Ainslie Bullion - Daily news, Weekly Radio and Discussions

Before I start with a couple of negative points I want to just say that my views match yours somewhat. I too think the sharemarket is hope (consumer confidence) and not reality. I feel the true is same with real estate.

You state that every crash follows an interest rate hike, but then you state that it comes too late. I think that an interest rate hikes should not occur at all, and the fact they shouldn't have occurred leads to the market crash.

So now on the graphs - a couple of points - there is no such thing as 100% probability or likelihood in statistics. Until a decision is made there is some possibility/probability/likelihood of a decision not being made. This is especially true since the decision is being made on data not yet released, on a meeting that hasn't happened by people who are still monitoring the economic state. Hillary was nearly 99% likely to be president. One other quick point is that there is an expectation on what the rise will be, but what happens if there is a rise but it is minuscule or too high? Nobody is talking about "what change" will happen other than "100% probability of an increase between 75 and 100 basis points". My response is "sure, but there's only a 50/50 chance of that.

My prediction is a rise of 50 basis points, which will semi-shock the market and make gold come back to 1200 until next year's data clarifies things. I base my guess on the same statistics that most proponents use (I made it up just now - shhh don't let anyone know the market prediction secret).

Second point - you have a graph of correlations but every correlation has two corresponding probabilities, the probability that the correlation is JUST RANDOM but you accept it, and the probability that the correlation is NOT RANDOM and you reject it. The easiest way to show this is by displaying the confidence intervals (potentially the box and whisker plot as is commonly used with market data).

In other words, the correlations that go up and down could be just due to random data and have no relation to anything and, in standard statistics should not even be shown.

At very least the probability that the data IS RANDOM should be shown - i.e. (p <0.05). Further, was there any smoothing of the graphs, if so what technique was used?

The point? Currently it looks like gold is negatively correlated to the share market - that when shares go up gold goes down. This may be the case, but you didn't supply any actual figures for me to confirm that conclusion.

 

# Your 1st highlighted statement - Is An Incorrect Quote - read it again

# Your 2nd highlighted statement and prediction - :/

# Your 3rd highlighted statement and prediction - :lol:

# Your stated "2nd Point" from what I read is actually closer to your 4th point - still

So you seem very sure that your "predictions" are more worthy than Ainslie which is fair enough but are they only time will tell

I am now wondering if you work for another Bullion house in or near Brisbane

One cold hard fact bases in history is this - Gold will stand alone long after "your predictions" and I are long gone

For any employment offer from our thick skinned sponsor here is my mobile number - 04 - - - - - - - 1 :lol:

Yes I am willing to move to Brisbane

 

Your 2nd point Is An Incorrect Inference - read it again
His 2nd highlighted statement is actually an opinion - not a prediction.

 

AB clearly states THAT NEARLY EVERY CRASH IN HISTORY - emphasis on the word - NEARLY !!!


So thanks for the tip to - reread it which I did - which clearly says that I was right all along

So you both are wrong,can you live it I can

 

Nice PS, but I'd like to expand on Ainslie's take of this correlation:

The statement that this positive correlation is "rare" is incorrect.
No doubt intentionally worded to mislead, it reflects a great example of the commonly used conveniently-dismissive-of-fact-pumper-style writing language.
It is obvious looking at the posted chart that a positive correlation is not even close to "rare". However, when analysed, the numbers show that when analysed back to 1965, gold continues to have a near-zero correlation with the S&P, which means they basically move independent of each other.
Whilst numbers don't lie, if you are curious this calculation has been published by Wharton finance professor Jeremy Siegel.

Why (if it were true) would this be "potentially good news"?
I'd love to hear your answer.
Unfortunately, contrary to the title of this thread there is a distinct lack of "Discussions", so I don't really expect an answer.... or any type of "discussion".
I do however look forward to critiquing the next lot of pumpershyte posted on this propagandic billboard.
Cheers

 

This was his 2nd highlighted statement: "I think that an interest rate hikes should not occur at all"
I suggest you reread it one more time.

 

Okay - so maybe I had a brain fart, but I thought the statement "'hope' underpinning much of what you will read lately" was talking about markets, primarily the S&P and all ords that are share market indices.

RE the correlation - you have completely misunderstood my point - I'm merely stating that I have seen no evidence for a correlation what-so-ever. A "Pearson Moment Correlation Coefficient" of 0.2 or -0.2 is so poorly correlated that it should either be dismissed or should have VERY strong statistics around it (as in thousands of data points which they may have). In essence it means that a change in one variable has almost no relationship. This is NOT a regression (i.e. predictive) relationship. Any statistics package to show a correlation of 0.2 as "significant" would require a vast amount of data. In business intelligence and econometrics you must dismiss anything that is not significant. e.g. if I take two prices 30 seconds apart, the correlation MAY be 1 - but that is meaningless because we are talking about 30 seconds of data. Without displaying the statistical confidence of the correlation I have no concept of the error rate (is it plus or minus 0.4??).

I am not saying I know more than Ainslie, but just like a house buyer learns the market, and a real estate agent learns what to say to make a sale.... it's their job to turnover precious metals by giving whatever data and backing they can to do that and my job to work out when to buy and sell, listening in part to what they say. But to be clear, that's all it is, what I am saying is a guess. No calcs, no analysis beyond gut feeling. I truly think a random roll of the dice may give a good answer as either Ainslie or I can give. The same goes for the interest rate rise. I don't have the knowledge or data that the people on the board have, so I am being naive in the extreme to think I know they are making the wrong decision.... so call me naive in the extreme because I think it is the wrong decision.

 

Oh - and I am not in precious metals, never will be.

I'm in financial systems, business intelligence, econometrics, corporate finance, financial systems, enterprise resource planning systems, machine learning, mathematical analysis, performance analysis, business process engineering and reengineering, executive management and blah blah blah.

In short, I do whatever brings in the money - I do not now, nor will I ever assume that I will make money from precious metals, stocks, or term deposits. I earn money from my job. The rest is savings. Sure, my stocks went up 60k this month... but that's after they went down 40k before that. It's not real money until it's in your hands. It's all gambling, so I'm doing this for fun.

 

So I am calling you naive then

What is that saying - there is no such thing as bad publicity

Kudos to you Ainslie Bullion

 

Yes - true. And in true google debate fashion I googled until I found someone that could say what I meant with data and quotes and stuff so it's gotta be true.

http://www.cnbc.com/2016/11/22/david-stockman-doubles-down-on-his-sell-everything-call.html

Seriously - this is one of those times I didn't bother to check a single fact they said, but I agree completely.

 

And again - I am NOT selling bullion... but I am bullish on it because, like that article said "Given this prediction, Stockman re-emphasized that gold and cash will be king and urged investors to shift their portfolios accordingly. "

I still am not going 100% in, more like 25%. I can see Australia seriously avoiding most of this, if not benefiting from it. I see the Australian share market going up (as US money leaves the US to make money), the Aussie dollar going up and although Gold and Silver will go up in US dollars, there may not be a huge shift in $AUD/oz. I couldn't be bothered googling an article that says that but I'm sure there is one that does. If not, I can write one and then cite it.

 

Oh - and as for "knowing more than Ainslie" - this is in agreement with what they are saying.

wrcmad - as for my comment on whether a positive or negative correlation is good or bad... I have no idea what-so-ever. I don't know enough to form an opinion. Sorry - too new to this.

 

I was really asking Ainslie, as it was their statement.
Seeing as though we won't get an answer from them, I'll take a punt at the reasoning:

Given their statement "... negative correlation between gold and shares is back in and that is potentially good news." was preluded by the false insulation that positive correlation is a rarity, coupled with the suggestion that an exact repeat of last year's share/gold price action is imminent, they stand to gain from the implied impending gold price-rise by way of flogging more of their wares. That would be tantamount to the relevant meaning of "good news".

 

There is never a bad time to buy Gold in my opinion whatever the cost or other peoples or even the "experts" opinions.

That is probably the way that the 100kg of Gold was found stashed around the old house in France this week.

So buy Gold today,tomorrow and forever,what a great and surprising inheritance for the people you love and leave behind

# I am in no way being paid for my opinions about this thread.

 

It's like any asset - when is a bad time to buy? When you are buying for investment at the top of the market or before a drop.

You stated you aren't buying for investment, in which case I agree - buy constantly. Sometimes you will win, sometimes you won't but over your life it will average out. It's the same as super.

 

Indian Gold Ban Put to Bed

A couple of weeks back we reported on India banning large denomination notes (here). Whilst generally originally being accepted by most voters as it was ostensibly about stamping out 'black money' the move is starting to cause more widespread panic in India and some of the more hysterical conclusions even globally. As reportedly 60% of notes have not been handed in the government has been upping the ante to move things along, now with a shorter deadline to get them into a bank and the threat of a penalty tax on deposits considered too large to be legitimate.

The more concerning rumours were around gold being banned for citizens. The theory is that the black money is just being converted to gold. That this rumour emanates from the world's second biggest consumer certainly caused consternation in markets. When asked we have maintained a very strong view this would never happen given Indian's very deep seeded and cultural need to hold gold. The uproar and cost of political capital would be devastating. Indeed a top finance ministry source has just categorically put it to rest saying:

"There is no such proposal before the government on restricting domestic gold holding,"

The Indian government's battle with gold is nothing new. In 2013 we saw layers of restrictions introduced to curtail imports as it was worsening the Indian balance of trade (gold is second to only oil as an import). Modi has actually wound some of this back since taking power and given his political opposition has now turned against him on the cash ban there is little chance he would change tact.

The other thing that we are now seeing too is rising premiums paid over the spot price which in itself is a positive sign of surging gold demand.

 

'Risk on' Returns Italian Banks 'Risk Failing'

There was a somewhat predictable change in mood in markets overnight as the so called Trump Trade was overcome by some global realities. Shares and the USD came off and bonds and gold rallied all around the world as fears mount on the outcome of Italy's referendum. With the No vote looking certain to be the victor, attention again turned to Italy's banks as the most immediate victims. The Financial Times reported that eight Italian banks were at risk of failing on refinancing concerns that could evaporate with a No vote. Italian bond yields spiked further and the Risk Premium, which is the difference between their 10 year yields and the 10 year Bund (German bonds) hit a 2 year high.

We reported on the Euro banking crisis most recently here (with links to previous) but the core issue with Italy's banks is non performing (bad) loans (NPL's) at a time of inordinate banking stress courtesy of EU negative interest rates and a stagnant economy. To clearly quantify this for you, they have $600 billion of NPL's but only $375 billion of equity on their books. They have been unable to fix this with capital raisings and the EU rules say the Italian government cannot 'bail out' the banks. That leaves bail in's which is political suicide given Italy's extraordinarily large number of domestic 'mum & dad' depositors and bank bond holders in Italy.

It also of course would see enormous pressure to bear on other EU banks. The graph below clearly shows the 'everything is awesome' Trump jump in EU banking shares is now over and heading south.

A No vote has no immediately obvious outcome, with many scenarios that could play out. Uncertainty could reign for some time yet which is just as toxic for these precarious banks. And then we have the French elections in April.

 

GFC Redux Here We Go Again

We were struck by a Tweet yesterday by The National Property Research Co. (who co-presented with us at The Future Proof Portfolio seminar recently) quoting the definition of stupidity as 'Knowing the truth, seeing the truth, but still believing the lies'. The context for them was the apartment market and we will go through that tomorrow, but let's look at shares first.

Vern Gowdie of The Daily Reckoning in his article on Saturday included the following:

"The US share market is in dangerous territory. Each new high makes the market cheerleaders joyous, but it should make prudent investors nervous.

This table compares a number of valuation and economic data sets between the previous market high in September 2007 (and we know what followed that) and now.



Source: TCW

To quote from the report:

'It's back to the future again. Leverage has returned, most notably in the corporate sector where debt metrics have not just round-tripped, but are now in excess of the levels experienced before the Great Recession.'

Lessons have not been learned. The addiction to debt is even greater than it was in 2007."

Too often we are not so much 'stupid' as lead astray by people supposedly more learned than ourselves and whose message reinforces our investment bias or, quite simply, what we hope to be true. Vern Gowdie spends most of that article deriding the vested interest of most financial analysts and advisors who never tell you shares are looking over valued.

Whilst you may think we spruik a similar vested interest we are at lengths to remind you we spruik nothing more than balance; reminding you that a financial crash is a certainty and that gold is historically highly uncorrelated to financial assets. That can make gold an excellent hedge, and indeed a profitable investment, with such an occurrence.

 

I see the table as the result of the GFC rather than immanent second GFC. That said look at the bottom three figures. In short, interest rates are too low (second from bottom figure), if they raise interest rates, people can't afford their debt and there will be a recession next year (third bottom figure), and if they don't increase their interest rates they can't stimulate the economy. To date they have been stimulating the economy by increasing the federal reserve balance sheet from 2008 until now with Quantitative Easing (QE) which they can't afford any more (bottom figure). In fact, if they don't increase interest rates there will be a lack of confidence in the economy.

The US Fed Ex are in a catch 22.

In my opinion, neither outcome will be catastrophic but the US economy is not healthy. Although I would argue that Ainslie have a "dog-in-the-fight", but I agree less so than most financial analysts and advisors.


On the bright side for both stackers and sellers (like Ainslie), I think now, and probably the next 3-6 months is "buy" time.

 

GFC Redux housing too?

Yesterday we showed the similarities between US financial markets now and 2007, so let's look at property today. You will recall that it was a US property crash that triggered the GFC. So how are things looking now?

Marc Hanson of property market specialists M Hanson Advisors recently published this collection of charts and commentary:



As Hanson says: "It's never different this time. Easy/cheap/deep credit & liquidity has found its way to real estate yet again. Bubbles are bubbles are bubbles. And as these core housing markets hit a wall they will take the rest of the nation with them; bubbles and busts don't happen in "isolation"."

Just as we are seeing in Australia (we will discuss more tomorrow), it is getting harder to afford housing as well:

"Houses have NEVER BEEN MORE EXPENSIVE to end-user, mortgage-needing shelter buyers. The recent rate surge crushed what little affordability remained in US housing. It now it requires 45% more income to buy the average-priced house than just four years ago, as incomes have not kept pace it goes without saying."

The following graph from the OECD published earlier this year reinforces how US house prices have grown faster than wages since 2010. You will note Australia has been far worse and our friends across the ditch top the list.



The elephant now in the room however is the impacts of rising bond yields and soon to be official interest rates as well. Mortgage payment stress is coming as increases in servicing interest amid stalled wage growth bites. The other victim could be retail as consumers are less likely to fund purchases by simply drawing from their (to date) 'cheap' home loan. Indeed, as the Wall Street Journal reported off the back of a Mortgage Bankers Association report:

"The MBA estimates refinances will fall 46% next year, to $484 billion, which will hurt Americans' ability to free up cash by reducing the cost of their monthly mortgages."



Tomorrow we discuss property in the Aussie context, hot off the heels of yesterday's Building Approvals plunge per below: