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BMO Has A Simple Message To Its Clients: Go To Cash Now
In a surprising development, the most bearish, and easily most comprehensive, report that we have read in a long time on the broader markets, comes from Canada of all places, via BMO's Quant/Tech desk. The report's title is simple enough: Go To Cash - In Plain English. Not much clarification needed. Here is the gist: "We advocate switching out of equity positions and going to cash. The European sovereign debt crisis appears to be nowhere near over. The global credit environment is worsening. Cost of capital is going up and availability is going down. There are large gaps between where the credit market prices risk and where the equity market is priced. Equity is lagging the deterioration in credit conditions. Moves in currency, equity and commodity markets are mirroring the moves in the credit market. Global growth, in a credit-constrained environment, will slow. Profits will be squeezed by the higher cost of capital...We advocate a zero weight toward equity, and that investors convert their equity positions to cash."
Full report below, and here is a link to the original report with far more technical data.
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Gold and CASH are considered safe havens. One can even add Treasuries to that. When these instruments are running like bulls, it spells out some heavy storms ahead.
Gold is considered by many as real money but not as liquid as cash. Treasuries are considered safe cash equivalents due to their backing.
Rather than ignoring the significance of cash or exaggerating the importance of gold, you should always ask yourself why this is occurring simultaneously. I agree it's counter-intuitive that gold, cash and treasuries can rise together but you can't ignore the market's anticipation being implied.
Gold equities might have correlation to gold, or they might not (if the company has big hedge book, if govt imposes heavy taxes {looking at you, Australia}, or if they mine metals other than gold, which affects their marginal returns).
And even if the paper value of your gold mining companies skyrockets, expect Uncle Sam and other national govts to jump on it like a starving wolf jumps onto a crippled, bleeding rabbit. Yes, even if you hold it in your 401-K or IRA.
Here is what my favorite Canadian analysts are saying:
One thing market watchers have learned over the past couple of years is to pay closer attention to the link between credit conditions and business confidence. In the U.S., the small business sector has been disproportionately impacted by the credit and banking crises, a development that has had important ramifications for the labour markets. It is important to keep in mind that small businesses normally account for about two-thirds of job creation in the U.S. Fortunately, things are beginning to improve. Just-released data by the NFIB, showed a tangible improvement in small business confidence in May, with the index rising to a 20-month high. As today’s Hot Chart shows, the level of confidence is still low, but it is finally starting to play catch up to the ISM index of business activity (which is akin to a large-business confidence survey). May showed particularly interesting developments for hiring plans and inventory accumulation which both turned positive during the month. As shown, this is the first such occurrence since November 2007.
And here is some more good news, Job openings rise to highest level in 16 months:
Job openings jumped in April to the highest level in 16 months, a sign that hiring by private employers is healthy despite last week's disappointing jobs report.
The number of jobs advertised at the end of April rose to 3.1 million from 2.8 million in March, the Labor Department said Tuesday. That's the most openings since December 2008.
Private employers accounted for the entire net gain. The government's advertising for jobs decreased, despite the hiring of hundreds of thousands of census workers in May.
Job openings have risen by about 740,000 since bottoming out at 2.3 million in July. But they remain far below pre-recession levels of about 4.5 million openings per month.
The competition for jobs remains tough. There were 5 unemployed people, on average, for each job opening in April. That's down from 5.4 in the previous month, but well above pre-recession levels of 1.8 jobless workers per opening.
The biggest increases in available jobs were in professional and business services, leisure and hospitality and education and health services. Government job openings fell by 36,000.
The report comes after the Labor Department said Friday that the economy generated 431,000 jobs in May. But almost all were census hires. Only 41,000 of the new jobs were in the private sector.
"The biggest increases in available jobs were in professional and business services, leisure and hospitality and education and health services."
once again confirming the death of manufacturing sector...
Oh... and don't forget about that 5% Wage Bill that's supposed to add a significant amount to economic growth.
Buy those Chinese Solars while the timing is good! Risk on!
Oh yeah... </sarcasm>
Still like you, Leo.
Wow. You cats really get hyped up on this kind of thing don't you? Here is exactly what is going to happen. Everyone is going to relax and be real cool, start spending some god damn money buying shit, and everything will be fan-fucking-tastic. You "hoarders" are intentionally stockpiling necessary resources just so you won't be in the same boat the rest of us are in. You Dicks! How the hell is the economy supposed to thrive if you are not spending a little over 100% of your income annually and doing your part to Keep America Rolling.
LOL
If only I had more storage space. 50% of my disposable income supports the economy buying items I will not use in the near future. The other 50% is PMs. Sorry Unkie Sam - I just don't support your murder-mayhem agenda for the planet. Please fucking die.
Need a raise? DEFAULT
Chicken wings and beer prices keep falling.
I'm trying my best out here. Geez.
Johnny Bravo? Is that you?
I junked you!
Your lack of planning for your family is pathetic, not to mention, selfish.
You "hoarders" are intentionally stockpiling necessary resources just so you won't be in the same boat the rest of us are in. You Dicks!
Yes, us "hoarders" are stocking up on "necessary resources" and if that makes me a Dick, well then I'm a big swinging dick!
Got Gold...NO...I didn't think so!
wow, did everyone lose their sense of humor? I think the post was satire...
wow, did everyone lose their sense of humor? I think the post was satire...
Who are these LITTLE people junking anything that is remotely offensive.
Jethro pull your head out of grannies ass. You are the little people!
...who just ramped up the S&P 10 points in merely 5 min?
Sorry, made a call to Bubble Ben, but told him to wait till the last five minutes of the trading day. He never listens properly to my instructions. :)
...the same people who just now cut gold down $10 in 5 mins.
and continuing...from 1042 to 1056 in two spike moves
S&P seems to have major "support" at 1040. Or is this just position covering in last 5 min of trading in Europe?
But markets are closed now in Europe, so did I miss important news that could explain this "efficient market" move?
We went all cash 45-days ago so I guess the Bank of Montreal must have caught wind of that and followed our move.
Cash baby, cash! LOL!
Bear trap?
Wow. An intraday chart to refute a global macro call? Why not show the daily chart for the GBP?
Agreed.
Leo is so lame lately, I don't even have the motivation to junk him anymore.
Global macro call? This is where the men are separated from the mice! Either you got cojones, or you're just another wimp going to cash because you don't have a fucking clue of where to place your money. Cash is trash! Solar bitzchez!!!! LOL!
How pithy.
What a complete, pathetic, and utter Jerk.
We find out at 3:30 what today was all about. Go grab your playboy off your toilet and relax.
LOL, I agree, Playboy and toilet paper and wait for the grand finale!
http://rawstory.com/rs/2010/0608/obama-quietly-declines-nominate-cia-wat...
Nothing to see here, move along now.
I am Chumbawamba.
The CIA spook Gods don't want to be second guessed nor have to explain themselves to anyone. After all, when all you're doing is right with God, country and yourself, you can never do anything immoral or illegal, right?
Ask Blankfein. Does this mean I'm barred from heaven?
Nope, your welcome. Just bring some light clothing. I hear it's warm down....er...up there this time of year.
Hey good job on savng that girls life in New Jersey.
A deck collapsed and the little girl was saved by her floaties!!
I was kind of surprised they didn't recommend any gold or silver either given their bearish outlook. But here's an interesting view on gold from John Hathaway, one of the longest running gold bulls:
http://www.goldalert.com/stories/The-Gold-Price-and-Fighting-Deflation
Hey Chumbawamba...can I have your address...lol!
And to think -all of this right after a Bilderberg meeting!
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." - Napoleon Bonaparte, 1815
IMHO, Cash is a better position then the markets. With that said, PM's are a better position then cash at this point in time.
Gold will always be money.....FRN's.....not so much!
You know Pappy taught me the three F's that are important in life, Food Fuel and Firearms. Should it come to what ya all are talking about, lets hope you got all that there Gold hidden away real nice.Cause I'm purdy good with that there 30 ot 6 Remington. Hope you can eat your Gold.
Have you considered stocking up on a little junk silver as well? So we can trade like semi-civilized people instead of killing each other? It works great amongst like-minded folk.
+ one silver bullet. for the predators.
Gold and silver are for me.
Lead is for anyone coming to take my Au and Ag away.
You did not listen to your Pappy correctly:
The Three F's are:
Food, Funds, and Firearms.
And if your funds are anything other than physical gold and/or silver, you automatically pick up the Fourth F:
F*cked.
Go listen to your Pappy again.
They got it half right. Now tell them the rest of the tale and say 'buy gold'
They got it half right. Now tell them the rest of the tale and say 'buy gold'
So we've gone from "green shoot of recovery" to "double dip recession unlikely".
Hmm... Is that progress ? What's next.... "Depression unlikely to last for a long time" ??
Setting up for a flash crash!!!
Well never mind....how the hell did the pull the rampjob off this time?
Given the key issue at hand, as discussed by BMO - Shortage of $$ and Europe trying to get hold of as many $$ as possible, it follows that many hedgies on both sides of the Atlantic are feeling the pain, especially those who put their hope in ECB and its monetary discipline (so much for that).
I have a question for this esteemed group, please all and any thoughts on this is are appreciated.
First the scenario, based on a few numbers I’m seeing, big players, banks, funds and hedgies are all looking for liquidity at some level, a price they are paying for their hubris and underestimating the rot within the system. So when one looks for liquidity, one tends to sell the best performer (contrary to logic), and given the deflation expectations among many, GOLD - is an ideal candidate. So the big pools are liquidating, while retail is panicking (in terms of debasement of currencies and therefore buying GOLD) both in Europe and Asia and not so much yet in US. IMF will be looking for $$ shortly and my bet is there will be more supply of Gold in the market sooner than later. There are few more factors, but without getting into them, I’m sure this audience gets what I’m trying to say, Gold prices should be seeing a lot of downward pressure at this point and not regaining it highs. (Let me clarify, I am partial to gold and expect it to hit $34xx in the next 4 years), however, this recent price action, along with global trends, suggests somethings afoot.
One possible explanation might be the, big houses (without naming names) are looking to raise cash as noted above and hence forced to sell some physical, and if I have the ability to set(manipulate) the Gold market price I would try to set it as high enough as possible without raising any flags. So that brings us to the question who is buying all this physical from these big houses, my take is a sovereign in Asia who’s reserve portfolio is appreciating with appreciating $$ and not to mention its currency. Yes I think China is aggressively accumulating Gold now that it has built up its copper and iron reserves. China is also taking advantage of a strong $$ while it lasts.
The strong prices in Gold, the last couple of days may have lot of reasons - technical, retail panic, etc. but I strongly suspect there is more to it that meets the eye and am trying to come up with the most logical explanation, and I don’t think is simply panic buying by retail, but something new and big has presented itself as a suitable challenger to the esteemed houses.
Again any thoughts are appreciated. IB
I think you just lent credence to the old axiom: Gold is money -- as you have just defined it.
My thoughts -- your logic and reasoning are too good for zh and will not be appreciated by the zh patrons.
Cash? Too bad 60% of US 'cash' is overseas
All that cash will be rolling back on U. S. shores soon enough. Let's just hope it's not a tsunami.
Doubt it. The cash JC was probably inferring to is held by CB's as reserves incase they want to purchase...say some gold. Can't have it both ways. Unless they purchase that gold or oil from the US, then it remains expatriated. Best way to have all that cash roll back on shore is through either 1) thriving US export economy or 2) booming interest rates. Two scenarios unlikeling in the short to mid term. (short being 6 months, mid being 2 years)
Maybe they'll just buy real estate and professional sports teams.
I hope this post goes in the proper place...
Steaming Wookie Do, that was an excellent post. In order to live through a horrible disease, sometimes one has to go through major surgery and treatments. The US is about to force the powers that be to go to the operating room, like it or not.
Nothing pulls a country out of a severe recession like war unfortunately.
What if they had a war and nobody came? Hoping that the Internet does not crash, there may be some hope that false flags and what-not will be apparent.
Now is the time to sell gold! A bubble is when buying is done due to fear or greed and right now there is a lot of both going on. The gold bubble will burst, but before it does, if you own it, now would be a good time to sell it!
Gold is the snuggie of investment.
So if gold, which maybe 1% at most of the polulation owns, is in a "bubble", then how would you describe the markets for the US dollar and world governmental debt?
By diligently hunting for the gnat in the room, you have managed to overlook the elephant --- and he is ready to go on a rampage!
Hot damn! Well said.
That elephant is about to leave a steaming pile right in Ira's living room.
Gold's 'Real Move' to $7,000 ComingPrice Manipulation in Gold and Silver?
Record inflows for gold fundsThere are too many people selling gold for gold to be in a bubble.
Most buy Gold as insurance (except Gold Bulls)....you know incase the economy tanks, the dollar become worthless, paper no longer accepted, market crashes, etc.. Or maybe I'm just a silly preparedness whacko....which I am.
I don't think your silly at all. There is nothing wrong with preparing for the worst and hoping for the best. IMHO, gold is insurance and also a store of wealth. You could do a lot worse and not have any gold or silver (physical). Everyone has a strategy and those that are aware will prepare;if they are financially able.
Me too sir.
by definition a bubble requires a mania, or to put it another way, a suspension of reality on the part of the investor. There are too many people out there talking down gold; few people are buying gold for irrational, emotional reasons. People are buying gold on the basis of analysis. So, I dont think we are near a bubble yet. Also, there is the matter of supply; bubbles occur with markets or objects where more of the thing involved can easily be created (e.g. new houses, cheap loans, stock offerings). It is difficult to conjur up gold; it has to be mined. I am at 18% gold now and comfortable with that.
As kindof an aside to this aside, I'm having a hard time coming up with any instances of buying something, that don't somehow involve either fear or greed (desire). In fact, my understanding is that those Wondertwin Powers are what keep markets balanced. (refer to 'moral hazard', to see what happens when fear is removed.)
Did anybody read Bob Dolls pathetic article in the Wall Street Journal today?
Buy equities, the US is not as bad as Europe.
BlackRock is too big to fail you know.
When will it end?
Too many playas. Too little time. If you want to 'invest', then good luck. This is an environment for being carried out on a regular basis if you still believe Capitalism 1.0 still works. It doesn't, and the change coming will send people running as fast as they did when the Vikings invaded our island paradise back in the first millenium A.D.
The paper may be right in theory, but let's be real here - they'll unleash QE 2.0 way before we see the March 09 lows again.
OK, I'm late to this thread, I was at political meetings all day.
There are no buyers for Greek debt at the ECB’s zombie price. The ECB’s balance sheet has been weakened by that move.
If they are all swimming together, as is currently the case, then the macro environment is in a contagious state (correlations tend toward perfection, or R goes to 1, ONE).
Even a dumbshit like me knows what that means.
all join hands and sing "We Are The World..."
now you got that damned song stuck in my head...
heh
why would they say go to 100% cash instead of just cover your positions?
Seems a little too extreme to me to be called "advice".
paradigm breakage = extreme.
Go to cash is like 'go to' in Shakespeare. GTFO.
Or, we recommended that you all buy oil and base metals while we naked shorted the life out of every gold mining company in existance and can't seem to settle.
So take what cash you can, and for god's sake, don't buy any gold miners, like your mother is telling you.
Oh, yes. We forgot. Dr. Pangloss is on a holiday and can't be reached.
I don't know shit but I bought scared to death when Ron Paul told me what was up. a few years ago.
Nothing wrong with cash.
But.. which bank will guarantee my cash deposits during a bank holiday?
Does the article suggest to take cash out and hoard it at home?
That would be at least consequential.
whups, I got refresherized.
I think Hugh H. summed it up best.....I recommend you panic!
On being junked ....
I have noticed the whole junk issue over the past few days. And seems to me some are being targeted.
Not sure how this site is being hosted so I don't know how much control the ZH people have but it would be simple to write a script that looked for the outliers - both junked and junkee - and accorded permissions accordingly or set both cases up for manual review.
Agree
I recommend you panic.
The only play worth playing is going short EU and U.S. equities, and shorting industrial input commodities (i.e. crude oil), while going long the VIX and Gold.
Check out our most recent winning trade strategies @ http://bit.ly/cUFQBJ , and please by all means tell us how we're wrong, b/c we know we're RIGHT!
How can you do the math to figure a short when there is no way on heaven nor earth to predict how many dollar bills Bernake will toss out of the helicopter? It's Monopoly money at this point.
From Garth Turner.....................
http://howestreet.com/articles/index.php?article_id=13696
The doomer side of the Net, for example, and portions of this degenerate blog, were rocked in past hours by a “go to cash” report attributed to BMO Nesbitt Burns – usually in the business of flogging stocks and mutual funds to crusty millionaire white guys from North Toronto. Word flashed that a major Canadian bank was telling its clients to dump equities and run into paper – which would have been a big deal, if true. Turns out the report was the cry for attention by a single BMO Capital Markets quant, Mark Steele, whose office I spoke with yesterday.
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