Monthly Archives: September 2013

27th September 2013 — What is real inflation

The threat of inflation is a regular theme here at Spreadbet Magazine.

We are deeply concerned about the long term implications of the excessive easy money policies of the major central banks, since 2008. In the absence of clearly defined exit strategies, the likelihood is that once this money starts seeping out into the real economy, prices will head much higher. Financial markets have already experienced the super-charged effects off this.

A crucial point, which has been missed in the current debate about tapering, is that the taper is not an exit strategy. It will simply be a reduction of the Fed’s extraordinary bond purchasing programme. They will continue to purchase billions of dollars of financial assets each month, to add to the $3.73trillion in “assets” it already holds. The explosion in the sheer size of the Fed’s balance sheet is already troubling in itself, but the greater it grows the greater the hazard posed by future inflation.

 

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26th September 2013 — GDX, an alternative leveraged gold play

The GDX (or Market Vectors Gold Miners ETF as it is rather long-windedly known!) has been causing a bit of a stir, here at Spreadbet HQ, over the last few months. This ETF bundles a collection of gold and silver associated stocks together in an effort to track the NYSE Arca Gold Miners Index (GDM). It offers investors and spreadbetters a leveraged play on the price of gold and is tradeable on the larger spreadbetting websites.

Now I know I’m about to bang on again about yet another gold related story, but bear with me. This really is an exciting time for the precious metal and if our house line is right (buy, buy, buy!) then this could prove to be an exceptionally profitable trade. As with all these things, timing is everything and now looks like the time to be buying. Even if we are wrong, downside can be managed with fairly tight guaranteed stops, so the risk/reward is definitely on our side.

 

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23rd September 2013 — The MIDAS Touch

King Midas’ legendary ‘curse’ was that all he touched turned to gold. If only my trading fortunes were blessed with such ill (good) luck! Today, rather than a Midas touch, I find myself faced with a MIDAS test.

OK, I am sorry, enough of the terrible puns!

Immediately before the FOMC bottled making a decision (which in hindsight wasn’t much of a shock I suppose), I released this piece, which analysed the gold price in the context of the MIDAS method. So far this summer, MIDAS has made some fantastic calls in various commodity markets (copper, natural gas, silver and gold). During this time, experienced users of MIDAS will have been able to get in and out of these markets, as crucial levels of support and resistance were confirmed and failed.

 

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19th September 2013 — Making sense of the Fed

So, hands up if you expected the Fed to do nothing?

Are there one or two hands at the back there?

No, I thought not.

Last night, there was a valuable lesson for all of us. No matter how strong a consensus is, it can often still be wrong. Judging by the extreme moves across the board, it looks like there is a frantic amount of repositioning now happening. I am still long gold (and pretty delighted about that), but I’ve missed the boat on stocks (which I’m less happy about).

 

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18th September 2013 — Gold; a test of faith

We’ve been quite categorical about our position on gold over the summer. We are bullish and believe the current pullback represents a buying opportunity.

It is true that many die-hard gold bugs loudly proclaimed their allegiance to the precious metal from the top, all the way to the bottom, losing fortunes in the process. While we hope we haven’t been afflicted by the same investment fanaticism, we are betting that the latest weakness is a precursor to the next move higher. It is possible that the recent drops have been exacerbated by taper-related speculation, but we are now at or are approaching several key areas of technical interest. As always, we let ourselves be guided by what the charts have to tell us.

 

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15th September 2013 — Spain warns the eurozone crisis is not over

Well what a difference a year makes!

This time last year and news that Spanish public debt was about to hit a new record would have sent markets reeling. Now, however, I expect them hardly to budge.

The numbers out of Spain are truly awful. Unemployment is above 26% and youth unemployment above 50%. The national debt is now €942.8bn, which equals 92.2% of GDP. This is 15% higher than September 2012 and Spain’s central bank expects the situation to deteriorate over the next 3 years, with public debt to GDP eventually topping 100%. Considering how pitiful the efforts of eurozone policy makers in predicting anything at all have been, this prediction could even be on the positive side!

 

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11th September 2013 — Sharp move higher in the Baltic Dry Index

The rally in commodity stocks looks like it has legs!

Prices of raw materials have taken a bit of a dip in the last week, but the Baltic Dry Index (BDI) has suddenly soared. The BDI is issued daily by the Baltic Exchange, based in London, and measures the utilisation of 23 of the world’s largest shipping lanes. The overwhelming majority of commodities are still shipped by sea, so the BDI gives investors a fantastic means of gauging global demand. It also serves as a decent proxy for what is really happening in China.

Yesterday, the BDI closed at 1,478, having risen nearly 50% in the last month;

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8th September 2013 — Slight uptick in fear; is a possible buying opportunity brewing?

Towards the end of the week, I caught a Tweet which said that the latest French bond auction was the most expensive since President Hollande came to power. On its own, this little titbit of information seemed innocuous enough, but it struck a chord with me. It’s been a while since I did a cycle through the collection of charts I have to help me gauge the temperament of this QE-fuelled market. It was high time I got my head back in the game.

To be perfectly honest, with the taper around the corner, I’ve actually done very little on the main indices since I closed my short on the Dow a few weeks ago. Apart from the long list of reasons to stay out of the market at present (e.g. uncertainty over the war in Syria, crucial US monetary and fiscal events, the German election, Japanese economic reforms, general rout of the BRICS and so on…), I’ve also wanted to reflect on how to position myself once the FOMC decides to act. Naturally the devil is going to be in the detail of whatever they announce, but I’ve increasingly questioned my original view that the taper is going to represent an immediate sea change in the outlook for US stocks.

 

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5th September 2013 — AIM; the high growth market that doesn’t grow!

A throwaway comment at the end of my last piece on this blog last week drew a surprising response over the weekend. Writing about the AIM resource sector, I said “buying and holding these stocks is, after all, investment suicide.” Let’s just say, this view has not proven to be universally popular..!

I can accept I am a little jaded towards the small-caps, after a rotten 18 months, but the more I look at AIM the more broken I feel the model is. This might sound a little contradictory, after I was celebrating the purple patch resource stocks have just hit, but just because I plan to make good money in the coming months, doesn’t mean I have to like how I do it.

 

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