Thursday, September 11, 2014

Our Pattern Loving Brains, Spooky Coincidences, Randomness, and Biases

Behavioral finance anyone?

Rising Rates and Gold

The market is most definitely factoring in a rise in interest rates, which is not only pressuring gold but also lighting a fire under the dollar. This has occurred in junction with the continuation of Abe's Japanese QE and talk that Draghi will implement a European style QE.

That said, the price of gold may have already factored the above scenario in. So says the folks at Kitco news.

The points presented appear valid. First off, look at the price of the dollar, here represented in the UUP.

Seems like a short-term parabolic move to me. A parabolic move that may be losing its upside luster. A pullback in the price of dollar, would likely lead to the alternative trade of higher gold prices.

More so, many of the gold/precious metal equities continue to bounce around their respective resistance levels. Lets turn to my go to guy in the space- RGLD.

Even though gold price are scooting around the $1,240 level, off from around the $1,300 per ounce level just a few weeks ago, RGLD refuses to give up the ghost. Not that it still can't give it up and test the 200 day moving average, the stock price, volume, and technical measures look more like a tentative consolidation. Look, I am still of the opinion that we may still see lower prices in the precious metal investment complex. Once we see fed change the language of their guidance, we are likely to see a reversal in the buy the rumor, and investors/traders may sell the news. I would not be surprised if we do not see some information released at this point, allowing for more informed decisions to be made.

And just for informational purposes, the gold timing models I employ have turned more positive.

6-month rolling timing model has dipped below the -1 demarcation. Negative results in the timing model suggests a more positive entry point in the precious metal equities and as gold prices follow the equities, the price of gold.

Wednesday, September 10, 2014

Blame the Fed for High Asset Price- Faber

 The folks at Wall St for Main St walk through Marc Faber's outlook on the markets, the fed, interest rates, precious metals, and the general investment climate.

How To Think About Hedge Fund Activism

This video below is a recording of Alon Brav detailing his research in to hedge fund activism and the return enhancement actions under taken by these funds. I presented this important research at least once, if not multiple times, but the following does add to the prior commentary.

Gold In the United States

Some worthwhile facts and history concerning gold in the US. Via the Visual Capitalist

When the Bull Market Will End- Jim Rogers

Sage thoughts from Mr. Rogers

Gold Consolidation Leads Increased Prices in Gold- CMP Group

To help frame your views on the precious metals.

Just Sitting on Your Hands with Precious Metals

I was out yesterday hemming and hawing with musings and insights into the general course of precious metal investments in regards to the central bank machinations, key movements in the currency markets, a dial down of international political flare ups, etc. Although I think we could see some more downside here in the precious metals complex, for my money, I am staying with the investment. Some of the my largest investment mistakes have come at the hands of attempting to be to cute, too 'fine tuned', and too on the ball when I should have just been sitting on my hands...... more so in regards with a thesis I believe remains in tact but I was attempting to hold gains. 

But lets face it, the dollar trade is the big mo trade at the momentum and that is unlikely to stop on a dime. Just look at that gain......

More so, yesterday's pullback in no way suggested a reversal moment, especially in regards to the action in the Yen and Euro. Here exemplified by the FXY and FXE.



That said, parabolic moves like we see on the dollar rarely maintain themselves in the long-term. If I was to reduce my precious metal positions, a pull back in the dollar signaling potential strength in the precious metals may be the time to do it.

Taking A Precious Metal Break With AAPL

Just to be fair, I have no skin in the game with AAPL shares. That said, AAPL is such a large share of the overall equity market, the share remain hard to ignore. Additionally, yesterday Apple hosted the big event where where the company not only announced iPhone 6 but the also the Apple Watch, which frankly I just don't get on why consumers would need an Apple watch but what do I know.

That aside, I thought the price action in yesterday's trading was amazing to watch. Lets look at the charts. F\

First the annual....

and then the intra-day chart

What is interesting here is that it appears some big investors were using the strength to get out in big way. Just look at that volatility in yesterday's trading. Outside of thinking that option traders probably made out well with the volatility, the other idea that crossed my mind was does this volatility portend to an increase in the market's risk. I guess we shall see. More to note and worrisome, we have seen two days with volume coming off the high on AAPL shares. This is as a gap is open at $76 while the RSI and MACD slow relative to the price trend. If owned AAPL shares, I would be concerned if the price AAPL pierced the 50 day moving average.

Tuesday, September 9, 2014

Risk Revisited- The Practical Guide to Behavioral Finance

Howard Marks of Oaktree Capital explains the difference between volatility and risk. Although the academic world, and in turn many aspects of the profession, look at volatility and risk synonymously, Marks explains why this cannot be so. Alternatively, you could view the below as a practical guide to behavioral finance.

And Marks' discussion on risk

The Business Of Movie Ratings

This take is a rather interesting look at the business of movies. the associated ratings, and in some respect society as a whole.

Gold Musings and the Patience of Job

I have to admit, I have been rather quiet the last few days. Aside from attending to my day job and more importantly family events, the real elephant in the room where it pertains to the investment universe has been the gold sell off. And to be honest, I really did not know how to comment in regards to what one should do. On one hand, I remain bullish long-term on the yellow metal and the precious metal equities. However on the other hand, and yes I am putting on an economists hat here, many of the precious metal equities have busted their May/June support levels, which could indicate further downside. The break in some of the equities has occurred in conjunction with the price of gold piercing the $1,265 support level. With many of those technical levels taken out, I have been debating holding the line on some of gains for year in the hopes of jumping back in later at better prices. To frame my thinking, the long gold trade has been hit from many sides in the last few weeks. Lets review some of these occurrences.

- The geopolitical environment has come off the boil with the Ukrainian cease fire accord with Russia

- QE is apparently coming to a close in the US, which has coincided with chatter from both the Fed and the investment community about an increase in interest rates sooner rather than later.

- The take-down in US QE, coincidentally right, has come with an indication that Draghi will now push the ECB in to a European style QE.

The latter two has pushed the price of the dollar higher, as the Euro price in the currency markets have plunged. just look at the charts.....

The dollar has gone nearly parabolic.

And inversely, the Euro has plunged.

This trading dynamic has put pressure on the price of gold and correspondingly the precious metal equities. Surprisingly though, the price of gold has held up well despite the parabolic moves in the currency trades. this is while the precious metal equities have remained stronger, technically, than the metals. Bottom line, I am unsure of a recommend course. I think we are sitting at a critical juncture in the precious metal space and prices could move in either direction. Although I have been accused of having the patience of Job, to a fault, I also understand doing nothing is sometimes the best course of action.

Monday, September 8, 2014

Everything (And More) on Bitcoin

Although I have shown you many views and opinions on Bitcoin, in conjunction with coming out saying the price some months ago was likely bubbly, in all actuality I really have no opinion on the crypto-currency. The machinations, the debates, the price changes are damn interesting to say the least, but as a money alternative or substitute for any other form of money...... I just don't know.

In that vein, I was watching a few pieces on Bitcoin over the weekend, and I thought I would share some of these with you.

First, on the fragility of the infrastructure.

Second, an older overview of everything Bitcoin.