We have been living in a new era of “fantasy finance” since the Fed officially intervened massively, in 2009, and since the non-official control of the gold price, in 2013. Investors are now thinking that everything is possible: stocks rising into infinity, oil being given to us by producers and refiners almost for free (it sells cheaper than mineral water), countries that can borrow at historically ri-di-cu-lous rates, and, no later than just a few days ago, a bank in Denmark that pays people to contract a real estate loan (negative rates) ! The financial world, with its lies and immoral management, has been transformed into a Pinocchio’s Enchanted Island... for adults !
It’s the start of a new year. The question is whither the prices of gold and silver? This Brief presents our answer.
It all looked so rosy just a few short hours ago. WTI crude has slipped from over $58.50 (once again testing that upper band of resistance) to back below $56 and down almost 2% from Friday's close (not stabilizing). While the S&P and Dow (futures) remain green, the Nasdaq has tumbled into the red on the heels of Gilead's weakness (the 6th largest name in the Nasdaq 100).
"As a result of our investigation, and in close collaboration with other U.S. Government departments and agencies, the FBI now has enough information to conclude that the North Korean government is responsible for these actions. While the need to protect sensitive sources and methods precludes us from sharing all of this information, our conclusion is based, in part, on the following... the FBI will identify, pursue, and impose costs and consequences on individuals, groups, or nation states who use cyber means to threaten the United States or U.S. interests."
If this is any indication we should see a big move in Renminbi
Investors have been lulled into a state of complacency due to a seemingly "unstoppable" rise in the financial markets. Bad news remains good news, and even small drawdowns are quickly reversed sending stocks surging higher. Eventually, the paradox of what happens when a seemingly unstoppable force collides with an immovable will be answered. Historically, such realizations have not been kind to investors. This weekend's reading list takes a look at the reasons why stocks could rise higher, and the potential they won't. The question to be answered is "What will you do when the immovable object is met."
While technicals remain largely meaningless in the global centrally-planned "USSR market" (as penned by Russell Napier, who asked "Which World Has No Volume, No Volatility And Rising Prices?", his answer: the USSR), pattern-seeking carbon-based traders still find refuge in the comfort provided by technical analysis. So for all those who believe past performance is indicative of future results, here according to BofA's MacNeil Curry is how various asset classes perform during Thanksgiving week compared to all other weeks during the year.
The vast majority of investors are ignoring a major warning that this bounce is not to be trusted.
"Most Important Chart For Investors" Updated: Edwards Sees USDJPY 145 Next And "A Tidal Wave Of Deflation Westward"Submitted by Tyler Durden on 11/13/2014 09:38 -0500
What happens next? Here, straight from the horse's mouth that got the first part of the rapid Yen devaluation so right, is the answer. As Edwards updates with a note from this morning, "the yen is set to follow the US dollar DXY trade-weighted index by crashing through multi-decade resistance - around ¥120. It seems entirely plausible to me that once we break ¥120, we could see a very quick ¥25 move to ¥145, forcing commensurate devaluations across the whole Asian region and sending a tidal wave of deflation westwards."
Woe unto the gold speculators, and a curse laid upon the house of silver.
At least, that’s how it may feel. In more clinical terms...
Back in late September, we posted what Albert Edwards thought at the time was "The Most Important Chart For Investors" which was quite simply, a chart of the USDJPY. Considering the BOJ's overnight move, he was absolutely correct. So for all those who missed it, here it is again, because it explains not only where the Yen is headed next, but why, sadly, this could well be the end of Japan and the mirage of a recovery that has had everybody hypnotized for the past 6 years.
Gold has been in a bear market for three years. Technical analysts are asking themselves whether they should call an end to this slump on the basis of the "triple-bottom" recently made at $1180/oz, or if they should be wary of a coming downside break beneath that level. The purpose of this article is to look at the drivers of the gold price and explain why today's market value is badly reflective of gold's true worth.
In the past few years the stock market has always recovered from corrections to make new highs, and we cannot be sure if the party is indeed over. However, both from a fundamental and technical perspective, the probability that it is over seems quite high. Should market internals and trend uniformity to the upside improve again, this assessment would obviously have to be revised. However, there are surely more than enough warning signs extant now and every financial asset bubble must end at some point.
A correction of significant magnitude is currently “inconceivable” as the U.S. is now “clearly” on a trajectory towards stronger economic growth. This is the “frame of belief” that pervades in the financial markets currently. However, there are many risks investors should not ignore. Making up losses is much harder than reinvesting stored capital once a clearer picture emerges. While the current belief that a correction of significant magnitude in the markets is "inconceivable," We are not sure that word means what they think it means.
If central banks have learned anything since 2008, it's that waiting around for the panic to deepen is not a winning strategy. Put yourself in their shoes. Isn't this what you would do, given the dearth of alternatives and the very real risks of implosion? Anyone in their position with the tools at hand would not have any other real option other than to buy stocks in whatever quantity is needed to reverse the selling and blow the shorts out of the water. If $1 trillion doesn't do the job, make it $3 trillion, or $5 trillion. At this point, it doesn't really matter, does it?