On Gold’s Relationship to Quantitative Easing
Jul 28, 2020 | Educational
For a whole host of reasons, the gold price is hitting new all-time highs this week. This is happening in “nominal” terms, meaning not adjusted for inflation. To reach a new inflation-adjusted high, and break the 1980 ceiling once and for all, gold will have to challenge the $2,500 per ounce level. At the rate things are going, that could…
The Market is Moving On From Intel
Jul 27, 2020 | Educational
With all of the top-down influences on markets these days — from central bank policy to COVID-19 realities to smartphone trading apps — it’s nice to remember that fundamentals still matter sometimes. Then, too, there isn’t really a monolithic “market,” per se. Different areas of the market are behaving quite differently and showing wide divergences in performance. The tech juggernauts…
Valuation Multiples May Not Matter Anymore — but Only Up to a Point
Jul 23, 2020 | Educational
When someone says U.S. equities are historically expensive, what do they mean? It depends on the measurement being used. Different yardsticks will measure different things — and come back with different results. For example: It has been pointed out that, in 2020, there were 28 stocks in the S&P 500 trading above 10 times sales. That is a staggeringly high…
DENIAL: Deflation Exists Now, Inflation Arrives Later
Jul 22, 2020 | Educational
In terms of a multi-year, big-picture forecast, there is a simple acronym to remember: DENIAL, as in, “DENIAL ain’t just a river in Egypt.” DENIAL stands for “Deflation Exists Now — Inflation Arrives Later.” Today the U.S. economy — and the global economy, too — are subjected to powerful and persistent forces of deflation. There is a combination of moderate…
How to Quickly Calculate Real Yields (Which Are Currently Negative)
Jul 21, 2020 | Educational
In a June 1 TradeSmith Daily, we explained why, in a deflationary environment, the price of gold tends to go up. You can read that piece here. The short version is that, when things turn deflationary, the real yield on Treasuries turns negative. A negative real yield, meanwhile, is worse than a zero yield. If you are earning a negative…
Copper is Heralding a Rise of FDR-Style Public Works Projects
Jul 20, 2020 | Educational
Copper, like many other assets, has been on a tear lately. From the March 2020 lows through mid-July 2020, the copper price (as represented by Comex front-month copper futures) rose almost 50%. There is a widespread belief that rising copper prices are a signal for global growth. This makes sense historically because of copper’s natural role in the world. Copper…
Bank Earnings Confirm What We Already Knew (About the U.S. Economy and Federal Reserve)
Jul 16, 2020 | Educational
Earnings season is underway, and we heard from some of the largest U.S. banks this week. The reporting confirms what we already knew: There is no V-shaped recovery whatsoever, and the Federal Reserve is doing a lot for Wall Street (though not Main Street). Among the four banks we heard from — Goldman Sachs, JPMorgan Chase, Citigroup, and Wells Fargo…
Boom-Time Memories of a Bust Gone By
Jul 15, 2020 | Educational
Try to guess the visionary entrepreneur we are thinking of based on the following clues: He is especially fond of the letter “X,” including it in things he has named. His net worth — at valuation in the tens of billions — put him on among the top 10 richest people on the planet. He once vowed to take the…
How Silicon Valley Engineered a Retail Trading Mania
Jul 13, 2020 | EducationalNews
2020 will be remembered for kicking off a global pandemic. But it will also be remembered for a market mania, driven to a surprising degree by bored sports gamblers, millennials taking a flyer with stimulus checks, and day-trading retail investors new to markets overall. We know the Federal Reserve provided psychological support (through an implied promise to support markets no…
Jim Rogers is Dead Wrong about Bitcoin
Jul 08, 2020 | Educational
When it comes to Bitcoin, Jim Rogers is sorely misinformed. To be clear, Rogers deserves great respect as a macro investor. As a co-founder of the Quantum Fund along with George Soros, Rogers had one of the greatest performance runs of all time. In the 1990s, he wrote an incredible book called Investment Biker. The book chronicles a two-person trip…
