Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Abnormal New Normal

Stock-Markets / Financial Markets 2013 Oct 31, 2013 - 09:56 AM GMT

By: HRA_Advisory

Stock-Markets

The US dodged a bullet and the Vancouver Subscriber Investment Summit had a great turn out on the same day. Coincidence? I think not.

Seriously; thanks from Keith, Lawrence and I for the great turnout. I'd like to thank the companies that presented as they make these days possible. Last but definitely not least I congratulate Nichola Vermiere and Katy Severs for organizing a great event and doing all the hard work to make sure it was well attended and went off without a hitch. People thanked me for a great show but It's Nichola and Katy that do the heavy lifting. I just show up and try not to trip over the microphone wire.


We made it through another US budget drama. Gold ended it better than I feared. It's too soon to know if that is just a "buy on news" knee-jerk reaction but I suspect not. Fed accommodation should continue for a while and physical buying has picked up again. It seems improbable Washington would put us through another shutdown in three months but the losers are already sounding belligerent. You can't discount another sideshow at the start of 2014.

A short period of something like normality hopefully means the small subset of juniors delivering real results will get a hearing and positive reaction to good news. That would be a nice change.

Washington continues its pantomime, dominating the newswires with one internal deadline after another. The markets have been taking the process pretty calmly, almost enthusiastically. Wall St. essentially ignored the whole process. Yes, the volatility was high but at the end of the day the NY market hit a new record which tells you how unconcerned most traders are.

The episode was driven by Republicans and it seems like Wall St, which is not a small contributor to the GOP, was comfortable the party would not do the stupid thing when it came down to the wire. It does make one wonder what the more radical elements of that party will do for an encore.

Many in the corporate world are already making noises about voting with their feet and with their wallets. I'm not sure how much Tea Party funding comes from corporate types but it sounds like some of that funding is about to evaporate.

For all the sound and fury in the past three months we're left pretty much where we were at the start. We have another set of deadlines three months in the future and promises everyone will play nice and formulate some kind of budget deal. It might actually happen this time.

No one objective views this side show as anything but a political disaster for the Republicans. They tried to make Obama blink first and, unlike 2011, he didn't. It seems even less likely he will blink first in January. I think that is Wall St's read. Budget impasses are the "new abnormal" and traders are going to largely ignore them unless there is a firm reason to think there is default risk.

I don't think traders care about things like sequestration either. Something is happening that appears to be shrinking deficits; they're uninterested in the details. As long as they don't read headlines implying the government is going to take more money out of their pocket they will tune out the process.

So where does that leave us? The shutdown had some economic impact though will take time to gauge how much. It's assumed by most macroeconomists that this episode knocked about 0.3-0.5% of Q4 GDP. That isn't a huge deal if its accurate. It would take the projected growth rate for Q4 down to 2%, a pretty lackluster amount.

In the midst of the shutdown weekly employment claims were coming in higher but the data was noisy and pretty much useless. The shutdown didn't last long enough to generate layoffs anywhere and government employees are going to get back pay for time missed.

All in all it shouldn't be that damaging but its coming on the back of mediocre payroll numbers. The September nonfarm payroll number will now be released on October 22nd and the October one will come out a week late. Its hard to say whether either number, especially the October one, will have much impact since its sure to be heavily revised later.

For the gold market, the shutdown is mainly important for its impact on the Fed's QE program. The September Fed meeting minutes indicate FOMC members expected a start to tapering before year end. The shutdown will have changed that. There may be more lasting effects on the $US as well.

The Fed has always insisted its QE program and the taper that ends it are data driven. Recent comments from Fed committee members--including a couple of monetary hawks--show concern that data quality is going to be poor for a while.

It will take a couple of months before the impact of the shutdown on the wider economy is measured. The political grandstanding hasn't helped consumer confidence. Several private surveys show confidence at nine month to two year lows.

I've never found these surveys to be great predictors but they could still give the Fed pause. The US is about to head into the shopping season that makes or breaks the retail sector for the year. I don't think the Fed wants to rain on that parade.

As I expected, Janet Yellen has been nominated as the new Fed chair. She is a monetary dove, more dovish than Bernanke in fact. She isn't blind about it; she was simply right that this would be a weak expansion. She's also on record in the past being dubious about how trustworthy the unemployment rate is as a measure of US financial health. She's right about that too. Anyone who can do the math can see much of the reduction in the unemployment rate comes from workers giving up, not from workers getting jobs.

While I agree that physical demand should ultimately price gold many other factors are short term drivers. "Taper talk" has been a big negative for most of the year. That should work in gold's favor for the next few months as traders assume the taper will be pushed back.

Impact of the $US on gold and other commodity prices is variable but there are periods this year where it had a large impact (or other factors had big impacts on both gold and the greenback). We saw that the day after the US shutdown ended. Gold rose $40 and the $US got hammered. This was partially a "risk on" trade plus an acknowledgement that the Fed would extend QE. Gold didn't follow through the next trading day but held most of its gains and other commodities gained. The $US is at a nine month low--any sort of negative economic news could drive it below support at 79 which would be supportive of commodity prices.

$SUD US Dollar Index - Cash Settle (EOD) ICE

While the US was busy with political theatre China clocked a 7.8% growth rate in Q3, reversing two months of slowing. That should help support base metals and bulk material prices like coal and iron ore. Europe has also been showing more signs of life. It's going to be a long hard road back for the EU but at least it looks the economic nadir has been crossed.

In addition to support from a weaker Dollar physical demand picked up when gold dropped below $1300. ETF outflows (i.e.--the move from West to East) continued. Those sellers were no doubt surprised that gold gained after the vote in Washington. Others like them might be rethinking exiting the space.

The initial reaction to the end of the shutdown is encouraging but it will take a couple of weeks at least to know whether we have established an uptrend.

Though I would consider the next month of US economic data highly suspect in terms of quality, a batch of weak readings could help the gold price and generally better economic readings elsewhere could help base metals. The S&P looks stretched but the Fed stimulus trade is back on so it probably gets a victory lap too, unless/until we see weak job/retail numbers.

All this should add up to a better tone for juniors but there is little time to stage a rally. Tax loss selling is again a factor, though I think there has been a bunch of that already. Gold needs to gain at least another $50/oz to start calming traders. If that happens we may see a bit of strength going into year-end once tax loss sellers have finished.

That is hardly a ringing endorsement but it's better than I feared even a couple of days ago. A small minority of active, well managed companies still have to carry the day and that was never going to be easy.

By Eric Coffin
http://www.hraadvisory.com

Eric Coffin, editor of HRA Advisories, recently sat down with President and CEO of Colorado Resources, Adam Travis, to discuss more about the company, its recent successes and why investors should stay tuned to this story. Click here to download Eric’s interview with Colorado Resources now!

We think there will be more discovery winners but it's still a "show me" market. HRA understands that which is why we are offering you a chance to try out HRA for three months for only $10.00!

    The HRA – Journal, HRA-Dispatch and HRA- Special Delivery are independent publications produced and distributed by Stockwork Consulting Ltd, which is committed to providing timely and factual analysis of junior mining, resource, and other venture capital companies.  Companies are chosen on the basis of a speculative potential for significant upside gains resulting from asset-based expansion.  These are generally high-risk securities, and opinions contained herein are time and market sensitive.  No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned.  While we believe all sources of information to be factual and reliable we in no way represent or guarantee the accuracy thereof, nor of the statements made herein.  We do not receive or request compensation in any form in order to feature companies in these publications.  We may, or may not, own securities and/or options to acquire securities of the companies mentioned herein. This document is protected by the copyright laws of Canada and the U.S. and may not be reproduced in any form for other than for personal use without the prior written consent of the publisher.  This document may be quoted, in context, provided proper credit is given. 

    Published by Stockwork Consulting Ltd.
    Box 85909, Phoenix AZ , 85071 Toll Free 1-877-528-3958

    hra@publishers-mgmt.com   

    ©2013 Stockwork Consulting Ltd.  All Rights Reserved.

    HRA Advisory Archive

© 2005-2019 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