May

18

The regularities in fixed income seem much less numerous than the regularities in stocks. What is the cause of this?

First one market goes down much in one week, then another market goes down the next week. Is it random or predictable ? Last week it was gold.

Is there an all seeing eye that looks for ways to inspire mish and churning in markets that learns from recent outcomes and paths of scores in vivid sports events?

The growth in the belief in the value and inevitability of the world state has preceded the decline in gold.

The gold is down 7 days in a row and this has happened only 4 times since the new millennium. But it is unlike other markets except bonds. Why?

number of runs of 7 or more
in new millenium

market      up runs         down runs

bonds       9                 3
sp         40                 7
bunds      11                16
dax        21                10
nas        41                13
gold       18                 4
crude      14                18
euro(fx)   15                10
yen        15                10

The number of bonds you could buy with one spu (i.e the stock to bond ratio) and the amount of gold you could buy with one spu (i.e. the stock to gold ratio), are at 5 year highs. What does this portend? Are there any other ratios of moment and are they predictive?

Why have central banks which used to be in general antithetical to big stock market rises become so favorable to them, to the extent that many of them are buying equities themselves?

What is the frequency of scandals as a function of the duration before and after major elections?

What are the seasonal tendencies of the outbreak of wars as a function of weather?

The nikkei to spu ratio was once 60 and fell to 7 and is now 9.5. Does it show trends? ( one must check these numbers).

The vix is at 12.5, and all who have sold puts on stocks have made fortunes since 2008. How will this situation be rectified?

The euro at $1.28 is in the lower half of its 1.60 to 1.20 range since 2005. Is the Troika getting an itchy finger? And do they like to see the US wealth prospering at their expense?

And just one more: Is there a point in life and markets, where all resistance to pressure to succumb ceases as in Beauty and the Beast or a market rise of a certain % in the case of stocks or a decline of a certain % in the case of bonds? The danger of relying on a equilibrium ratio comes to mind with the ratio of stocks to bonds at a 6 year high.
 

Veteran trader Anatoly Veltman adds:

You cite the same poignant reason for the recent Gold demise as was the Palindrome's predictive opinion voiced way before April 2013. Of course, the clincher was the fact of the relative over-valuation of Gold as a currency on its way to $1921 peak in 2011.

When Gold is high, i.e. over the latest decades' boiling points of 500-800 USD - it trades as a currency on a cross against other majors. The USD is still a premiere reserve currency, and EUR and JPY represent the next largest economies. Note that against the JPY, Gold is still holding near the all-time record!  

Now, there would be some change in Gold's complexion if it traded under its current marginal production cost of $1100. We might see producers' moves to shut down, hedge, finance, etc. The world average production cost is estimated anywhere in $550-800 range, and those levels are simply unimaginable given the growing distrust of the world's population toward fiat money. It's not impossible, however, to have a spike down there one day: under a scenario that world Central Banks were to reach a consensus - and lighten up. Curiously, such consensus could only come about if your current concept of the sudden universally found "belief" were to fall on hard times. I'm sure this logic is somewhat counter-intuitive.

Yet, in the near-term, a lot of back and forth trading is guaranteed to happen. Just like the May 6th of 2010 stupendous one-day range in stocks has basically contained the price discovery that followed over the next months and months -so may Gold be mired in a range not far exceeding it's mid-April spike. Gold's done exactly that for a full month already; and with allowance for a few currency spikes, we are likely to see Gold at current  levels again by summer's end.


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