Friday, January 31, 2014
Here's the bullish percent Nasdaq-100:
Seems to have gone from 76 to 70 since the Monday close.
Here's the Nasdaq-100:
Funny that over the past 4 days, the bullishness has dropped despite the $NDX still being where it was at the Monday close.
I dunno what it really means, you figure it out.
Disclosure: I own some HQU.TO and now even some HVI.TO.
So here's the Dow Jones Industrial:
Er mah gerd! It's horrible! We're all going to die, etc.!
But here's the Transports:
Weird, eh? Looks like a pretty calm pullback in comparison to the Industrials. SMA(50)'s not even really broken yet.
I guess people are still going to transport things after the world economy collapses, eh?
The only way I can get more obscure than this is by taking that vid of my first band from 1990, transferring it to mpg video, uploading to YouTube and then posting it here. Which I will not do.
This is Distorted Pony, who apparently reformed for a bit in 2010, but who were a rather uncompromisingly heavy noisecore band from the US in the early 90s.
It's sad that after 20 years, this still sounds fresh and new and punk. You'd think the kids of today would have bothered to build on what was going on 20 years ago.
Thursday, January 30, 2014
I like buying the US ETF XIV when I feel the US market has bottomed and should be moving back up. Problem is, I end up getting reamed on currency exchange.
Well, I looked on the internet today, and gosh darn it wouldn't you know, Canada now has a TSX-listed short VIX ETF:
Horizons - HVI, inverse VIX futures ETF.
I don't know why the short-Vixes don't seem to get slaughtered over time on rollover; it's something I still have to figure out. For some reason, they perform significantly better than the underlying market that you're playing the volatility of: 2-3 times when you compare XIV to SPY, for example.
Also, I don't like how XIV in the US has seen an explosion in volume since late 2011: this is making me wonder if (I dunno if I even make any sense here) all that new participation is arbing away options volatility, which would provide a false signal to the US market, in the long term making it run up a lot stronger than it should if the volatility premium is being artificially repressed.
Still, at least there's now a Canadian inverse VIX ETF, which makes me very happy indeed. Thanks, Horizons!
Some news for today:
Ritholtz - more US companies are reshoring.
Telegraph - Iran and Iraq plan oil price war with Saudi Arabia. And thus the price of oil will come down. That's bullish manufacturing and bearish commodity exporters, and it's indicative of a secular bull market for DMs.
FT Alphaville - chinese chicken. I think he's talking about Chinese banking system risks. Can't tell for sure; he's trying to be clever and shit. I dunno, you figure it out and let me know.
PS Dave - how are those bought deals looking? The juniors go up a few percent and all of a sudden they all decide to run financings, as if this is their last chance. It'll always be about how much paper you can sell, not how much gold you can mine.
The Daily Fail - Are you a hairy diabetic who smokes and suffers from stomach cramps? Your Neanderthal ancestry is to blame!
Of course there's the caveat that one should never get their science news from the Daily Mail, unless of course one is studying topics like hot female schoolteachers banging their students.
But I like this, because now when my asshole doctor starts blaming me for smoking, stomach problems and my familial tendency for type 2 diabetes, I'll just shout "why are you such a fucking racist? What do you have against Neanderthals?"
(It's funny cos he's black)
It's broken if it drops below here.
Problem is, silver's an industrial metal, and apparently there are looming oversupply issues that are completely different from the supply/demand balance for gold; but people still seem to trade silver as if they think it's a leverage to gold.
In which case, gold might take a hit just because people see silver going down.
As far as industrial metals are concerned, copper looks pretty bad:
That's quite a nasty downward trend. Though I guess this chart's scale makes it look worse than it really is.
What's gold like?
Uh-oh! It's already broken the upward channel support line, and now it's threatening to drop below its supporting EMA and Bollinger mean.
Now, there's still the SMA(50) supporting it, so maybe it just drops, retests the SMA(50), and goes back up. But worries spreading through the market about an emerging markets crisis and a Chinese banking system collapse (whether or not you think these worries are at all realistic) should make the market scared of owning gold, no?
So, it looks like we'll see in the next day or so if this was it for the gold bounce.
Wednesday, January 29, 2014
So apparently, Turkey hiking its rates did absolutely nothing to stem the outflows after all. Lira's collapsing, and South Africa's similar experiment also failed and their Rand dropped too.
So at this point, you have 2 collapsed EM economies whose central bank competence has now been utterly rejected by the markets.
Here's Barry Ritholtz on gold:
I don't know how the heck he can possibly expect gold to get to $600-$800.
What are the world economic conditions that he expects to see that would drive the price of gold so low? Annihilation of emerging market economies? Collapse in mining costs?
But a lot of his other points, e.g. the goldbug narrative and gold being able to bounce to $1400, actually are the types of things I agree with.
We'll have to see if he ends up being right over the next few years.
I would have thought that Turkey pulling a Volcker with their interest rates last night would have destroyed gold. I mean, it's proof that EMs will do anything, including crippling their own economies, just to protect their current account balances.
Isn't this doubly bad for gold? Knowing your currency is protected reduces demand for gold as wealth protection, and knowing your country will collapse its own economy to protect its currency is bad for EM wealth generation. Turks just lost a good reason to own gold last night.
I guess when you look at the nuance, it's not a big deal: Turkey isn't that big a gold consumer, China hopefully won't have to Volcker its economy (though it's hopping onto the path of interest rate liberalization, which is meant to make rates rise), and India can fix things just by electing a new government that aren't morons. But the market doesn't ever care about nuance, does it?
So instead, gold is back up to $1266 on Turkey's confirmation of the end of the secular EM bull market. Go figger. I guess if gold can still go up on utterly horrible news like this, that's an indication of an underlying bullish trend for gold, fundamentals be damned, eh?
Anyway, here's some morning reading:
Investment News - equities market the best in our lifetime, says Liz-Ann Sonders. She's where Rosenberg ripped off his new bullish thesis:
Some of the driving forces she identified include the fact that U.S. businesses “are sitting on a huge hoard of cash, which is at a level not seen since World War II,” she said. “We know the capital is there, but we haven't had the animal spirits to put it back to work yet. But this is the year we'll probably see increase in [capital expenditure] spending.”And for those of you who are still freaking out over PE ratios:
In terms of equity market valuations, Ms. Sonders said she is not worried about the fact that forward price-earnings ratios are around the historic median level.In fact, from a feedback systems perspective, moving back into median PE territory is a condition coincident with future growth. Put as simply as possible, median PE is the equilibrium point where the earnings-growth machine operates at maximum efficiency.
“Bull markets rarely stop at the median P/E,” she said.
In making her point, Ms. Sonders used a slide showing that the average trailing P/E of every bull market since the 1950s was 18.7, which compares to the current level of 16.6.
“We know that profit margins are at or near all-time highs,” she said. “But unless you're rolling over into a crash, it has not been historically a problem for the market coming off all-time highs in profit margins.”
Bonddad - the housing slowdown has already begun. Again it's a YoY slowdown, so I'd ask him to think about whether 2013 is a fair comparison year. I don't know anything about US mortgage rates, but UST10Y was about 80 BP or 30% lower in January 2013 versus this month, and housing prices hadn't spent much time recovering yet, so of course you'd expect housing demand to slow down this year in comparison to last year. In fact, here's the chart:
Do you still think a YoY comparison is fair?
Mining.com - no proof that gold miners are returning to hedging, say SocGen and GFMS. Now can the Lamestream Media please quit beating that dead horse?
At end-September, the outstanding global hedge book stood at 2.94 million ounces or 92 tonnes, the lowest volume since the Société Générale and Thomson Reuters GFMS quarterly series began in 2002 and nowhere near the height of gold miner hedging in the Nineties.So quit trying to scare people with threats of future hedging, guys. Til the data across the industry begins to show otherwise, it's not actually happening.
FT beyond brics - prospects improving for easing in India gold restrictions. Still, as noted it may depend on Indian CAD, which may still take a long-term nosedive in a secular EM bear market. Nevertheless, the Congress Party realizes that it has to compete with the BJP on the topic of gold, and that's a good thing for the first half of this year, I think.
Bloomberg - gold flows east as bars recast for Chinese. This news story, once the property of the goldbug brigade, has now made it into the Lamestream Media. Still bearish gold, bro? Even better, the goldbugs have been sitting this out:
Billionaire John Paulson, the biggest SPDR holder, told clients in November he personally won’t invest more money into his gold fund because it’s not clear when inflation will quicken. The hedge-fund manager, who held his SPDR position in the third quarter after cutting holdings by 53 percent in the previous three months, lost 63 percent last year as of October in his PFR Gold Fund, a person familiar with the matter said.Paulson's staying out of gold, and it's because he's still sticking to his utterly incorrect "money-printing hyperinflation Zimbabwe wharrgarbl" thesis. If he instead was looking at the gold supply/demand balance as a function of growth in demand for EM wealth protection in the face of long-term dwindling of mine supply, he'd be whistling a different tune, wouldn't he bro?
BI - rich people scientifically proven to be fucking assholes. Here comes the science:
“As a person’s levels of wealth increase, their feelings of compassion and empathy go down, and their feelings of entitlement, of deservingness, and their ideology of self-interest increases,” he said in a Tedx Talk in Marin County, Calif.Now, the difference in politeness across socioeconomic strata might just be because when you're poor, you hang around more poor people; and when you piss off poor people, they are much more likely to kick your fucking face in. Thus, poor people tend to be politer to each other, just as a matter of self-preservation.
One study involved two players who don't know each other, a rigged game of Monopoly and a bowl of pretzels.
The setup: The two strangers are told to play a regular game — except the rules are slightly different than usual. One player starts with twice as much money than the other and an extra dice to roll.
In every case, the players recognized that the game was rigged, but as time went on, the “rich” player became more rude and obnoxious. That person spoke and moved louder, and even ate more snacks than the other participant. When the “rich” spoke about why they won, they would focus on their own strategy.
“They became far less attuned to different features of the situation, including that flip of a coin that had randomly gotten them into that privileged position in the first place,” Piff said.
In another experiment, he looked at different levels of generosity. Piff gave a variety of volunteer participants $10 and told them they could keep it or share part of it.
It turns out those who had lower salaries (less than $25,000) gave 44 percent more to the stranger than those who made more than $150,000.
Piff also studied footage of a crosswalk in California to determine that 50 percent of people in the most expensive cars would not stop for pedestrians, while those with the cheapest cars stopped every time.
Whereas rich people have more to lose by getting into fights, and they tend to govern themselves and form expectations of others' behaviour under the childish mistaken belief that acting "civilized" is good. So they have less fear of getting their fucking faces kicked in, and so they have less motivation to be kind to others.
Yes, on the subject of ethics, I'm a hardcore pragmatist. Some people say that makes me a psychopath. But if I really was a psychopath, maybe it'd be smarter for you to not piss me off by calling me a psychopath.
Tuesday, January 28, 2014
Here's what a famous mining anal yst says about my blog:
It’s a great place to read not because he’s right all the time, but because he’s smart all the time, his observations are mor insightful than nearly all the so-called experts and because he’s a freethinker and gets you thinking about your own weaknesses and current exposures; anyone who wants to read people that agree with what you say think and do are not doing it right.
at 3:28 PM
Some more reading:
BI - Richmond Fed was good. This after some other backward-looking manufacturing data was bad. Ignore it all, therefore.
Ritholtz - Friday was a 90/90 day. Certainly felt like it. Ritholtz's thesis is that 90/90 intensity means major capital pools were moving to new positionings.
All Star Charts - time for gold stocks to outperform gold. His angle is that the long gold short miners pair trade is done, and it's time to flip the trade in the other direction. I know nothing about pair trading, but one problem I see is that everyone already is short gold. Anyway, saying the pair is a good trade means nothing for the price of gold itself - or for the price of the miners. Just that the miners won't suck as bad as gold.
Mineweb - First Quantum unveils its changes to Cobre. Unfortunately for FQ, it looks like they weren't able to make any capex reductions after all.
IKN - the Bloomberg News gold headline generator. BTW, they actually do use computers to auto-generate headlines. In fact, computers generate a lot of the news content on the wires in general. So this isn't even humour, it's just true.
Kid Dynamite - avoid the confirmation bias of the retail mouthbreather. Quote:
Listen up: EVERY market participant is biased. Longs think they’re right, shorts think they’re right. Instead of shooting the messenger, what you *should* do when you’re presented with a (long or) short thesis you don’t agree with is to consider if the conflicting view strengthens your own thesis or weakens it. Is the conflicting thesis sound? Is it based in reality? What is the conflicting thesis missing? What are you missing?I've personally found that maybe only 5% of people out there have any clue at all how to debate: it's as if wilful mental retardation has become an epidemic.
Nobody knows how to analyze an argument, identify underlying assumptions, identify situations in which the argument becomes invalid, question frames of reference, propose alternate explanations, or show how data is misinterpreted. Give them a nuanced and well-thought-out position, with caveats and all, and the morons respond with shouting monosyllabic talking points from ZeroHedge.
If I say "the set of conditions A+B+C suggest consequence N", you don't respond with "wharrgarbl inflation wharrgarbl money printing": you either disprove A B or C, or you explain how the three conditions might not support the consequent - either because some other condition D stands in the way of N, or because the relation "A+B+C=>N" doesn't exactly hold in this situation, or because any of those four isn't what we think it is, or maybe A+B+C equally supports N' which isn't equal to N. Or whatever. Lots of ways to properly debate.
That's if you're not a fucking retard.
You learn this in highschool debating club, people.
Some things worth reading:
FT Alphaville - the banks are OK, Spanish edition. Looks like they're saying you can invest in Spain again.
FT Alphaville - on subprime in China. I'd add that Chinese authorities have innovative ways to contain runaway moral hazard that weren't available to the Americans in 2008 - like executing people.
FT beyond brics - Indian market stays out of EM firing line. So don't listen to that "EM bloodbath" crap: this is just fear over Argentina (gimme a break) and Turkey (gimme a break), with some ignorant China fear thrown in, resulting in indiscreet dumping of EEM.
Reuters - Turkish central bank will probably jack up rates. And then the Turkey fear will subside. Quote:
The bank said it would issue a statement on the outcome at midnight (2200 GMT) on Tuesday.Ouch. 11% yield? Do you think EMs can continue growing when the easy money is choked off like that?
Fearful up to now of an outright rate hike, it has been struggling to defend the lira instead by burning through its forex reserves and trying to squeeze up borrowing costs on the margins - a battle it has clearly been losing.
"We think they are close to throwing in the towel," said Luis Costa, head of CEEMEA strategy at Citi, citing political pressure as the likely reason the bank had been slow to react.
"They probably made sure a more aggressive reaction is sanctioned by Erdogan."
Turkey's yield curve was inverted, suggesting that markets expected significant tightening. The yield on the 10-year benchmark bond rose to 11.02 percent from 10.44 percent on Friday, while the 2-year bond rose to 11.14 percent from 10.99 percent.
Reuters - Greek yields blah blah. Where we get this disaster of a lede:
Greek yields fell on Tuesday as the market took a break from selling riskier assets, but they remained near 2014 highs with the country seen as the most at risk in the euro zone to contagion from emerging market turbulence.Um... what? Greece is exposed to EM contagion? Maybe it's exposed to a bad Turkish economy, but we knew that 6 months ago. It's certainly not exposed to "contagion" from Argentina, South Africa or China. Clue in, sheeple!
Here's a GLD chart:
I'd want to see GLD stay above the EMA(16) and Bollinger mean, which would mean its uptrend channel isn't violated.
If it farts back down below the SMA(50) (that's $119.39 right now), then you have to ask yourself if this was yet another October fakeout, and is there more downside to come for gold?
I don't think Whitey has any gold left to sell, but who knows?
Complicating things are news reports out of the Fed meeting that Janet Yellen had bran flakes for breakfast, or something, hell I dunno. But whenever the media says "Fed", expect the price of gold to react.
Here's Rio Alto:
Though the other juniors are looking weak, Rio's still above its short-term EMA.
If you subscribe to IKN's thingie, this weekend you read about the probable reason for all that volume smashing Rio's price through $1.70 this month. I won't say what it was that he said, though I'll say it makes me a more relaxed holder of Rio, and I'd also note that there was more volume driving it up than the volume that's now driving it back down.
Monday, January 27, 2014
So on Friday, Argentina's central bank gave up trying to defend the Peso. As a result, their official exchange rate shot up toward the real (black market) exchange rate.
The point forgotten is that Argentina's Peso was fucked to begin with. No new information here. No, it's not going to precipitate a crisis.
Because of that, people all of a sudden became worried about EMs generally, to the point that people are now talking about OMG China shadow banking collapse.
There is no new information there either. The EMs were fucked to begin with because we're in a secular DM bull market. And China hasn't all of a sudden seen massive stresses pop up over the weekend, to the best of my knowledge. They've sucked for a while, the Communist Party is working on it.
So if the freakout continues, it's only because the market had underpriced real-world risk til last week.
Sunday, January 26, 2014
And this has really been bugging me. A post of mine from a year ago has steadily been in the 5 most popular on this blog for about the past month. And it's nothing to do with Mila Kunis, even.
Me - peak gold and the USGS 2013 report.
Why are people still interested in reading this post from a year ago?
So PDAC put up the newsletter writers' schedule for Sunday, but in a difficult to use format.
So here's an easier format:
Roulston at 9:55 is a perfect time to come rolling in to PDAC. Finally they scheduled him at a time when I can see him.
I guess I'll go see Jojo at 11:35 (even though he hates me now), and then stay for Kaiser at noon. Cookie at 12:50 means I get a smoke break between the two... and holy shit, look at that! The only two newsletter writers worth seeing are scheduled right next to each other!
And both over lunchtime, which kinda sucks. So I guess I'll have to leave after Roulston, get an early lunch (probably won't be much of a rush at all at 10:30 on a Sunday), and then come back for Kaiser & Cookie.
After that, I wouldn't normally see Mickey Fulp again, since his talks usually devolve into rapid-fire "name a stock and I'll give you a 2-second opinion". I might see him since he's right before Eric Coffin (who I definitely want to see), but right after Coffin is Adrian Day, and I'd like to see him again so I can look at his presentation with a more critical eye.
I think it's lame that they still allow the Liberty Silver Sucker Brigade to talk at PDAC, when they could get someone more intelligent and worthwhile. Like Sean Brodrick. Or me. Or even Jeff Berwick. If you go to see Handwerger or Westie, make sure you spend their entire presentation shouting "Liberty Silver was a pump & dump" over and over again at the top of your lungs, m'kay?
Anyway, Adrian Day's done at 3:20, which means I can leave and get back home at a decent time. Nice!
Thank you to the PDAC schedulers for putting together a schedule that finally works for me. Now if only you can fix the trainwreck that is Tuesday!
I'll probably try to record some of the talks, but we'll have to see how it goes. The mining company presentations are a lot easier to record, since you're in a smaller room with no people and can put your recorder right up against the PA speaker; the Smelly Investor Room at PDAC is a different kettle of fish altogether.
Here's two interviews from last week in Vancouver.
First, John Kaiser:
Kaiser agrees with me that while the banks are still calling for $1000 gold, "they're wrong, and the market knows it". He says because all the low-hanging fruit is gone, if the world wants more than the gold they have now they're going to have to pay a lot more for the ounces.
He thinks Goldcorp moving for Osisko is symptomatic of the majors taking out beaten down companies before they get repriced to the upside.
He's also on the "reshoring" bandwagon, thinking that jobs will begin moving back to the US from China because of China's slowing productivity and internal issues.
Then he goes on about zinc and nickel and copper and stuff. You can tell gold is out of favour when Kaiser talks about base metals.
And then Cambridge House also interviewed a bunch of utter fucking clowns like Marin Katusa, Peter Schiff, Mike Maloney, Danielle Park, David Morgan, Rick Rule and the GATA boys, who are all in complete agreement that the US dollar will collapse and America is destroyed - therefore buy gold.
How long are the doomer brigade going to keep tooting this horn?
So anyway, back to reality. Here's the Cookie Monster:
He still thinks things will suck til 2015. Then again, you have to remember Cookie's interested in explorecos, and they probably will continue to have utterly no capital participation. So I guess the explorecos certainly could take a year to come back.
He still thinks the real explorecos are the ones who put up maps, sections, drill info (with co-ordinates and azimuth dammit!), and maybe put up their 3D info on Corebox. Which I agree with.
He feels good ol' rock-banging geology has been replaced with them damn kids and their damn computers, dagnabbit.
And by the way, gold dinged $1278 or so on the China open. I guess someone still wants gold.