What Are Reasonable Gold Market Expectations?

Posted on June 25, 2013 by MN Gordon

What Are Reasonable Gold Market Expectations?
By Jeff Clark, Senior Precious Metals Analyst, Casey Research

The historical record shows that those who get washed out during big corrections miss the greatest buying opportunities of a bull market.

With that as context, what can we expect from gold moving forward?  Let’s start with the short term…

Full market capitulation is underway.  Headlines about gold are almost universally negative today, and all about selling.  This feeds on itself, and the process may not be over.  In this kind of environment, prices will overshoot to the downside.  In other words, the bottom may not be in.

What if we get more short-term pain? Continue reading →

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Notes from Cabo San Lucas

Posted on June 21, 2013 by MN Gordon

The native inhabitants of Cabo San Lucas, the Pericú, had a rough go of it in their twilight years.  First they were overrun by Hernán Cortés and his Spanish Conquistadores in the 16th century.  Then, two centuries later, Jesuit missionaries told them what position to make love in.

Naturally, the Pericú revolted against the Jesuits.  But the combination of combat deaths and old world diseases irreversibly thinned out their population.  By the late 18th century they were culturally extinct.

When Hatsutaro, a Japanese castaway whose adventures were chronicled in the book Kaigai Ibun, landed in Cabo San Lucas in 1842, there were only two houses and about twenty inhabitants.  As far as we can tell, the place continued in slumber for the next 60 years.  In the early 20th century, however, the fishing trade brought development to the area.  Then, by the mid-20th century, Cabo San Lucas had become a popular vacation destination and the coastline was dotted with large scale tourist developments. Continue reading →

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Ingesting Rabbit for Supper

Posted on June 18, 2013 by MN Gordon

All of the sudden boring old government bonds have become real interesting.  For over the last six weeks a remarkable new awareness has come over the credit market…

If you can believe it, interest rates don’t always go down.  In fact, sometimes they go up.

“In the last six weeks, benchmark 10-year U.S. Treasury note yields have surged to 2.19 percent, from 1.60 percent at the beginning of May,” reports Reuters.

“As a result the market has seen a sharp outflow from bond funds and notable lack of demand in Treasury bond auctions.  The fund outflows and the rise in volatility offer a worrying glimpse of how markets are likely to behave as the Fed works to scale back its enormous monetary stimulus of the U.S. economy.”

Our guess is that as the Fed tapers and turns interest rates will rise – a lot! Continue reading →

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Economic Subsistence

Posted on June 14, 2013 by MN Gordon

Several weeks ago DOW 16,000 was a foregone conclusion…it was practically guaranteed.  Now the DOW’s wildly spiking and diving above and below 15,000.  What gives?

From what we gather, markets are anxious about what central bankers can and can’t do to suppress interest rates.  After five plus years of a Fed funds rate at practically zero and 10 Year Treasury yields bumping along around 2 percent for the last 20 months, the feeling this can’t last forever has begun to set in.  Alan Greenspan’s even talking about it.

Perhaps the economy is improving and no longer warrants all the monetary stimulus.  Or maybe a mass devaluation is approaching.  Regardless, rates must eventually rise.  But what are the consequences?

No doubt, asset prices have been inflated by ultra-low rates.  Take the housing market for instance.  Low rates first cushioned the fall.  Then they floated prices back up.

So what will happen when rates normalize to 4 – or even 6 – percent?  Connecting the dots brings us to the very simple conclusion: when rates rise, prices will fall. Continue reading →

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