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‘Helicopter Yellen’ Sends Stocks, Gold, Silver Soaring

Gold, silver and stocks surged overnight and today after the Fed maintained their ultra dovish monetary policy stance. The risk to markets of an early hike in U.S. interest rates eased leading to a  fall in the dollar after the release of minutes of the last Federal Reserve policy meeting. 

‘Helicopter Janet’

World stock markets roared their approval of reassurances that the U.S. Federal Reserve will not raise interest rates any time soon. Capital came flooding back into almost every asset class and the dollar fell sharply.

Gold jumped over 1% to $1,224.30 – at a two-week high, while silver surged 2% on the Fed minutes. 

The dollar, jolted lower, while gold, silver and oil and commodity prices rose. The other precious metals also caught the updraft. Silver surged 2% to $17.646 an ounce, platinum was up 0.5% at $1,283.20 an ounce, and palladium was up 0.4% at $803.75 an ounce.

Gold in U.S. Dollars,  5 Days (Thomson Reuters) 

There were big gains on Wall Street and for Asia stocks, and European shares duly followed suit as Britain’s FTSE 100, Germany’s DAX  and France’s CAC 40 rose 0.7%, 1.2% and 0.8% respectively in early trading.

Market participants have interpreted the tone of the FOMC minutes as suggesting that U.S. interest rates could remain lower for longer than most expected, causing the dollar to weaken. 

Observers had been worried that the minutes from Chair Janet Yellen’s Fed could lead to market volatility and further sharp stock market falls. ‘Helicopter Janet’ is confirming the belief of some market participants that she will continue the ultra loose monetary policies of her predecessor ‘Helicopter Ben’ and of course Alan Greenspan before them.

Bond yields throughout the world, which have plunged during years of cheap funding from the Fed and the world’s other major central banks, hit new record lows. 

Ireland’s bond yield hit a record low of 1.63%, despite Ireland still having important structural issues that have yet to be addressed and significant debt challenges.

The minutes showed Fed officials were wary about the dual threats of a stronger dollar and recent wobbles in the world economy as they desperately seek an eventual exit from record low rates.

Currency debasement continues in the U.S. and with other central banks – banks, and indeed markets appear hooked on the cocaine of ultra loose monetary policies and cheap money.

A rise in U.S. interest rates will be bearish for stocks, bonds, property and the already struggling U.S economy. Stocks already appear overvalued and ripe for a serious correction. 

The U.S. recovery is exaggerated and the health of U.S. consumers and the fundamentals of the U.S. economy remain weak. An economy that has over 55 million or nearly 20% of the population on food stamps is by its nature very weak and vulnerable.

S&P 500 – Jan 1985 to Oct 8, 2014 (Thomson Reuters)

For more than 5 years now the Fed has been ‘jawboning’ markets and threatening to rise interest rates and return to more normal monetary policies. We have consistently warned that it is important to watch what central banks do, rather than what they say – as they frequently conflict.

Indeed, even what they say can conflict and it is often dissembling and some would say designed to confuse and mislead market participants. 

Copious amounts of monetary whiskey have been downed in the global economy and yet the recovery remains weak at best. The mother of all monetary hangovers awaits us all and will likely manifest in stagflation and sharply higher inflation.

 This underlines the vital importance of having an allocation to gold in a diversified portfolio. 

Gold will maintain its purchasing power in the coming years, as it has always done throughout history. 

RECEIVE BREAKING NEWS AND UPDATES HERE

GOLDCORE MARKET UPDATE
Today’s AM fix was USD 1,227.50, EUR 961.99 and GBP 757.67 per ounce.
Yesterday’s AM fix was USD 1,220.00, EUR  963.51 and GBP 758.38 per ounce.
        
Gold climbed $11.90 or 0.98% to $1,222.50 per ounce and silver rose $0.21 or 1.22% to $17.40 per ounce yesterday. 

Gold in Singapore eked out small gains from $1,223/oz to , before shaving gains to trade down 0.2 percent at $1,219.30 by 0036 GMT.

Silver in U.S. Dollars,  5 Days (Thomson Reuters) 

Yesterday, the U.S. Fed  released minutes of the Sept. 16-17 meeting, that highlighted fears that a rising dollar could impact the fragile U.S. recovery and noted the economic turmoil in Europe and Asia (see above).

More signs of the very difficult economic situation in Europe came out of Germany today where German exports slumped by 5.8% in August, their biggest fall since the height of the global financial crisis in January 2009, as the sanctions and tensions with Russia took their toll.

It is yet another sign that Europe’s largest economy is faltering amid broader euro zone weakness and crises abroad.

The Bank of England kept interest rates at a record low 0.5% today and kept printing money for bond purchases to the tune of £375 billion a year.

The risk of a new recession in the euro zone and caution from the US Federal Reserve suggested a first increase in UK borrowing costs might be delayed. 
The bank’s Monetary Policy Committee left its bank rate at 0.5%, the level at which it has sat since the worst of the financial crisis over five years ago. 

Record low interest rates in the UK and globally remain positive for gold. 

RECEIVE BREAKING NEWS AND UPDATES HERE

www.GoldCore.com

via Zero Hedge http://ift.tt/1vTXoDY GoldCore

Curious how Bill Gross feels in his new digs at Janus Capital (aka old digs in Newport Beach)? Curious how much money he is managing now or how he will manage it? Curious why he has a band aid under his right eye? All should be revealed in the Janus Capital live webcast going on now.

The highlights so far:

• GROSS SAYS THE WORLD HAS TOO MUCH DEBT, A `STRUCTURAL PROBLEM’
• GROSS SAYS IT’S NOT THE `OLD NORMAL’, IT IS THE `NEW NORMAL’
• GROSS SAYS ANOTHER PROBLEM IS TECHNOLOGY DISPLACING WORKERS
• GROSS SAYS GLOBAL ECONOMY IS SLOWING DOWN
• GROSS SAYS ZERO INTEREST RATES DISTORT CAPITALISM

And:

Gross chose Janus because it frees him to run $ with a strict focus on investing.

— Janus Capital (@JanusCapital) October 9, 2014

Gross says Janus is a simpler sequel to his first life at PIMCO.

— Janus Capital (@JanusCapital) October 9, 2014

Gross says in James Bond speak: “You only live twice,” and I expect to live a happy second life with Janus.

— Janus Capital (@JanusCapital) October 9, 2014

Gross says structural forces like demographics, technology, & jobs migrating from U.S. are curbing growth.

— Janus Capital (@JanusCapital) October 9, 2014

Race against the machine: Technology is displacing workers, creating disruption & lower growth, says Gross.

— Janus Capital (@JanusCapital) October 9, 2014

Gross doesn’t expect Federal Reserve to raise funds rate much above 2% given structural economic issues.

— Janus Capital (@JanusCapital) October 9, 2014

Gross does not see significant bear markets on horizon, but sees market returns lower going forward.

— Janus Capital (@JanusCapital) October 9, 2014

For the rest watch below:

via Zero Hedge http://ift.tt/1vTXlrZ Tyler Durden

Because humor like this clearly costs money. As always, from the one and only Dennis Gartman.

October 6:

The well-defined upward sloping trend channel continues to remain fully intact and until that trend line is broken we have to once again err upon the side of being bullish of shares generally… Support levels have held and trends from the lower left to the upper right obtain. One may wish to join the bearish camp, but one would be wrong.

Stocks suffer biggest drop in 2 months shortly thereafter.

October 8:

If the Russell were to hold today and turn higher, then we might very seriously consider covering a portion of our derivatives; otherwise, we shall sit tight, remaining market neutral and fearing that indeed the bear market has begun and that rallies henceforth are to be sold rather than weakness bought.

Stocks surge by most in years shortly thereafter.

And then, first thing today:

Down 35 points one day; up 35 points the next! The Bulls were taken out and shot Tuesday; the Bears were shot yesterday and all we know for certain is that the upward sloping trend still holds and that weakness is to be bought with the Fed still behind the market.

And this too:

NEW RECOMMENDATION: We wish to return to the trade we were once involved in for a rather long while: long of the English speaking currencies/short of the Yen and we shall do so upon receipt of this commentary, buying US dollars, Canadian dollars, Aussie dollars, New Zealand dollars and Sterling relative to the Yen with two units of the latter vs. the proper dollar weighted sum of the other currencies. We shall have a stop on the trade in tomorrow’s TGL, but for now a loss of 1% would be sufficiently large.

It sure would, and with the Yen in dollar terms jumping to the highest level since September 16 this morning, the stop would have certainly been hit.

But the punchline:

Finally for those who care, we are up 7.1%, year-to-date, in our retirement funds here at TGL as of last night’s close.

Because virtually momentum trading one’s 401(k) is the new killing it.

via Zero Hedge http://ift.tt/1uG85cY Tyler Durden

Authored by Steen Jakobsen, CIO Saxobank, via TradingFloor.com,

• Tensions and volatility inevitable as world redefines itself
• China and Russia forming powerful anti-US alliance
• Potential for geopolitics to become core to risk assessment/return

World Order is the title of the latest book by Henry Kissinger, the former US Secretary of State and National Security Advisor, and it's riveting stuff. Kissinger draws on his deep experience of decades of shaping foreign policy and observing the complex interactions between nations and ideologies to develop a timely analysis of the world and where it's heading.

Some of Kissinger's central themes are drawn out in an interview with Charlie Rose in Bloomberg Businessweek.

A key concept is that the world goes through frequent cycles of redefinition and these periods mean increased tensions and higher volatility. China and Russia are now forming a strong anti-US and anti-dollar alliance. This alliance is expanding in magnitude and impact as China increases its presence not only in Africa but also in Club Med via infrastructure investments.

The new world order means less US dominance, a gradual weakening of reserve currency advantages and trade areas away from from Europe and the US. Add to this the much-needed fight against radical Islamism and we have a potential for geopolitical risk finally becoming part of risk assessment and return.

Kissinger says that the current era is one of the most chaotic periods of which he is aware. Every part of the world is redefining itself, some internally—like China, and some externally.

"The European system hasn’t dominated the world; it’s been abandoned in Europe. And the US is moving into a new period in which the dominance enjoyed in the immediate postwar period economically is no longer there. On the other hand, we are still the central element in creating a new order. Without our participation, it’s difficult to see how a new system can emerge in most parts of the world."

That's the essence of Kissinger's argument as presented in Businessweek but I would encourage you to read both the interview and, of course, the book itself.

Finally, let me add a chart from a recent presentation of mine:

End of US Supremacy?

 

*  *  *

Which looks a lot like the one we presented here (via Deutsche Bank) where we concluded:

The geopolitical consequences of the diminishment of US global dominance

Each of these events has shown America’s unwillingness to take strong foreign policy action and certainly underlined its unwillingness to use force. America’s allies and enemies have looked on and taken note. America’s geopolitical multiplier has declined even as its relative economic strength has waned and the US has slipped backwards towards the rest of the pack of major world powers in terms of relative geopolitical power.

Throughout this piece we have looked to see what we can learn from history in trying to understand changes in the level of structural geopolitical tension in the world. We have in general argued that the broad sweep of world history suggests that the major driver of significant structural change in global levels of geopolitical tension has been the relative rise and fall of the world’s leading power. We have also suggested a number of important caveats to this view – chiefly that a dominant superpower only provides for structurally lower geopolitical tensions when it is itself internally stable. We have also sought to distinguish between a nation being an “economic” superpower (which we can broadly measure directly) and being a genuine “geopolitical” superpower (which we can’t). On this subject we have hypothesised that the level of a nations geopolitical power can roughly be estimated multiplying its relative economic power by a “geopolitical multiplier” which reflects that nations ability to amass and project force, its willingness to intervene in the affairs of the world and the extent of its “soft power”.

Given this analysis it strikes us that today we are in the midst of an extremely rare historical event – the relative decline of a world superpower. US global geopolitical dominance is on the wane – driven on the one hand by the historic rise of China from its disproportionate lows and on the other to a host of internal US issues, from a crisis of American confidence in the core of the US economic model to general war weariness. This is not to say that America’s position in the global system is on the brink of collapse. Far from it. The US will remain the greater of just two great powers for the foreseeable future as its “geopolitical multiplier”, boosted by its deeply embedded soft power and continuing commitment to the “free world” order, allows it to outperform its relative economic power. As America’s current Defence Secretary, Chuck Hagel, said earlier this year, “We (the USA) do not engage in the world because we are a great nation. Rather, we are a great nation because we engage in the world.” Nevertheless the US is losing its place as the sole dominant geopolitical superpower and history suggests that during such shifts geopolitical tensions structurally increase. If this analysis is correct then the rise in the past five years, and most notably in the past year, of global geopolitical tensions may well prove not temporary but structural to the current world system and the world may continue to experience more frequent, longer lasting and more far reaching geopolitical stresses than it has in at least two decades. If this is indeed the case then markets might have to price in a higher degree of geopolitical risk in the years ahead.

via Zero Hedge http://ift.tt/1uG82ht Tyler Durden

The stock market is no longer cheap.

 

The single best predictor of stock market performance is the cyclically adjusted price-to-earnings ratio or CAPE ratio. Most investors price a company based on its current Price to Earnings or P/E ratio. Essentially what you’re doing is comparing the price of the company today to its ability to produce earnings (cash).

 

However, corporate earnings are heavily influenced by the business cycle.

 

Typically the US experiences a boom and bust once every ten years or so. As such, companies will naturally have higher P/E’s at some points and lower P/E’s at other. This is based solely on the business cycle and nothing else.

 

CAPE adjusts for this by measuring the price of stocks against the average of ten years’ worth of earnings, adjusted for inflation. By doing this, it presents you with a clearer, more objective picture of a company’s ability to produce cash in any economic environment.

 

We have mentioned before that CAPE is the single most important metric for long-term investors. I wasn’t saying that for impact.

 

Based on a study completed Vanguard, CAPE was the single best metric for measuring future stock returns. Indeed, CAPE outperformed

 

1.     P/E ratios

2.     Government Debt/ GDP

3.     Dividend yield

4.     The Fed Model,

 

…and many other metrics used by investors to predict market value.

 

So what is CAPE telling us today?

 

The S&P 500 is currently at a CAPE of over 26.

 

 

The S&P 500 has only been at this level or higher a handful of times in the last 100 years. All of them have coincided with major market peaks.

 

This is not to say that the market will crash tomorrow. However, there are considerable signs that the market is in trouble.

 

Those of you who have been reading us for some time know that we prefer to use nominal GDP as a measurement of GDP growth in the US.

 

The reason for this is that all “adjusted” GDP data involves a “deflator” metric that is meant to adjust for inflation. The Feds often use an inflation adjustment that is even lower than their official Consumer Price Index metric (which is already massaged to downplay inflation) in order to make GDP growth look greater.

 

Consider this simple example. Let’s say that the US GDP grew by 10% last year. Now let’s say that inflation also grew by 10%. In this scenario, real inflation adjusted GDP growth was ZERO. However, announcing ZERO GDP growth is a major problem politically. So what do the Feds do? They claim that inflation was just 8%, and BOOM you’ve got 2% GDP growth announced for a year in which real GDP growth was actually zero.

 

By using nominal GDP measures, you remove the Feds’ phony deflator metric. With that in mind, consider the year over year change in nominal GDP that has occurred.

 

 

As you can see, we’ve broken below four, the reading that has been triggered at every recession in the last 30 years.

 

The primary drivers of asset prices are the economy and corporate earnings. The above chart shows that the US is on the brink of a recession. With that in mind, consider that corporate profits are at all time highs.

 

Not only that, but corporate profits, as a percentage of GDP are at all-time highs. Never before in history have corporations made so much money relative to the US economy. This trend is not likely to continue.

 

 

So, we have a weak economy, record profits (mostly from cutting payroll by firing people) and record profits as a percentage of GDP. The simplest interpretation of this is that there will be a reversion to the mean at some point.

 

So… we’ve got:

 

1)   Stocks overpriced based on the most predictive metric out there (the CAPE).

2)   The US economy at or near recession territory.

3)   Corporate profits at record highs.

4)   Corporate profits as a percentage of GDP at record highs.

 

The market is primed to drop. Now is the time to prepare.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

 

http://ift.tt/1rPiWR3

 

 

Best Regards

 

Graham Summers

 

Phoenix Capital Research

 

via Zero Hedge http://ift.tt/1CY01Hl Phoenix Capital Research