UNLOCKED: GoldFix Clint Eastwood, Santa Claus, and Your 401-K
Happy New Year
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HouseKeeping: Thank you for reading the work. This Report is meant to be read like Barron’s Weekend or Sunday papers were back in the day. Some data, some market concepts, some history. Enjoy
These past three months have been a lot of fun. We hope to put more focus on this in the new year using your feedback. Subscriber and “coffee crew” support has been more than encouraging. We want this to be a viable service for the long run. So: whether you subscribe ( it’s $5 a month and no ads), buy the writers (there are 2 now) a coffee/beer, or become a Founding Member to our Sunday discussions; we appreciate it. I hope to personally thank each of you in the next week.
SECTIONS
Market Summary: weekly recap
Precious: analysis
Reports: research
Technicals: active trading levels
Podcasts: GoldFix and Bitcoin
Charts: related markets
Calendar: next week
1. Market Summary
The year ended with US stocks at their highest prices….
and highest expectation of future1 profits ever…
THE MONETIZATION OF STOCKS
Global central banks added over $2 trillion to their balance sheets in 2021. The subtitle loosely refers to the concept known as permanent monetization of debt2. More accurate perhaps would be “equitization of debt”. But it just didn’t sound as cool to us. Stocks are Money.
Take: How can the unwind of this ever be bullish for an economy? It can’t.. thus it won’t end beyond some lip service when it seems bulls are losing faith. The balance sheet, and thus the debt will be allowed to run-off until one of 2 things happens. Either: expiration of the bonds bought by the Fed to finance the stock purchases by the retirees, or expiration of people who own the stocks.
BUFFETT INDICATOR
The "Buffett Indicator" has never3 been higher…
TOP STOCKS
The current top 10 stocks now are at the peak going back to 1999 tech bubble predecessors pre-pop.
Take: Even the best stocks may now be seriously overvalued.
CHINA AND EUROPE LAG
China suffered for multiple reasons: US policies, economic slowdowns, poor management, foreign outflows etc. Europe tracked the US a little behind the curve.
Take: Kind of like their own Central bank policies, US, EU, and China.
BUBBLE POP
“Bubble-market” stocks chart finished below pre-stimulus pump up...
MONEY STARTS TO FLOW AWAY FROM BAD BUSINESS
Unprofitable tech stocks had quite a year, ripping higher to start 2021, giving back all their gains and then slumping into year-end.
Take: Signs of a two-tiered market and the effect of an ebbing monetary tide.
SHORT SELLING COMPLACENCY WAS PUNISHED
The basket of meme stocks held its own.
Take: but the most high profile news darlings like AMC and GME finished well off their ballooned highs.
REMEMBER THE K-SHAPED RECOVERY?
Recovery stocks finished the year beneath Stay-At-Home stocks.
Take: Fascinating empirical evidence the stock mkt rally is almost completely Fed engineered, despite the strong “recovery”.
To the extent that Stay-At-Home stocks are analogous to the “real economy”; The K-shaped recovery is now definitely an upper case K.
By The Way: The K Recovery
Since around the year 2000, Wall Street and Main Street have been decoupling. The Lehman crisis events and government response accelerated that divergence, and, most recently, policymakers' response to the COVID crisis has driven the divided between Wall Street's success and Main Street's distress has never been wider. The chart below is a microcosm of the post covid K-shaped recovery.
Investopedia defines A K-shaped recovery as: occurring when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
CLEAN ENERGY HELPS DIRTY OIL
Energy stocks were 2021's biggest winners while Utes and Staples lagged.
Take: a product of both monetary inflation and the clean energy initiative making its effect felt in supply (demand will drop later if it works) of carbon fuels.
BIG TECH BENEFITS; SMALL TECH LANGUISHES
Nasdaq has pushed ahead recently relative to Small Caps, suggesting real yields are going lower again.
Take: Gold, inflation-istas, note. The next push lower in real rates, if it happens, may have much more exaggerated unintended consequences in what goes up and what goes down in price. “Transitory” may be the first of several OOPS moments. And “oops” risk can be deflationary as well.
CRYPTO IS BAD FOR YOU, WHAT IS CRYPTO AGAIN?
Cryptos had another big year (even with headlines more than willing to focus on recent price action). Bitcoin ended the year up 65% while Ethereum rose over 400%.
Take: We are fond of saying ‘intervention only affects speed of trend, it cannot destroy or reverse it.’ As always, this is true in very big picture events. Do what they do, not what they say.
EUROPE’S ENERGY CRISIS
One of the biggest stories of the year was European NatGas prices, but the last week has seen an armada of LNG vessels heading across the Atlantic to solve Europe's demand and EU gas prices have crashed back to reality. The following chart compares apples to apples across us/uk/eu energy prices (in oil barrel equivalents)…
Take: this will be partly blamed on Putin.
Putin will blame the EU for not planning, The EU will blame oil companies, Oil companies will blame ESG mandates. Noone will ACCEPT responsibility. Citizen’ will have no representation in this.
THE NAKED SANTA CLAUS
It is all about timing now…
Take: fundamentals will remain repealed and the K will remain in play until one of 3 things happens.
GOOD: The real economy catches up to the stock market. Only then do they admit the risks they took; while patting themselves on the back.
BAD: People admit to each other there is no Santa Claus. They already know it, but don’t dare admit it to friends.
UGLY: Stock portfolios outlive stock investors.
4- a little girl rescues us
Let’s be frank about BAD number 2 above. The stock market is naked. If that analogy doesn’t resonate with you; try this one.
No adult believes in Santa Claus. Most children also understand he is not real. But admitting non-belief would cancel all the gifts they get. The payout is why everyone continues to believe.
We are the children. The Fed’s magical ability is Santa Claus. Neo-keynesian politicians are the parents. If you don’t believe us, go ask your adult friends what are they most worried about. Press them. The final answer will be something like “well what can you do? We’re in it too deep. It’s not like we have a choice. We all just need to stay the course.” and if you press too hard the push-back will be “We shouldn’t talk like this”
Meta-Take: all 3 will happen. The economy will catch up to the stock market, the stock market will recognize it is naked, and…the investor pool will be refreshed. Timing and to what extent each of these happens are the trick.
BONDS
STIRs have surged4 higher matching The Fed's renewed hawkish jawboning with 1 full rate-hike priced in by May 2022 and 3 full hikes by Dec 2022...
Treasury yields were all higher on the year but the last few months, since The Fed shifted tone towards hawkish, has seen the belly underperforming as the long-end rallied...
The yield curve flattened on the year with 2s30s down around 35bps...
The Dollar ended 2021 higher, but faded back below its 50DMA on the last day of the year (and below 2019's closing price)...
COMMODITIES
Bitcoin has been hovering around its 200DMA for a few weeks...
Ethereum's major out-performance pushed it to the strongest relative to Bitcoin since early 2018...
Oil prices saw their biggest annual gain since 2009, but gold was lower and Silver suffered its worst year since 2014...
Gold did managed to get back above $1800...
Given where real yields ended the year, we suspect gold has some upside...
And while WTI did take a hit from Omicron, SPR releases, and political jawboning, it's back above $75 again
Take: No more protective bullets left, except for outright price controls in seasonal goods. If winter is cold, spring will be a disaster
Unfortunately, the de minimums drop in gas prices of the last few days is likely as good as it gets as oil and wholesale gasoline prices have rebounded amid fading omicron fears...
GoldFix Friday WatchList
Complete Watchlist Here
Crypto Weekend:
***New Content: (BETA) Bitcoin Brief for Dec 17th, 2021****
2. Precious Recap
This week’s Gold analysis will be succinct and straight forward. Please forgive the brevity as holidays, a stubborn head cold, and a focus on reading to learn more for our own use and subsequently share with you have taken their toll this week. Everyone else is rehashing old stuff as “best of 2021”. We don’t do rehash here. So here’s Our Gold Analysis for the next 2 months:
Metals have 4 dominant drivers until February
Bitcoin for right or wrong reasons has cannibalized demand for Gold as an allocation choice
Gold is looking very shitty considering how negative real rates have been
Gold is looking pretty damn good considering how strong the dollar is and how fun it is for everyone to crap all over it: Wall street firms, Central Bankers, Financial BloomMedia, and now introducing the Bitcoin salesmen who tell you to dump gold for bitcoin. Tough guys all. Gold Doesnt care
The thesis is correct. The strength of the move is in doubt because we may have underestimated the bitcoin flows and the CTA sellside strength going into a hiking cycle.
We have risk on.
Tuesday: "There is a theme running through everything today”
Wednesday: The theme works both ways
Thursday Twitter:
…gold flows dont care about the dx today.... but when those flows are done, we see if the banks have the stomach to push it back to 1800 again
…money wants what it wants today. and tomorrow. deadlines loom. how much money is allocated, we dont know. probably not a lot at this point or the banks would have front run it last week. but money must be placed-Source
Friday: Our only real market comment:
Monday: We will likely see if this has legs pretty quickly
3. New Reports
Bridgewater's Market and Economic Observations For 2022
A group of our senior investors share their forward-looking thoughts on the year ahead.
On Tuesday, we shared our senior investors’ reflections on what surprised them about markets and economies in 2021. Today, we’re sharing their forward-looking thoughts for 2022 and the big themes and dynamics they’re going to be monitoring closely in the new year.
We see this piece as more informal and personal than most of our Observations, and the thoughts expressed may not all be fully internally hashed out yet or fully consistent with our systemized views.
4. Technical Analysis
Report Excerpts Courtesy MoorAnalytics.com
GoldFix Note: Do not attempt to use price levels without symbol explanations or out of context. Moor sends 2 reports daily on each commodity he covers. These are non-actionable summaries.
Gold
TECHNICALLY BASED MARKET ANALYSIS AND ACTIONABLE TRADING SUGGESTIONS Moor Analytics produces technically based market analysis and actionable trading suggestions. These are sent to clients twice daily, pre-open and post close, and range from intra-day to multi-week trading suggestions. www.mooranalytics.com
Bitcoin
Energy
Go to MoorAnalytics.com for 2 weeks Gold, Oil, and Bitcoin reports free
5. GoldFix and Bitcoin Podcasts
This is What You Want to Happen for Gold and Silver
Bitcoin is A Tool of Freedom the Powerful Need to Coopt.
6. Charts for 2021
With macro mark -ups. Which mean nothing except to balance the author’s own point of view. With one conclusion: Gold did pretty damn well given the dollar strength and net disinvestment on the year.
10 Year Yields
S&P 500
Nasdaq
Dow Jones
Dollar Index
Gold
Silver
Copper
Crude Oil
Bitcoin
TiPs
Charts by GoldFix using TradingView.com
7. Calendar
Some of the upcoming week’s key data releases and market events
MONDAY, JAN. 3
9:45 am Markit manufacturing PMI (final) Dec. -- 57.8
XX am Construction spending Nov. 0.7% 0.2%
TUESDAY, JAN. 4
10 am ISM manufacturing index Dec. 60.2% 61.1%
10 am Job openings Nov. -- 11.0 million
10 am Job quits Nov. -- 4.2 million
WEDNESDAY, JAN. 5
8:15 am ADP employment report Dec. 373,000 534,000
9:45 am Markit services PMI Dec. -- 57.5 2 pm FOMC minutes
THURSDAY, JAN. 6
8:30 am Initial jobless claims (regular state program) Jan. 1 195,000 198,000
8:30 am Continuing jobless claims (regular state program) Dec. 25 -- 1.72 million
8:30 am Trade deficit Nov. -$72.6 billion -$67.1 billion
10 am ISM services index Dec. 66.1% 69.1%
10 am Factory orders Nov. 1.5% 1.3%
FRIDAY, JAN. 7
8:30 am Nonfarm payrolls Dec. 405,000 210,000
8:30 am Unemployment rate Dec. 4.1% 4.2%
8:30 am Average hourly earnings Dec. 0.4% 0.3%
3 pm Consumer credit Nov. $25 billion $17 billion
Main Source: MarketWatch
Zen Moments:
8. Disclaimer
Disclaimer: Nobody is telling you to do anything here. Anybody who tells you to do something without first intimately knowing your personal situation is irresponsible at best and manipulative at worst. Worse, anyone who acts on other people’s opinions without first doing an inventory of their own situation shouldn’t be surprised if they lose money.
This is not a doom column. These observations are not made to make you bearish. They just how things work in our view. We are bullish despite what we know. Eyes wide open.
What is debt monetization? Monetization is the permanent increase in the monetary base with the aim of funding the government. In other words, monetization occurs when central banks buy interest bearing debt with non-interest-bearing money. The requirement that it be a permanent exchange of debt for cash is critical. typically it becomes permanent when the central bank just refuses to close positions and instead lets them expire naturally
Big H/T to Zerohedge.com whose charts were a major source of these comments
short term interest rate index: used to handicap fed policy of rate hike timing
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