Precious Metals Outlook,Stock Market Strategy and Worldwide Liquidity Update

Precious Metals Outlook: Bloomberg TV Headline: Goodby Gold

Bloomberg TV ran the above story yesterday morning, interviews were conducted and a consensus was formed. Based on this simple indicator I would say that Gold Prices bottomed yesterday at around $1159.  We will call this indicator the ‘Fin. TV’ indicator. You may recall how unbelievably accurate the Fin. TV indicator was in early July when identifying the equity market low.  I explained this phenomenon in the post titled , Stock Market Strategy: The More Things Change the More They Stay the Same . The bottom line of the explanation reads: “Rosenthal Investing Axiom: When CNBC et all call for imminent market demise expect instantaneous market rally.”

So, by applying the Fin. TV rule to Gold prices we should not be surprised to see Gold trading at $1175 as I write this note. Yesterday’s cacophony of calamitous Gold comments leads to the current $15+ comeback; categorically classic!

Stock Market Strategy: Data and Comments Continue to Point Towards Q.E.2

This morning’s disappointing GDP news dovetails nicely with voting Fed member Bullard’s comments yesterday.  The Zero Hedge story, “GDP Misses Expectations, Comes At 2.4%, Plunges From Revised Q1 GDP Of 3.7%” Offers a good breakdown of the details. I would, however, caution readers who believe this news is negative for the equity markets. Please remember the all important equation: Liquidity Expands + Credit Markets Improve = Equity Market Rally . News such as disappointing GDP numbers leads Fed members to speak out openly about the need for more liquidity…            

Bullard comments on deflation: St. Louis Fed President Bullard issued a paper arguing that the Federal Open Market Committee’s extended period language may be increasing the probability of a Japanese-style deflationary outcome for the U.S. within the next several years. Bullard concludes that an appropriate quantitative easing policy offers the best hope for avoiding a low nominal interest rate, deflationary outcome. Bullard frames his discussion in the context of theoretical analysis by Benhabib et. al. 1 that emphasizes two possible long-run outcomes for the economy: one which is consistent with monetary policy as it has typically been implemented in the U.S. in recent years, and one which is consistent with the low nominal interest rate, deflationary regime observed in Japan during the same period… See report here

…And comments about more liquidity are being backed up by actual growth in worldwide liquidity as seen in the chart below. While this cycle persists expect higher equity prices at best and consolidation of gains at worst….


About Bret Rosenthal

Interpreting the news that moves markets. Principal of RCM, LLC, and founding partner of the Fortune's Favor Family of Funds
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