Saturday, July 12, 2014

And as for the price of gold....

Yay! Seems the monsoon rains are coming! - monsoon likely in north after July 14. The precip prediction map linked above seems to show a great glob of heavy rain from Delhi through to Bhutan next week. Still nothing in the far northwest though, and the area around Madras looks bad, but overall it's looking better than it did last week.

And just to remind you, Whitey: which country buys a thousand tons of gold a year? Hm?

Saturday blog stats fun

Here's the past few hours of searches:

People come to this blog for the funniest reasons.

1. Quite honestly, I get a heck of a lot of mileage out of talking about Daniela Cambone. It seems I always get a big new surge in traffic whenever she interviews someone who is well-respected among creeps and weirdos: the crazies then Google her, usually with the intention of marrying her, and then come to my blog where I explain to them that no, she's married already.

2. Yes, Mila Kunis is maturing, but that's okay because she'll always be a hot babe.

3. Cute kitten gifs are always good for a few clicks.

4. What is it about Katy Perry and the Illuminati? Is it because she used to be a Christian singer, so now the fundie wackaloons have to accuse her of Satanic tendencies? Seriously, guys: she has a fantastic singing voice, and while she's not my thing she does have stunning legs. And she seems to have a great personality too. So why do you have to accuse her of getting help from the Illuminati? If anything, they should be asking her to help them.

5. It is indeed the Lassonde Curve. The most important chart in junior mining.

6. Ha! You'll never know! You gonna try to track me down, bitch? Don't think you can just walk up to me and pop me in the nose like you did Mickey Fulp: I've got no good name to uphold.

Friday, July 11, 2014

Our Daniela at Freedom Fest

OK, you're all waiting for my review of the Kitco Freedom Fest interviews, so let's get started:

IKN forgot what a complete twat Doug Casey is

IKN - I'd forgotten how much of a twat Doug Casey is.

Seriously people, quit sending links to Freedom Fest interviews to people with brain cells. This kind of crap just makes us punch our computer monitors and kick our dogs.

I might do a post later this weekend, but only to analyze Daniela's fashion choices. One dress in particular is really nice. As for the speakers, the content of their discussions can be summarized with the following series of humourous pictures:

Friday cartoon

Because I got nothing better to do, and it's damn funny.

Krugman on "the Fed stealing from grannies" as a talking point for the extreme right wing

The Krugginator has been on a roll these past couple days, discussing the blowhards who whine about how the Fed is robbing from grannies by keeping interest rates artificially low. You know the type.

Krugman - more on class and monetary policy. He presents the data showing who actually depends on interest for income, and then notes:
So interest is a significant source of income only for people high in the distribution; it gets really big for people with very high incomes. These are the people who have a lot to lose if inflation erodes the values of their assets, and a lot to gain if inflation comes in below expectations or there is actual deflation.

So hard-money ideology is, to an important extent, a reflection of class interests — not so much the one percent as the 0.01 percent.

Krugginator - on losing interest. Quote:
Yes, there are some middle-class retirees collecting interest on their CDs. But the big losers are people with very high incomes. Again from the Piketty-Saez data, we can track the decline in interest incomes from 2007 to 2011 (measured in 2012 dollars) and compare it with income in 2007 at different percentiles. [...]

It’s not a big deal for people in the bottom half of the top 10 percent, who might well consider themselves middle class. But among the top 0.01 percent, low interest rates have actually been a bigger income hit than Obama’s tax hikes (partial reversal of Bush cuts plus the ACA surcharge).

You’re living in a fantasy world if you don’t think this has something to do with the diatribes against currency debasement and all that.

The Kruggatolah - the monetary fever swamps. Quote:
I was aware that there were a fair number of people on the right attacking the Fed, not for running the risk of inflation or financial instability or something, but for expropriating the property of right-thinking, clean-living people who deserve higher interest earnings.
Does that sound like anyone you know?
The starting point seems to be the notion that the Fed is keeping interest rates below their “free market” level.
Does that sound like anyone you know?
And then there is the assertion that there are lots of salt-of-the-earth regular Americans who are having their rightful incomes stolen by this anti-free-market policy. Actually, interest income for retirees is both fairly small in aggregate and highly concentrated among a small number of people. The AARP tells us that the average senior had more than $3,000 in interest income in 2012, but that the median was only $255. That’s saying that interest income is minor for the great majority.
You'd think that the supposedly-proletarian, populist, "dispassionate", anti-Fed, hard money advocates out there would be in favour of Fed policy of "suppressing" interest rates to increase employment and stimulate wage growth. That helps the "honest working man" a hell of a lot more than giving more risk-free interest income to the richest 1% of grannies, doesn't it?

But no, don't let reality get in the way of the right-wing plutocratic John Bircher propaganda that you parrot every day on your free blog!

Four links for Friday

Here's some stuff:

Calculated Risk - awesome hotel occupancy rates. Best year since 2000 for hotels. So do you still believe the clowns who say the US economy is just "muddling along"?

Ritholtz - on asshole pundits. Some comment:
The reality is that expert forecasts are statistically indistinguishable from random guesses. The funny thing about these predictions is the more specific and confident the forecaster is, the more likely the viewing public will believe them. And even more amazing, the more self-confident a pundit is, the worse their track record is likely to be, with the least-accurate guesses coming from the most famous pundits, or those who got lucky with one big outlier.
Personally, the more arrogantly self-confident a pundit is, the more likely I'm going to think he's an idiot. Because many pundits have personally made very confident predictions to me that turned out to be utter bullshit months later, whereupon said pundit has given me yet another perfectly confident prediction with a straight face.
The next time you see someone blathering on TV, or read a front-page article blaring about the bubble, or see any magazine cover warning of the impending recession, simply Google the track record of the forecaster. After you stop laughing, you can set about doing something more productive with your time.
If the guy is constantly wrong, or even mostly wrong, or even wrong 50% of the time, why should you listen to anything the clown has to say? Bonddad and Calculated Risk are wrong only very rarely, so why listen to some other idiot whose predictions would have left you completely wrong-footed? Who is the goldbug buffoon who kept you out of the S&P 500 since the gold miner bubble burst in 2011?

Mineweb - First Quantum hunts for more copper deals. And this from the guys who already own Taca Taca and Cobre.

Chronicles of Brodrick - base metals blast off! What Eric Coffin already said, except in chart form. Should the PMs correlate positively with base metal prices?

Yesterday's GDX and GDXJ action

Chronicles of Brodrick - bearish outside day for miners yesterday. He points out that bearish outside candles were printed on a lot of stocks.

Yabut Sean, the selloff in the miners only happened at 3PM, so that candle doesn't tell the whole story. Here's the intraday from Google Finance (the Bloomie term for peasants):

The 3PM selling spree did not correspond to any action in either US equities or in the precious metals themselves. Nor could I find any news that would be PM negative at 3PM. So it's not an algo.

Was it just someone large getting out of his position? Was it just someone concerned that GDX and GDXJ were +3SD (thus overbought) by the daily candles?

Or is it part of a conspiracy wherein someone buys large positions in miners, then drives up the PMs, then sells the miners at a 50% profit before dumping the PMs back down? Did someone really try hard to print a bearish outside day, just to scare charties?

Now here's something neat: it doesn't show up well in GDX's chart, but in GDXJ's chart there was a significant enough tickdown V at precisely 1PM that also didn't correspond to any action in US equities or miners. So I'm guessing if there is a conspiracy, then someone probed support at 1PM; they saw there was a fair bit, and thus they marshalled some more strength to push harder at 3PM.

So is this someone short the miners who's now trying to drive them lower?

If so they're fighting seasonality.

Or are they just trying to drive the price down so they can shake the tree? That would be a good reason to make sure a bearish outside candle shows up on the chart.

Anyway, I like this bit from Sean:
You probably didn't buy as much gold and silver miners as you wish you did before the recent run-up. Now you'll get your chance to buy before the NEXT run-up.
I like it because I can imagine a lot of other people thinking this same thing. So if there is no weakness in PMs the next few days, I'd expect any pullback just might be treated as a buying opp by goldbugs.

It's not where we separate the men from the boys, Sean: it's where we learn how committed the goldbugs really are to this upmove.

Friday videos - two from Inspiral Carpets

Here's two from Inspiral Carpets, reminding oos wot i's like Oop Norf:

Apparently, Oop Norf they have marching bands:

Thursday, July 10, 2014

The problem with gold and real interest rates

Blackrock has $4.4 trillion in AUM, according to Wikipedia.

Let's say Blackrock sees that real interest rates are negative, and mistakenly believes that negative real rates have anything whatsoever to do with the price of gold. So Blackrock decides to increase its asset allocation in gold by just 1%.

That increase in asset allocation would mean they'd have to purchase 1200 tons of gold. That's a significant percentage of annual production. The price of gold therefore skyrockets instantly.

There is far too much investment capital out there, relative to the price of gold, for an investment strategy based on Wall Street mumbo-jumbo to be pursued conscientiously; if capital jumps into the kiddie pool of gold, it becomes the market. You do not ever want to become the market.

This bullshit about real rates might have held twenty years ago, when Indians and Chinese were still dirt-poor and there wasn't nearly so much investment capital out there. But it doesn't hold today.

Asanko and B2

Here's Asanko, formerly Keegan (apparently?):

That's a further breakout. Pretty good for a company that wants to build a mine in the middle of an Ebola epidemic, no?

Meanwhile, here's B2.

Hey, Clive? You're underperforming Ebola right now. Might wanna look into what you're doing wrong.

Yabut seriously B2 might still break out through that $2.95 resistance line, and that would make for a pop in a laggard, which is a nice thing to trade this far into a bullish junior market move.

Still, Clive has been underperforming Ebola.

WSJ monsoon coverage and what it means for gold

WSJ paywalled - lackluster monsoon rains trigger crop worries.

What is good about this is gold has gone up since the article, which means Wall Street Whitey (who reads WSJ) is buying despite fear of a monsoon failure in India (which would tank the gold price). Which means he's buying for White People reasons, not for supply & demand reasons.

What is bad about this is that any gold Whitey buys off the market, Whitey later sells back onto the market. Because gold is nothing but a roulette wheel for Whitey.

Any gold India buys, however, stays off the market thereafter. Or at least it has done for 2500 years.

So Whitey buying gold is not fundamentally bullish for gold. Not at all.

GLD charts, daily and weekly

Here's the GLD daily candles:

Today's candle is a breakout above a couple weeks of consolidation, where the short EMA was never violated, and MACD faked you out with the threat of a crossover. That looks good, though I'd want to see a volume spike this week. Oh well.

Here's the weekly candles for a bigger picture:

This week's candle is nice because it's also popping up above the short weekly EMA, and its longer SMA as well. Gold's MACD is still very neutral. It's only +1SD right now too.

Hey, and it's also printed 6 white candles in a row, the first one bouncing off the -2SD line.

So heck, this weekly chart doesn't scare me either.

Then again, this might all be down to positive summer seasonality for gold.

Then again then again, that seasonality should last through to August, assuming the monsoon picks up.

So in sum, despite the (relatively) strong move already in gold and the juniors, this move doesn't look used-up at all.

Now, the weekly chart shows a bullshit "inverse head and shoulders", which isn't because the volume is all wrong and the neckline is too crooked. However, if this upmove has all been down to Wall Street Whitey playing TA games, then I guess we'll see GLD finally stop at the weekly's "inverse neckline", which would be around $132 and would coincide with the +2SD line on the Bollinger.

We'll see. I'm curious and have my eyes open.

True Gold Mining and how to be a kamikaze and destroy your portfolio

Here's the chart for True Gold:

TGM has warrants at a 47 cent strike, due 18 August, i.e. 5 weeks from now. As of this second its last trade was $0.46 (i.e. this chart is a bit old).

I would definitely suggest that you would be an utter maniac to buy at-the-money short-date warrants in any junior miner stock, even if you think gold is going up. I think TGM is a good company that should be worth a lot more money a year from now, but it should also not be worth a lot more money five weeks from now when the warrants come due.

And if it closes Aug 18 below 47 cents your warrants are worth utterly zero.

Nevertheless, if you are really certain that gold's going to pop hard in the next 5 weeks, and that a junior building a mine would definitely pop with it, then if you're also a real psycho who would be happy to lose the entirety of his investment, you might consider TGM warrants to be a fun way to swing for the fences, what with the warrants trading at $0.02 ask (last I checked).

They were a $0.005 bid just a few days ago btw.

Disclosure: I already bought a couple hundred thousand at $0.04 average price, a month or more ago. Just as a casino play. Because unlike you, I am an utter maniac. I guess I should have waited for the time premium to burn off more - I could have bought half a million at one cent just last week.

Point being, if I chicken out, I might even sell them at 4 cents long before maturity, for a wash, and I might puke them in your lap, so don't buy.

Eric Coffin on junior mining

I don't assume this blog has any readers who don't read IKN; it's really just an antechamber where certain select IKN readers go to get news about stuff that doesn't involve junior miners or the Bolivaran struggle against American imperialism. Oh and for Friday music videos that don't suck.

Still, even though IKN linked to this already, I will too: - Eric Coffin thinks junior mining has bottomed and is taking off. A lot of great thoughts here from one of the few junior mining analysts who doesn't have his head up his ass. For example:
Zinc prices recently hit new highs, printing prices above $1.00/lb for the first time in three years. Inventories are still not low by historic standards but they have been dropping since early 2013 and that fall should continue. At the current pace warehouse inventories could be down to levels that could trigger larger price gains before year end.

I point out zinc in particular since it seems to be subject to less “extraneous” noise—like Chinese commodity financing or doom and gloom western traders. It’s unsexy enough to be a useful guide to base metal complex demand and it ain’t following the script either. A zinc supply deficit is projected but it looks like things are moving quicker than expected. I don’t think its traders playing games—just good old fashioned demand.
Which is a metal that I haven't been paying attention to, and I'd agree you want to watch the metals that aren't part of Wall Street Whitey's playbook if you want a more honest read of what's going on. I've been concentrating on silver for clues, myself - I don't think Whitey bothers with silver anymore.

Also, re inflation:
Core CPI is now matching the US Fed’s 2% target and personally I don’t think it’s going to stop there. There are reasons to expect some of the larger categories like Owner Equivalent Rent to keep rising and we’re just starting to see the prices of goods rise—it’s been mostly services up to now.
Scary btw that here we have a junior mining analyst who seems to have passed Econ 101. I don't think there's another one out there.
This isn’t a “Weimar II” story. While money supply growth increases the odds of an inflation spike I don’t think that is likely. This is a more mundane move based on a stronger economy, improved lending and higher demand. That’s a good thing. Most of the move in base metals is basic demand but some is starting to come from traders expecting a lift in inflation. Copper has historically been a pretty good inflation hedge

The June US payroll report came in way over consensus. This led to gains in equities and bond yields but also seemed to feed directly into the commodity complex. All the base metals had a very strong move the day the job report was released. Base metals don’t drive money into the exploration sector as much as gold does but this adds to upward pressure I think is still building.
All in all a good article to read, though I find it disturbing that he doesn't touch on the fact that gold and the juniors are supposed to pop 30-50% every summer. It's seasonality.

So is he misleading himself by looking for sensible reasons behind the metals' performance? He usually comes off as a somewhat cynical, world-weary fellow, so the optimistic tone of this letter seems out of place during the summer pop in juniors.

Anyway, it's still a worthwhile piece to read, so go read it.

Gold is up, markets down. Ho hum.

So according to CNBC (who I watch for 5 minutes in the morning while having a smoke), the markets went down because

1. people are scared of a shitty little bank in a European backwater that never recovered from the Euro crash;

2. something something Israel;

3. some number out of China;

4. oh and European industrial production hasn't recovered yet.

In reality I think they're selling Europe because they had bought Europe thinking the recovery would take 6 months.

But gold is up, and Rio Alto's up 10% this morning, and the True Gold warrants are almost in the money even. So I don't care, I'm happy.

I actually sold my CIE.TO on Tuesday, but that was cos the chart was starting to look like it was rolling over and I was going to be incommunicado all day (I still work for a living you know).

Wednesday, July 9, 2014


Was busy at work today. Here's some news:

Bespoke - stocks and bonds trading in unison. Last time it happened? 1980-2000. Good time to invest then, no?

New Deal Demoncrat - unemployment rate below 6% soon. With charts.

WSJ China Realtime - Chinese economy likely picked up in Q2. Um... dooooom?

Mineweb - Indian gold ETFs don't actually own gold. Oops.

Reuters - India has the best-ever onion harvest, now faces shortage of onions. Because they have no clue how to store goddamn onions over there.

Tuesday, July 8, 2014

Some noontime noos

Here's some reading for today.

Calculated Risk - Tim Duy on inflation hysteria. I wouldn't call it inflation "hysteria", but rather just an informed awareness that slack has been taken up and the next topic for the market is going to be reflation to normalcy. However, Duy does make the good point that betting on increased inflation means betting against the Fed.

Tim Harford - on volatility. Quote:
No matter what the indicator, the story is similar: low volatility, low uncertainty and low dispersion are what happens in good economic times. Recessions are high-volatility, high-uncertainty and high-dispersion events. Low levels of uncertainty may breed complacency but they are also what the economy seems to need.
Or, more simply, $VIX is low because things are improving and the market is going up, dumbasses. Genius, eh? So where's my free fucking plug, Ritholtz?

NYT Upshot - the everything boom. Quote:
In this sense, high global asset prices could be the result of a world in which there is simply too much savings floating around relative to the desire or ability of businesses and others to invest that savings productively. It is a reassertion of a phenomenon that the former Federal Reserve chairman Ben Bernanke (among others) described a decade ago as a “global savings glut.”
Which I agree with totally.
But to call it that may not get things quite right either. What if the problem is not too much savings, but a shortage of good investment opportunities to deploy that savings? For example, businesses may feel that capital expenditures are unwise because they won’t pay off.
If there's a shortage of good investment opportunities, it's because Big Capital has spent the last 12 years seeking rent (or simply hiding in tax havens) instead of investing in productivity improvements. Which kinda sounds like the endgame at the end of a secular bear market, no? I guess you kinda need that at the end of a secular bear before you can start to see capital move into productivity improvements to drive a secular bull, no? Does that not make sense?

FT beyond brics - pragmatism likely to prevail in India's budget. Geez, with all this speculation, there's a lot of room for disappointment, no?

S&P ANNIHILATED ON CUPCAKE DISASTER: here's what Joey the Weasel will run with at 4

So if the market continues to drop, Joey the Clickwhore will be printing the following BI headline at 4PM:


with the following picture:

I'm such an expert at predicting this crap.

VIX shows possible SPY correction happening

Here's $VIX:

It's popped over its SMA(50), so we might get a bit of a continued spike up for a couple days.

Here's SPY:

Might this $VIX spike portend a drop just to $195? Or all the way down to $192?

Whatever it is, the only imminent risk I can see is to the upside. Q2 GDP is going to be reported very soon, and according to New Deal Demoncrat or Bill McBride (I don't remember which) it will be an upside surprise whopper. Like 4% or better.

Then earnings season begins. Earnings will have improved yet again if Q2 GDP turns out good. The only possible downside is that analysts become concerned about rising input costs, if Michael Shaoul is right.

So this will be a buy opp, I just have no idea when.


Oh god. Jeffrey Saut just pulled a McClellan:

BI - Jeffrey Saut says the market is vulnerable to a pullback because Tom McClellan's strategy of plotting one chart on top of another worked so well. Saut has done a McLellan and pulled this chart out of his ass:

If you'll remember, McClellan pulled a similar chart out of his own ass back in February, that suggested the market was days away from a 1929 disaster:

But, as Ed Yardeni recently noted, the market didn't obey this prediction, with the result that we're still waiting for his disaster to happen:

I guess Saut didn't watch that whole McClellan 1929 dooooom story play out, because he has pulled the same disingenuous stunt of printing one chart on top of the other to try to predict where a market goes.

Really, this is the type of reasoning you'd expect from a seven-year-old from a stone-age culture, not from someone who can be trusted to manage people's money.

So we can now add Jeffrey Saut to the list of charlatans who pull baseless speculation out of their asses to fill column inches. And thus, we can now ignore him forever too.

UPDATE: I have no idea if Saut has used two dissimilar y-axes for his chart the way McClellan did. But I don't care, because that's not the problem: the problem is charting two completely different things and suggesting that one will be predictive of the other because reasons comma potato.

Grant Williams loves Raoul Pal

My old Raoul Pal post is one of the most popular on the blog again today. (That's the post where I make fun of him pumping Bitcoin, not the one where I make fun of him for bottom-ticking a sell call at the June 2012 bottom.)

Whenever this happens, I try to figure out why people are looking this clown up and coming to my blog.

But there has really been nothing on the internet on the past week about Raoul Pal, as far as I know.

Except this:

Mauldin Economics - Grant Williams goes on a vision quest, or something, god I dunno.

It would seem that this one article spurred a large amount of interest in Raoul Pal due to this ebullient praise:

About three years ago, somebody sent me a piece of writing he thought I would like, with the strict warning that I wasn’t to forward it to anybody, quote from it, or make any reference to it in any way in my own writing. Period.

My friend was quite forceful about this and told me that he had never forwarded anything written by this particular author before, because the material was available only to a very small group of people, was extremely expensive to subscribe to, and the author was (quite rightly) fiercely protective of his work.

The only reason he had sent it to me was that it contained an article on a subject I had recently written about, and the author’s thoughts were very well-aligned with my own.

Obviously, my interest was piqued, and so I sat down to read the 60-odd-page, chart-filled literary magical mystery tour I had been sent.

It was one of the best things I’d ever read.

There was something about the way the author wrote — colloquially, but clearly, with great understanding of his subject — that enabled him to convey complex concepts effectively, and the quality and depth of his thinking resonated strongly with me.

I read the piece a few times and then began to wonder who this guy was — and, more importantly to me at that point, why I had never heard of him before.

My research into the mysterious author revealed just enough for me to understand that I SHOULD have heard of him, and the question as to why I was unfamiliar with his work turned 180 degrees — I became fascinated with the fact that our paths HADN’T crossed up to this point.

Interestingly, over the next few months I began hearing his name more often, and as I traveled around the world I occasionally happened to see copies of his work sitting on the odd desk — and it was always on the desks of seriously smart, highly engaged people. So, whenever I could, I snuck a look at his writing to see where his thought process was taking him.

Maybe it was my imagination, or maybe it was because I was now looking for it, but each time I heard his name or came across his work, I had the feeling that I’d stumbled upon some kind of bizarre, exclusive club into which I hadn’t been invited. And that feeling grew.

All I knew about the mysterious stranger was that he lived in a tiny fishing village on the Valencian Coast of Spain, that he had retired at a young age from running one of the world’s largest hedge funds (at the time, anyway), and that he was a truly brilliant and original thinker.

So I emailed him.

I had been invited to speak at a small gathering in Spain; and because my travels rarely included Europe, I figured I should at least make the effort to meet him while I was so close, and so I offered to drive out to his village and buy him dinner.

To my surprise and delight, he responded the same day, said he was familiar with my own writing, and very graciously accepted my offer to feed him.

A month later I found myself sitting at a beachside bar overlooking the Mediterranean Sea, having dinner with Raoul Pal and his colleague Remi T├ętot.

For the past ten years, Raoul has been writing and publishing The Global Macro Investor from his home in the picturesque town of Javea. GMI is utterly brilliant.

As the evening wore on, the conversation flowed easily among the three of us as we realized that we all saw the world in the same way. Not only that, but we had some very definite ideas about how financial information reaches its audience — about the quality of that information and also about the platforms used to disseminate it.

So does this mean that Grant Williams is also an idiot who sold out of the stock market in June 2012, and put all his money into Bitcoin?

Because this is Raoul Pal:

Zerohedge - as of June 2012 you only have 6 months at best before the whole system collapses!!!!

My Own Market Narrative - and thus I make fun of him.

Silver Doctors - Bitcoin's upside is 5000x gold's!!!!!

My Own Market Narrative - and thus I make fun of him again.

And Grant Williams thinks Raoul Pal is an utter genius. So now, if you follow the Principle of Cootie Contagion, you can add Grant Williams' drooling blather to the list of stuff that you can ignore on the internet from now on.

Monday, July 7, 2014

And here I was laughing at David Hasselhoff

I watched incredulously as a documentary on the 80s ended with the New Years Eve party at the fallen Berlin Wall, where the headlining performer was... was... David Hasselhoff.

Germans have no taste.

But in case you think the British are any better, here is the chart-topping #1 single in the UK for December 1993:

The Spice Girls were a marvelous improvement on this.

MARK HULBERT IS A TWIT: here's what you need to know

Hulbert via Marketcrotch - gold is only worth $800. Huh? Wait, what? Who would be left to mine it at $800? And how is it "worth" anything in such a case? Let's try to parse the stoopid:

Yet according to Duke University finance professor Campbell Harvey, one of academia’s leading experts on gold prices,

What? He's one of "academia's leading experts on gold prices"? Says who? I guess he's going to have some theory based on Asian gold demand, then, eh?

the odds are poor that the metal will return any time soon to its all-time high in August 2011. That month, the spot Comex gold contract reached an intraday high of $1,929.20, more than $600 above Thursday’s settle price of $1,320.40.

He puts gold’s fair value today at a little higher than $800.

Huh? Wait, what? Why?

A valuation model Harvey proposed in a National Bureau of Economic Research study 18 months ago, when gold was nearly $1,700 an ounce, correctly foresaw that the metal was overvalued.

That model is based on the tendency for gold to decline whenever the ratio of its price to the consumer-price index rises well above its average level of about 3.4, and to rise when it is significantly below that average. With the CPI now at 237.1, this ratio stands at 5.6.

Wait, whose CPI? American CPI? How exactly would the price of gold have anything to do with American CPI, when Americans don't buy gold?

I'd really like to know if he explained an actual market mechanism by which gold prices are driven by American CPI. Because my default assumption is that he has presented no such mechanism. He has literally pulled this out of his ass.

To be sure, Harvey acknowledges, gold is perfectly capable of taking a long time to return to its fair value — and by no means will the path it takes be a straight line. So a near-term rally isn’t out of the question.

So in other words there is no relation. I mean, it could be going in that direction right now because he's right, or it could be because the US sold all its ETF gold holdings and that caused a price shock that turned the market participants strongly bearish for the past couple years, or it could be because Jennifer Love Hewitt is using her mind-control powers in service to the ancient gods of Urartu, or it could be all dependent on how my cat feels on any given day.

Over the past decade, Harvey points out, gold’s price has been quick to respond to changes in Treasury yields — rising as yields fall, and vice versa. If you believe that yields will on average be higher in coming months than where they are today, as he does, then “gold will most likely decline” over the shorter term.

Whose treasury yields? American treasury yields? How exactly would they affect the price of gold? Especially considering there have really been only two long-term trends in UST yields since the price of gold was decoupled from the US dollar, and over that time Indian and Chinese wealth have exploded?

What I'm saying is: if you believe in the magical UST mojo then you're basing your belief on a very limited dataset (of two long-term trends only), and over that time one real and comprehensible input to gold prices (Asian demand) has radically changed. Gold isn't owned by rich Whitey anymore. Plus there are other explanations based on actual supply and demand that explain the gold price over that period.

If you nevertheless want to bet on gold, or simply want to follow the advice of many financial advisers to allocate a small amount of your portfolio — perhaps 5% — to gold for diversification purposes, shares of gold-mining companies are probably the cheapest way in, as the shares of such companies have significantly lagged behind bullion over the past 18 months.

Ah ha ha ha ha ha ha! Yes! Buy gold miner stocks! Especially when they've grossly underperformed gold for the past six years, due to massive equity dilution and costs spiralling out of control! Plus you get to own country risk! Oh, and also, their assets are depleting precisely during the time the price of gold has been weak.

Seriously? If you really truly think gold is going to $800, short all the miners and walk away. They go to zero.

If you think gold is going to $1500, maybe you want to own one of the half-dozen miners that has a bright future.

This Hulbert guy is either willingly filling column inches with bullshit to make a quota, or he's an idiot.

That jerk Pharyngula destroys your enjoyment of all superhero movies forever

I haven't read him for a couple years. And apparently scienceblogs now feels it has to re-create the evil of the late 90s by forcing popups on you.

But here's an insightful post of his:

Pharyngula - man of steel, movie of wreckage. Where among other things he makes the following insightful observations about superhero movies:

•Slugfests. In every case, bad guy meets good guy and you know that shortly they’ll start throwing roundhouse blows at each other. This is not how people interact with each other, except when they’re very drunk and stupid. These are supposed to be super-intelligent, powerful beings, and their standard response to any challenge is to punch someone in the nose.

•There are no human costs. We see skyscrapers fall, entire New York city blocks destroyed, invulnerable super-bodies flung through office buildings like missiles, and never see a single person injured or killed. We see one death and Superman howls in anguish, and I just wanted to say, “Hey, Supe, when you smashed that IHOP? You probably turned half a dozen people who were just trying to have a pancake into bloody mush. I don’t even want to try to get a body count from that imploded building over there. So why are you upset over the quick and painless demise of that one jerkwad?”

Yeah, on the one hand I agree: superhero movies are mass-media psychopathy. Seriously: if you really are suspending disbelief when you watch these movies, and if the proper reaction of a human is to care about the suffering of others, then you really should have been traumatized like crazy when the Avengers and those alien guys went and destroyed New York City or wherever, no?

I mean, thousands of innocents must have died, no? Do you not care about their families? The children who will never see their fathers and mothers again? Families rent asunder? Lovers forever separated by the veil of death? The trauma of knowing that the authorities can't even find your loved ones' remains?

So either suspension of disbelief is bullshit, or all humans are psychopaths who can watch others suffer without feeling an emotional reaction.

Frankly, I believe the latter.

Turing bots are garbage: a short conversation with "Cleverbot"

So I was looking around for a good online Turing bot to chat with.

I found, which seemed to have an interesting idea: you chat with multiple entities, and try to figure out which is human and which is a bot. That seemed an interesting idea, but as it turns out there are no humans online, and the two entities that I did chat with were both quite obviously bots. I nailed it in something like 3 sentences.

Why was I so sure?

Because they had no opinion about Lana Del Rey.

No really. If you're connected to the internet, then you have an opinion about Lana Del Rey.

Here's one way to easily determine if you have a bot or not on the other end: ask it for its opinion on something it should definitely have a strong opinion of. The usual bot will be programmed to change the subject - not respond in any way that indicates even a semblance of sentience.

For example, here's a screenshot of my very very short convo with Cleverbot, another "Turing-winning" bot which supposedly got a lot of press a few years ago by being very convincing on the Turing test:

Really, when every single statement in a conversation is responded to with a gross tangent, it's a sign that the programmers aren't even trying. This is just the goddamn Eliza script, 50 years on.

Honestly. Do these people think that human beings just talk at each other? Is there no such thing as responding to what another person says?

India monsoon update

And since the Indian monsoon is the single best determinant of gold demand worldwide (BECAUSE INDIANS BUY GOLD, NOT WALL STREET WHITEY), let's see what's in the news:

Times of India - monsoon officially hits Bhopal. That's still only central India. Though it only hit 2 days later than the previous worst, which strangely was in 2012, a good year for rain overall.

Reuters - monsoon strengthens after weakest start in five years. Why do you care?:
The weak start to this year's monsoon pushed the government to take tough steps including raids against hoarders to ease market concerns over possible supply shortages.

Soaring prices of basic goods such as milk and potatoes lifted retail food inflation in May to 9.4 percent and there have been fears of worse to come with the delayed spread of the monsoon to the grain bowl region of northwest India.
Though NW India doesn't buy as much gold as the south, apparently.

Bloomberg - India drought odds seen increasing. But quote:
The odds of a drought are 60 percent now, compared with 25 percent in April, Skymet’s Chief Executive Jatin Singh told reporters in New Delhi today. Monsoon, which accounts for more than 70 percent of the annual rainfall, will be 91 percent of a 41-year average of 89 centimeter (35 inches) this year, he said. That will be least since the 78 percent in 2009, according to data from Skymet, a private forecaster.
But 91% isn't a drought: when you chart yield versus rainfall, 91% doesn't have much effect on yields. It's when you get down below 80% that it really starts to impact the harvest. My advice is ignore the whining and worrying (especially from a "private weather forecaster"), and look at the hard data.

Some Monday news

Here's some stuff to consider:

Calculated Risk - is inflation coming? He notes capacity utilization numbers historically don't necessarily correspond with high inflation.

Ritholtz - a correction is coming, so what? They happen, and they quickly reverse. Just don't listen to the clowns who argue that we're approaching a "blow-off top" or some such nonsense.

Calculated Risk - more on dorms counting as basements. Deeper analysis into the topic.

FT beyond brics - MNCs betting big on India. I guess that is a positive, and assuming Modi can get rid of Vodafone-style crucifixion of foreign multinationals then maybe the money continues to flow into India and they avoid an EM secular bear. I guess it depends on keeping the multinationals greedy enough to invest in a third-world dump instead of the good ol' USA.

IKN - World Cup forecast. I guess that's why he hasn't been posting for the past several weeks.

Sunday, July 6, 2014

Some Sunday reading

I don't normally pass on Sunday links, and it's to the chicken-and-egg point where I dunno if blog traffic disappears on weekends because of it, or if instead I haven't bothered posting cos there's no weekend traffic. But here's some stuff:

New Deal Demoncrat - weekly indicators. Still no crash coming.

Reformed Borker (Bork Bork Bork!) - fun with stock market hysteria. Where he has a laugh at financial media click-whoring.

The Atlantic - the misguided freak-out about basement-dwelling millenials. They're not living in basements - they're actually at university, which is counted as a "basement" for the purpose of the survey. Considering the jobs being created in the US are higher-paying ones, these kids will be making good money once they graduate. - BP hikes iron ore supply to destroy rivals. I remember a few years ago hearing an iron CEO say "we can produce iron at a profit at $30, we're not worried". So now a bunch of Chinese iron mines will be shut down.

Economic Geologist - Randgold CEO says "all-in sustaining cost" is bullshit. Also, the gold mining industry can't exist at $1300; therefore gold won't stay at $1300. I mean, look at scrap numbers - when has there ever been a time (in the modern era) when all physical gold on the market came from scrap? Therefore mines need to operate, therefore the price has to go up.