March 11, 2013
- “Violent reactions” be damned: two charts that point to bright days ahead for gold
- Jonas versus the Journal… Our trading desk mocks the media, eyes more profitable trades
- Will the wonders of 3-D printing never cease? Patient has 75% of his skull replaced
- Resourceful bank robbers (in contrast with an epic heist)… raucous reactions to our D.C. Shake (-Down) video… a few encouraging words… and more!
Chris is chewing over a couple of charts in a recent presentation by Jeffrey Gundlach, founder of DoubleLine Capital.
“These two taken together make up the simplest case for gold,” he says. “The first shows you the growing balance sheets of the world’s largest central banks.
“This is the legacy of ‘quantitative easing’ and all the money printing that has gone on in recent years. I see no way that the central banks will reduce the size of their balance sheets anytime soon. In fact, I think it is far more likely that they continue to grow.”
The next chart is a variation of one we’ve shared before. It adds all those central bank balance sheets into a single line… and plots it along with the price of gold.
“Note,” Chris adds, “the sometimes violent reaction gold has had on its way to higher ground. I’d stick with gold.”
On the flip side, there’s the purchase of gold by non-Western central banks. South Korea bought 20 metric tons last month for $1.03 billion.
“When you see central bankers acquiring gold,” Kingsview Management’s Philip Silverman tells CNBC, “you can kind of take it like this: You don’t fight in the stock markets when the Fed (U.S. Federal Reserve) is easing, so you wouldn’t want to fight the central banks when they’re buying gold, because they have deep pockets.”
As we noted a month ago, central banks added more gold to their reserves in 2012 than in any year since 1964.
“We’re not seeing any fear or selling action,” says Bron Suchecki of The Perth Mint — a favorite gold source among retail investors.
Suchecki says the Asian market offers subtle, but important clues: “The interesting thing about the Indian market particularly is that they are very canny buyers. They will desert the market if prices move up, [but] will come back in when the prices correct… When they feel the gold price has formed a new base… they’ll see that as the new bottom, they’ll buy that bottom…”
Overall, “we’re not seeing any rush to buy with the price dropping down into the $1,500 range,” he adds — “but nor are we seeing any selling. I think that’s quite positive. It tells me that [they're] very much strong hands and are not selling on this price weakness.”
Sure enough, gold begins a new week where it began the previous week. At last check, the bid was $1,579.
“Here is the key to a rebound in gold,” suggests our macro strategist Dan Amoss: “The investing herd must realize that the global economy is not as healthy as advertised.
“It’s not hard to find symptoms of economic sickness: European banks remain quietly insolvent; the Italian, French and Spanish economies are shrinking with no signs of a turn; Chinese industrial production, retail sales and lending are all slowing; and Japan’s just-released machinery orders are weak.”
“Japan,” Dan goes on, “is an interesting test case for the crazy idea that printing money leads to real economic growth.
“Japanese manufacturers will realize that a weak yen, while helpful for exports, has the disadvantage of pushing up prices for imported energy. Besides, with a weaker global economy, demand for Japanese exports should slow. Japanese households also face higher prices for imported products. Such conditions will not lead to an enduring Japanese economic recovery; instead, they will lead to a no-growth, inflationary situation.”
Meanwhile, “hedge funds have cut exposure to commodities and gold and have piled into an overcrowded trade: the stock market. They’ll bid up gold yet again when central banks create inflation, not real economic growth.”
In today’s 5 Min. Forecast PRO, we reveal how speculative short positions on gold are at a record high… and we suggest our own speculation to take advantage of a powerful gold rebound. If you don’t have PRO-level access, you can remedy that here.
Stock traders, perhaps still adjusting to daylight saving time, can’t move the needle this morning.
The Dow and S&P are up barely, the Nasdaq and Russell 2000 down barely.
“Try as the media might to dump some volatility into the daily ebb and flow of the equity market, things look downright orderly right now,” says Jonas Elmerraji of our trading desk.
He’s thinking about this headline a week ago today in The Wall Street Journal…
At that time, the market had been open a little over an hour and the S&P was down 0.2%. Heh…
“When the most respected purveyor of financial news in the world is trying to pass off meaningless market action as a stock market apocalypse,” says Jonas, “it’s a sign that you need to toss your copy of the Journal in the recycling.”
Jonas says there’s a small but important difference between volatility and fear: “Volatility is a very good thing when stocks are making bigger moves in a bull market. But fear, on the other hand, is a very bad thing for investors. It’s kryptonite for a market rally.”
Fear has been mostly absent since the S&P bottomed near 1,350 in mid-November. This morning, it’s a tad above 1,550. “While we’re likely to see a return to a more volatile environment from here, the important thing is that investors aren’t scared.
“Eventually, the market will correct again. But as long as that correction stays within the primary uptrend that the S&P is currently in the midst of, that doesn’t contradict my bullish outlook for stocks in 2013 — it strengthens it.”
Jonas has four trades right now. His average holding time is 21 days. In each case, he’s shooting for double-digit gains. For access to his research — at a surprisingly affordable cost — give this a look.
And now a new wonder of 3-D printing: A trauma patient is recovering from surgery in which doctors replaced three-fourths of his skull.
The patient remains anonymous, the location of the surgery a secret… but we know the custom-made thermoplastic implant comes from privately held company Oxford Performance Materials (OPM).
In this case, doctors take a mold of the area where bone was replaced. But in other instances, doctors can simply give patients a CAT scan. Then, according to Wired, an OPM team “builds on the data from the scan and creates printable CAD [computer-assisted design] files that feature screw holes and scaffolding necessary for implantation.”
“If you can replace a bony void in someone’s head next to the brain,” says Scott DeFelice, OPM’s president, “you have a pretty good platform for filling bony voids elsewhere.”
Talk about not being able to get 3-D printing out of your head…
Sounds like there are other neat applications in the works — we’ll keep our eyes peeled. OPM has cleared a big roadblock too: The FDA approved the use of its implants in critical procedures.
“3-D printing will have the impact people expect it to have,” DeFelice teased, “but it will take longer and happen in places people aren’t expecting.”
[Ed. Note: We're hardly the experts on 3-D printing, but lucky for us, Makers author Chris Anderson has agreed to join us for this year's Agora Financial Investment Symposium in Vancouver. Discounted registration is still available: dates and other critical details here.]
In the post-2008 Great Correction economy, you have to be resourceful — even if you’re a bank robber.
Three gunmen held up the Bank of the West in Capitola, Calif., last Thursday. Their timing was impeccable — during a memorial for two police officers from nearby Santa Cruz. That’s right, the kind of ceremony that usually draws hundreds of officers.
“I think they took advantage of the law enforcement community trying to honor our fallen brother and sister,” said Capitola Police Sgt. Marquis Booth.
Four days later, the crime remains unsolved.
We’ve had robberies on the brain around here lately. There’s one Patrick Cox can’t stop talking about. Maybe you got his email earlier today — the one in which he describes how thieves used a helicopter to get away with millions. The surveillance video is remarkable…
…and so is the potential $1 million reward. Check it out…
“Thank you,” writes a grateful reader, “for interjecting ‘noninflation-adjusted’ in your ‘record high’ sentence” about the Dow.
“It has been almost 61 years since I entered college, but there are traces of mathematics still rattling around in my brain that say we will have to top 16,600 or thereabout to create a correct Dow figure adjusted for inflation. So why all the whooping and hollering?”
The 5: Beats us.
Of course, you can come up with different numbers depending on the baseline you use, but these figures make the point well enough…
“I like the D.C. Shake (-Down) video,” writes the first of a few reactions in our inbox. “It’s even more apropos since the lyrics ‘con los terroristas’ (with the terrorists) is so fitting!”
“Wow!” says another. “And to think I was nervous when I signed your petition against drones. All I can say after watching your video is, unless you have complete faith in Eric Holder’s letter to Rand Paul, I hope you have a good place to hide from bunker buster bombs!”
“LOL, guys,” says a third. “Was that Monica Lewinsky posing as Nancy Pelosi?”
The 5: Uh, that’s a vivid imagination you have. But that’s the beauty of the thing; every time you watch it, you see something you missed the last time.
We’re up to 30,793 views this morning. If you haven’t watched, watch it and leave a comment at YouTube. If you have watched, share it widely — whether by email, your preferred social media vehicle or both.
“Thanks for the good work,” reads the first of a few emails after our drone coverage last week. “Anyone who thinks politics and economics are not related has his head firmly placed where the ‘sun don’t shine.’ Long may you write.”
“These readers really want you to stop talking politics?” says another. “When I started subscribing to these openly libertarian newsletters, I was a staunch Democrat.
“But the first thing I realized was how valuable it was to have a sort of ‘political opinion disclosure.’ I didn’t agree with you guys then, but at least I knew where you stood and could factor that in. But how scary is it that I had previously been following a lot of investing advice that was ‘politically neutral,’ as if politics have no real bearing on investing! Does it matter if a business you invest in is taxed 5% or 75%, or if their cost of borrowing is manipulated by a cartel of large banks?
“And that was all before I learned the most valuable thing of all: that I was wrong and heavily brainwashed about a great many political issues. I say be thankful you can find advisers who talk straight, rather than in politically correct, focus group-vetted language devoid of all utility. Think of your retirement plan literature selling you on nonzero bond allocations!”
“Banish any political opinion from your writing about the markets? Is that not what the Austrians have had as their goal for decades?
“If the politicians would quit with the ridiculous notion that they can actually control a business cycle, let alone an economy, and would keep their ever-growing noses out of the business world, there would be no need to inject any political opinion. Sadly, that has not been the case for at least the past century.
“So until the dolts, doofuses and incompetents get out of the way, I say continue to take potshots and cheap shots at every one of them that deems himself smart enough to defy the laws of economics. Thanks for the always-entertaining 5.”
The 5: All true… but where in that ideal world would we direct our mockery?
The 5 Min. Forecast
P.S. “Swedish police,” according to a 2009 Associated Press story, “faced stinging criticism Thursday for failing to stop helicopter-borne gunmen from pulling off a Hollywood-style heist against a cash depot while blocking an air pursuit with a fake bomb.”
That’s the one Patrick Cox can’t stop talking about. He’s on the trail of a method to prevent a crime like this from happening again — ever. Follow the clues to a $1 million reward at this link…