Free Editorial

Priced In or Priced Out?

From the April 15, 2015 HRA Journal: Issue 231

The major markets are refusing to view anything as bad news.  Weak economic reports mean the Fed will hold off—good ones mean it doesn’t matter if they do.   With all that positivity it’s hard to know what is priced in these days.   Everyone is buying into the script that any weakness in Q1 was just weather related and will soon turn around.  The fact that most April indicators haven’t really done that doesn’t seem to faze anyone.

We’re into earnings season now.  As I note in the editorial traders need to hear lots of positive forward guidance.  If they get that they won’t care if earnings are down overall which they will be.  It’s all about tomorrow.

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Painted Into a Corner

From the March 31, 2015 HRA Journal: Issue 230

After a month of pain gold traders got some relief thanks to a dovish Fed.   The price hasn’t moved enough to have a big impact but it’s nice to see a bit of green on the screen.  The next US payroll report will define market sentiment for the balance of the spring.  Fed chief Yellen basically said there would be no April rate hike and the wage gains, or lack thereof, in the next payroll report should decide if the first rate increase comes in June or not until autumn. 

So far there hasn’t been much of a financing window for the juniors this year.  After good activity in January thing have cooled and there are few placements getting announced.   That could change if the next payroll report gives gold another boost. 

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US Dollar: Killer App

From the March 9, 2015 HRA Journal: Issue 229

More of the same.  The US Dollar continues to surge and mow down everything in its path.  The distortions created by these currency moves are getting large enough to be dangerous.  The potential for one or more emerging markets to get into serious trouble based on US denominated debt is quite real now.

Even Wall St which refused to view any news as negative is starting to worry.  Imported deflation won’t be enough to save profit margins for a host of multinationals if the Dollar keeps rising.  The minor—and they are minor—rate increases the Fed is considering shouldn’t matter but in a zero bound world they do.  Traders are more convinced than ever that rates will rise soon.  I’ve thought they should for over a year but Yellen needs to be very sure when she makes her move.  A policy mistake now could be expensive for everyone. 

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Tarnished - Part Two:

From the February 12, 2015 HRA Journal: Issue 227-228

This last of three issues covering my thoughts about 2015 will focus on base metals and a couple of bulk materials with some guesses on major markets.  The editorial was a long one and has been split into two parts of which this is the second. This final installment of the early year market overview deals with bulk minerals, oil and major equity indices.  

Iron Ore and Coal: Just Ugly.

The chart below shows the slow motion collapse of the iron ore market through 2014.   The price is off 45% from the start of the year and hovering at lows not seen since the modern era of open market (rather than negotiated) iron ore pricing started in 2009.

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Tarnished - Part One:

From the February 12, 2015 HRA Journal: Issue 227-228

This last of three issues covering my thoughts about 2015 will focus on base metals and a couple of bulk materials with some guesses on major markets.  The editorial was a long one and has been split into two parts of which this is the first. As you already know the news from this corner of the commodity universe has not been good.

The results of the ECB meeting and Greek election were as expected, only more so.

Credit where it’s due; Mario Draghi did a masterful job of playing both the traders and the Germans. He had to make a major concession to Germany and other northern central banks to close the deal. That concession will weaken the impact of the QE program but let’s not quibble during Mario’s victory lap.

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We're Number Two!: The Year Ahead - Part Two

From the January 15, 2015 HRA Journal: Issue 226

The first couple of weeks of 2015 certainly look nothing like the same period in 2014.  It would be wise to treat that as a warning.  We will all have to stay on our toes this year.  The many imbalances in the world’s financial system are coming to a head.  All may be resolved in a positive way but there are many places things can potentially go wrong.

The copper flash crash and the Swiss unpegging their currency from the euro are but two examples of the high volatility world we’re in and that was all just this week.  Next week brings the ECB meeting that may or may not kick off QE.  Either way we could see more wild swings in currencies and metals.  I’m quite pleased with how gold is trading but expect the unexpected around the time of the ECB meeting then the Greek election.

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Olive Oil: The Year Ahead - Part One

From the January 4, 2015 HRA Journal: Issue 225

There was enough good news in the US through December to send all the major indices in New York except NASDAQ to new all-time highs and the tech index isn’t far off.   It’s all rainbows and ponies on Wall St right now which should make any sensible person a bit nervous.

As I expected oil is still in the dumps and that state of affairs should last for a while.  As noted in the last issue this big a drop in oil prices is a stimulus though it’s a smaller stimulus in the US than Wall St. wants to believe.   Expectations are high after the US printed 5% GDP growth in Q3.  That was indeed impressive and cheaper oil should help generate good growth numbers in Q4 and Q1 2015.  Things may tail off after that though. 

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A Slippery Slope

From the December 2, 2014 HRA Journal: Issue 224

Volumes remain high in the bullion markets and volatility is higher if anything.  We just had one of the biggest up days in a couple of years but, overall, gold hasn’t moved much higher.  That won’t change until we get a number of up days in a row rather than the pendulum swing we’ve seen lately.  If India’s reduced import restrictions lead to the import volumes we saw before 2013 and China’s demand holds up we may finally get the change in trend we’ve been hoping for.  I think the odds of that are good though its going to take time to evolve.

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Are We Done Yet?

From the November 18, 2014 HRA Journal: Issue 223

Was that it?   It’s too early to say but the move off the $1130 is the largest up leg in over a year if it holds.  That alone forces us to seriously consider that we may have just seen “the” bottom even if technical traders don’t believe it.  

The bears are not out of ammunition yet however.  The Indian government is not happy about the level of gold imports and there is no way to tell how large the bullish bets on the November 39th gold referendum in Switzerland are.  Bad news on either front could give chart traders the bottom they are wishing for.  I’m timing the next Journal issue for the date of the referendum because it could have a very big impact.

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Yep, It's a Train

From the November 2nd, 2014 HRA Journal: Issue 222 

My apologies if the graphic leading the editorial seems flippant.  That’s not the intent.  It just seemed to sum up the prevailing attitude of resource stock traders.   If bear market bottoms are supported by fear and disgust (and they are) I think its fair to say we should be very close to one now.  

Based on many recent conversations with friends, colleagues and traders I can tell you that the sentiment is 100% negative right now.   That isn’t good short term and doesn’t bode well for tax loss season that is about to be upon us but—medium term—it’s a positive sign.  We’re most definitely in the teeth of the bear and fear and loathing are the signposts to the exits in this sort of situation.

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