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Contrarian Gold Stocks 3

The gold-mining stocks have suffered a disastrous year, plummeting while the rest of the stock markets soared.  This vast performance gap has catapulted bearishness on this sector to epic extremes.  Few own gold stocks anymore, and everyone aware of them loathes them.  This has crushed their stock prices to unsustainable fundamentally-absurd levels.  They now offer the ultimate contrarian buying opportunity.

Legendary investor Benjamin Graham, Warren Buffett’s mentor, wrote that stock markets act like a voting machine over the short term.  Stock prices are largely a function of popularity.  The more investors like a sector, the higher they bid its stock prices.  The opposite is true as well of course, an unloved sector sinks as investors abandon it.  That is what happened to gold stocks this year, investment demand evaporated.

This has left gold-stock prices radically undervalued, with the flagship HUI gold-stock index trading under 200 this month.  This is an extraordinary anomaly.  After first hitting 200 over a decade ago in September 2003, the HUI finally left it behind a couple years later in August 2005.  Over the 8+ years since, the HUI has spent only one month under those levels.  That was during 2008’s brutal stock panic and this month.


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This is a PDF article so you will need to click on the link.

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Has the long-term cycle bottomed early?
A reader asks, “I was wondering if it’s possible that the long cycles, such as the 60-year cycle, have already bottomed early.  Is that even a possibility within the scope of the cycles?  It appears that the Fed has complete control of the markets right now.   One cannot help but wonder how high they will drive the stock market, and how low they will drive the gold miners.  It would seem that the imbalances are beginning to look a little conspicuous.”
This is a question many investors are asking themselves right now, so let’s delve into it.

It’s important to note that the 60-year cycle that was referenced above is “fixed” as opposed to dynamic.  This means that its bottom is absolute and can't be moved beyond its standard deviation of roughly 1-2 months.  Therefore it hasn't bottomed yet and won’t bottom until later next year, as per the norm of a yearly Kress cycle.
Now is it possible that the Fed’s extraordinary stimulus efforts in recent years have mitigated the cycle?  Yes it is.  Historically the last 60-year bottom of 1954 saw a similar situation wherein the Great Depression of the preceding decades – and the U.S. government's response to it (namely war-time spending) – essentially ended the depression/bear market a few years before it normally would have ended under the Kress cycles.

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QE To Infinity Out Gold Demand To Infinity In

Dec 10, 2013

  1. Bloomberg News reports that gold held in ETPs (exchange traded products) declined again, over the past week. To view a chart of these consistent outflows, please click here now.
  2. Gold is a timeless investment, and that means different themes dominate the market at different times. In the 1970s, American investors dominated the gold market.
  3. China & India were irrelevant to gold prices then, because they had no real purchasing power. Chinese citizens were forbidden from buying gold, and India was simply too poor to buy significant tonnage.
  4. The gold market staged a parabolic advance in 1979, because of Western citizen buying. A horrible collapse followed in 1980. Fearful Western investors sold because Paul Volker raised interest rates dramatically. Indian citizens did buy gold all through the bear market that followed, but supply overwhelmed their demand.
  5. The rise in the gold price from 2008 to 2011 revolved around a quantitative easing (QE) theme. Again, investors in the West were a key price driver, but buying from China and India increased tremendously. Most of that Chindian buying revolved around a gold jewellery theme, rather than QE.


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Feel free to share this timely video analysis which illustrates why 
Iran will NOT stop its nuclear weapons programme.

Also accompanying text on the Iran nuclear deal here -

Best Regards

Nadeem Walayat,
Editor,  The Market Oracle

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Why gold and silver are having a tough time

Ben Bernanke provided some clarity to the recent confusion surrounding the Fed’s QE stimulus program.  He indicated on Tuesday that the near-zero Fed Funds rate will likely remain at that level long after ending asset purchases under quantitative easing (QE).  This satisfied Wall Street and provided much relief, allowing a mini-rally to transpire in equities but providing additional selling pressure for gold and silver.

Thus the inverse relationship between gold and the stock market continues to hinge on the assurance of easy money courtesy of the central bank.  While many precious metals analysts continue to insist that gold will benefit from QE, the evidence is quite clear that the opposite is in fact the case.  Stocks are the clear beneficiaries of loose money and investors have exited the safe havens of recent years, namely gold and Treasuries, in favor of equities this year.  Until the massive liquidity provided by the Fed is in any way reduced, gold and silver will likely continue to have a tough go of it.


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The “melt-up” scenario for 2014

Market mavens have increasingly turned their talk to a possible “melt-up” scenario in the stock market.  The big fear entering 2014 is that another runaway freight train-type stock market, like the one preceding the 2008 crash, is gathering momentum.  The latest comment by incoming Fed president Janet Yellen only added to that speculation.

Yellen stated last week that, based on current valuations, stocks aren’t “in territory that suggest bubble-like conditions.”  Her lack of concern is one reason for thinking that the equities could be on the verge of a melt-up.  Economist Ed Yardeni has made the case for this potential scenario playing out, especially if Yellen turns out to be more dovish than Bernanke as he expects.

There are two principle drivers behind the melt-up scenario: the first is the so-called “reach for yield” among investors that Yellen herself alluded to in her latest remarks and which has resulted in a veritable bubble for corporate and emerging market debt issuance.  The second is the unprecedented monetary policy of the Fed in its frenzied efforts to beat deflation and lower unemployment.

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SPX Topping Valuations 2

2013’s incredible stock-market melt-up persisted this week, with the flagship American stock indexes surging to fresh record highs.  The euphoric bulls continue to claim today’s lofty stock prices are justified by reasonable valuations.  But nothing could be farther from the truth.  Stocks are actually very expensive these days, with high valuations seen at major bull-market toppings.  This makes for super-risky markets.

Successful investing demands buying low then selling high, so the price paid for any stock is absolutely critical to its ultimate return.  Paying too much, buying even a great company’s stock when it is too expensive, virtually assures poor future gains at best.  And overpaying when a bull market happens to be topping will lead to severe losses, as subsequent bears cut in half even the mightiest blue-chip stocks.

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Fed official admits failure

Apologies are becoming increasingly common these days.  From the ubiquitous “Twitter apologies” of celebrities to the mea culpas of scandalized politicians, the public has become used to hearing them on a daily basis.  It came as a surprise, however, when a former Federal Reserve official apologized for the part he played in the ultra-loose monetary policy known as QE.

“Confessions of a Quantitative Easer,” the Wall Street Journal published the public apology by former Fed official Andrew Huszar.  The gist of the piece can be summarized in Huszar’s words: “We went on a bond-buying spree that was supposed to help Main Street.  Instead, it was a feast for Wall Street.”

Huszar claims responsibility for executing the bond-buying experiment known as quantitative easing.  Despite his prior knowledge that the Fed’s independence from Wall Street was eroding, an observation that caused him to walk away from a previous Fed job, Huszar heeded a call to return in order to oversee the Fed’s mortgage purchases.  He described it as a “dream job.”

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Ron Holland on 'Restoring Our American Legacy' and Protecting Your Wealth in Perilous Times

Published by The Daily Bell - November 10 2013

Introduction: Ron Holland is a contributing editor to several newsletters dealing with political and investing topics and author of several books, including Escape the Pension Trap. Originally from North Carolina, Ron lived in Geneva from 2003 to 2004 and divided his time between the US and Europe until 2012 when he moved to Toronto. Ron has developed and introduced several innovative investment products to investors in the US, including the first Swiss-franc denominated variable annuity portfolio licensed in the US. In his writing and conference presentations, Ron emphatically advocates global investment diversification into foreign currencies and non-US markets as essential for protection from the US government's growing debt. Holland is particularly concerned about the vulnerability of retirement funds in the US, and consults to leading financial solutions providers seeking to provide viable options for citizens seeking protection. Ron's latest book, Restoring Our American Legacy, will be available in digital format in November, 2013.

Daily Bell: Hello, Ron. Good to speak to you again. Tell us about your upcoming book, Restoring Our American Legacy. It addresses the threats to our liberties, wealth and retirement benefits, how we should protect and grow more wealth with the new JOBS Act and suggests the potential for a boom in private equity and IPO business. Expand on that, please. What are the threats? Where's the promise?

Ron Holland: Well, your question provides a lot of answers. This is a 19-chapter free digital book that talks about confiscation threats to our wealth from both the lawyer-infested legal system and from a financial or military crisis-driven presidential executive order, and threats to our private qualified plan and IRA retirement funds. Bank robber Willie Sutton said he robbed banks "because that's where the money is." This is the same reason that governments across the West are already confiscating and forcing retirement funds into government debt – because that is where the liquid funds are.

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written by Taki Tsaklanos

2013 is proving to be a hallmark year in the ongoing saga which is called “economic recovery.” If anything has started to become blatant, it is undoubtedly the distortion in money, markets and metals.

During the first years after the financial crisis of 2008, the markets reacted in line with what one would expect from additional liquidity: stocks recovered from the crash, interest rates were pushed down, most commodities have gone up, and precious metals were the best performers. Most currencies have been whipsawing.

Although a range of interventions with exotic names have been invented by the creative directors of Western central banks, our belief is that the full effects of those measures have only started to manifest themselves in 2013. With the end of the year in sight, this year will go into history marked by a historic crash in precious metals, an epic surge in interest rates, US equities all time highs and European and Japanese stock markets surging the wall of worry. Courtesy of the central banking liquidity injections, interest rate manipulations, and, most likely, repeated efforts by the Protection Plunge Team (PPT).

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Two major scenarios for the 60-year cycle bottom

With less than a year to go before the bottom of the 60-year Super Cycle many investors are wondering how the coming months will play out.  There are at least two major possibilities that need to be discussed: the soft landing and the hard landing.

The effects long-term 60-year cycle, which answers to the economic long wave (K-Wave) can be seen in the fact that commodity prices and inflation are unusually low given the extraordinarily high levels of central bank and government stimulus in recent years.  Despite $85 billion in monthly asset purchases by the Federal Reserve alone, the oil price – one of the most sensitive inflation indicators – has actually been declining in the last couple of months.

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Nov 5, 2013

  1. Historically, gold futures prices often make an intermediate trend bottom around mid-November.  Please click here now.  This price chart from Dimitri Speck provides a good picture of average seasonal price action.
  2. Arguably, Indian festival buying is the main reason that gold tends to bottom in this November time frame.  Unfortunately, recent Indian government restrictions have reduced Indian gold imports dramatically, so seasonal pattern traders should exercise some caution in how they approach the gold market this year.
  3. Please click here now.  That's the daily gold chart, and you can see that my stokeillator (14,7,7 Stochastics series) is flashing a sell signal, with the lead line fairly high at about 68.
  4. If gold were to decline for another week or so, the stokeillator would likely come down to an area where it could signal a gold price rally, and that would fit with the price action suggested by the seasonal chart.
  5. Please click here now.  That's a longer term look at the daily gold chart.  Gold has been trading in a rough sideways pattern for many months, and I believe that “show time” is approaching now.

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Gold vs. Wall Street’s program traders

Gold ran into trouble last week after an encounter with its important 150-day (30-week) moving average.  The 150-day MA, which is an important psychological resistance barrier that is programmed into many Wall Street trading algorithms, was touched by gold a few days ago and was unable to overcome it.  I’ve long maintained that the 150-day moving average is a psychologically significant benchmark for the gold ETF, both as a line of support and resistance.  GLD’s performance in recent days has confirmed this observation.

To illustrate the technical and psychological significance of the 150-day trend line, during the boom years between 2009 and 2011 gold and the gold ETF always respected the 150-day MA as the proverbial “line in the sand” during corrections in those years.  During the entirety the 2009-2011 rally, the gold ETF never once penetrated the 150-day MA until late 2011 when the last bull swing ended.

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