Author Archives: Pater Tenebrarum

     

 

 

Special Guest Trey Reik and Board Member Jim Rickards Discuss Fed Policy

On occasion of its Q1 meeting in late January, the Incrementum Advisory Board was joined by special guest Trey Reik, the lead portfolio manager of the Sprott Institutional Gold & Precious Metal Strategy at Sprott USA since 2015 [ed note: as always, a PDF of the complete transcript can be downloaded further below].

 

Trey Reik of Sprott USA.

 

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A Recurring Pattern

When the gold price recently spiked up to approach the resistance area even Aunt Hilda, Freddy the town drunk, and his blind dog know about by now, a recurring pattern played out. The move toward resistance fanned excitement among gold bugs (which was conspicuously lacking previously). This proved immediately self-defeating – prices pulled back right away, as they have done almost every time when the slightest bit of enthusiasm emerged in the sector in recent years.

 

There is a well-known resistance area in gold priced in USD between roughly $1360 and $1380. It has become the proverbial watched pot.

 

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Pater Temporarily Keels Over

Regular readers have no doubt noticed that the blog has fallen silent for around three weeks and may be wondering what has happened. In a nutshell, we were hospitalized. After a lengthy time period during which our health gradually but steadily deteriorated (we have complained about this previously), we finally keeled over. Thereupon we were forced to entrust the ruin that houses our mind to an experienced team of doctors (depicted below).

 

A great many diagnostic and treatment alternatives were tried, including experimental ones. The fact that we remain among the quick is a strong hint that something must have helped.

 

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Drain, drain, drain…

 

“Master!”, cried the punters,

“we urgently need rain!

We can no longer bear

this unprecedented pain!”

“I’m sorry my dear children,

you beg for rain in vain.

It is I who is in charge now

and mine’s the put-less reign.

The bubble dragon shall be slain,

by me, the bubble bane.

That rustling sound? That’s me…

as I drain and drain and drain.”

[ed note: cue evil laughter with lots of giant cave reverb]

 

a public service message by the Fed chieftain, rendered in rhyme by yours truly

 

Money from thin air going back whence it came from – circling the drain of a ‘no reinvestment’ black hole strategically placed in its way by the dollar-sucking vampire bat Ptenochirus Iagori Powelli.

 

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Has a Bear Market in Stocks Begun?

The stock market correction into late December was of approximately the same size as the mid 2015/early 2016 twin downturns, so this is not an idle question. Moreover, many bears seem quite confident lately from an anecdotal perspective, which may invite a continuation of the recent upward correction. That said, there is not much confirmation of said confidence in data that can be quantified.

 

Our proposed bearish wave count for the S&P 500 Index, which could easily be completely wrong, so take with a big grain of salt. Let us just note here that this chart looks bearish regardless of the wave labels. The latter are mainly meant to serve as an orientation aid (i.e., if something very different from the expected fractal shape develops, we would know that this interpretation is wrong; on the other hand, if the expected shape does develop, we could be reasonably confident of where short term turning points are likely to occur and would have further confirmation that a large scale bear market has begun).

 

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A Year of Turmoil

Dear Readers,

The team at Acting Man wishes you and your loved ones a Merry Christmas / Happy Holidays and all the best for the new year!

Hopefully our missives helped you navigate the treacherous waters of the financial markets this year. As our low posting frequency attests to, we unfortunately continued to be incapacitated by our poor health. Nevertheless, we did our best to chronicle the growing cracks in the bubble edifice.

 

Evidently the Bad Santa got hold of the markets this year.

 

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The Seasonal Trend Inversion Continues

By now it has been pretty well telegraphed that the Fed will likely announce that it is going to end its “automatic 25 bps rate hike every quarter” policy and replace it with some sort of “incoming data dependent” version. Normally one would expect this to constitute a “buy the news” event, especially in view of the recent sharp decline in the stock market. However, there are still a few problems with this idea –  the chart below illustrates one of them.

 

The eerie, almost perfect inversion of the usual seasonal mid-term election pattern continues unabated – and even though we have pointed this out for quite some time, we are also a bit surprised by how persistent this phenomenon has been.

 

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Worldwide Liquidity Drought – Money Supply Growth Slows Everywhere

This is a brief update on money supply growth trends in the most important currency areas outside the US (namely the euro area, Japan and China)  as announced in in our recent update on US money supply growth (see “Federal Punch Bowl Removal Agency” for the details).

 

Nobody likes a drought. This collage illustrates why.

 

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US Money Supply and Credit Growth Continue to Slow Down

Not to belabor the obvious too much, but in light of the recent sharp rebound, the stock market “panic window” is almost certainly closed for this year.* It was interesting that an admission by Mr. Powell that the central planners have not the foggiest idea about the future which their policy is aiming to influence was taken as an “excuse” to drive up stock prices. Powell’s speech was regarded as dovish. If it actually was, then it was a really bad idea to buy stocks because of it.

 

Jerome Powell: a new species of US central banker – a seemingly normal human being in public that transforms into the dollar-dissolving vampire bat Ptenochirus Iagori Powelli when it believes it is unobserved.

 

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The Mighty Gartman

Investment newsletter writer Dennis Gartman (a.k.a. “the Commodities King”) has been a target of ridicule at Zerohedge for a long time. His pompous style of writing and his uncanny ability to frequently make perfectly mistimed short term market calls have made him an easy target.* It would be quite ironic if a so far quite good recommendation he made last week were to turn into the call of a lifetime (see ZH: “Gartman: ‘We Are Officially Recommending Shorting This Rally'”).

 

A little collage devoted to the Commodity King. It is easy to see how he ended up being made fun of. Actually, by now he has garnered a quite sizable fan community at Zerohedge and other web sites that report on his frequently ill-timed flip-flops (often announced with great conviction). However, a major call on the stock market he recently made seems to have been perfectly timed.

 

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Crony Capitalism vs. Free Markets

Many of our readers are probably aware of the excellent work our friend Jonathan Tepper does for Variant Perception (VP)*****, a financial research boutique that really does bring a unique perspective to the table*. Jonathan (with co-author Denise Hearn) has just added a new book to his résumé, which is going to be released on 12 November: The Myth of Capitalism (MoC) – Monopolies and the Death of Competition** (a link to the official site is at the end of this post).

 

Jonathan Tepper and Denise Hearn: The Myth of Capitalism, an excellent plea for more competition and free markets.

 

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Economic Man Threatens to Leave You Alone if Elected

This one is mainly for readers residing in that glorious water source for California commonly known as Colorado. In case you are not aware of it yet, Roger “Economic Man” Barris, an occasional contributor to this site, is running for Congress in Colorado on a Libertarian Party ticket. We will briefly explain why you should vote for Roger, but first two pictures:

 

Roger Barris, Libertarian Party candidate for the House of Representatives, 2nd district.

 

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Most read in the last 20 days:

  • How Beijing Uses Fake Money to Cannibalize the U.S. Transit Market
      A Distorted Landscape One of the more remarkable achievements of fake money creation is that it distorts and disfigures the world in odd and uncanny ways.  Dow (not quite) 27,000.  Million dollar shacks.  Over $13 trillion in subzero-yielding debt. You name it.  Any and every disfiguration is possible with enough fake money.   The global stock of outstanding government bonds with negative yields-to-maturity reaches a new record high of more than $13 trillion – this is...
  • Gold, the Safe Haven - Precious Metals Supply and Demand
      Investments vs. Money Last week the price of gold went up another $11, but the price of silver dropped 4 cents. The gold-silver ratio hit another new high, up another point, though down from Tuesday’s high water mark. This obviously was not the week that wage-earners increased their money holdings or that institutions expressed a preference for the bargain of silver.   Prosperity is just around the corner... and so is the trade deal. [PT]   This coming week...
  • Independence Day in America Circa 2019
      Freedom and Apple Pie The days are long and hot in the Northern Hemisphere when real American patriots raise the stars and stripes. Today the free and brave, with duty and self-sacrifice, begrudgingly accept federal holiday pay to stand tall upon their own two feet. Rugged individualism and uncompromising independence are essential to their character.   Independence day festivities...   With purpose and intent, they assemble as merry mobs along the shoreline to...
  • The Strange Behavior of the US Dollar in the Wake of Fed Rate Cuts
      A Change in Interest Rate Expectations In the last issue of Seasonal Insights I discussed the typical pattern of stock prices when the Federal Reserve cuts interest rates.  As one would expect, the stock market tends to stabilize after cuts in the federal funds rate. The issue is topical, as many investors and analysts expect rate cuts to be implemented soon given that signs of an economic slowdown are beginning to proliferate.   Market expectations about the direction of...
  • The Four Dimensions of the Fake Money Order
      A Good Story with Minor Imperfections “If you don’t know where you are going, any road will get you there,” is a quote that’s oft misattributed to Lewis Carrol. The fact that there is ambiguity about who is behind this quote on ambiguity seems fitting. For our purposes today, the spirit of the quote is what we are after. We think it may help elucidate the strange and confusing world of fake money in which we all travel.   Consumer price index, y/y rate of change...
  • Wall of Worry M.I.A. -  Precious Metals Supply and Demand
      Too Much Excitement? The prices of the metals fell last week, with that of gold -$9 and silver -$0.32. Of course, it was a week of stock market exuberance. Why would anyone want to own money, or seek safety when the Fed can seemingly push interest down / assets up indefinitely? As the old TV ad for Lotto proclaimed “you gotta be in it, to win it!”   “Stablecoin” Tether is used as a dollar stand-in on cryptocurrency exchanges that offer no fiat currency pairs. There has...
  • Resistance Created by Long-Suffering “Hodlers” - Precious Metals Supply and Demand
      Gold vs Other Assets The prices of the metals went up +$15 and +$0.23. We will be brief this week, as Keith just got off a 17-hour flight from Perth to London. Stocks continue their march upwards. And hence the gold price seems stalled—or is it? It may seem like gold goes up, when stocks go down and vice versa. That’s been the recent pattern. Why should people own money without return, when stocks are where the action is?   Gold-SPX ratio: in long-term gold bull markets,...

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