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Friday, September 25, 2015

On the palpable sense of fear, and the goldbugs' great hope


I haven't bothered to give my readers the links, because I don't like wasting their time, but there's been a palpable sense of fear in the market commentary recently: not just from the doomer end of the spectrum (Business Insider), but even at places like Financial Times.

Let me summarize the various theses:

1. Blah blah China slowdown worse than they will admit. As if even only 5% growth in China, with higher growth of the consumer sector, is a bad thing for the rest of the world.

2. Blah blah China currency outflows, despite the Chinese central bank already having told us that all that's happened is they've moved some of their US reserves to the banking sector.

3. Blah blah worldwide recession imminent. No really. The neocons demand contractionary policy worldwide and then they bitch about the recession they've caused.

4. Blah blah S&P 500 earnings recession. Yes, with 3.9% revised Q2 GDP and no signs of economic slowdown in the US, as you'll know because I have been giving you that data.

5. Blah blah China stock market crash - and indeed $SSEC did crash, all the way back to where it was this February. Wake me when it actually does something.

6. Blah blah Shiller P/E. No, seriously, they're trotting that old pony out again.

7. Meh, I dunno. Bunnies. Bond market liquidity crisis. Whatever.

Now, if the S&P 500 dropped as the manifestation of those palpable fears, instead of as a result of VaR models, you'd have to ask yourself where is that money flowing to, right?

And in fact if the world was worried about some systemic crisis driving the US into a recession or justifying lower equity valuations, you'd think there would be a money inflow into some, I dunno, more traditional store of wealth? Y'know, something that can't drop 50% like a stock market can? Something you diversify into, that (as Ben Bernanke said) acts as a hedge against fat tail risk?

Like, maybe, some shiny yellow metal of some sort?


No honky cracker inflow into gold means there's no real fear of anything anywhere. This has all been one great big VaR model hiccup.

I'm sure if there was a real crisis, gold would spike to $1500 quickly, considering Whitey just finished emptying out the entire Western market and dumping it into the laps of the Indians and Chinese. Then all you goldbugs will make a fortune on your gold miners.

You probably will anyway, longer-term, but don't expect Josh Brown's latest tantrum to signify the beginning.


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