Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold vs Stocks Macro Changes

Stock-Markets / Financial Markets 2016 Feb 08, 2016 - 05:00 PM GMT

By: Gary_Tanashian

Stock-Markets

A picture is worth 4-plus years and thousands of words, and the picture below has a lot to say. I'll say some words as well, since I have kept them bottled up for years in an effort to make sure we operate with discipline as opposed to gold bug style emotion.

The bear market and subsequent inflation-fueled credit bubble early last decade was when I first started paying close attention to macro markets (as opposed to stock trading, which I had done for a few years prior) and how they operate. Having seen well paid professionals lose half of my IRA in 2002, I took over all of our finances and never looked back. But I needed to understand how markets worked and that has been a challenging and rewarding endeavor, not to mention an ongoing learning experience.


I use talky charts like the one below because I need to be talked to, or coached. But I need this coaching to be 100% honest and accurate, not the ranting of some biased lunatic who would have me buy in to his world view. The chart below honestly shows exactly what gold did vs. the S&P 500 during the 2007-2009 US crisis, the Euro crisis and subsequently, the aftermath of unprecedented policy interference in financial markets.

Why care about what gold did vs. the S&P 500? Because it is perhaps the best macro signpost I know of when trying to determine what sort of macro phase we are in. Conventional economists and analysts advise riding out the correction, imploring people to remain calm and hold stocks for the long-term, while this chart is opening the prospect of a cyclical change, as in a counter cyclical change.

I call financial services professionals "conventional" because the vast majority are always going to keep their clients buying and selling stocks or simply holding long, depending on how their compensation is best served. Brokers want trading, fund companies want holding (and buying the dips) and sales people of all stripes want to keep you in the game at all costs. Eventually, they will puke. But if the macro is changing as this and other charts seem to imply, their puke point will come only after more pain stimulates and reinforces their (and especially their clients') fear.

Interlude: As if by divine intervention this headline of an article written by a CFA just showed up in my inbox as the lead item from Contrary Indicator Central, AKA Seeking Alpha: The Stock Market Decline is Entering its Puke Phase. The market will bounce (sometimes strongly) several times along the way, but when the final puke comes 99% of CFA's are not going to be calling it.

I don't play the conventional game. I use 'talky' charts like the one below to tell me that Alan Greenspan instigated a bubble in commercial credit, which spoon fed liquidity into asset markets and eventually encouraged enough risky behavior and leveraged speculation by our buttoned down friends in the various financial services industries (using other peoples' money) that the whole thing (boom) needed to be flushed (bust).

Gold:SPX Monthly Chart

Gold, as a risk 'off' asset was preeminent during the resolution of the excess. That is the counter-cycle. But the 2007-2009 risk 'off' phase went too far and even a person as negative on the methods used by policy makers as your letter writer had to become bullish in the face of Time Magazine 's The New Hard Times headline, complete with a soup line of displaced workers. From NFTRH 9 on November 22, 2008...

"Okay, everybody's got the memo; deflationary depression it is. Well not everybody... I'll go with the old pros [ed: my late friend Jonathan Auerbach and a veteran trader who came out of retirement to work at Jon's shop due to the bullish opportunity] and stick to my story that there will be recovery - born of inflation - and there will be places to invest and places to avoid. With the entire world now expert on deflation and 1930's history, I have got to believe we have a huge counterparty of 'sissies' [Jon's term for weak hands and fearful market participants] waiting to take the other side of the trade.

I personally believe any coming stock market rebound is a trade only and things could get worse before they get better [they got worse, into March 2009]. But if I were a deflationist I would be uncomfortable with the level the major media and by extension, the public are up to speed on the concept just as I was uncomfortable with every Tom, Dick and Harry on board the inflation express."

Time Magazine Cover

The point of this segment is not to brag about being a successful contrarian. Honestly, that is how I am wired anyway and it has not always worked to my benefit. For instance, I was unable to get contrary to my own belief system and take significant advantage of the massive stock bull market that I believe was created out of unsound policy.

But I do have the patience of an elephant and I have kept charts like the above, and especially its message, in mind every step of the way. The chart goes on to say that Operation Twist successfully "sanitized" (the Fed's word) inflation signals, just happened to coincide with a global deflationary phase, a 'best of all worlds' Goldilocks phase in the US and best of all, for those revived conventionalists now operating with the public's confidence once again, put risk 'off' gold on the outs.

The chart says gold may be coming back on the ins relative to the S&P 500 after an unprecedented phase of über confidence reset the picture and nullified the lessons of 2008 for a vast majority of market participants. We've come full circle.

NFTRH 381 then went on to dial in the necessary up to the minute info on the precious metals move, US and global stock markets' technical status, bonds, currencies and perhaps most important of all, the macro indicators that steadily guided us to this point over the last year.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in