While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
February 24, 2015
Fiat Lux
Featured Trade:
(DIPPING MY TOES BACK INTO GOLD),
(GLD), (SLV), (GDX), (ABX), (PALL)
(THE GAME CHANGER IN INDIA),
(INP), (PIN), (EPI), (EEM), (CEW), (ELD),
(USO), (KOL), (CU), (GLD)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
Market Vectors Gold Miners ETF (GDX)
Barrick Gold Corporation (ABX)
ETFS Physical Palladium (PALL)
iPath MSCI India Index ETN (INP)
PowerShares India (PIN)
WisdomTree India Earnings (EPI)
iShares MSCI Emerging Markets (EEM)
WisdomTree Emerging Currency Strategy (CEW)
WisdomTree Emerging Markets Local Debt (ELD)
United States Oil (USO)
Market Vectors Coal ETF (KOL)
First Trust ISE Global Copper Index (CU)
One of my best calls of 2014 was to plead with readers to avoid gold like the plague, periodically dipping in on the short side only.
Gold certainly delivered disappointment in spades, falling 4%, while the US stocks, bonds and the dollar were on fire. The barbarous relic has been in a bear market since it peaked at $1,922 an ounce at the end of August, 2011.
Gold shares have fared much worse, with lead stock Barrick Gold (ABX) dropping a gob smacking 81% since then, and the gold miners ETF (GDX) suffering a heart rending 74% haircut.
However, the recent price action suggests that hard times may be over for this hardest of all assets. Despite repeated attempts, the yellow metal has failed to break down below the $1,100 support level that I have been broadcasting as the line in the sand.
It rallied $230 off the bottom, and then recently gave up half that move. (GDX) has performed even better, popping 44%. For a sideways to eventually rising gold market, this is a great place to get involved with a short dated call spread.
The Chinese are far and away the world?s largest gold buyers. So when the Chinese Lunar New Year rolls around, the biggest participants disappear. That explains where the latest triple digit dump came from. This will end soon.
Few people realize how small the gold market is. All of the gold mined in human history, from King Solomon's mines, to the bars still in Swiss bank vaults bearing Nazi eagles (I've seen them) would only fill 2.5 Olympic sized swimming pools.
That amounts to 5.3 billion ounces, about $8.6 trillion at today's prices. For you trivia freaks out there, that is a cube with 66 feet on an edge.
China is the world?s largest producer of gold (13.1%), followed by Australia (10%) and the US (8.8%).
The problem for gold bears is they?re not making it anymore. Production has been only rising incrementally in recent years, reaching 2,860 metric tonnes, or 100.9 million ounces in 2014. This is worth $116 billion at today?s prices (see chart below).
That would rank gold 5th as a single Fortune 500 company, just ahead of General Electric (GE). It is also only .38% of global public debt markets worth $40 trillion.
That is not much when you have the entire world bidding for it, governments and individuals alike. Talk about getting a camel through the eye of a needle!
The old inflation adjusted high of $2,300, nearly $400 higher than the record absolute price of $1,928. No wonder buying is spilling out into the other precious metals, silver (SLV), platinum (PPLT), and palladium (PALL).
Like an ugly sister, it is hard to love gold in a disinflationary world. However, I think we are getting ripe for a technical rally that could take up $100 or more from here for the nimble. The recent high at $1,228 seems like a chip shot. That works fine for a deep in-the-money call spread position.
When playing in the gold space, I always prefer to buy the futures, or the (GLD), the world?s second largest ETF by market cap, either outright, or through a longer dated call spread. The dealing costs are far too high for trading physical bars and coins, and can run as high as 30% for a round trip.
Having spent 40 years following mining companies, I can tell you that there are just way too many things that can go wrong with them for me to risk capital. They can get nationalized, suffer from incompetent management, hedge out their gold risk, get hit with strikes or floods, or get tarred by poor equity market sentiment.
I do believe that a true bull market in gold will return some day, just not now. Inflation will make a comeback in the 2020?s. Newly enriched emerging markets will also want their central banks to raise gold holding to western levels, which implies a long term purchase of several thousand metric tonnes.
For all the statistics about gold you?d ever want to read, please visit the World Gold Council at their site at http://www.gold.org/supply-and-demand.
So far in 2015 the Indian stock market has handily beaten that of the US, by 10.6% compared to 5.3%.
?The India election result is the biggest development to affect emerging markets over the last 30 years.? That is what retired chairman of Goldman Sachs Asset Management and originator of the ?BRIC? term, Jim O?Neal, told me last week.
Indeed, the stunning news has sent long term country specialists scampering. In my long term strategy lectures I have been titillating listeners for years with predictions that India was about to become the next China.
With half the per capita income of the Middle Kingdom, India was lacking the infrastructure needed to compete in the global marketplace. All that was needed was the trigger.
This is the trigger.
With a new party taking control of the government for the first time in 50 years, the way is now clear to carry out desperately needed sweeping political and economic reforms. At the top of the list is a clean sweep of corruption, long endemic to the subcontinent. I once spent four months traveling around India on the Indian railway system, and the demand for ?bakshish? was ever present.
A reviving and reborn India has massive implications for the global economy, which could see growth accelerate as much at 0.50% a year for the next 30 years. This will be great news for stocks everywhere. It will help offset flagging demand for commodities from China, like coal (KOL), iron ore (BHP), and the base metals (CU).
Demand for oil (USO) grows, as energy starved India is one of the world?s largest importers.
A strengthening Rupee, higher standards of living, and relaxed import duties should give a much needed boost for gold (GLD). India has always been the world?s largest buyer.
The world?s largest democracy certainly delivers the most unusual of elections, a blend of practices from today?.and a thousand years ago. It was carried out over five weeks, and a stunning 541 million voted, out of an eligible 815 million, a turnout of 66.4%. That is far higher than elections seen here in the United States.
Of the 552 members in the Lok Sabha, the lower house (or their House of Representatives), a specific number of seats are reserved for scheduled castes, scheduled tribes, and women. Gee, I wonder which one of these I would fit in?
Important issues during the campaign included rising prices, the economy, security, and infrastructure such as roads, electricity and water. About 14% of voters cited corruption as the main issue.
Some 12 political parties ran candidates. The winner was Hindu Nationalist Narendra Modi of the Bharatiya Janata Party (BJP), who led a diverse collection of lesser parties to take an overwhelming majority. For more details on this fascinating election, please click here at http://www.ndtv.com/elections.
It is still early days for the Bombay stock market, which has already rocketed by a stunning 20% since the election results became obvious last week.
This could be the beginning of a ten-bagger move over coming decades. Managers are hurriedly pawing through stacks of research on the subcontinent they have been ignoring for the past four years, the last time emerging markets peaked.
In the meantime, the action has spilled over into other emerging markets (EEM), their currencies (CEW), and their bonds (ELD), which have all punched through to new highs for the year.
I?ll be knocking out research o specific names when I find them. Until then, use any dip to pick up the Indian ETF?s (INP), (PIN), and (EPI).
?China is still the 800 pound gorilla. Maybe it?s no longer going to grow at 10%, but it?s still going to grow at a faster rate than Europe or the US,? said Edwin Rodriguez Jr., the biggest financial advisor in Louisiana, with $2.8 billion in assets.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more