Dear Gold Bugs: Sorry to be Right (Again)

I told you so.

I am not going to rub this in too much, and certainly this is not salt in your wounds. But the price of gold is down as much $32 in commodities and down almost $11 in the spot market when I looked because the Fed raised a quarter and not a half, and no, run-away inflation is not here yet.  Will $1,130 fall?  Fraid so…looks that way for now.  Hope to be wrong though.

You have to be careful on trying to invest for quick returns. No such thing if you’re after real money on a reliable basis. You might get lucky now and then, but seriously?

Have have been telling you for literally YEARS now that GOLD IS LIKELY TO BREAK BELOW $1,000 before it hits anything approaching a new high. With the price down $132 away from that prediction, please realize I don’t give financial advice but I do have a pretty good eye (after all these eye surgeries, lol) for price channels and huge respect for Elliott waves.

I still own my lone gold coin and I am not selling. People will likely see new record all-time highs for gold, but not until post collapse of the stock market when the only road open to the government will be Son of Hyperinflation.

Then gold will scream.  When it does, the government itself will revalue all that gold it has on the books at $42 something an ounce to help paper-over the national debt.

But for now, we just sit on our wallet and try to remember that we’re in this for the long game, not just the bottom of one inning.

Is $800 gold possible? Yes, as we have told you many times. Do I WANT that? Be serious. But learn to read (and follow) data, not wishes and fairy dust. You bank account will thank you.

Fed Move Non-Event, Lower Seen

The Federal Reserve decision Wednesday to raise interest rates a quarter-point was totally expected and priced into the market.

This morning it looks like will hold about flat which we will get to with the Consumer Price data in a minute…

While there was an initial knee-jerk reaction to the downside, it was less than 120 points on the Dow, and even smaller losses in the tech sector.

To be sure, there’s a little bit of concern about 2017 when the Fed plans to make three rate increases.

We seem to remember in 1928 the Fed made three rate hikes as well and we all know how that turned out.

Nevertheless, there is a good case for the Dow to continue up because we are in a stock market bubble.

What we are looking forward to in the immediate future – a week or so – will be a bit of tax – selling as losing trades need to be settled before the end of the year to count as tax losses. That should happen between now and perhaps Tuesday of next week.

Then immediately before Christmas it’s almost traditional to have a Santa Claus rally.

Then we get into the New Year where we are playing trader’s roulette with three target date ranges for the market all time high.

The first of these would be in the middle of January. The second falls the middle of March, while the third would be in late July to the middle of August.

In all of our scenarios, we are looking at the possibility of a major decline in the economy beginning in 2017 and continuing to at least 2019.

The Future of Tech and Bricks

It was very interesting to see Pres. elect Trump hold meetings with so many of the chieftains of high technology on Wednesday.

Equally disappointing was the lack of depth in the reports of the meetings outcome.

Most of the subtext was about trade (example) as well as job creation, like that 25,000 promise out of IBM.

Our perspective on this is much different than most. We view what’s going on at the macro level as a battle of the titans.

One block of titans includes people like Amazon, chief Jeff Bezos. His firm has started 2-hour delivery times of key products in multiple test markets, and this is expected in our work to become a major challenge to shopping mall property owners.

Now what makes it so interesting to us is that the president-elect is very much in the real estate ownership arena through his Trump property developments.

While the mainstream context has to do with jobs and reinvestment in America, blah, blah, blah, we can’t help but squint our eyes a bit and wonder if the larger subtext may be more important.

Remember that Amazon has more than 60,000 robots doing repetitive tasks very well, such as stock picking and prepping of shipments. Toss in pending advances in artificial intelligence, and you would scare the hell out of me by bringing up a business plan modeled on shopping mall property ownership.

There may be a happy ending possible in all of this.

One thing the Trump administration could do is to convince long-term institutional investors, such as pension funds and life insurance companies to put their money in faster turnover sectors of the economy than real estate.

The operating theory might go something like this: If you can grow disposable incomes fast enough that shopping continues to increase and mall traffic does not deteriorate significantly, then real estate at the commercial level might not collapse. World Saved!

But on the other hand, the continued advancement of shopping mall-gobbling robotics used by online retailers is becoming a well-established fact of life.

As we have suggested many times, the best approach may be the Wal-Mart mixed – model which incorporates an emergent online shopping and fulfillment operation with the convenience of a local store for product selection, and if necessary, returns of merchandise.

We continue to expect over the longer term, to see business model “mixed marriages” develop between pure online operators (such as Amazon) and pure brick-and-mortar operators. Could you see for example an acquisition by Amazon of someone like Best Buy or perhaps even a supermarket chain?

I’m not kidding about a supermarket chain, either. What would happen if Amazon went into the supermarket business?

For one thing, it would give a well-established food distribution input that could be used by Amazon’s “Fresh” program to expand market share against non—online foody companies.

And in addition, Amazon could modify a grocery store to include some of their new hot products.

For example, there could be a display with Kindle Fire HD’s or the new Echo Dot, or the full on Echo product itself.

Some technology – such as voice controlled interaction with computers and personal media – takes hands-on time to really become adopted.

Just like in the automobile sector progression. People read about electric automobiles in the 1990s with the occasional Volkswagen or Porsche conversion to electric, but it was not until the performance limits began to be exploited by companies like Tesla or the range became the whole ballgame for the Japanese and many of the Detroit hybrid-electrics, that the future of electric automobiles really became assured.

So what I sense is ahead will be this big area of integration between point-of-purchase and online.

I haven’t seen much about that in the discussions with Trump, and it may actually be premature to start thinking in those terms. But the forces are there, the opportunities are clear, and the business pressures – and did I mention ant-trust potential? – Is there for those who fail to adopt.

When I see an adoption that might make sense, could that spell investment opportunity?

Pull Over That Computer

What? Self-driving car runs red light?

Case law will be interesting here. Parents are legally responsible for the behavior or their children, so we assume this same will hold with robotics.

But at what point does computer technology reach the legal equivalent of “adulthood?”

And scarier…just how “smart” really, are 18 and 21-year olds?

OMG Computer Law just went through an infinite expansion. I Robot meets I Lawyer.

Consumer Price Data

Hand me the press release, please? Ahem…let’s all read it together now…

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent

in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.7 percent before seasonal adjustment.

The shelter and gasoline indexes continued to rise in November, and were again the main reasons for the seasonally adjusted all items increase. The shelter index advanced 0.3 percent in November, while the gasoline index increased 2.7 percent.

The food index was unchanged in November, as the index for food at home fell

0.1 percent, its seventh consecutive decline. The energy index increased 1.2 percent, although gasoline was the only major energy component index to increase over the month.

The index for all items less food and energy rose 0.2 percent in November after rising 0.1 percent in October. The shelter index accounted for most of the increase, but the indexes for motor vehicle insurance, education, communication, and used cars and trucks also rose. The medical care index was unchanged over the month. Several indexes declined in November, including apparel, household furnishings and operations, airline fares, and new vehicles.”

I’m sure not seeing those reputed airline fare decreases. Buying some tickets for kids to come visit the old folk’s home and OMG, spendy? Yee-gads. If that’s a decline, I’m a major religious figure who lives in Italy.

Still hasn’t taken too much wind out of the market, which is about flat heading down to the opening.

Gee this has sure been fun, hasn’t it?  Drop by tomorrow for more…and only three more work-days until Monday…

Comments

Dear Gold Bugs: Sorry to be Right (Again) — 12 Comments

  1. Let’s not forget, when Obama killed the hydrogen car that gm had created along with hydrogen generators they wanted in every house.

  2. George;
    I don’t understand the $42 an oz unless it’s the price at which they are stealing it under the guise of executive order [not law]. By the way, look at the 1/10 oz coin. It’s labelled $5. So the “executive demand” price should really be $50/oz.

    The ave Joe still needs to get the yellow dog when they can because when it moves there will be no time to buy what inventory may be available. Want to count on delivery from India, Russia, China, Brasil ( yep – no z in Brasil – just ask them!) or where ever! When everyone is scrambling for it and your still at work to pay for inflated everything!

    Nope!

    Just endure the drop and wait for the pop!

    Coop

  3. “Then gold will scream. When it does, the government itself will revalue all that gold it has on the books at $42 something an ounce to help paper-over the national debt.”
    So you are saying that the gov will ‘set’ the price of Au from $800 to $42? If so, ouch! And what of Ag?

  4. If you remember,I’ve been telling you for a few years now that the price of gold rises and falls with the fortunes of the Phillies since gold’s re-legalization in 1975.I told all of my friends and family to get out of gold in October 2011-when gold was hovering around $1900-when Ryan Howard fell to the ground making the last out in 2011.The rest of the competition has gone all out since then,while they’ve done nothing significant.

  5. The manipulated ‘paper price’ of gold and silver will always be lower than the ‘spot’ price for physical gold/silver (in other words, I take possession). The Asian countries will continue to buy until it will be impossible to purchase physical. So yes, the manipulation will continue until the paper price becomes an absurd distortion. As far as retail, whether on-line or brick and mortor, I think the larger question is falling real US incomes. You are not going to have a consumer sector on $10/hour jobs. The mode of fulfillment is irrelevant if the income will not support the market. They are using currency arbitrage to support the current consumer ‘market’, but the distortions are becoming too large, unless the producing countries can produce ‘no cost’ goods!

    • No gold in India is not over $3000oz. That nonsense was claimed by those who sell metals. The price includes a VAT tax and if this is subtracted the price in dollar terms is the same. The rupee has collapsed so they must pay more in rupee terms for the same amount of gold. China has the same tax.
      Also the dealers of metals have been claiming the some”cartel” has been suppressing prices on the Comex to instill dollar confidence and this is nonsense. The FED has been trying to weaken the dollar not have it strengthen. You simply cannot have a significant rise in commodities with dollar strength including gold. The US is a huge exporter of commodities and a strong dollar makes this too expensive in foreign markets with demand falling then prices.
      If you read the Deutsche docs a handful of banks were fleecing and then gouging in the physical market. They were using the twice a day London metals fix by lowering prices having miners and other sellers to receive less then raising price to have wholesalers and other buyers to pay more. They were helped by traders in the spot market by moving price down and then up by taking out stops. This was not happening on the Comex or futures market. This was simply short term price manipulation in the physical market but it did not change the long term trend which is down all due to dollar strength.
      The HFT algos on the Comex were consistently driving up price to the 1362 bearish reversal level, adding shorts riding price weakness back down. When currency traders in London 10 weeks ago started monkey hammering the EUR/USD and GBP/USD crosses and driving up the USD/JPY cross algos then started to drive price up when New York creates short term dollar weakness after London closes and then adding shorts when the next day London is at it again. Price went from this 1362 level all the way to 1240 reversal level and then all the way to where price is today.
      The gold price did not break the 1362 bearish reversal level at July’s close, August close, Septembers close nor the quarterly close all indicating more price weakness which we got. It also did not break the 1272 bearish reversal level at Novembers close all indicating more weakness with gold going under $1000.
      The fact is the promoters of metals especially on the retail level have been claiming all sorts of nonsense to justify why prices are going down and not up.
      A couple of interesting things about the lawsuit. It was investors who sued and not miners, wholesalers and the traders who had their stops taken out. Investors are supposed to be in for long term. How could they have been harmed unless they of course bought physical without hedging which is not a good idea. Sounds like these guys just made some poor financial choices buying physical at the wrong time and not hedging.

  6. Re: Consumer Prices
    Got my SSA notice of .3% increase. Notice of Medicare premium increase included.
    Net change? A whopping ZERO percent!

    Yes, the books are cooked.

  7. I think the price of gold will go lower than even its current [manipulated] price, until the PTB have extracted all the wealth they can. From what I’ve read, people have counter-intuitively bought more of it rather than sell, to the surprise of “The Club.” So it may be awhile before our overlords “pull the plug.”
    India’s recent moves are greatly disturbing. Even though I dont have gold jewelry, I’m angry that a government should put limits on how much jewelry one can have.