PM Weekly Market Commentary – 09/11/2020

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  • Sat, Sep 12, 2020 - 07:05am

    #1

    davefairtex

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    Posts: 2187

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    PM Weekly Market Commentary – 09/11/2020

On Friday, gold fell -6.06 [-0.31%] to 1951.39 on moderately light volume, and silver dropped -0.11 [-0.41%] to 26.95 on light volume. The buck was mostly unchanged [+0.02%], as was SPX [+0.05%], crude rallied [+0.94%], and bonds rose slightly [the 10-Year yield fell -1.0 bp].

The metals sector map shows gold leading silver, and the miners mostly trailing the metal. That’s generally bearish for PM. Somewhat surprisingly, platinum was in the lead, while copper trailed along with silver. It appears as though PM is still engaged in a modest correction.
<table border=”1px”>
<tbody>
<tr>
<td>Name</td>
<td>Chart</td>
<td>Chg (W)</td>
<td>52w ch</td>
<td>MA9</td>
<td>MA50</td>
<td>MA200</td>
<td>50/200</td>
<td>Last Crossing</td>
<td>last</td>
</tr>
<tr>
<td>Platinum</td>
<td>$PLAT</td>
<td align=”right”>2.90%</td>
<td align=”right”><span style=”color: #ff0000;”>-2.05%</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #2e8b57;”>ema9 on 2020-09-09</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Senior Miners</td>
<td>GDX</td>
<td align=”right”>0.73%</td>
<td align=”right”>50.94%</td>
<td bgcolor=”#ff0000″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #ff0000;”>ema9 on 2020-09-10</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Gold</td>
<td>$GOLD</td>
<td align=”right”>0.44%</td>
<td align=”right”>29.29%</td>
<td bgcolor=”#ff0000″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #ff0000;”>ema9 on 2020-09-10</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Palladium</td>
<td>$PALL</td>
<td align=”right”>0.42%</td>
<td align=”right”>44.90%</td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #2e8b57;”>ema9 on 2020-08-28</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Gold/Euro</td>
<td>$GOLD:$XEU</td>
<td align=”right”>0.36%</td>
<td align=”right”>21.03%</td>
<td bgcolor=”#ff0000″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#ff0000″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>falling</span></td>
<td><span style=”color: #ff0000;”>ema9 on 2020-09-11</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Junior Miners</td>
<td>GDXJ</td>
<td align=”right”><span style=”color: #ff0000;”>-0.31%</span></td>
<td align=”right”>56.09%</td>
<td bgcolor=”#ff0000″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #ff0000;”>ema9 on 2020-09-10</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Silver</td>
<td>$SILVER</td>
<td align=”right”><span style=”color: #ff0000;”>-0.63%</span></td>
<td align=”right”>48.16%</td>
<td bgcolor=”#ff0000″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #ff0000;”>ema9 on 2020-09-03</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Copper</td>
<td>$COPPER</td>
<td align=”right”><span style=”color: #ff0000;”>-0.98%</span></td>
<td align=”right”>15.21%</td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #2e8b57;”>ema9 on 2020-09-11</span></td>
<td>2020-09-11</td>
</tr>
<tr>
<td>Silver Miners</td>
<td>SIL</td>
<td align=”right”><span style=”color: #ff0000;”>-1.15%</span></td>
<td align=”right”>60.37%</td>
<td bgcolor=”#ff0000″><span style=”color: black;”>falling</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#2e8b57″><span style=”color: black;”>rising</span></td>
<td bgcolor=”#ffd700″><span style=”color: black;”>rising</span></td>
<td><span style=”color: #ff0000;”>ema9 on 2020-09-10</span></td>
<td>2020-09-11</td>
</tr>
</tbody>
</table>
This week, gold moved up +8.60 [+0.44%] to 1951.39 on moderately light volume. The long white candle was a bearish continuation, but forecaster climbed, rising into an uptrend. Gold is in an uptrend in the weekly and monthly timeframes.

Gold/euros rallied +5.89 [+0.36%] to 1649.54 on moderately light volume. The doji candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. Gold/euros is in a downtrend in both the weekly and monthly timeframes.

COMEX GC open interest fell -1.5K contracts on Friday, but rose +19K contracts this week. That was 6 days of global annual production in new paper added to the market. Current open interest for GC: 53% of global annual production, up +1.80% this week. 709 GC contracts stood for delivery at COMEX this week.

Gold commercial net fell -3.6K contracts, which was +4.4K new shorts and +796 new longs. Gold managed money net rose +6.5K contracts, which was +1.8K new shorts, and +8.4K new longs.

While the commercials added to their short positions, and the buck rallied, not much happened to the price of gold this week. Weekly forecaster thinks this was a positive outcome; it flipped back into an uptrend, although a mild one.

Silver dropped -0.17 [-0.63%] to 26.95 on light volume. The high wave candle was a possible bullish reversal (33%), but forecaster fell, dropping into a downtrend. Silver is in an uptrend in the daily and monthly timeframes.

COMEX SI open interest rose +348 contracts on Friday, and rose +78 contracts this week. Current open interest for SI: 93% of global annual production, up +0.04% this week. 518 SI contracts stood for delivery at COMEX this week.

Silver commercial net rose +2.7K contracts, which was -4.0K fewer shorts and -1.4K fewer longs. Silver managed money net fell -1.8K contracts, which was -139 fewer shorts, and -1.9K fewer longs.

The gold/silver ratio climbed +0.77 to 72.41. That’s bearish.

No real change in open interest; there was some short-covering by the commercials. The COT report looks pretty confused right now, compared to what things did historically – the pandemic messed everything up.

The candle print was very mildly bullish, daily ended the week in a mild uptrend, while weekly flipped into a mild downtrend. A lot of mixed signals don’t provide us a lot of guidance as to where prices go next for silver.

 

GDX moved up +0.73% on moderately light volume, while GDXJ fell -0.31% on moderately light volume. XAU rallied +0.51%, the long white candle was a reasonably strong bullish reversal (43%), forecaster dropped, but remains in an uptrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio climbed +0.29%, while the GDXJ:GDX ratio dropped -1.05%.

Miner trends weakened this week; while the candle print was mildly bullish, daily ended the week in a downtrend, price dropped below the 9 MA, and weekly weakened somewhat also. While miners as a group did better than silver, it wasn’t by very much.

Platinum rose +26.46 [+2.82%], and palladium rose +9.75 [+0.42%]. Platinum moved back into an uptrend, althougha mild one. Palladium remains in its uptrend – it is back to looking fairly strong once more.

Copper fell -0.03 [-0.98%] to 3.03 on moderately light volume. The high wave candle was a probable bullish reversal (52%), forecaster dropped, but remains in an uptrend. Copper is in an uptrend in all three timeframes.

Well I said on Thursday that copper had reversed. Just kidding. Friday’s big rally erased all of Thursday’s losses and a bit more besides – copper is back above the 9 MA, and just managed to regain a daily uptrend too. The monthly looked about to reverse too – but that also was unwound by Friday’s big move.

The buck climbed +0.63 [+0.68%] to 93.33 on heavy volume. The swing low candle was a probable bullish reversal (56%), forecaster climbed, but remains in a downtrend. The buck is in an uptrend in the daily timeframe.

Major currency moves included: CAD [-0.80%], GBP [-3.44%].

Note that the big plunge in GBP had to do with the ongoing BRExit negotiations. As usual, things will be pushed right until the last moment; the EU only makes a deal when they have a gun to the head. That time is approaching now. Anyone remember PM May and her Unconditional Surrender approach? That was so long ago it seems like prehistory.

The buck ended the week in a daily uptrend, the weekly candle print was mildly positive (it was a swing low, but not a very highly rated one), and weekly forecaster thought it was mildly good news but isn’t convinced quite yet. At this point, the dollar reversal is still “a process” rather than a confirmed event. FWIW, the Euro remains in an uptrend, although the weekly Euro model doesn’t resolve nearly as well.

Crude plunged -2.07 [-5.22%] to 37.60 on moderate volume. The opening black marubozu candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. Crude is in a downtrend in all three timeframes.

EIA report: crude +2.0m, gasoline -3.0m, distillates -1.7m. The report didn’t move the market at all.

Unlike copper, crude didn’t stage a grand rally on Friday; crude ended the week in a strong weekly downtrend, and the monthly even flipped into a downtrend as well. Crude is not looking god at all right now.

There was an article at oilprice about oil traders chartering supertankers for offshore oil storage; when I looked at the 3-month contango, it wasn’t all that high – just $1.23. (So buy now, store in a tanker for 3 months, sell 3 months from now, and pocket $1.23. Not a huge payday.) New oil glut? I’m not seeing it reflected in contango. Then again, that might be because all these supertankers are being chartered for oil storage.

https://oilprice.com/Energy/Crude-Oil/Traders-Charter-Supertankers-Amid-Signs-Of-New-Oil-Glut.html

SPX plunged -85.99 [-2.51%] to 3340.97 on moderate volume. The swing high2 candle was a likely bearish reversal (74%), forecaster climbed, but remains in a downtrend. SPX is in an uptrend in the monthly timeframe.

Energy [-6.90%] led the market lower, along with tech [-4.57%], while materials [+0.97%] and industrials [-0.30%] did best. This was a bearish sector map.

The VIX plunged -3.88 to 26.87.

The weekly SPX candle print was very bearish (the highest rating for a weekly swing high weekly there is), but weekly forecaster didn’t change much at all, and Friday’s price action saw the daily bounce back into no-trend. Where that leaves us is mostly no-mans-land. VIX ended the week well down off the highs. It sort of feels like traders took their profits from the recent drop going into the weekend. “Wait and see”, while leaning bearish.

The 10-Year yield fell -5.0 bp to +0.67%. The short black candle was unrated, forecaster dropped, but remains in an uptrend. The 10-Year yield is in an uptrend in the weekly and monthly timeframes.

Yield uptrend = bond downtrend. In spite of this week’s bond rally, the forecasters think bonds are going to fall.

JNK was unchanged this week. The short white candle was unrated, forecaster dropped, but remains in an uptrend. JNK is in an uptrend in the weekly timeframe.

JNK had a bad day on Tuesday, but recovered by Friday. Weekly remains in an uptrend, but not by much.

Physical Supply

The GLD ETF tonnage on hand dropped -2.04 tons, with 1248 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.28%
* PHYS -0.66%
* PSLV -2.62%
Gold dealer big bar premiums:
* gold [1kg]: +1.35%
* silver [100 oz]: +7.37%

At end of week, physical ETFs remain in discount, gold big bar premiums are moderate, and silver big bar premiums remain well down from the highs.

Economic Reports

Fed Balance Sheet: 7010B, -6.9B, Liquidity Swaps: -16.9B, Reverse Repos: -5.0B, Treasury Securities: +7.0B, MBS: +363M. Net selling by the Fed; just modest buying of Treasury bonds; the balance sheet has gone net nowhere for about two months now.

Yield Curve Inversion: the 1-10 spread fell -3 bp to +54 bp today. 1Y: 0.14% (+0 bp), 10Y: 0.68% (-3 bp).

Producer Prices: headline +0.57% m/m. The PPI has recovered maybe 60% from the pre-pandemic levels; producer prices are also an inflation metric.

CPI All Urban: headline +0.37% m/m, CPI less-food/energy: +0.38% m/m. That’s an annual run-rate of 4%. And that’s for government-measured inflation. CPI has now moved above the pre-pandemic highs. The Fed has just been granted its most fervent wish: even government-measured inflation is well above 2%.

Summary

This week gold, silver, and the miners pretty much moved sideways. Given the moderate dollar rally, that was actually mildly good news. Trends remain very weak; prices could go either way at this point.

The buck still looks as though it is in the process of a bullish reversal, but it appears to be taking its time about completing the move. There was talk last week about how the ECB might be worried about a strengthening exchange rate; the ECB didn’t seem to share these concerns. Mostly, the news out of the ECB was mildly positive, in that they were was slightly more optimistic about economic recovery than expected. Takeaway: ECB won’t take action to impact the exchange rate, and that’s positive for the buck.

For risk assets, things were mixed: crude had a bad week, SPX had a moderately bad week, copper fell slightly (after staging a remarkable recovery on Friday), while crappy debt was unchanged. The VIX fell, suggesting that the bears were ringing the cash register at the end of the two-week drop. Here too direction was uncertain – probably leaning slightly bearish for SPX.

The economic data is telling us that inflation is now a thing. The stimulus is over, and yet inflation continues to run at 4.4% annualized. And we know from the Fed’s recent announcement that they will do nothing to stop it, at least for quite some time to come.

What are the chances for a new stimulus bill? Zero percent. Team Red attempted to pass a limited stimulus package this week, which was promptly voted down by Team Blue – and Rand Paul too, for good measure. Apparently the measure needed 60 votes for it to proceed.

So no more money printing for a while. And the Fed has stopped growing the balance sheet for two months now too.

In the “is COVID still with us?” department, hospitalizations in California are at the lowest level since April; deaths are plunging too. In New York, which has had herd immunity for 3 months now, the apparently ignorant “manager” of the city announced that whatever restaurants have managed to cling to life this long will be able to open for in-person dining at the end of September. At 25% capacity.

In Los Angeles, the public health director, in a conference call with school administrators and nurses, said that K-12 schools would not be opening for in-person learning “at least until after the election, in early November.” After the audio of this call leaked out, there was an immediate scramble to explain “what she really meant” by that statement.

How many times have I said it? “During an election year, even if it seems unconnected, everything is about the election.”

I suspect things will just continue to become more intense as the election date approaches. Joe Biden has been ordered not to concede “under any circumstances” by Mrs Clinton, Antifa/BLM brownshirts remain a force in being, tens of millions of mail-in ballots threaten to assure that the outcome of the contest will remain (deliberately?) uncertain for weeks after the date, and there are a number of other strategies being suggested to further prolong the resolution of this “free and fair” election.

For some unknown reason, this election appears to be “for all the marbles.” Why does it matter so much? That I don’t know. But someone sure seems to have a gun to their heads. Failure to win this contest is simply not an option, it is a life and death matter. This is the unspoken subtext underlying all the extraordinary efforts occurring right now.

How will that affect prices? It would seem to be gold-positive, and probably risk asset negative; signs of a clear-cut victory (by either side) would probably be dollar-positive, with certainty being better than chaos. That’s just a guess.

We surely are living in interesting times.

  • Sat, Sep 12, 2020 - 07:50am

    #2

    davefairtex

    Status Member (Offline)

    Joined: Sep 03 2008

    Posts: 2187

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    silver chart

Sorry for missing the silver chart.  I was working on it.  Something I said to JAG inspired me to more heavily weight inputs from recent timeframes vs the very early stuff and see how that affected the training sessions.  It was…helpful but not revolutionary.

You can see silver is on the edge of a bearish reversal, even though the candle print is mildly positive.

  • Sat, Sep 12, 2020 - 09:25am

    #3

    JAG

    Status Platinum Member (Offline)

    Joined: Oct 26 2008

    Posts: 528

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    It’s a Day Trader’s Sh*t Show

Just when I think the market can’t get any weirder, the day traders take over the options market.

VIX call options have been surging in the morning and are dumped into the close. It took me a few days but I finally figured out how to play it in my non-day trading brokerage account.

Nobody has any balls in this market, bulls or bears.

I’ve never seen day trading in the options market like this before, and it’s widespread:

From Bloomberg:

An Apple call with a $120 strike price expiring on Friday traded nearly 200,000 times on Thursday, making it the day’s most-active option, according to data compiled by Bloomberg. Trading surged even as the value of the contract plunged over 87% to close at $113.49 on Thursday — well below the option’s strike. Despite the burst, the option’s open interest only increased by about 10,000 contracts, suggesting that the vast majority of the trading volume was positions opened and closed the same day. To see such frenzied activity in what’s effectively a one-day option suggests that day traders are behind the flows, according to Charlie McElligott from Nomura Securities.

I’m so screwed.

I feel like I need to hold my longer term VIX call positions to hedge my bitcoin holdings. I’ve been buying extra positions at the close and selling them into morning strength to hedge my hedge, so to speak.

I guess I need to sell my bitcoin and my VIX calls, take my money out of the banks and money market accounts, and just grab a beer and watch the Great Depression 2.0 unfold.

This is historic.

  • Sat, Sep 12, 2020 - 10:51am

    #4
    Nate

    Nate

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    Posts: 465

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    for all the marbles

I get the same sense that this is for all the marbles.  Two major expirations lie dead ahead:  our currency and our empire.  Both Brent Johnson and Armstrong mention the loss of faith of our currency in the near future.    I think it will start early next year when massive money printing tries to paper over the mess we are in.  Don’t have a good feel for how long it will take, but my guess is that our next president will be our last president (barring assassination).

In Fate of Empires, Glubb found that the average life of an empire is about 250 years.  Check that box – we are basically there.  Regardless of who is elected, it wouldn’t surprise me if several states pull out of the union.

The last group in charge will do the final looting of the empire.  One last chance to strip mine whatever the previous administration overlooked.

I really think if is for all the marbles.

 

  • Sat, Sep 12, 2020 - 11:22am

    #5
    robie robinson

    robie robinson

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    PM Weekly Market Commentary – 09/11/2020

JAG, the great Cash has world class advice. If you are of a mind, take a few minutes and enjoy his advice.

 

  • Sat, Sep 12, 2020 - 04:42pm

    #6
    jmone

    jmone

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    PM Weekly Market Commentary – 09/11/2020

Oz Update for the Week : For all the “excitement” of the volatility of Tech Heavy Weights in the US, and the end of the week for us in Oz, not much changed.

  • Sun, Sep 13, 2020 - 04:19am

    #7

    davefairtex

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    Pento’s Model

Michael Pento gave a good interview with Greg Hunter this weekend.  I like Pento’s approach to prognostication.  Namely – rather than pontificating where SPX will be at end of year, and saying what “must” happen – he just looks forward just a few months based on a model that projects either inflation/deflation, as well as growth.

Right now, he is projecting deflation, and he sees the market heading lower.

Here are his model inputs [link below].  I think I will go run an experiment.  I’m just guessing predicting GDP isn’t all that hard.  [Update: it isn’t; although GDP just represents activity, which can be spoofed by money printing and/or debt bubbles.]

https://pentoport.com/managed-accounts/

The inflation/deflation bit – I’m not even sure what timeseries to use.  CPI?  PPI?

Blue line is the forecast for “real GDP”, black is GDPC1: projecting a bounceback above zero anyway by Q3, at least according to the current numbers.  Series GDPC1, understanding all the flaws in both the GDP model, and in the inflation measure used to adjust it.

For inflation: Fed balance sheet & total bank credit – now flat.  No monetization, and no big burst of new credit.  This suggests deflation (i.e. when the credit impulse flattens suddenly, that’s deflationary.)

  • Sun, Sep 13, 2020 - 05:53am

    #8
    VTGothic

    VTGothic

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    Posts: 261

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    Don’t treat BTC like a stock or commodity

@JAG wrote

I feel like I need to hold my longer term VIX call positions to hedge my bitcoin holdings. I’ve been buying extra positions at the close and selling them into morning strength to hedge my hedge, so to speak.

I guess I need to sell my bitcoin and my VIX calls, take my money out of the banks and money market accounts, and just grab a beer and watch the Great Depression 2.0 unfold.

JAG, would it make sense to you to write: “I feel like I need to hold my longer term VIX call positions to hedge my gold holdings”? If so, I guess you should sell your digital gold. But I’d say that’s a big mistake if, as you say, you are expecting “the Great Depression 2.0”.

Looming depression, or looming inflation, is not the time to sell gold. Right?

Let me suggest you don’t yet understand BTC’s use proposition. It’s not a share in Apple, and it’s not pork bellies. Along with PM, it is the very thing you want your money resting in when either inflation or deflation hits the economy.

But hold the coin. Not calls on the coin.

  • Sun, Sep 13, 2020 - 08:15am

    #10

    JAG

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    Posts: 528

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    No Herd Immunity for Me

Mr. Robinson, you are a wise, wise man. Thank you for that advice. So my choices are to hold, to fold, to walk away, or run. Unfortunately, my choice is double down.

I’m going to hold my VIX calls for at least another week or two. It’s going to be really painful, but no pain, no gain.

—————————————————————–

VTGothic: Let me suggest you don’t yet understand BTC’s use proposition. It’s not a share in Apple, and it’s not pork bellies. Along with PM, it is the very thing you want your money resting in when either inflation or deflation hits the economy.

I would respectfully disagree. The ultimate and only goal of investing and trading is dollars, not the asset.

In my view, dollars are denominated in assets, not the other way around. It’s dollars that I need to pay my taxes and my bills. Financial and market assets are ephemeral, coming and going with the psychology of the herd. When it really matters, everybody needs the same thing; dollars.

Bitcoin didn’t even exist during the last deflationary mindset. How do you know the herd will choose it under those psychological conditions?

And regarding inflation, everybody thinks that the prices of gold and bitcoin are mechanistic in nature. If the money supply increases then their price should go up.

That’s hogwash. The most important factor in the ‘inflation equation’ is not money supply but money velocity. Here is the latest chart on that:

Inflation doesn’t exist. The inflation trade in the markets is just FOMO.

My point is simple. Herd psychology is the predominant factor in all financial markets, not fundamentals, not macro. Especially today.

I have to choose to go against the herd at this point. It’s lonely out here on the Tejas plains.

  • Sun, Sep 13, 2020 - 09:19am

    #11

    davefairtex

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    Posts: 2187

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    position sizes, assets = bets

JAG-

My two cents is to keep your position sizes low enough so that your emotions don’t take over and make it difficult for you to make (generally) unemotional choices.

I think the herd thing is right, especially now.  Armstrong thinks we’re in a correction.  If we are, then hanging on is the right move.  Certainly there will be increasing chaos in the next few months.  That’s probably risk off.

There might be another opportunity post-election for another big volatility trade, but we’ll have to see how that goes.  Armstrong’s volatility indicators are suggesting this.

Assets are what you get to buy with deferred consumption.  They are all directional bets, however.  A bank account is a bet on the buck – and recession (“everything else is too expensive”), rental property a bet on inflation and also on your local economy, risk assets are a bet on growth, bonds are a bet, mostly, on recession, but also on the buck.  And gold is a bet on a collapse of confidence in government, and somewhat on inflation.

Puts and calls are also bets, but they have this annoying time fuse to them.  They force you to be correct both in direction and in timeframe.  Mostly, you have to be right in a near-term timeframe for them to pay off.  And they have to be relatively surprising events, otherwise the event is already largely priced into the premium.  So – surprising, near-term events that you’re right about isn’t the easiest thing to nail repeatedly.

I’m still not sure what bitcoin is a bet on.  Maybe a bet on capital controls?

We need to see it through a full cycle first.

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