Category Archives: SpreadBet Magazine

6th December 2013 – The ancient Hebrew approach to avoiding boom & bust

“This fiftieth year is sacred—it is a time of freedom and of celebration when everyone will receive back their original property, and slaves will return home to their families.”

—Leviticus 25:10

A few years ago, I came across a really interesting idea about property rights. I was listening to a radio programme, broadcast from a church in the City. It was an ecumenical discussion, involving different faiths and examined the morality of debt driven economies. I wish I had kept the podcast, but one contributor was a Rabbi, who introduced me to the ancient Hebrew idea of a “jubilee”.

 

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6th December 2013 – MIDAS support for gold at $1,206/oz

So, this been quite a week for the precious metal.

To say the trade has been choppy would be quite an understatement. Four of the five trading days have seen 30-40 intraday moves. We’ve tested some of the lows set earlier in the summer and there is a feeling something significant is going on in this market at present. Earlier today, our proprietor, Richard Jennings, wrote another bullish call on gold, pointing to further evidence that a bottoming process is playing out. A cursory glance over the chart below, strongly suggests he could be right:

 

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4th December 2013 – Another day another massacre

Following on from my last piece about the current collapse in gold and gold mining stocks, this is starting to look more and more like a capitulation event. And as we all know, for a market truly to bottom it first needs to capitulate.

To recap what I wrote yesterday, I believe that the market for gold is going through a fundamental change. Gold itself is fast transforming from a crisis trade, in anticipation of the financial system collapsing or blowing up in a hyperinflationary boom, to a fundamental play supported by the true cost of production. An investment company, called Hebba Investments, has been publishing a series of research reports on Seeking Alpha for the last few years. They have developed a model to calculate the all-in production costs of the world’s largest listed miners. In their latest note they estimated that the average all-in production costs for these companies (accounting for more than 25% of the world’s supply) were $1,221.75/oz during Q3 2013.

At this very moment gold trades at $1,215/oz.

 

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3rd December – Is this it for gold?

Gold bulls are getting massacred.

The market euphoria that has gripped the main boards and taken hold of the “all is well, bravo the Fed!” crowd has a nasty sting for any pragmatist who knows that a debt crisis cannot be solved by yet more debt. That the latter group will almost certainly be proven right in the long run will do little to cheer them if they are wiped out in the meantime. This could well prove to be the bitter irony of what is happening now. What was it Keynes said about the market remaining irrational longer than he could stay solvent?

Anyway, back to today and gold mining stocks and associated ETFs have been crushed under heavy volume selling, and the price of the yellow metal looks almost certain to retest its 52 week lows (note I said “almost”). If this happens and the decline continues then serious technical support looks well over $100 away.

 

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26th November 2013 – Crash or correction – Shiller P/E crosses the all important 25

A running theme here at Spreadbet Magazine has been this market’s refusal to revert to the mean. Mean reversion is the quintessential characteristic of price movements but thanks to the hugely distortive effects of quantitative easing, today’s investors/traders/speculators seem largely to have forgotten this. At some point they will be reminded of it, but the question is will this be in the form of a crash or a correction?

As things stand now, I am going to bet on there being a correction, not a crash. I’m certainly not suggesting shorting this market, but rather waiting until a decent opportunity presents itself to get long again.

 

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