10% is a risk and performance will drag if the market rises.

Therefore, even taking a neutral view (or "don't know" view) on market prospects, investment managers are under significant pressure to invest in the current environment.