A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The problem in writing about gold is that recent volatility has pushed out many investors who are ambivalent about the sector. This leaves a high percentage of true believers who, in the belief that mainstream media is either naïve or cowed by black helicopters, cocoon themselves in their own private corners of the Internet.
But for investors still trying to decide what to do with their precious metals holdings, hedge fund manager and former Department of Treasury economist Mark Dow is warning that the gold price is going much lower.
"The irony of the precious metals bubble is that it was the guys yelling 'bubble', bubbles of every stripe – bond, stock, credit – who sought refuge in the only asset class that was truly in a bubble. In other words, the fear of bubbles created its own bubble, trapping the bubblers... [Central bank quantitative easing] has lost its psychological punch, emerging markets have tepid income growth, the dollar is trending stronger, and USD rates can only be a headwind."
"The second wave of the precious metals unwind is upon us" – Dow, Behavioural Macro
"The Riskalyze Report: Advisors buy the dip in gold " – Reformed Broker
Steve Randy Waldman is an excellent antidote for investors like me who are tired of the endless bickering between economists. Most recently, Mr. Waldman discussed the effectiveness of quantitative easing in his typically even-handed, objective way. While accepting that the U.S. economy would have been weaker without QE, he writes, "I really dislike QE because I have theories about how it actually does work. I think the main channel through which QE has effects is via asset prices. To the degree that QE is taken as a signal of central banks 'ease,' it communicates information about the course of future interest rates (especially when paired with 'forward guidance'). Prolonging expectations of near-zero short rates reduces the discount rate and increases the value of longer duration assets."
The entire post is a worthwhile read and offers some helpful background for investors worried about a post-QE market downdraft.
"Some thoughts on QE" – Waldman, Interfluidity
I read everything the Financial Times' Izabella Kaminska writes, and pay particular attention to her thoughts on global crude markets. In the weekend FT, Ms. Kaminska provided a terrific overview of what's going on in global energy markets in a Q&A format. Key excerpts:
"Until now it wasn't hard for the market to absorb all that extra [U.S. produced] oil because there were plenty of disruptions in places such as Libya and Iraq. The problem lies with changing expectations about tomorrow's demand in a world suddenly awash with oil, but burning less.
But if demand in the future falls, won't someone eventually have to slow production?
Absolutely. Otherwise a collapse in prices will put every producer off and risk leaving everyone without fuel. The problem is, whoever cuts first loses the revenue to someone else. It is a game of 'chicken.'"
"A game of 'chicken' threatens the oil production balance" – Financial Times (subscription may be required)
Ritholtz Wealth Management's director of research Michael Batnick draws an important distinction between reasonable caution in the current market and permabear charlatans warning about the end of the financial world.
"The thing about these perma-bears that makes my blood boil is that when they're wrong they still win, it's their investors who get burned. These people can stay wronger longer than you can stay solvent because they'll collect their fees regardless of the outcome. The unfortunate reality is that the uninformed don't know that this snake-oil salesman has called 14 out of the last 2 bear markets."
"Selling fear" – Batnick, Irrelevant Investor
Tweet of the Day: "@modestproposal1 What the 'smart money' is buying. pic.twitter.com/31JhJvVyfq"
Diversion: A compelling New York Times reports that attention deficit hyperactivity disorder (ADHD) is not really a medical condition, and the diagnosis is a pharmaceutically-based attempt to shove normal people into the round hole of bureaucratic compliance. "People with ADHD. may not have a disease, so much as a set of behavioral traits that don't match the expectations of our contemporary culture.
From the standpoint of teachers, parents and the world at large, the problem with people with ADHD looks like a lack of focus and attention and impulsive behavior. But if you have the 'illness,' the real problem is that, to your brain, the world that you live in essentially feels not very interesting."
"A natural fix for ADHD" – New York Times
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow