Tuesday, September 20, 2016

Gold Miners Correction Continues - Where Does It Stop?

Gold and gold miners have sold off significantly over the past six weeks.

With the Bank of Japan and FOMC decisions immient, we need to prepare for the next move.

A dovish BOJ may embolden the Fed to raise rates this month.  This is a secondary premise.

The primary one is the BOJ does very little and the Fed puts off a rate hike for another few months.

Our estimate of market reaction is a relief rally for miners followed by more choppy price action once the announcement is made.

Any strong pullback in gold or miners is likely to be bought and is a buying opportunity in our view.

Tuesday, September 6, 2016

Swiss Pension Funds - You Are On Your Own Now

Swiss National Bank sees limited scope to help pension funds

The Swiss central bank has little scope to help pension funds hurt by low returns, Chairman Thomas Jordan said on Tuesday.

He acknowledged the difficulties but told an audience at the University of Lucerne:

"A large part of the challenges faced by pensions ... is to do with regulations, the real economy and demographics and so is of a structural nature.

The Swiss National Bank has charged a negative interest rate of -0.75 percent on deposits it holds for commercial banks beyond a certain threshold since January 2015. The policy is designed to relieve upward pressure on the Swiss franc by making investments in the currency less attractive.  

My view:

Swiss pensions are now under stress as the Central Bank undermines their returns with a negative interest rate policy.  The statement that they have limited ability to help the funds is blatantly false, as funds are spiraling down in value as the SNB policy to keep the Franc down hits Swiss bonds and 
cash hard. 
We are not yet at the point where stocks (a privately held asset) and gold, the oldest form of money scream to new highs.  First a point of recognition must occur in the minds of the public and fund managers that government bonds are garbage and will only provide negative rates of return both in asset value and yield.

In the United States, bonds are still yielding above zero rates.  We anticipate that the US bond market will effectively be the last man standing before it too succumbs to negative yields in due time.

Friday, September 2, 2016

Something That Makes You Say Hmmm

From Kitco:
  • Gold futures                                                    + 25%

  • Silver futures                                                   + 39%

  • S&P 500 Index                                               + 6.72%

  • 10-Year Treasury Yield                                  + 1.60%

  • 10-Year German Bond                                   - 0.5%

  • US dollar index                                               -3.39%

  • China's Shanghai Composite Index                -13.4%

  • Japan Nikkei Stock Average                           - 11.1%

  • Europe Stoxx 50                                             - 7.7%

  • Sao Paulo Bovespa (Brazil)                            + 34.3%

  • Dax – Germany                                              - 1.9%

  • CAC 40 – France                                             - 4.3%
Performance data through Sept. 2.

My view:

It is telling that two zero return assets classes, gold and silver, are outperforming nearly every other asset class.

Can we believe the all is well story the central bankers and preeminent economists tell us given these facts?