Well that was a week. And then today was a day.
Stocks are all over the place. Friday was a big ol’ drop. Monday looked the same until about an hour before the close, when dip buyers rushed in and turned an almost 4% loss into a halfpercent gain for the S&P 500.
Someone I follow on Twitter looked for previous times the markets have bounced that much in a day. Since 1977, the S&P 500 has only recovered from an intraday loss of more than 3.98% three times.
Jim Bianco followed that look-back with this comment:
We all know why the volatility: the Fed. I’ve talked at length about why the start of a rate hike cycle is having such repercussions. In short: higher rates challenge companies that are addicted to cheap debt and the bond market is losing a huge and price-insensitive buyer (the Fed) who may soon even become a seller. Together, those forces could mean significantly higher debt service costs, which would threaten profits, and profits are the most important and consistent correlation with rising share prices.
On a more arm-wavey level, the Fed’s shift from ultra support to inflation-fighting tightening is being taken as
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I always pay attention to the relative number of gainers and losers when updating stock prices in the Full Portfolio Table and this was the best ratio to date: 36 of the 42 stocks in the portfolio were up compared to the last time I printed the table, on December 15.
There were two reasons: uranium and gold.
I’ll start with uranium, where the spot price is up 8% in a few days. There are two related reasons: buyers returned to the spot market after a predictable holiday break to find uncommon violent political demonstrations across Kazakhstan, which produces 46% of the world’s uranium.
Today was the fourth straight day of protests in Kazakhstan. On Saturday the government deregulated the price of liquified petroleum gas (LPG), which many Kazaks use in their cars. The price immediately doubled and protests spread across the country. The president has since dismissed the prime minister and cabinet and imposed a state of emergency across several cities. Internet connectivity has also been largely cut off so updates are sparse.
Some social unrest in Kazakhstan is normal but a country-wide protest is a first, so there’s no knowing how long this could last. While the
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From the Gold Resource Investor Letter: December 2021
Inflation means the Fed really is ending QE and raising rates. Last week bond traders finally accepted that reality…and then dumped bonds before the market loses a massive and totally price-insensitive buyer (the Fed). It made for a volatile and negative week that could be a preview of what’s to come. Also…with the first rate hike now likely in March, gold’s seasonal run has been squeezed out. I expect range-bound movements (like we’ve had for a year already) until the first hike sets gold going again.
One of the things I love about my job is that, to understand metals markets, I must understand the macroeconomic landscape.
Sometimes the landscape stays stable for weeks, months, even years. Such was my first metals bull market experience: the China growth story emerged in the early 2000s and pushed metals – base and precious – upward for years. It was supply and demand in an inflation and growth environment. Then the Great Financial Crisis blew everything up but before that – and for gold also after – commodities had a stable set of year.
Stability isn’t quite how I would characterize things today. Instead, every few months something happens that requires me
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The Federal Reserve did just what we all expected: they doubled the pace of the taper such that the central bank will stop buying Treasuries and mortgage-backed securities by March and pulled rate hikes forward. Comments in recent weeks from Jerome Powell and others on the Federal Open Market Committee that decides on monetary moves had prepped the market for all of this. While we never know about a hike until it happens, today’s FOMC tries to prep the market for such moves through its speeches and its dot plots.
Today’s meeting produced a new dot plot and, yes, it pulled rate hike timelines forward. All of the 18 members of the committee said they could see the case for at least one rate hike next year, a noticeable change from September’s meeting when the committee was split 50-50 on any hiking in 2022. The median voice on the committee sees three 25-basis point hikes in 2022.
Whether these projections actually come to be is another question entirely. The Fed does not want to be blamed for causing a recession. The stock market is so important now, at least in perceptions of economic strength, that fear of causing a
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From the Maven Letter: December 8, 2021
The Silver Institute recently released an interim Silver Market Review, which is basically a mid-year update. It has some interesting highlights that I want to bring to your attention.
First, the Institute expects every key area of silver demand to rise in 2021, with record overall industrial demand despite supply chain challenges. Overall demand is expected to reach 1.029 billion ounces, surpassing the billion-ounce mark for the first time since 2015.
Industrial demand is expected to be strong, thanks to a post-pandemic recovery, reaching a new high of 524Moz. Solar, the single largest demand component, should be up 13% to a new high over 110Moz, underscoring silver’s importance in green energy. Electrical and electronics should be up 10%.
Impressively, they expect physical investment demand to be up by 32%, or 263Moz. That’s up by 64Moz, or 25.5% of overall demand. Strong buying is expected to be led by the U.S. and India, whose demand is expected to triple after falling dramatically last year. They also expect silver ETFs to see another 150Moz of net purchases, after last year’s stunning 331Moz. That will add up to a total 564Moz over the past three years. At Nov. 10th, global silver ETF
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Le sigh.
A month ago I thought things were finally sorted. The Fed made its highly telegraphed tapering move while assuring everyone they would not raise rates at least until the taper job was done by mid-next year. That created a clear runway, finally, for gold to act as an inflation hedge in a highly inflationary environment.
And for two whole weeks that is exactly what we got. Gold gained on news of inflation and, since there’s inflation news almost every day, it pushed the yellow metal up 6.5% to hit $1874 per oz. in mid-November.
Apparently, two weeks of clear sailing is all we got.
Ten days ago the gold market seemed to get whacked on news of Jerome Powell’s reappointment as chair of the Federal Reserve. As I wrote last week, I don’t think the reappointment of a dove-tending chair known for telegraphing his moves and being pushed back from tightening fairly easily was really what pressured gold; I think it was that rising COVID case counts in Europe prompting new restrictions pressured the Euro, which boosted the US dollar, which pressured gold.
OK, that was fair enough. But yesterday wasn’t fair.
In his semi-annual testimony to
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Thanks to all who sent feedback on my thoughts around Stop Losses and, more generally, when to sell.
I did more thinking, lots of it sparked by reader emails. As a way of running through all those thoughts, I’ve included quotes from various emails below and followed up with my thoughts. Scroll past the quote-response section to the end of the article if you just want to see the conclusion.
Stop losses are for people investing in extremely liquid equities.
Stop losses are for people who do not re-evaluate each position immediately after every news release, and every company presentation, and every macroeconomic development of note.
Stop losses are for people who do not frequently re-evaluate their thesis for buying a given company.
In other words, stop losses are NOT for people who invest in the junior resource space. People prone to using stop losses may have accidentally wandered into the resource space, but they do not belong here.
I included these comments as an example of the many responses I got opposed to Stop Losses. Such responses included points like the above: the fact that many juniors’ limited trading volumes means selling and re-entering isn’t always an option
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I have a question about your risk management. I observe that you use no stop-limits and see that you have few/many stocks in your portfolio which are -50%, up to -70%. Some weeks you sold some stocks with a big minus. On the opposite you have some winners. Your total performance is not clear for me and I don’t understand why you don’t sell earlier. For instance others are selling if the stock falls 20% below the price of buying but you hold them. From my point of view you hold it too long …
I am new subscriber and I really don’t want to lose my money and therefore I am a little bit concerned about your risk management.
For instance why you still hold “Visionary Gold”? More than 50% you lost within the last two months. At your service I miss an active money management or maybe I don’t see it. As subscriber I have a little bit the feeling that you are too close with the mining companies and the service sounds more like marketing for them. So my feeling is that they are your “real” clients … sorry to saying this but I have this
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