readtheticker blogger: August 2022

Tuesday, 30 August 2022

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Original Post: https://ift.tt/sq8yWBb

Sunday, 21 August 2022

Silver 2023 looks bright - Update

Silver does well when the economy is starting a recovery phase. Big shorts have to cover forcing the silver price higher.

Previous Post: Silver 2023 looks bright

The silver game changed at the bottom of the 2008 GFC crisis, US Debt to GDP exploded, making the investing component of silver as important as the industrial side of silver.

During all the silver bottoms of 2009, 2013, 2016 and 2020 the US PMI sinks and then recovers followed by a US dollar sell off.

2009 - GFC, FED and PBOC saved the world.
2013 - QE on and off.
2016 - China slow down, Nov US Elections, Trump tax cuts.
2020 - COVID crash, Fed pump.

The silver recovery in 2013 was scuttled by the strong US dollar as the Fed removed QE before other central banks in Europe and Asia. This means the silver long trade off the bottom of PMI lows has a 75% success rate.

Today the silver trade is reset. Now PMIs are falling, the dollar is strong and silver is pulling back. Rinse and repeat.

US Economic data is falling hard. Housing sentiment and PMIs are crashing. The FED has hiked short term interest rates in quick time in a all out effort to lower the US inflation figure of 9.1%. To push so hard one way suggest the swing back the other way will be an opportunity to invest.

Chart 1 - Silver, US PMIs, US Dollar, US Debt to GDP%

Silver

Keep an eye on silver and gold.

Original Post: https://ift.tt/TIlemfG

Sunday, 14 August 2022

Markets during pandemics 1918 vs 2020

It seems the market moves of inflation, debt and interest rates and very similar during once in 100 yrs pandemics.

1918 - 1920: Swine Flu Pandemic Market review
1) The shock forces the Dow to sells off (black).
2) Different news of multiple flu waves and effects sends stocks up and down.
3) Government creates debt to help resolve the crisis (light green shade).
4) Supply shortages send CPI (blue) to record heights while new money supply from new debt is present.
5) As the pandemic subsides the Fed hikes the fund rate to crush inflation (red) [Monetary Tightness].
6) Due to the over aggressive hiking of funds rate, inflation collapses very quickly.
7) The inflation collapse forces the Fed to pivot and cut rates in very quick time [Monetary easing].
8) Gold rallies on deflation (fast falling CPI) and easy monetary conditions.

During 1918 - 1920 period the economy was not as dependent on oil as it is today and the oil price remain flat during this pandemic. Also the US dollar was not the world reserve currency, the British pound was at this time.

1918

It seems history repeats in the same manner.

2020 - 2022: COVID Pandemic Market review
1) The shock forces the Dow to sells off (black).
2) Different news of multiple COVID waves and effects sends stocks up and down.
3) Government creates debt to help resolve the crisis (light green shade).
4) Supply shortages send CPI (blue) to record heights while new money supply from new debt is present.
5) As the pandemic subsides the Fed hikes the fund rate to crush inflation (red) [Monetary Tightness].

Currently 2022 August this is were we are, in the FED tightening phase.

This time oil is a large part of the world economy and the US dollar is the worlds reserve currency. The methods used to calculate US CPI in 1918 and 2020 are also very different. Plus computer trading algos tend to push markets around more so than 1920's.

Inflation excluding food and energy may collapse very quickly, however the elevated price of oil may hold up headline inflation (CPI) for a few months. But do not underestimate the deflationary damage COVID has done to the demand side of the debt heavy US economy, as this may force the FED to cut rates very quickly (monetary easing) which will likely see gold rally. The last two times the Fed (2009, 2019) cut the funds rate gold moved higher, the faster the rate cut the faster the gold rally.

Keep an eye on gold over the next 6 months.

2022