Friday, August 28, 2015

Chinese Exports Down, Consumer Spending Up?

The economic data is getting weirder and weirder. China devalued the renminbi because its exports had plummeted about 8 percent, and now we hear consumer spending in America was up 3.1 percent in the second quarter.

Have U.S. consumers suddenly stopped buying Chinese products? I don't think so. For that reason I'm very suspect of these numbers.

Once answer could be consumers slowed down spending during one part of the quarter, which could have skewed the export numbers of China for last month.

Other than that, it's very strange if we find out that wasn't the case, and somehow consumer spending exceeded expectations by a lot, but they decided to spend on goods from America or other countries. Since that hasn't happened in years, as far as what would essentially boycotting Chinese products, it's very difficult to believe these numbers are reflective of real consumer spending.

Again, the only scenario I can think of is if Americans really spend big in the first two months of the quarter, and then cut back. Otherwise, something stinks in these numbers. 

Thursday, August 27, 2015

Will Fed Raise Interest Rates in September?

When you consider the self-deception of the Federal Reserve, it's difficult to project whether or not it will raise interest rates in September.Even though global economic conditions are deteriorating, there has been no strong signal one way or the other on what Yellen is thinking.

Almost all of Asia is crashing. Countries with strong exposure to commodities, like Canada, Brazil, Russia and Australia are struggling, and Europe is weak as always. That leaves the U.S on its own. I don't see how it can maintain any semblance of growth in the near future.

One temporary answer would be for the government to increase spending like it did the last quarter to reinforce the illusion of a strong recovery. That never works over time though, which is good for gold.

As a matter of fact, if China and many other Asian countries work to strengthen their currencies by selling Treasuries en masse, even while they engage in a currency war, that would almost certainly halt the idea of raising interest rates, and some believe it may even initiate another round of quantitative easing. We all know what that would do to gold prices.

We must watch China in the weeks ahead, as it has already sold off over $100 billion in Treasuries over the last couple of weeks, and it's sure to continue to do so. Almost certainly other Asian nations will do the same, which has the potential to change the direction the Fed wants to go.

What's happening in Asia is countries are fighting to remain competitive with exports, which of course why they're devaluing their currencies. At the same time they don't want them to fall so much it wreaks havoc on imports and brings about higher inflation domestically, so they're selling Treasuries to support their respective currencies.That means Treasury yields are going to remain level or go up, which the Federal Reserve doesn't want to face when it comes time to make an interest rate decision.

Gold Not Convincing Investors Yet

It's amazing at times to see how quickly investors forget lessons in safety, and blindly believe the mainstream narrative on the state of the economy and stock market.

For that reason, along with the Fed's manipulation using its lack of commitment and visibility concerning interest rates, it is keeping investors paralyzed in regard to moving more of their capital to gold. Since they don't know what the Fed is going to do, they're seeking safety in cash or Treasuries instead.

With the world now plunging toward global recession, it's amazing the disconnect many investors have between the world and America, as if what happens everywhere else won't have an impact on the American economy.

It's going to take a harder landing to reveal the real weakness of the U.S. economy, and it will definitely come in the not-too-distant future. Smoke and mirrors can only do so much before it comes falling down.

At that time gold will be the go to place of safety, and it once again will soar in price.

Why I Wasn't Impressed With Economic Data

Sometimes it does get old when mainstream media cheerleaders gush over any news it deems irrefutable and positive about the economy. The latest data suggest an "unexpected" solid performance in the last quarter, which suggested to many the recovery remains on track.

Of course much of the response came about because of the plunge in the stock market, temporarily disrupting the media narrative, which now can be resumed as if everything is okay.

What I want to talk about most is the government spending number, which was up about 2 percent. To me, that's almost the entire story of the surprising growth numbers.

Sure, corporate and consumer spending improve, and that appears to be legitimate. But when you include a 2 percent increase in government spending, that disproportionately pushing up the numbers because of the size of the budget, which if they were removed from the data, would have resulted in an unimpressive performance.

As for the corporate expenditures, my belief is a lot of that was because of the depressed commodity prices, which companies took advantage of. China did so as well, spending over 20 percent year-over-year on over 20 commodities. With reports suggesting this isn't sustainable, I think some figured this out, and attempted to lower future expectations.

Gold is still positioned well in this economic environment, and I believe the fake economic recovery will be exposed in the near future, as it already is in many other parts of the world, and gold will start to climb.

Tuesday, August 25, 2015

Fed's Manipulative Fingers All Over Interest Rate Uncertainty

The more I watch what has happened with the price of gold recently, which while having some strength, hasn't jumped in the way it should have under these market and economic conditions.

It's obvious investors have been holding back on plowing into gold for safety because of the manipulative comments from the Fed that is may or may not be raising interest rates in the near future.

The lack of clarity, which now has to be considered a planned move, is what has been holding the price of gold down because investors don't know whether or not there is a rate increase coming soon.

This pushes capital into bonds, which is what the government and the Fed prefer. That may last for a little while, but once the Fed makes it clear what its next move is, there will no longer be any doubt. Almost certainly the next move will be to do nothing.

Once that happens, there will be an accompanying comment that will once again darken visibility in attempts to keep money from being placed in gold.

The reason why the Fed hates that is it contradicts its cheerleaders, and brings back the narrative of the consequences throwing fiat money into the financial system has.

My belief is the Fed won't be taking any steps in regard to interest rates, as the global markets aren't through getting hammered, and with China, Japan and Asia in general struggling, along with Canada and Australia, there is little in the way of positive catalysts to signify ongoing growth.

The slow growth projections of the U.S. economy confirm this.

With a lot of cash on the sidelines as well, I believe it's getting ready to be invested in gold once the central bank signals where it's taking interest rates.

By making investors wait, it's further generating pent-up demand, which when released, may even be stronger than believed at this time.

If it goes the other way and interest rates are increased, I see that as a temporary pause. The global economy is grinding to a halt, and there is no way the U.S. economy can maintain the slow growth way it's now enduring, with consumer spending. 

One way or the other gold prices are going to rise, and I don't think it's going to be a long time into the future, whether the Fed raises interest rates or not.

Monday, August 24, 2015

Gold Positioned To Jump As Markets Fall Apart

With economies around the world slowing down, currencies plummeting, and the commodity sector beaten down, there is more to the stock market correction, then, well, being a correction. That's good news for those that have been waiting for gold prices to gain some momentum.

There of course is also the tough decision ahead for the Federal Reserve, which until recently, was almost sure to raise interest rates. That's more than in question at this time, as global markets take a big hit.

Even if the Fed decides to boost interest rates, gold is still looking good, as there are just too many negative catalysts out there to make that the determining factor in the price of gold.

Not only that, but there is a growing number of people that believe not only won't the Fed raise interest rates, but the global and domestic U.S. economy may be far worse than it is, which points to the possibility of another round of quantitative easing. And we all know how gold prices would jump in case of that event. If the Fed decides to hold off for now, that is also positive for gold. So whatever way you look at it, gold prices will start to rise, and will continue to do so over the next year at least; possibly further out as well.

Safety is going to be a dominating part of the investment landscape, and gold will be one of the leading assets investors seek to protect their capital.

Friday, August 21, 2015

Hedge Funds Now Bullish On Gold

Institutional investors, including hedge funds, have reversed their aversion to gold, as they are now betting on the precious metal to move up again, according to the Commodity Futures Trading Commission.

On August 18 they surpassed gold futures and options contracts betting against gold by 18,454, said the CFTC. A week before bears had 2,794 futures and options contracts than gold bulls.

Much of this came from the stock market crash in China, and was heightened further by Chinese exports plunging by 8 percent, pointing toward the country probably being in the early stages of a recession. It also generated questions as to how healthy China's economy has really been, and whether or not the data reported was even less accurate than had been believed.

Japan has also been struggling, along with the rest of Asia. Countries more heavily reliant on natural resources, such as Canada and Australia have also been suffering a reversal in fortunes, as commodity demand has been falling.

All of this is happening in the midst of a currency war, as many nations with significant export markets fight to weaken their currencies in order to boost exports.

Recent numbers from media also show that sector is under strain, with ESPN losing a moderate number of subscribers.

Taken together this has increased the probability the Fed will hold off on raising interest rates. That's likely to play out that way, and if things get worse, we may not even see a bump up in the interest rates.

Combined with a strong U.S. dollar, which is starting to put pressure on U.S. exports, as data from the New York Fed recently stated that region of the country failed to meet expectations, it would be very surprising to see a change in interest rates by the Fed.

Things are falling apart so quickly, it's hard to see how gold prices can be suppressed going forward. Instead of an interest rate hike, we may be seeing talks of another round of quantitative easing instead.

Thursday, August 20, 2015

Gold About to Rally Big Time?

It looks like a lot of negative catalysts are coming together to provide the foundation for a major gold rally.

Emerging markets are in disarray, as are developed markets like Japan. Asia as a whole is under enormous pressure, and the latest Empire State Manufacturing report revealed U.S. manufacturing is slowing down as well, partly from the strength of the U.S. dollar.

With a currency war going on in Asia, as countries compete to boost exports, it's difficult to see how American exports can gain any traction.

Media stocks have also been taking a pounding, based primarily upon Disney's (DIS) ESPN losing a "moderate" amount of subscribers. That most likely points to a period of even more disruption, which many investors have been monitoring since the growth of the streaming video market.

Many retailers have also underperformed, especially those with a presence in malls; although Wal-Mart (WMT) has been getting crunched as well.

Add to that the underemployment in the U.S. and dubious employment numbers, and you have the makings of another perfect storm that could push the price of gold above the $2,000 an ounce market - possibly much higher, depending on how the parts of the whole hold up.

Gold and silver could be poised for a major move. I don't see how this weak economy can hide the devastating impact of endless quantitative easing, or how GDP can continue to improve when major trading partners are under economic siege.

I don't think this time around the strength of the U.S. dollar will be able to hold back the upward move once it takes hold. We could even see measures taken - possibly in the form of more quantitative easing (to hide the fact the Fed is once again entering the currency wars) - to lower the value of the dollar against competing currencies.

Either way, gold is beckoning, and it's a matter of when, not if, it starts to soar once again. I'm positioned for it in my portfolio. Are you?

Tuesday, August 4, 2015

U.S. GDP Can't Break the 3 Percent Growth Mark

As has been the case for the last ten years or so, the U.S. economy continues to grow at a rate that has failed to meet expectations. The recently released numbers from the Commerce Department show GDP growth is at only 2.3 percent, significantly below the expected 3 percent being looked for.

It has been a full decade since the last time the GDP has grown above a 3 percent rate, making it the weakest recovery in about 70 years. Economic growth hasn't surpassed the 3 percent mark since 2005, according to the Commerce Department.

Another key factor is the continual drop in productivity, which according to the Labor Department, reached a high in 2002. Being a number of years before the Great Recession, it can't be considered the primary source of the drop in hourly output.

more on U.S. economy

The U.S. Dollar Going Forward, and How to Best Play it

There has been some confusion among those interested in the U.S. monetary policy and why the U.S. dollar has remained strong even as the Federal Reserve created enormous amounts of money out of thin air. Under normal conditions that would have put downward pressure on the value of the greenback.

read more on U.S. dollar