I know what I know and that is all.

For those who have followed me, know that I am pretty good at calling the Fed over the last decade.  During the period of 2010-2015, after the markets were saved, @dividendmaster (on twitter) and I use to have yearly bets on what the Fed was going to do. Most years it was nothing, even though they huffed and puffed about raising rates.  For about 4 years running I won our yearly bet.  In the fifth year, he finally won the bet, in December.  (I'm being approximate here, I'm too lazy too look it up, but you get my drift).

During the period when the Fed left rates alone, I would argue: "How strong could the economy be if the Fed was afraid of getting rid of ZIRP (Zero Interest Rate Policy for you newbies). 

Since 2005, I have argued the only thing the FED cares about is the stock market.  America, as a country, values itself solely on stock market valuations.  The country could be humming along,  full (real) unemployment, political harmony, and finally even with everyone, black, white, yellow, singing Kumbaya in the streets if the stock market was in the shitter, the Fed would be responsive.

Let's take a look at the markets today.  Since the night Trump was elected, and remember the futures that night showed a -1000 Dow reading, the market has gone insane up what 40% at the ATH? (Again, to lazy to look).  Unemployment is at "record lows" and until recently the markets were humming along.

Given this backdrop, the Fed was talking and actually acted tough for a while.  However, throw in a few falling economic numbers and things didn't quite look as rosy.  Never mind in my 51 years on this planet I have never seen this country torn apart, politically, as it is today. (I'm too young to remember the Vietnam war and what that was actually like.)  But through this period the stock market held up beautifully, so it was full steam ahead for the FED.

But oops.  The stock market had a 10% correction from all time highs and Trump threw a few grenades toward Powell via Twitter.  So what happens?  The Fed goes into full panic mode and Powell comes out and says things are getting weaker and the hikes are pretty much done.  Ok.  Whatever.  Are the markets even allowed to have a general run of the mill correction anymore?  If every time the market goes down for an extended period is Cramer going to whine on real money?

The Country and the markets MUST be allowed to have normal economic cycles.  Stifling the negative cycles will only make those cycles that much worse when the inevitable comes do.

The following figures I DID look up:  Since 1972 the cumulative average of a 30 year mortgage is 8.10%.  For comparison the average today is roughly 4.90%.  (http://www.fedprimerate.com/mortgage_rates.htm)

Ok, so you scream to me "But the 1972-2018 had extreme periods of interest rates, as high as 18% in 1981 and the lowest in January of 2013 at 3.41%.  So let's look at interest rates from 1921 though 1947.  Looking at various charts rates ranged from a high slightly above 6.0% in 1921 down to a rate slightly lower than 4.5% in 1945.  The last year in the chart I'm looking at is 1956 and rates were at 5%.

When I first got into the selling bonds for a living in 1991, one of the first bonds I can remember selling was a 8 year PA Turnpike Bond, AAA (when AAA meant AAA) at 6% at par.  Only the shittiest of a shit muni will yield 6% today. 

My point is at some point the FED has to forgo the stock market to bring rates back into historical normalcy.  The FED needs to grow up and normalize rates the markets be damned.  I argued during the Great Depression that the FED should have burned it all down and started fresh.  IMO, the gov't should've announced they were seizing troubled banks, guaranteeing deposits and letting the Country go to even greater levels of shit than it went to.  Let the rain wash away ALL the filth if you will.  It would have been survival of the fittest amongst the banks.

Shall I even get into the fact how the FED though their interest rate policy has pushed savers out of the banks into the markets?  If checking and savings accounts (hell, even CD's) came back to historical norms, how much money would flow out of the markets? 

Ohhhhh........I get it now.

Tap...Tap...Tap...Is this thing on?

It's been a while.  Almost 10.5 years since I last wrote on this blog, a lot has happened since then.

To bring you up to speed, 10.5 years ago,  I was extremely bearish on the markets and extremely bullish on gold.  I was eventually proven 100% correct.  The problem was, I was early, very early.

Back in the early 2000's, once I fully understood the disaster that was housing was going to unfurl on the US (and world) economy, I started investing in gold.  My first purchase of gold was under $400 and my first silver purchase was around $3.  I took some time to really understand the situation and how gold and silver would eventually play out.  No one cared.  I was mocked, laughed and ridiculed.  Even when gold finally broke $400, $500, $600, all I heard from everyone was that it wouldn't last and if I didn't sell I was a moron.  The stock market kept marching higher.

Finally, after the shit hit the fan, I did start selling.  I sold when gold first hit $1500 on the way up and got out of most around $1650ish.  I actually top ticked silver and sold some at $50 but dropped the rest on the way down around the $40ish level.  My clients who listened and I had the last laugh.

Then the world's stock markets became what I like to call hiddedly-piddedly. (extremely fucked up).  In short, IMO, the only thing that saved the markets was the Fed.  It can be argued if the markets were "saved" or the ultimate was just put off."

So where are we today and what do I think?

First not many care what I think, but since you're reading this, I believe you might.

Back in 2007-2008, very few believed the market correction was going to be as severe as it turned out.  Anyone and everyone said just hold onto your stocks and this will pass.  It didn't.

Compare this to today's markets.  EVERYONE is freaking out over a 10% correction from the all time highs (ATH).  It's like Wall Street forgot that stocks can go down over a period of time.  IMO, this, for now, is simply a valuation correction and I don't see a credit crisis coming.  To what level stocks correct to, I have no idea.

I will say the idea of a company like GE possibly going belly up and no really caring is interesting to say the least.

Now that being said, this could easily turn into a bigly rout if someone big (I'm looking at you Deutsche Bank) goes belly up or even a real whiff of trouble from a major player is exposed. You know that whole contagion thingy.  However, for the most part I do believe the banks are light years ahead now as compared to 2008.

But c'mon, how much more expensive could the FANG stocks get?  How much more air could be under marijuana stocks?  However, unlike the dot com bubble, these are real companies with real earnings.  Amazon, IMO, is the greatest company in terms of customer service and products that has ever walked the Earth.  However, I wouldn't touch that stock with a ten foot pole, even now.

Facebook, while a real company, could literally be gone in two years and no one would miss them at all.  (For the record, I only use FB for some newsgroups; I don't care to post my thoughts or pictures nor do I go through my feed that often.)

You can ask around on Twitter that I have a pretty good and accurate record in calling the Fed's moves.  I am usually contrarian to what everyone thinks.  For almost this entire tightening cycle, I have been saying that the Fed will keep the pedal to the metal UNTIL the stock market cracks.  Again, just 10% off ATH's, and we are already hearing of Fed surrendering.  The FED is a slave to the stock market as that is how the USA measures its wealth.

Finally, let's talk about pet rocks, I mean cryptocurrencies.  Look, I am not the brightest bulb on the tree, the sharpest knife in the draw, etc etc, but if you could not see how this was almost a complete mania then you have no business in the markets.  What gets me about the cryptos was everyone who loved them hated gold for the same exact reasons!  They argued for cryptos that they were a storage of wealth vs the dollar, they would have widespread use, they were "safe" (Say what you will, but I never lost a 1/10 of an ounce of my gold or silver due to theft unlike the millions lost in the crypto space due to theft)

The only use for cryptos that was widely accepted across the world was to trade them.  One could argue the same for gold and silver; but then again, gold and silver have, what, a 6,000 year history.

Finally, when gold and silver got crushed from $1900 to $1100 (where I finally picked some up--but I am agnostic now) the gold haters were tap dancing on the grave all the way down.  With the crypto carnage all I hear about is the pain.  Not that this was a beanie baby bubble multiplied to the extreme.

Admitting the Obvious......

So the Fed minutes come out today and the Fed finally admitts the obvious, there is runaway stagflation in the economy. DUH............

Oil hit $134 around 4:30, gold was up $13 to $930ish and the market got clocked for 400 points over the last two days. Oh, and not one mention on CNBC about how wrong they were about how peachy things are.

Speaking of CNBC, I have met the enemy and thy name is Guy. Yesterday, on Fast Money, Adami had the balls to call gold's rebound a dead cat bounce and nothing more. Disgusting. They and the rest of that station are a joke and do the average investor a huge diservice.

So where to now? Well, the dollar has resumed getting demolished like anyone with an ounce of intelligence thought it would and gold has responded nicely. I look for gold to reach $1,000 shortly.

As I have always said, all roads lead to gold, no matter what CNBC says.

Traderneal the Contrarian

In my previous post I indicated that the attendance at the gold show was light and that I thought it was a good sign for the gold market. I received a few questions as to why I thought that.

I was only at the show for thes second day, and like I said having attended these shows for the last five years both in NYC and Vegas, the attendance looked very light to me compared to those other five years. Normally, the first day of the show is the heavy day, but I have heard that attendance that day was just "ok."

Whenever one is an investment for the long term, no matter what it is, when that investment gets really going, the late money starts pouring in trying to catch the move. This late money is always the quickest to bail as it is usually the small retail investor hopping in.

In gold, as the late money sells, it creates a waterfall effect as the stops are hit and the price drops dramatically. (Like we had from $1030 down to $850.) Also, if you are in an investment like gold for the long term, you want it to be a quiet party and you don't want the unwashed masses in for as long as possible, for exactly the reason as what happened; the price drop.

So, gold hit $1030, was all over the mainstream media and these shows were packed, does that sound like the "ideal" investing opportunity? Flash forward two months; gold is down to $870ish (the days of the show), out of the spotlight and the show was lightly attended. Yet, and this is the important part, the FUNDAMENTALS TO BE IN GOLD HAVE NOT CHANGED ONE BIT!!! You will see the price move higher as the stronger hands start taking over. That is why it is a contrarian sign. I only want the unwashed masses involved in gold, when the fundamentals no longer apply as to why gold should go higher. I want them pushing the price to an absurdly overvalued level. In other words, when all that happens, I need someone to sell my gold to. When what has happened over the last two months, I need someone to buy gold from.

I'm Back......

Sorry for the lack of posts over the last few days. Got back from vacation on Wednesday, and honestly was not in the writing mood. I will only say that no matter what is going on in the gold markets, my faith has not waivered one iota. In fact, I spent the day at the NYC gold show today, and here are my highlights.



Just got back from a long day at the NYC gold show and drinks and dinner with the boys from Van Eck. Thoughts from the show:

1. It was very sparsely attended. This is very bullish as I have been going to these shows in both NYC and Las Vegas for the last five years and they are usually pretty crowded. Now the fact that this was the second and final day of the show may have been the reason for the sparse crowds, but I have never seen crowds this light. It is bullish for gold as more and more people are losing interest in the metal. (Contrarian play)

2. Larry Kudlo was the keynote speaker and to sum up his speech:
....Thinks McCain will win ....Is bullish on equities and bearish on commodities (kind of like the last 10 minutes ....If anyone has every done anything in importance in gov't or finance, Larry is friends with him ....Thinks rates will be 75bps higher by this time next year. ....Thinks the dollar will be significantly higher under McCain ....Thinks gold will be 20% lower.
Way to play to your audience Larry. Gee, think he did this for the check?

3. Heard this from two different and somewhat relieable sources: The reason for this correction in gold is the fact that Bear Stearns was extremely long gold and extremely short the dollar. These trades have not yet been unwound. One of the folks who told me this that the Fed sent out a communique saying that any member bank that puts this trade on in size will not be able to borrow at the discount window. (Take the last part FWIW).
Truthfully, I have heard that theory before and was somewhat skeptical. But the people who I heard this from are in touch with what is going on and make the theory more incredible.

4. Had a long and very nice chat with Dennis Gartman. I was prepared for war as Dennis has been extremley negative on gold without giving a good reason. As it turns out, we agree on many of the same points.
......Thinks gold could bottom around $850 and should go no lower than $797. .......Agrees that Bob Pisani from CNBC is totally clueless ......Thinks that the Fast Money guys, especially Guy Adami, should know better when it comes to gold. ......Thinks that CNBC is constantly bashing gold and commodities, not from any company mandate, but from the fact that more people own stocks than commodiites, and that higher commodites means lower stock prices which in turn means lower ratings. In other words, CNBC is bashing commodities simply in the hopes of avoiding lower ratings.

5. Agrees that at some point we will Gold and the dollar going higher at the same time. This will freak many people out as no one will have a clue why this is happening. When this type of move finally does happen, he thinks it will be violent thrust to the upside. (CNBC will be committing suicide---my thought, not Dennis's.)

Listedn to James Dines presentation which was that he is wildly bullish on silver, thinking it will hit $100 ounce. Also likes palladium. He feels that since gold and platinum have already taken off, it is these two metals turn.

Dinner with the Van Eck Mutual Funds really didn't uncover too many nuggets except for the fact that the head trader thinks gold will bottom around $820, and will be at new highs by the end of the year.

The traderneal Theorem.......

I am going on a brief vacation and will be back on Wednesday night. Now, whenever I am gone for a few days and out of the office and away from a computer, gold has a tendency to do very well; I call it the Traderneal Theorem. So enjoy the nice rally that will ensue from Monday to Wednesday.

What can I say that is worthwhile? According to CNBC all is well and commodities are dead. In fact, they act like you are an evil person and should die if you own commodities are commodity stocks. This is an actual quote from Bob Pisani earlier today:

"The markets are off their highs because commodities are higher, and that's a problem."


With logic like that, what is one to do?

Look around, read the newspapers, read financial news online, things are still horrible, terrible in fact. The Fed did not increase the TAF from $100B to $150B, and agree to take in AAA CMO's because things are hunky dory. Funny, but every cruise I have been on, the life boats and life jackets are safely stowed away.

Without a doubt, all roads lead to gold. Hell, I plan on adding if the price goes lower.

Enjoy the rally and see you Wednesday.

Don't Worry Be Happy........

From our frineds at www.minyanville.com