Banks can't make money like this, look at Europe to see how bad
The foundational problem here is that globally there is no growth story that does not involve assistance from central banks, which has been clear for a few years now. Regardless it has been great to be in stocks but, at the end of last year signs of the US consumer slacking off started to crop up. The first signs were in durable goods after that, transports fell off a cliff. Inflation has been with us for years but they measure it incorrectly by taking a bunch of products made in china, like TVs and clothing which mask the reality of the fact that everything involving real estate (rent, food...) has been inflationary. Everything involving human services has also been inflationary (health care, education, construction costs.) While everyone celebrates low unemployment rates, they are very inflationary. Try getting someone to build or fix anything without paying a fortune and it becomes clear.
The Yen as a flight to safety currency has been absolute BS for years now but that trade would not die, it has been with us since the 80s, if anyone cared about fundamentals it should have broken with the onset of Abenomics. The yen VIX ratio just broke down. Then gold surged against the Yen, XAUJPY blasting past all-time highs.
Nobody seems to care about this problem in Japan but what it means is that the Nikkei is about to get rekt. The only thing that has held that market up for many years now has been the reversal of the yen carry trade and people buying shitty Japanese stocks every time the trade reverses. They are about to get a margin call on a mass scale. How much money do the Japanese have in the S&P 500, they will be forced to dump right at the worst of the volatility spike. That SPX chart will be a sight to behold.
The next piece that you need for mass inflation is a disruption of the supply of goods, enter in Trump trade wars and tariffs...
Everyone who thinks this is all about the coronavirus will be very confused when they see what comes next, they will talk about what BS the reaction of markets is and, and ...
I thought that the story was going to unfold gradually over the next year, then the bigger disruption of the supply of goods started to kick in with china shutting down. This is almost certainly not long-lasting but it is a trigger event and the nail in the coffin is the drop in rates and yields.
Here is the problem, the markets will probably continue to correct for 6 more weeks or so. If it is fast and not gradual gold will get hammered short term with all the margin calls on everything else. Bonds and cash is where it's at for the correction. That being said I would not short gold at any time, this is not going to be a liquidity crisis like 2008 but people will look at that chart and dump gold assuming that it is going to do the same thing, they will pile on the shorts and drive gold to all-time highs when the short squeeze happens. After the big correction, it will be metals TIPS and gold miners.
Gold miners will correct at first but then enter a bull market. They are already making record-high profits because the cost of production is at the lows due to the valuation of oil and the local currencies where they operate vs. the USD.
The low the GDX just hit will likely be retested in an SPX crash, maybe lower. After that, they will remain among the few who's profits are growing. There will probably be a bubble in the GDX after the initial correction.
One could go on and on with arguments for metals (election year, CBs, Europe...)
The Yen as a flight to safety currency has been absolute BS for years now but that trade would not die, it has been with us since the 80s, if anyone cared about fundamentals it should have broken with the onset of Abenomics. The yen VIX ratio just broke down. Then gold surged against the Yen, XAUJPY blasting past all-time highs.
Nobody seems to care about this problem in Japan but what it means is that the Nikkei is about to get rekt. The only thing that has held that market up for many years now has been the reversal of the yen carry trade and people buying shitty Japanese stocks every time the trade reverses. They are about to get a margin call on a mass scale. How much money do the Japanese have in the S&P 500, they will be forced to dump right at the worst of the volatility spike. That SPX chart will be a sight to behold.
The next piece that you need for mass inflation is a disruption of the supply of goods, enter in Trump trade wars and tariffs...
Everyone who thinks this is all about the coronavirus will be very confused when they see what comes next, they will talk about what BS the reaction of markets is and, and ...
I thought that the story was going to unfold gradually over the next year, then the bigger disruption of the supply of goods started to kick in with china shutting down. This is almost certainly not long-lasting but it is a trigger event and the nail in the coffin is the drop in rates and yields.
Here is the problem, the markets will probably continue to correct for 6 more weeks or so. If it is fast and not gradual gold will get hammered short term with all the margin calls on everything else. Bonds and cash is where it's at for the correction. That being said I would not short gold at any time, this is not going to be a liquidity crisis like 2008 but people will look at that chart and dump gold assuming that it is going to do the same thing, they will pile on the shorts and drive gold to all-time highs when the short squeeze happens. After the big correction, it will be metals TIPS and gold miners.
Gold miners will correct at first but then enter a bull market. They are already making record-high profits because the cost of production is at the lows due to the valuation of oil and the local currencies where they operate vs. the USD.
The low the GDX just hit will likely be retested in an SPX crash, maybe lower. After that, they will remain among the few who's profits are growing. There will probably be a bubble in the GDX after the initial correction.
One could go on and on with arguments for metals (election year, CBs, Europe...)
