Excellent article Steve......love the story re your mate
great read - really enjoyed this piece
nice one Patrick - enjoyed this wire
Good article Chris - though i personally think REITS are a bit flaky on the half back line........history says they don't stand up to finals pressure - i'd swap them for precious metals - which not only tend to hold up when the going gets tough, but can actually pop up with a few goals against the tide (disclosure: long gold, and a massive Adelaide Crows and Andrew Mcleod fan)!
hi Patrick - thanks for the comment. There is no doubt the potential for countries in Africa (and other parts of the world for that matter) to increase their gold production. I wouldn't worry too much about the potential impact on prices though, as that additional production will do little to increase total gold supplies, nor the annual rate of increase in total gold supply. Have a quick look at this article i wrote for the Gold Industry Group a year or so ago on this subject, and look forward to any feedback you have. Cheers http://www.goldindustrygroup.com.au/news/2016/7/7/gold-investor-series-stock-to-flow-why-gold-is-not-a-commodity
Excellent piece Jonathan.......
Interesting and thought provoking read Chris......i'd think a lots of the newer entrants to the super space could do this easier as they won't have the legacy tech issues.....definitely something to watch
Great read Andrew!
Amazing read Philip.
Really enjoyed this piece Daryl, and agree with the view you've articulated re the change of focus for the government, and the profound shift that represents from the 'push prices higher' approach of the last 30 plus years.........
great report, the chart above is frightening IMO.....
excellent read...love the conclusion too
great read........interesting implications for gold too, which has struggled over the last few weeks
Was at the conference too.....very much enjoyed it.....definitely agree with the CE forecast on Aussie rates, though I'm not as bullish as they are re the United States!
Brilliant Alex - couldn't agree more........the pessimism on display by some commentators regarding this dynamic (and supposed requirements for UBIs etc) is not at all supported by historical observation
Great note Patrick - one of the obvious questions that springs to mind in light of the potential with driverless cars is the merit of huge infrastructure spending plans (particularly for roads)! Big question on whether we really need to spend money in that area given the potential productivity/efficiency dividend this technology will bring!
"rain gold" is an interesting turn of phrase! Good summation Patrick!
I'm obviously in the medium-long term bull camp Rudi, but thats an excellent piece covering the major headwinds! Enjoyed the read!
Spot on Chad re the comment about Demoncrats losing more than Trump winning - the Swing States in the Mid-West in particular were only +1m for Trump v McCain in 08, Clinton was -2m v Obama....Good Read!
Terrific piece Jonathan - could not agree more with the comments re disinflation!
Excellent read Chad.......
excellent article Stuart
Superb read.........interesting to consider gold performance in light of above chart considering the strong run since 2000 and fact its typically considered an inflation asset
Good wire Alex - that Real Assets v Financial Assets is a standout chart.....
Think you could be right Angela - market feels like it wants to push lower temporarily here - a 'hawkish' Yellen (a relative term if ever there was one) at Jackson Hole could be the catalyst
No disagreements from me Patrick regarding the positive steps and increases in racial/gender equality over the past 40 odd years.
Great wire and chart guys!
Great read Steve - couldn't agree more re the challenges ahead for the sector
I agree with Patrick's sentiments - though the alternative way of looking at this is that Financial Markets are entirely unconfused. Market participants now fully expect further Monetary Policy Extremism - in that environment - it is somewhat logical to trade dollars/euros/yen/pound for anything more tangible - be that ownership of productive businesses or gold.........whilst it is true that there is minimal CPI in the developed world right now, why wait for the money to die - better to trade it for something more tangible now
Great post Patrick (and comment Steve). The Dalbar reports are a must read. Thats the thing about volatility - investors should ride it out (or use it as a gift at times) but they just don't - locking in losses at worst possible times/overpaying etc.......if markets were easy though i guess it would be boring
On Buy high, sell low? -
I agree wholeheartedly John re the comment regarding the mistake of treating gold like any other commodity. In reality, the supply of gold is largely fixed (grows slowly over time), - but i think the WGC point re ETF demand was/is a valid expression of Western investor interest. Of course the ETF gold was purchased from other investors (predominantly unallocated gold held at HBSC/JP which are the major custodians outside of the BoE) so you could argue its a "rotation" of demand from one investor type to another. Enjoyed your article
super read - love the comments about questionable logic of buying a market portfolio of debt securities.
You bet James - question is how to do we get out of this place!
couldn't agree more - i'd add democracy (or actually just BIG GOVERNMENT) to the list, though I'm not sure disruptive technology is anything other than a positive
not surprised by these findings for broader commodities - the returns on gold in rising rate environments is something we've long spoken to clients about. This, coupled with USD returns post rate hikes, and the extreme bearishness toward metals right now can't help but whet a contrarians appetite.
i'd add a 'mistake' often made at this age too is mistaking fortune for brains in the investment market. Its almost better if your first couple of share investments lose money, to teach you humility. Not a hard rule obviously - but it can sometimes be a bad thing if you are a 20 year old who "invests" in some dot.com or junior miner which 5 bags - youngster then thinks they're Warren Buffett
great point Marcus
On FEAR MONGERING -
That yield convergence chart is quite something. Amazing stuff - and a major unintended consequence of ZIRP
Love it. The Gold Market (on both the bullish and bearish) side is alive with this kind of jazz too.
couldn't agree more- still see rates falling to at least 1.50%. Think we're getting a temporary post budget bounce in some economic data. Will prove transitory
Hi Peter - no question that there'd be a few punters caught up in the latest volatility in China that would have had to liquidate gold holdings in order to raise much needed cash. That's very different from China as a sovereign itself, who've made it fairly clear that higher levels of gold holdings are needed to balance out their foreign exchange reserves etc....
On China Gold? -
No arguments from me on the different mechanics at play mate - agree totally
One could argue that the latest shenanigans in Greece suggest loans to governments are not in fact free of credit risk.....nearly risk free is not the same as risk free
that interest payment as % of disposable income is a national disgrace considering where rates are - Great chart
nice piece Daniel
Terrific initiative Livewire - to bring together insights from three leading fund managers like this - and their assessment of what value is out there, their relative cash weightings, where valuations are and their thoughts on monetary policy both in Australia and overseas was fantastic. Top event - please run one again soon
definitely just a trickle at this point Rudi - but we've noticed a pick up in SMSF's and retirees buying gold since the RBA cut rates in Feb
have a feeling gold would hold up pretty well if Vanguard had included it in this chart - separate from other commodities
Justin great read - that chart from Minack is one of the best i've seen on the Aussie consumer!
Cracking article - Chart 2 in that report is a ripper!
Excellent interview gentleman
On A time to be patient -
No question weather affected the results, but it still fell way below expectations - which should have 'priced in' the weather to a larger degree. It's consistent with the broader rolling over of US Macro data too.
Roger agree 100% at the smaller end. Not hard to see why ETFs popular though when so many large cap managers can't beat indexes regularly. On the Buffett question - A Wolf advising others to remain Sheep should always be looked at with a skeptical eye.
does anyone have a stat on how much of the Australian Superannuation pie is in JGBs? Im hoping the funds are heavily underweight
Hi James - yes - definitely growing momentum - in part due to lack of transparency around fix, Barclays fine, and also the fact silver fix is ending (new process expected to be announced as soon as next week i think). Gold is highly liquid with tens of billions trading per day - pricing it is no problem at all - be interesting to see what market ends up agreeing on as a replacement - but anything to improve transparency is a good thing for the gold market (or any market for that matter). cheers
Hey Rod - yep agree - i think one last wash out can't be ruled out - especially now Goldman just got more bullish/less bearish :-) Another $100 move to the south would decimate investor sentiment and set up next cyclical up leg. But only time will tell. Massive weak ahead starting with Durables
Magic report Dean - and thanks for the share James. Love anything India related.
This is true - though it would be worth pointing out that our massive homes are filled with spare bedrooms - probably 6 million in total across the nation. In any other industry we'd refer to that as excess capacity, and makes one wonder about the so-called 'housing shortage'. But great graph on the square metres.
Hi Rudy - agreeing, disagreeing, and even fiercely disagreeing is part of what makes Livewire such a great platform for sharing views and debating. The major point i was expressing in this post was the fallacy that rising rates = falling gold prices.The late 70's proves that - as nominal rates more than doubled, and gold prices flew as well (which even you acknowledge). Happy to debate all pros and con's on gold investing, but not actually sure what point of mine you disagree with? Am i missing something?
No harm taken at all taken Rudi - thanks for clarifying - and agree 100% re there being too many simplistic arguments about gold (as well as a few other asset classes too). Cheers mate
Really good read - interestingly, in the earlier periods highlighted by Fidelity (1973-74 and 1978-80), gold outperformed even commodities by a significant amount (129% vs 50%, and 167% vs 4%), though in the 3 periods after - its been more of a wash. Good to see these guys picking up a broader basket of commodities though either way.
great share James - and some excellent charts in there
Good interview guys - Steve 100% with you - i think we could see official rates with a 1 in front of them by next year worst case scenario - and 2% highly likely. Where does it end though
Perhaps the better way to describe it would be turnover John? As in - there was 16% less gold traded, as less owners were willing to sell at the price buyers were willing to pay this year compared to last. Important to remember last year was a record for physical (bars/coins) and jewellery - so not surprised with these numbers (am encouraged by them actually). Also obvious turnover/demand not correlated to price short-term. 2013 price movement v turnover/demand conclusive evidence of that
Great chart Gavin - and Rod - 100%. Support #heartofgold too
Great chart and article Daniel.
This is a really good piece guys - but surely it should not be a political/central bank issue as to whether companies invest/buy-back stock/pay out higher dividends. This should be something boards are more than capable of working out for themselves. As for the AUD - yes - pushing it lower will help some industries, but will hurt others - and import higher inflation. Furthermore - what can the RBA do other than slash rates further - with deleterious effects for savers - who will then in turn be forced to buy more stock - which they'll only do if the boards pay out higher dividends. Catch 22 no?
Great peace Pete - particularly enjoyed 2 and 4 - spot on!
good poll David - i suggest there'll be a few people calling the Fed's bluff from this site.
Its a cracking piece but i don't know about you David - i don't think it's capitalisms fault at all when its politicians/central bankers who are responsible for the ills and artificial markets Chris rightly criticises.
Not surprising - though must admit i wasn't expecting the sell off to be quite so violent this morning (especially silver which just got 'oiled') Could be a counting crows (long december) for precious metal bulls if this morning sets the tone!
couldn't agree more with Charlie there. if the RBA don't cut they're going to have to most dovish of language. All the risk is to the upside (unless they cut 50bps of course), which they won't
Great article Tim and exactly why i buy gold - preferred form of cash! downside is volatility, upside is duration. Buffett is right about the no expiration date on cash but thats meaningless when its devalued perpetually
Yep - it's precisely the kind of thing that in a rearview mirror people will say 'how didn't we notice that' - good call James
nice wire James
it's a good point John - perhaps they should define it as turnover or some such thing - I'm quite certain people weren't throwing it away :-) The 1.76% point is highly relevant too. Overall gold supply inviolably stable. Price heavily reliant on existing owners demand!
Agree with you guys on this - the entire Super industry needs to be reviewed - contribution rates, preservation ages, tax within it - the negative press it's received isn't surprising, but there is merit in a broad review.
Interesting comment James - i can remember that happening when the NASDAQ bubbling along 13 years - the more things change the more they stay the same hey. Henry - you've to think long term - $654k per job is nothing - they'll mostly be part time earning $30k a year - will pay themselves off in no time :-)
With earnings unsustainably high, hardly any bears left in the market, and with P/E's at 25 (using Shiller) - lots of potential downside in stocks from here. If last 4 years prove to be cyclical inside secular bear, and P/E's drop below 10, and earnings revert to more sustainable levels - 50% haircut would be conservative IMO
Beat me to it Tom - was just about to post those questions from David on here as well.
Good article, but strange not one major bank or property group mentioning ABS Housing and Occupancy Costs report. At least 5 to 6 million spare beds in this nation today - not convinced at all on major housing shortage. Also, latest census shows for first time in 100 years, we saw an INCREASE in number of people living in each house. Thats what happens when times get tougher, people compromise on housing wants, and settle for housing needs. Thats a trend that will continue!
Fear not - if it's unsustainable, it won't be sustained - and Aussie housing clearly fits the bill. I think we'll see a fairly significant correction (in real terms) over the next decade, although i think the market still has a ways to run, especially in NSW. Lower rates in 2014 will add impetus too. Crazy anecdote btw James - i live in Balmain and it's a similar story there
Very interesting post Tom - interesting two of their short trades involve betting against commodity currencies - hard to see logic in that unless you aren't bullish global growth (which i'm not personally but not sure that's the GS 'house' view), and would also make the 1900 target for the S&P strange, unless they have a no/minimal Fed tapering stance.
Hard to see an genuine economic recovery when this is occurring. Surely you'd be funnelling more money into R&D, Upgrading capital equipment, hiring more staff etc if you thought economy was on the mend. Also something to keep in mind when looking at EPS and ROE for the market etc
Jay what is 'healthy inflation'. Surely if inflation is 'only 1%' then that's closer to 'price stability' than 2% or 3%. And as you say, the LFPR plunge is hiding the true state of unemployment in America (as is the lack of mainstream analysis on job quality vs quantity). Surely the average American is better off in inflation remains low, rather than high. Gallup poll just out showed a decent % of Americans see themselves in a worse position over last 12 months, despite 30% rally on Wall Street and +10% house price rise. http://www.gallup.com/poll/166850/americans-worse-off-financially-year-ago.aspx
Yep, a company with cash on its balance sheet has 5 options - keep it there, pay down debt, invest/hire, increase dividends or engage in buybacks Invest/hire if positive there is more growth to be had (hardly any of this is happening). Keeping cash on balance sheet or paying down debt is healthy too. Increasing dividends and buying back stock won't help future growth or keep balance sheet healthy, but a great way to push up stock price and boost EPS. Long term this is unhealthy
Hey James - i've seen plenty of this too - but i think the following article (and especially the graph on cashflow growth vs capex) puts a big question mark over what is now almost consensus opinion re higher business Capex. The article i've linked in is worth the read too http://www.businessinsider.com.au/us-profit-growth-weaker-than-reported-2014-3
That's right James / Matt - and not sure if you guys saw this one from Gallup - but looking like it's going to be an unhappy Xmas for retailers with American's planning to cut back on the retail spending cheer. http://www.gallup.com/poll/165872/americans-trimming-holiday-spending-plans.aspx Not to mention the fact that news about WalMart store doing a food drive for it's own staff who can't afford to celebrate Thanksgiving. Sad sign of the way America is heading.
Great wire Gavin and top article to share.
Nice article Chris - but ignoring the 'taper' - do you think the Fed will ever be able to end QE?
Spot on mate - the jawboning on the tapering / end of QE has been 'the story' of 2013 - definitely a year where actions have not spoken louder than words
Great article James - similar feature occurring here in Oz with credit card balances declining. Problem of course is there friends in Washington are adding it in bucketloads. Additional $7 Trillion in debt - equivalent to an extra $48k in debt per taxpayer. Ouch!
and believe they are talking tonight in Sydney is that right Gavin ?
Good update Jay - but why the conviction that QE will be tapered in 2014, at least in any meaningful way? They gave themselves the flexibility with QE3 for it to continue permanently for a very good reason.
Hadn't seen that weekly cross no - surprised they didn't get closer in the correction in 08 - keen to see what it looked like back in the 74-76 correction too. What are your thoughts now mate - $1000 on the cards?
agree - market is desperately looking for a catalyst - going to be a tough end for 2013 and early 2014 no doubt .
Good share Jay, but i would have take issue with some of this. Firstly, loan growth from the US banks has been non-existent (in fact i think lending to SME's in the US just turned marginally positive for the first time in 4 years), so his first point is highly questionable. His second point is true, but stock market wealth is highly concentrated, main street guys aren't getting much of that action at all.
Spot on - physical demand will top 1,000 tonnes this year - and thats just the official numbers being shipped through HK. Doesn't account for business people/tourists from Shanghai, Shenzen, Beijing etc who head to HK and buy jewellery/bullion bars and fly them home. Today, most will judge 2013 is the year the gold bull market died, but history will judge it as the year China took over the market.
Spot on Chris - i'm not trying to be partisan here (as i'm not) but we've gone from 'no more debt' to 'no more debt ceiling', 'stop the boats' to 'stop talking about the boats', and 'we will be a government of no surprises' to 'we will be a government with no shortage of surprises'. Not hard to see why people are quickly losing faith.
On Love this article -
Funnily enough there are some 'cycles investors' who think gold will bottom in Jan 2014 as well
you could well be right Chris - interesting that Credit Suisse are out arguing gold is in the 'capitulation phase' of its bear market. I think we're going to bottom by Q1 2014
Thanks James - even Westpac out this morning saying GDP for Q4 likely to be sub 1% now.
not to mention bullion mate - a lot of people would have expected to see gold crushed off back of last week's news culminating in payrolls. Might just be a short lived reprieve for the bulls though
American businesses are 'stocking' again - inventory build up was over 50% of GDP growth in last 12 months. Wouldn't count on this trend continuing unless we see sustained job growth in the US (which is looking up after last Friday), but a long way to go before we can be sure.
interesting when the bank only recently released another bearish gold outlook. Shows how beaten down they are, and the sector in general
Amazing that 'record' outflows from bond funds don't even equal 1 month of QE from the Fed. No wonder markets are completely controlled/obsessed with central bank decisions
could be right mate - disinflation trend this year and rising yields definitely been a drag on gold prices. Think the Fed will be watching that 3% line pretty closely, i don't think the US economy healthy enough to sustain much higher rates just now
Me too Gavin - i was still in Uni at the time but working for a broker - god there was some rubbish out there back then. We never learn hey!
the Yellen effect? :-)
Some good stuff in here Tom - especially point 3 - the Steve Bradbury investment strategy - if you can just stay on your feet whilst everyone else is falling over, you'll end up winning
Fascinating bit of analysis. Question i guess is whether the crisis is really over. QE, ZIRP, wealth confiscation being proposed by the IMF, there's quite a bit that could go wrong in the years ahead.
i think the scarier thing is that the head of the IMF is calling inflation a genie Good call James on tier 2's and resources in general. If i was looking for a long/short for the year (not that this is my speciality) i'd be long gold miners / short banks.
Eye of the hurricane IMO James - 6 years ago the US 10 year yielded more than Greeces. Every major Euro nation was a worse govt debt to GDP ratio, loan growth is weak, economy barely growing. Banks still horribly over levered, and political dysfunction and tension on the rise. This story, sadly, is a long way from over
good call Chris - the resilience it's showing vs commodity currencies not unexpected with the China PMI but portends another year of dissapointing GDP growth
HI Guys. no doubt weather a factor, but latest ADP report showed +25,000 in construction (+30k and +32k in previous two). the BLS report had construction +48k (admittedly was neg in December). Hard to see the weather affect there. Zerohedge had a (typically sarcastic) article on it here. http://www.zerohedge.com/news/2014-02-07/biggest-job-winners-construction-and-losers-government-january
Market Top ?
Hey Jay - nice post. I'm obviously a gold bull, although i wouldn't rule out another test of USD $1200 at least. Having said that, one thing all gold bulls and bears should agree on is that gold 'will last'. Whether it's in a bullish or bearish cycle (and i accept not everyone will agree with the bullish thesis) gold has no credit risk whatsoever and is highly liquid. The only risk investors take is volatility, which, viewed through a different prism, can also be seen as an opportunity. Jordan
Pete re your comment on stock market front running the economy, what did it do last year? Economy weakened, market flew!
Ha - yeah a couple of stiff whiskies might be in order. Not trying to be doom and gloom, and there are some positives, but on balance things look very weak. Tough times ahead i feel.
This is a very good read. Was at a Vanguard presentation last week and they thought CAPE was one of the better, if not best predictor of long term returns. If so, its going to be an ugly decade ahead, as in real terms - investors have NEVER made money in the following decade following valuations at these levels, and the drawdowns have on average been + 50%!
agree mate - its impressive how efficient they are and as you say a testament to adapting to new technologies etc
Nice wire Gavin. ETF's looking better too - GLD back above 800 tonnes at last glance. Did you see the AFR article over the weekend re Gold? Still bearish - which is great to see IMO
Previous ADP report downgraded big time too
Debt to GDP is only one metric - interest expenses vs taxation revenue a better one IMO. Any increase in borrowing costs will crush the US budget (and other sovereigns for that matter). Also - ageing population hurting now. Even the GAO forecast that Medicare/Medicaid etc would grow at 2-3 times the pace of GDP between 2007-2032. They are unprepared IMO.
How about debt servicing Jay?
Yeah mate - SocGen commented here http://www.macrobusiness.com.au/2014/03/australian-dollar-shot-as-currency-cold-war-turns-hot/
No arguments from me Chris - i think we will test USD $1350 from here first - was always going to be some Crimea 'premium' come out of the market after the referendum there. Cheers
im a gold bull - not a gold bug (it is different i promise), but the Saxo report did touch on some important points. I think highly likely gold takes a year to bottom properly, which would put a final bottom around June 2014. Whether thats at $1180 or sub $1,000 remains to be seen, but there is no likely short term catalyst for higher prices right now.
With average deficits of nearly $1 Trillion a year post GFC - i think they've given fiscal stimulus a decent shake. Might be able to borrow at zero in real terms now, but will that last forever?
Liked this video - the comments about all that money in China losing real purchasing power no doubt one of the reasons physical gold imports from HK regularly running at +100 tons a month. Better to save in bullion than banks!
Trend v Seasonally adjusted was the big news - undoubtedly a strong result, and rate cuts off table (for now) but trend (which ABS itself says is better) didn't look so great. Again note difference between FT and PT jobs too.
Par for the course i think. Retail sales have been stronger than expected and the employment result was a standout. Having said that, they'd be well aware of weakening business and consumer confidence, which might get worse if Big Joe keeps talking tough re the budget. AUD will be worrying them too, so there's no chance of a hike, but i'll concede my call of further cuts now looking premature.
Good sign that retail investor demand still pretty steady Gavin - cheers for that - i'd missed that announcement.
interesting - no doubt EPS growth has been impressive, but its not due to strong corporate growth to paraphrase the report. Stock buy backs have been a major factor in EPS growth, and other measures of corporate growth have been far less impressive, especially free cash flow, which is one major reason corporate capex is still so weak.
Pretty decent mate - volumes are solid, though not having a spectacular pick up like we did a year ago when the circa $200 drop occurred. More interest at the 'professional' end of town too, but people understandably nervous to increase allocations or introduce allocations with the market where it is right now
Great article - also a reason why most retirees/pre retirees aren't fearful of higher inflation (or positioned to protect from it). From a sequencing perspective, it happened 3 decades ago, when they were all much younger with much left to lose.
agree with a lot of this - good video
Hi Mate - something Dylan Grice wrote about a few years ago when at SocGen - the end game is pretty easy to predict - Default on a epic scale - just a question of its an honest default (ie telling Mr and Mrs Watanabe that their assets ie loans to the government) are worth a lot less than 'market value', or continued debt monetization. Entire Western world headed down this path. Question is how to protect (let alone profit) from whats about to unfold.
yeah gold in JPY has done fine of late - but short term its not looking great (in USD at least). The problem for the BOJ and Abe only compounded by the fact most of the debt is held internally and they're demographics are so bad. If the BOJ steps away from market and domestic pension funds need to sell, how does it not implode? You get the feeling a few decades from now financial history books will have a chapter focused specifically on Japan!
So true Gavin. We're so Fed obsessed when it comes to Gold - but real physical demand isn't determined in the US or London. If Western investors (mostly via ETFs) do change their tune, and even want 5-10% allocations to metals - then things could get very interesting in the PM space.
Love the point about private buyers wanting guaranteed returns - which are ultimately borne by the taxpayer. The one thing most people overlook in this whole 'we'll sell infrastructure' debate.
Agree James - no arguments there. Though the 'bear' camp got another win with the latest Gallup data re personal spending. Link here http://www.gallup.com/poll/172088/consumer-spending-dips-june.aspx