He makes a lot of good points, and he seems to be right, and the pumptarts wrong. http://traderdannorcini.blogspot.ca/2014/09/something-to-consider.html Something to Consider Ever since the Fed embarked on its journey with Quantitative Easing, we have all been getting an education in how the markets are responding to this grand experiment. Now that they are scaling back their bond buying program, we are also getting an education in how the markets are responding to that as well. Most of the longer term readers here at the site will know that during the initial years of QE, nearly every asset class began moving higher. Some moved in response to ideas of liquidity injections while others moved higher in response to anticipated currency weakness. This rising tide continued in near perfect sync until sometime in early 2012. That is when the commodity sector in general divorced itself from the rising equity markets. As you can see from the chart that follows, stocks have moved relentlessly higher while the overall commodity sector has continued to sink. Just today it notched a 27 month low. Yet in spite of this, we still have some telling us to prepare for runaway inflation any day now and of course with that, soaring precious metals prices. The question one should pose is "WHY?". What evidence is there to suggest that a soaring move higher is just around the corner in precious metals? Let's consider what this comparison chart is telling us. It is my contention that the reasons equities continue to rise is because they have become the only game in town when it comes to large speculators obtaining yield in a near zero interest rate environment. Also, something to consider is that US Dollar strength is attractive to foreign investors looking not only to obtain yield but also to capitalize on currency gains. In an environment in which the Dollar is generally strengthening against the majors, a foreign investor can move money into the US markets, not only obtaining a capital gains but also getting more "bang for their buck" when they finally cash out and make the currency exchange. So not only do we have domestic-based firms and funds buying equities, we have strong inflows of foreign capital also feeding the equity bull. That being said, a rising stock market does not necessarily equate to a strong and healthy overall economy. We have come to see this over the many years that this experiment in QE has been ongoing. When investors are looking for yield, they go where the bulk of the action is and that has been equities. Ask any competent money manager and they will tell you that they will not long be in the business if they are not producing solid gains for their clients. In a sense, they have no choice but to buy equities. I might add that I believe this is precisely what the Fed intended by driving interest rates to extremely low levels and providing so much liquidity. That money had to go somewhere and into stocks it has gone. Central Banks want rising equity prices to feed consumer and business sentiment and they got just that! The shortcoming of this experiment has been growth, while it has leveled off here in the US is not strong. As a matter of fact, one can see that whether through falling demand or rising supply or a combination of both, hard asset prices, aka, commodities, are falling in price. I have long maintained and continue to maintain that this is evidence of a deflationary wave that Central Banks have not been able to reverse. They have succeeded somewhat in blunting its worst effects but reverse it they have not. Consider the fact that the ECB might yet be forced to effectively go the way of both the Bank of Japan and the Fed and implement its own version of QE if their recent measures fail to generate any strong growth in the Eurozone. I have said all the above to come to this point - I will not argue whether stocks are overpriced or not. Frankly I do not care nor does the market at this point. Stocks are where the gains and have for the last few years, especially compared to commodities in general since 2012. Once that is understood, whether or not one likes it or approves of it is immaterial, one is on their way to understanding something about the nature of our modern markets. Money flows to where it can obtain a yield. It is that simple. However, and this I believe is most important, if the economy was actually growing as robustly as the soaring equity markets would seem to indicate, commodity prices would NOT BE FALLING. I think that is axiomatic and needs no further explanation. Look at the comparison chart and tell me that they are not going one way while equities are going the other. What this does tell is however is that current levels of demand are not strong enough to absorb the current supply. Along that line, I have maintained also that inflationary pressures cannot break out here in the US, or elsewhere for that matter, unless and until WAGES MOVE HIGHER. They remain stagnant however. Many of those who oppose my current outlook on gold will bring up the fact that the cost of many basic items seem to be going up and that this is evidence that inflation is present. They also maintain that the rise in prices is threatening the middle class and its way of life. They cite that as a reason to buy gold - to protect their purchasing power. I will only comment on this insofar as to say, that for the last few years, gold has been a pathetic investment to "protect one's purchasing power". The metal has collapsed in price from $1900 all the way to its current price of $1250, much like the vast majority of individual commodity prices have collapsed lower. What is so sad is that many of those advocating such things are generally much more in tune with what is happening in the broader global and national economy that the average Joe and Jill, who stuck with stocks and did nothing. The latter looks like investing geniuses while the former look like dolts. It is said that "Ignorance is Bliss" ( a saying that I personally do not ascribe to ) yet in their case, it sure seems like that is the truth! I sincerely believe that is not the point, at least as far as investing or trading goes. What is the point, and this is assuming that their claim is true, is that wages are failing to keep up with the rise in services or goods and thus that is crimping peoples' disposable income. After all, one has only so much money to spend, based on their take home pay, which has been relatively stagnant for many years now. If a larger share is given to buying "essentials", it is mathematically simple to understand that leaves less money available to spend on "wants". My question is, in such an environment, in which wages are flat, and growth is slow, and disposable income is tied up in essentials, where are the pressures going to come from to launch this long-heralded wave of inflation that will drive gold and silver prices inexorably higher? I maintain that the ingredients are therefore missing. To me it goes back to Wages and thus back to the Velocity of Money. Until wages move higher it is my contention that inflation of the scope great enough to attract the attention of market participants of size will not occur. Currently the TIPS Spread is falling, not rising. That is the best source to measure the sentiment of those who watch this sort of thing most closely. Any open-minded, objective survey of the chart will show FALLING INFLATION EXPECTATIONS are currently in ascendency.
Cheap money = Bosses paying down their loans. When their loans are being paid off with cheap money they look good. But That does not reflect a good company. Paying down debt with cheap money looks good on the books but it does not reflect "real" productivity of a company. H
"Money flows to where it can obtain a yield. It is that simple." That is the crux of the argument and I don't think it can be reasonably refuted. .
Agree that at zero cost of borrowing buying US treasuries or stocks and getting 2% yield or dividends, leverage that up 10x on capital is money for jam.. But he completely ignores the facts that markets are manipulated. He's talking about demand not keeping up with supply hence commodity prices are falling. Really? Is that why the GLD lost hundreds of tonnes of gold? Is that why gold demand from China alone soaks up almost the entire world's mine supply? What better way to keep 'inflation' in check by reducing the prices people pay for commodities. If you were US or China wouldn't you want to pay less for your commodities? If you look at something like iron ore that's real supply and demand because there's no futures market so it can't be as easily manipulated. Prices have cratered now which reflects I think China finally collapsing. But up until recently prices remained high. And why has oil price stayed high while things like copper zinc etc fell? It's my contention that it's manipulated to stay high by the US to sustain their shale industry because that industry needs $70+ oil to survive. It's all central planning.
^^ But fact remains, PM's are in the sh*tter, and stocks continue to sail. And we both know they can station irrational longer than many, many expect...I don't care, because I've been burned too many times in the stock market. I like what I own, and even though it is going down in value, at least my and my family have something fun to look at and marvel over. LOL.
Dan Norcini is one of the few blog/newsletter writers who's opinion I both respect and trust. For the moment USD fiat is also an attractive investment.
I can't help wondering about these US based members that have been pushing the bear case lately. I mean, this non-stop drivel about why Pm's are shit. All from the USSA... Hmmmmm. Seriously, are you guys paid trolls or just plain brainwashed? What is your purpose with posting this crap? Helping people? Generate a healthy debate? Yeah right. Do you have any idea of the state of the financial system? Do you have a clue that most western gov AND banks are bankrupt? YOU DO realize that they're painting the charts daily? And this "pumptarts" thing.... In case you didn't notice, this is Silver Stackers. Not Government Toilet Paper Stackers, or Stock Morons dot com. Now I know that you guys were probably not even aware of silver as an investment just 5 years ago, so you haven't been where we are right now. But you should at least know that you buy an asset on weakness, not on strength. So man the turtle up and BUY BUY BUY! and scream it from the roof top. stop being such weak hands! ps. and by the way Norcini is a documented idiot who thinks there's no manipulation and -sit down for this one- the markets are driven by hedge funds, not commercial banks. When gold will be up 100% (and it will), then he will be buying like everybody else. Will I be buying then? no way!
first off, the pumptart comment is more for the Morgans, Turks, Alaistair, and bunch of other KWN folks who said we'd never see, 34, 33, 32, 31, 30, 29, 28, 27, 26, 25, 24, 23, 22, 21, 20, 19, 18...while selling their book. Now, if one had listened to folks who did say dump silver at 49, and buy back at 20, they'd be doing a lot better than the pumptarts telling everyone to buy, since we'll never see x number again. I understand that the system is in the sh*tter, but that doesn't mean it can't stay irrational a lot longer, and folks getting a lot richer off the markets...and investing the profits in hard assets. Oh, and I'm very familiar where the state of the economy is. I'm not in the market, but I wish I had the balls to be from about the 6000 level, because I'd be smiling right about now, taking my proceeds and dumping into a gazillion ounces of silver or gold. But, common sense prevailed, and I lost out on this irrational opportunity...sounds like you did too. Oh, and make no mistake about it, I'm sinking every cent I have into PM's, otherwise known as money. All the best.
Trader dan is worth reading but he has a traders perspective. He is looking for fundamental and technical signals for a new trend and not seeing it yet. We could have another collapse or a recovery with high inflation and the Fed behind the curve. A recovery with mild inflation, to me, seems a low probability.
You are being so negative about PM's, that's a bit hard to believe... Maybe you are so bitter because you are buying silver or gold to make money? I hate to tell you this, but that won't happen. This is yesterday's game. You buy when it's cheap because you can get twice the amount of oz, not because you'll make twice the money. In other words: you won't get rich, it's just everybody else that is about to get a lot poorer. (that's in real terms... most won't even know it because all they see is nominal terms) As for missed opportunity, I was actively trading stocks up to 18 months ago, and yes I got in at the bottom because that was obvious. I always get out early. and I wasn't buying silver at $40, because that was obvious too. the same with buying RE or stocks now is obviously stupid. Now you can buy physical silver at $22 AUD for 1oz (same price as in the 80's). enough said.
sounds like you're right all the time. good for you. me bitter, nah, I'm happy, and having fun. I just don't like pumptarts that have ulterior motives is all. Have a great weekend.
valuecreator show some proof of Norcini being a documented idiot or shut the hell up about him. Norcini explained what happened last year and has facts to back up his position. You might try that some time. As far as pms going down, have you noticed that the commodity index keeps hitting lows? You must have missed that fact because few bloggers write about it other than Dan Norcini. I guess I was a weak hand last year when I dumped ASEs at $24 because I thought silver would decline some more. And now I could buy the ASEs back more than $3 cheaper but I am such a weak hand that I cannot do it. Either that or I won't because silver is in a confirmed downtrend. Silver at $20 isn't cheap if it goes to $10. Will silver drop that low? I have no clue. But despite the worldwide money printing, silver and the other commodities are looking very weak and no amount of pumping by the perma bulls will change that fact. If it wasn't for copper prices holding up, I would be short the commodity sector. My pm positions are hedged. Thinking that pms are a good long term asset does not make me blind to the 3+ year downtrend. And I don't care what silver was in the 1980s, I care where it is now and where it is going to be. Sugar is cheap too and you can eat it. So load up or are you a weak hand?
The point highlighted is extremely significant in my opinion. You won't get rich, and maybe you could even get poorer (relative to today), but my conjecture is that by holding PMs your wealth will decline far more slowly than everyone else's. And I remember one of your previous posts that added to my concern: "Central Banks Should Give Money Directly to the People" I also agree with many points in the original article in this thread but I am always ready to adjust my opinion. If I go back and look at my posting history I appear to have made similar arguments but I need to be vigilant to ensure I avoid emotional attachment to a particular viewpoint in light of new information or analysis: Disinflation: Are we looking at a long-term economic malaise with stagnant gold & silver prices?[/*] Cheap money chasing yield: Heading into one of the largest asset bubbles of recent centuries: We are now in a world where credit expansion policies and low interest rates from central banks have led to massive asset price inflation as a staggering excess of cash chases diminishing returns. There is a glut of cash and limited places for it to go. And with limited options, investors will be increasingly tempted into highly risky investments.[/*] Velocity slowdown: Velocity of money now slower than during the Great Depression: Not only is the velocity of money now slower than during the Great Depression, it is continuing to decrease.[/*] One thing I have been wondering about this week is the possible impact of the massive increase in excess reserves held by depository institutions: This is the comment I saw on it (actual comment is a year old):
It's absurd to think that no member here should ever be critical of the things they are investing their money into or critical of the goons that permapump silver to da moon tomorrow. Only a fool would condemn such criticisms in my opinion. I actually applaud those who bring realism into discussions and I'm glad that people like Barsenault have shared views of people who are not drinking the Kool-Aid of the pumptards just because these goons say scary sounding things about other types of assets and the US dollar. I wish I would have come across more reasonable minds than those I did when I first started stacking....I surely would have had more silver by now because I wouldn't have bought at $34 or whatever the spot was at that beginning time for me....about double of what I could be buying oz for now. .
I don't have to explain anything and I can say whatever I want. ok? Everybody is allowed to their opinion, this is a forum. I explain to people all day long what is happening and what to do, but not here and certainly not for free. Remember that you get what you pay for. All that Norcini does is spinning what HAS happened. You never see him say "this will go there" because he doesn't know, he's just a momentum trader trying to get a free lunch like the rest of them. He always says this might go up, if not then it will go down. Very clever. I don't need him to know if the price of something went up or down... His analysis are wrong headed, though, and I personally think he's an intelligence asset, he just plays the idiot. His take on Gold and Silver are prime examples of this. I mean come on, Price Controls are so obvious by now, why would you deny this??? At the end of the day he calculates his returns and wealth in $, hence me calling him a bonafide, ideniable idiot. It's by no mean an exclusive club.
VERY good point. Without criticism the forum would turn into an echo chamber and we'd all be worse off. The hard bit is to objectively evaluate alternate viewpoints that conflict with your own.
my point was that there is this little bunch of americans on the forum that seem to be hell-bent into pushing the case for not buying silver. I call bullshit.
Pete, to refer to you very nice post #13. These are all very short term things. Try to look at it from a bigger perspective: this is not just a depression, this is the end of an economic system, and its numeraire. All these people trying to make a buck should worry about saving their collective asses.
Yes this is absolutely true and I would not try to refute that statement. The big question is, how long will that continue, what happens when it stops and what do you do about it ? If you choose to ride the wave, you better have a good life jacket and great timing when the wave breaks. I think the words of Seth Klarman from 2013 are worth listening to (modern day Warren Buffet and one of the most successful US hedge fund managers)
