Hey Gold, Don’t Get Cocky!

Gold Fever - Article Header

Seen this movie?  If not, it appears to be starting another theatrical run.

With the recent action in gold, the precious metals bugs are are all stirred up.  Price action has been constructive.  Big time asset management names are mentioning it and the metal is definitely conveying a message.  New songbirds are putting their price calls out there for short-term and long-term destinations.  The old songbirds are putting their same old calls out there as they suffer permanently from the fever.

There’s no fever like gold fever, and I’m an expert in the symptoms.

We’re already seeing the $10,000 and up per oz. calls for gold.  What’s funny is you see the same old reasons for why precious metals are going to boom.  Everybody was selling the same handful of points in the last gold bull run and those same points are being tossed out there again as if they have meaning or truth.

– Negative real interest rates

– Excessive debt loads

– Accommodating monetary policy by central banks

– US Dollar losing value via debasement

– Inflation expectations

– Supply shortcomings

This is folly.  These are not reasons for anything; merely convenient sales pitches that still work on the zealous subset of speculators that are looking for either a reason to stay devoted to the precious metals or believe an amazing amount of money will be made by a small speculation.

From a technical analysis standpoint, it’s time for a rally and the price action hasn’t disappointed thus far.  However, technical analysis has virtually no merit any more due to the advent of the internet.  This has been statistically proven.  Tape-reading still has merit in conjunction with technical analysis and fundamental analysis, but it takes real talent and luck to fight the machines.  Here’s a Captain Obvious chart of gold proving higher prices in the making.

Snarky Gold Chart (7-13-2019)

But there’s only one thing that could potentially drive the price of gold and the precious metals to those high price levels so blithely forecasted.  Here it is in plain, bold English:

A HIGH PERCENTAGE LOSS OF RESERVE STATUS IN THE USD

That’s it.  I believe that to be the only driver that will get gold up over $5,000/oz. or higher.  Something in the order of the USD losing perhaps 35% or more of it’s reserve status which will coincide with decreased use of dollar-settlement in international trade.  Or said another way, chaos.  Because if the rest of the world decides to shift part of the USD’s reserve status to another currency whether it’s gold, Bitcoin, SDR, yuan, etc.; you can bet those in power in the US will be wreaking havoc as a result.  This will be adjoined to the financial/economic chaos that will already be in place.

There still exists old-world faith in the precious metals, and blockchain currencies do not have enough cumulative faith by investors to reel in allocation decisions.  This is the path for significantly higher prices in gold, silver, and the PGM complex; potentially even for the commodity complex.

Regime changes in currency reserves are not fast.  They don’t just happen like a stock market correction.  Many powerful and wealthy nations have a vested interest in the USD maintaining it’s ultimate reserve status.  Just bear that in mind as we watch the dynamics between all asset classes, markets, economies, and countries play out in real time going forward.

It’s tough to visualize if you can’t foresee a world where the USD loses place and face.  But hell, don’t take my word for it.  Google and consider the opinions about the subject of some of the most powerful financial insiders in the world:  Larry Fink – Head of Blackrock, Ray Dalio – Largest principal in the largest hedge fund in the world, and Mark Carney – Head of the Bank of England.

Ain’t no fever like gold fever.  Keep your wits goldbugs.

The Game of the Workplace

Whether you’ve been in the game for a while or are just entering the game, there’s some core concepts to truly understand in order to build a career to a place of satisfaction.  Having now been around the block a couple of times i.e. I’m old, I’d like to share a few more workplace truths to tack onto my 2012 piece about Perception Management.

Concept #1:  Your career advancement is not based solely on merit

In other words, just because you may be a high-performer, doesn’t mean you’re going to earn that snazzy title and a solo-office…or a corner office.  WHAT?!  Say it ain’t so!

Maybe you’re the fastest programmer with least bugs and consistent best end-user experience, maybe the top sales person, perhaps the highest performing middle manager, etc., whatever.  And yet, you’re still not getting promoted.  Why is that?  Have you considered your ability to manage-up?

Managing-up is simply managing the relationship with your superiors, in all facets.  This means you have to manage how you are perceived in addition to “Exceeding Expectations” in your performance.

If you’ve worked in any organization long enough, you’ll inevitably encounter upper management or executives and wonder how the heck they got there.  Managing-up is how.  Control the narrative around your career and you at least have a chance at controlling your advancement or stasis.

Combining the ability to positively manage others’ perception of you with your own ability to outperform to expectations is a great way to garner success.  Not the best way, but a great way.

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Concept #2:  You catch more flies with honey, and…

It is easier to win by cooperating and complementing your teammates’ skill-sets.  Even if that teammate is a competitor, by working together, you can both achieve more.

Cliche?  I know.  But why do you think this concept is constantly reiterated in sports and in the workplace?  Better to play nice and lift each other up than to look down  your nose, judge, plot, and scheme.  Leave the plotting and scheming to the talentless hacks who solely manage perceptions to cover for their absence of talent.

Concept #3:  Discipline!  Discipline is the key!

I said out-performance and perception management are great but not the best.  Combine those two notions with discipline and there’s the true formula for success.  Proven over and over; not statistically but visually, anecdotally, and through the countless commentaries of the successful.

How many stories have you yourself read about some successful person you admire where they comment on discipline?  It’s also known as the ability to outwork, to consistently apply the process, stay focused, etc.  Whatever you want to call it, discipline is about mental-toughness.  And combining discipline with concepts 1 and 2, my friends, is how you win in business.

Sure, this is a broad generalization.  There is nuance to all concepts, but the core concepts are the truth to success in the workplace.

image.pngNow all that being said, am I some successful, retired-early, self-made millionaire?  No.  I work for a living with the hopes of getting there one day soon.

But I’m just north of 40 years of age and I ignored those three concepts for the bulk of my multiple careers.  It cost me.  I have had a modicum of success and am just young enough to still apply these concepts and hopefully reach my business goals that much faster.

If you’re in your 20’s or 30’s or any age and have somehow come across this post, I implore you to please not ignore these simple lessons shared.  They seem like common sense but we all know how uncommon good sense can be.

If you consistently apply these three concepts in the workplace, then like the great coach Herman Boone says, “…like Novocain.  Just give it time, it always works.”

Speed, Glorious Speed!

If there is one thing that has been so dramatically impacted in the markets since 2008, it’s the speed of moves.  The causes are widely known.  Number one, high frequency trading (“HFT”).  Number two, massive amounts of money and capital backing HFT ops in conjunction with low-cost capital freely available to the “players” for any and all speculations.

A player is defined as bank trading desks, asset managers, hedge funds, pensions, university endowments, insurance companies, sovereign wealth funds, and any other sufficiently large entity managing money or assets.  And let’s not forget corporations and their buybacks.

The sheer velocity with which trend changes initialize now is amazing.  Trend followers will continue to have their impact because of their late nature to a move and their “pore-on” effect once the action is deemed legitimate.

Which leads us to the current sentiment in the buck, treasuries, bank stocks, copper, and steel.

Trump wins.  Buck goes up.  Bank stocks go up because rates go up.  Copper and steel go up because Trump is going to build four regional towers with elevators that reach the moon.  He’ll also build hyperloops all around the US.  Additionally, he’s going to revamp every bridge, tunnel, and plain old road with $4 trillion worth of modernization.

That’s how those five assets are currently trading.

Says to me, a short looks pretty good here.  I may be a little early.  But I think profits will be taken as fast as they’ve been made if sentiment reverses and the fervor dies down around the president-elect.

Convoluted Copper Chart - Weekly (11-28-2016)

Take copper.  The chart’s a little convoluted, but everything on it are charting 101 tools.  So chartists will instantly see what’s appears to be logical retracement points on a potential reversal of this fast trend.

That green-red, support-resistance line terminates right at the 20-week EMA.  If we were to see a profit-taking event, $2.30/lb. is as good a spot as any to maybe lock in short-profits as the mega-breakout at $2.20 just may be legitimate.

The same analysis can be applied to the other four assets, especially steel.  Using US Steel as a proxy, a 20% correction wouldn’t be surprising in the least.  There’s also a monster gap up at $20.

Two things most traders love, gaps and stems.  Technically, the stems are called “wicks” or “tails.”  I call’em stems because once they begin to grow on the underside of a candle, long profits seem to blossom.

It sure looks like little piles of money are building over in the corner.  Even if you don’t have the guts to go short, keep your eyes on the US dollar, Treasury yields and T-bonds, bank stocks, copper, and steel.

Do You Really Think They Won’t Be Bailed Out?

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C’mon world of finance!  Get a grip.  Lehman comparisons.  End of world talk.  It’s all so laughable.  While Deustche Bank going down in flames within weeks would certainly step up the timetable on a global depression; ask yourself.  Does that seem logical?

No, of course not.  They will be bailed out.  Just because Merkel came out and said that a direct bailout of Europe’s largest public bank is untenable, doesn’t mean it’s not going to happen.  Remember.  “When it becomes serious.  You have to lie.”  Period.  End of story.  Politics 101.

A backdoor bailout of Deustche Bank will occur.  It’s guaranteed.

Anybody remember this little document put out by the German central bank in July, just a couple of months ago?  It’s the inaugural listing by the Deutsche Bundesbank sharing their listings of investment grade bonds they purchased.  Who say’s they can not purchase junk bonds?  Equities are on the table.  When you’re pumping out that much stimulus via the ECB, it has to go into something as there simply isn’t enough supply of quality sovereign debt to purchase.

Enter the following:

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The bonds of the staples of the German business world and economy are on the German central bank’s balance sheet available for lending.  Which from my last post, you know what that means.

I suspect because the issue is so white hot, front and center to the world that the Bundesbank will not directly purchase a new bond issue or equity rights offering from Deutsche Bank.  However, that doesn’t mean that the ECB can’t put together a syndicate of Deutsche Bank counterparties to their insane derivative book and insure wholesale funding for purchases of dilutive financing or share issuances to support Deutsche Bank’s capital level.

I’m sure it wouldn’t be too hard to convince JPM, Citi, Goldman, BofA, HSBC, and let’s throw in Belgium too to come up with wholesale funding in order to buy newly issued debt and shares.  It’ll be perceived as the banking world trying to maintain the safety of the entire banking system and world economy.  Really, it’s just a grab for more time to stave off the inevitable market and economic collapse.

So relax.  Deustche Bank ain’t going down yet.  Go short those Deutsche Bank credit default swaps zipping up in value currently?  Close out your put strategies.  The music will continue to play and you must get up and dance.  DANCE PUPPETS!

Take a Break From the Markets and Enjoy Some Footage of MMA’s Potentially Next Big Thing at 135/145

Currencies are swinging with volatility. The S&P 500 continues to confound with its flat run for the year. Commodities are blowing apart everybody’s theory on hard asset alternative investments. So what to do? Have a short look at Boston Salmon

With a name like Boston Salmon, he’s just gotta be star. Right? If you’re a fight fan, then keep an eye on this young Hawaiian. He hasn’t been called up to the UFC yet as he’s still paying his dues in RFA, which is one of the minor-league feeders up to the main event. Their promotions usually air on AXS, which is generally offered as part of a basic package by local cable or satellite providers. It won’t be long before Dana comes’a calling for Mr. Salmon, though.

This youngster possesses super-crisp boxing, like many of the Hawaiian mixed martial artists. Shoots! But Salmon has extreme KO power to go with the boxing skills. He’s already one of the best combo throwers I’ve seen in a long time, but again, that’s not against the world’s best fighters yet. He’s also very skilled at takedown defense and the times I’ve witnessed a shot work on him, he just gets right back up ala The Iceman in his prime.

What really makes me love Boston Salmon’s skills though is his deadly-accurate, ultra-fast kick to the liver. Boston is a southpaw so he doesn’t have to utilize a switch before throwing it with power. The southpaw stance also allows him to whip the kick with more speed into the unsuspecting opponent’s liver. It easy to tell that this kid has practiced this kick tens of thousands of time in his life. It’s the best I’ve ever seen and I’ve been watching MMA fighting since it was only accessible on VHS back in 1995. Trust me when I tell you, I’ve seen my fair share of devastating liver kicks. Salmon uses his to perfection.

Against fellow stand-up bangers, he’ll soften them up with the left kick to the body and then it’s only a matter of time before the final outcome. What he’ll have to watch out for is when he’s up against the world-class ground guys who are superb at countering kicks with a shot or catch. It’ll be interesting to observe Boston Salmon’s progression. Impressive, athletic bangers aren’t always guaranteed stars. See Uriah Hall.

If you’re unfamiliar with Salmon, have a two-minute watch of 3 of his highlights.