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11.20.18 - FAANG Stocks Enter Bear Market

Gold last traded at $1,223 an ounce. Silver at $14.28 an ounce.

NEWS SUMMARY: Precious metal prices steadied Tuesday despite a stronger dollar. U.S. stocks extended their slump into the red for the year as tech stocks entered bear market territory.

Gold Is Just Getting Started -Scotiabank/Kitco
"Analysts at Scotiabank said that they see further potential for the yellow metal as the bank sees a wave of risk-off sentiment sweep through financial markets and inflation pressures rise, according to its November Metals Matters precious metals report. 'Economic data has generally been showing weakness, including some U.S. data, and economic bellwethers such as the base metals have remained under pressure as the U.S. trade disputes have dragged on,' the analysts said. 'Gold has turned more favorable as other markets have started to become more risk-averse. As such, there does seem to be room for more safe-haven demand for gold as money rotates out of equity and bond markets.'....The analysts noted that along with economic uncertainty, geopolitical instability surrounding global trade issues will continue to support inflationary pressures, which could help gold fight against ongoing strength in the U.S. dollar....The analysts said that new momentum in the gold market could also breathe some life into silver...'Should gold prices extend gains and investor interest return, then silver would likely outperform gold’s rebound in percentage terms as it has a history of being more volatile than gold,' the analysts said."

bears Stock-market gains for 2018 vanish -Marketwatch
"U.S. stocks fell sharply at the start of trade Tuesday, extending a pre-Thanksgiving rout that has been fueled mostly by a selling in shares of technology and internet-related companies. Sharp declines in Target and Lowe’s after disappointing earnings also contributed to the tone. U.S. financial markets will be closed Thursday for the Thanksgiving Day holiday and will be see an early close on Friday. U.S. investors continue to be plagued by doubts surrounding slowing global growth, U.S.-China trade relations, and the steady rise in interest rates that can be expected to continue into next year. These doubts have accumulated to induce fears that we are growing nearer to the end of the current economic expansion, strategists say....'Economic data remain strong, but the trend in the trend is deteriorating,' Peter Lazaroff, co-chief investment officer at Plancorp, told MarketWatch. 'Economic conditions are good, but the chances of economic conditions deteriorating over the next year or more is much higher than a surprise on the upside,' Lazaroff said."

Investors' favorite trade is officially dead as each member of tech's 'FAANG' is in a bear market -CNBC
"Each of the five 'FAANG' stocks slipped into a bear market during Monday trading. The FAANG stocks – Facebook, Amazon, Apple, Netflix and Google-parent Alphabet – have fallen steadily over the last 6 weeks as the companies delivered disappointing earnings and mixed forecasts. Collectively, the five stocks have lost nearly $1 trillion in value since hitting their respective 52-week highs. Tech stocks are coming off an October which saw the Nasdaq Composite plunge 9.2 percent, its steepest drop in a month since November 2008. Wall Street defines a bear market as a fall of 20 percent or more from a stock's 52-week high."

Goldman Tells Investors "It's Time To Lift Cash Allocations" -Zero Hedge
"It's been difficult year for Goldman's chief equity strategist David Kostin....You have such gloomy analysts as Peter Oppenheimer who two weeks ago said that 'things do not look encouraging' as various market signals suggest that 'equities could be about to enter a sustained bear market.'....First you admit that 'all good things eventually come to an end'...'Our baseline assumption is that both economic and profit growth will be positive in 2019 but decelerate from the robust levels of 2018.'....'Mixed asset investors should maintain equity exposure but lift cash allocations.' The reason - everyone is overweight stocks and underweight cash...'Cash will represent a competitive asset class to stocks for the first time in many years.'"

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11.19.18 - Homebuilder Confidence Plummets

Gold last traded at $1,224 an ounce. Silver at $14.40 an ounce.

NEWS SUMMARY: Precious metal prices rose Monday on safe-haven buying and a weakening dollar. U.S. stocks fell as declines in Apple and semiconductor shares put pressure on the broader market indexes.

The Gold Standard Didn't Disappear In 1971, It Just Went Underground -Lewis/Forbes
"Officially, the gold standard is regarded as superstitious nonsense, especially by academics. The fact that it worked very well for centuries, produced results that nobody seems able to achieve today. But unofficially, gold was not only the basis of the global monetary system for centuries until 1971, it has been - in rough form - the basis of the global monetary system for most of the time since 1971 also. Humans apparently cannot live without it, even if they want to....Alan Greenspan stabilized the dollar against gold during the 1990s, the 'Greenspan gold standard.' The dollar then had over a sixfold decline under Ben Bernanke, falling from $300/oz. to a low around $1900/oz. in 2011....A further decline in the dollar's value would not be tolerated. Serious firepower was brought to the task, probably including financial market manipulation at an unprecedented level. The result was the 'Yellen gold standard' from 2013 to the present, in which the dollar’s value vs. gold has been 'strangely' stable between $1150 and $1350/oz., with a midpoint around $1250/oz. The results have been pretty good....Unlike Greenspan, who gave a lot of hints that he was actively stabilizing the dollar vs. gold, Yellen and now Powell have kept mum....The gold standard works even when it is by lucky chance....The effective choice has been either a gold standard or a 'PhD standard,' and the PhD standard hasn’t amounted to much more than overt currency debauchery."

santa Santa rally for stocks? Get out while the getting is good, says this strategist -Marketwatch
"After some brutal selling in October, the last quarter of the year is already stacking up to be the worst since September 2015. Investment advisers are sounding some end-year caution. Our latest and call of the day, from Seema Shah, global investment strategist at Principal Global Investors, says 'take cover, worse has yet to come,' when it comes to equities. Shah says 'rather than a signal of renewed equity market strength - any year-end rally should be considered an opportunity to exit U.S. equities.' Shah's concerns are based on some familiar themes - Fed tightening, a negative economic hit from a strong dollar, POTUS stimulus that is slowly fading, a rout for tech stocks and the U. S-China trade spat. But one of these stands out bigly. 'I should emphasize again that my negative outlook for U.S. equities rests heavily not on assumptions about the trade war, but on the reversal of easy monetary conditions,' Shah says."

Homebuilder confidence plummets to the lowest level in more than two years as 'demand stalls' -CNBC
"Rising mortgage rates and continued home price growth are hurting affordability and fast becoming a toxic cocktail for the nation's homebuilders. Sentiment among homebuilders dropped 8 points in November to 60 in the National Association of Home Builders/Wells Fargo Housing Market Index. That is the lowest reading since August 2016....'Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,' said NAHB Chairman Randy Noel, a builder from LaPlace, Louisiana. 'While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall,' said the NAHB's chief economist, Robert Dietz."

Crypto Carnage Continues As Bitcoin Cash Fork Battle Builds -Zero Hedge
"Bitcoin has extended its recent collapse, plunging to $5100 this morning (the lowest since Oct 2017) and down 75% from its record highs in Dec 2017. The latest leg lower seems driven, among other things, by anxiety over the split in Bitcoin Cash. The cryptocurrency industry has now lost more than $660 billion in value from a January peak, according to data from, with the latest plunge coming as the two Bitcoin Cash software-development factions failed to agree on a way to upgrade the offshoot of the original Bitcoin, leading to a computing power arms race....Bloomberg reports that even Thomas J. Lee, managing partner at Fundstrat Global Advisors and a long-time crypto bull, slashed his year-end price target for Bitcoin to $15,000 from $25,000. The target is based on a fair value multiple of 2.2 times the breakeven cost of mining, which the firm pegs at $7,000, according to a report last week. 'Crypto-specific events have led to greater uncertainty in the crypto market, including the contentious hard fork for Bitcoin Cash,' Lee said in the note. Bitcoin’s break below $6,000 'has lead to a renewed wave of pessimism,' he said."

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11.16.18 - Retirement Dreams Lost for Millions

Gold last traded at $1,223 an ounce. Silver at $14.34 an ounce.

NEWS SUMMARY: Precious metal prices rose Friday on a weaker dollar. U.S. stocks traded mostly lower after a strong downturn in technology shares.

Gold Re-Monetization Is Much Closer Than Many Realize -Palisade Research
"February 2018 marked a major turning point for gold - monetary gold to be more specific - when the Swiss National Pension Fund switched out of synthetic gold derivatives into physical gold. Monetary gold is defined as 'physical gold held in their own vaults or in trust.' The Swiss decision complied with the new banking standards regarding capital adequacy as it relates to solvency and viability....Lessons learned from the last liquidity crisis, when Lehman Brothers nearly caused a global financial meltdown, forced a rethink in how assets held on an institution's balance sheet are to be valued. Counter-party risk became extremely important again...The need for liquidity was a key change in the creation of the new standards, and it shone a spotlight on an asset that had largely been ignored for this purpose - physical gold....A point to consider here is that gold is not traded at the commodity desks of large banks. It is traded at the currency desks....Central banks and large institutions will increasingly turn to monetary gold in the coming months and years. They will seek to add the quality that only monetary gold provides. Capital flows into monetary gold will reflect the need for an asset that is liquid, tested and trusted. Gold's re-monetization is now officially a matter of global monetary policy."

amaras law Yes, We Are In Another Tech Bubble -Real Investment Advice
"Technology has touched our lives in so many ways, and especially so for investors. Not only has technology provided ever-better tools by which to research and monitor investments, but tech stocks have also provided outsized opportunities to grow portfolios..Just as glorious as tech can be on the way up, however, it can be absolutely crushing on the way down....The latest fright came from US technology giants Amazon and Alphabet after their revenue misses last week. Both are highly successful companies but the immediate market reaction to their results suggested how wary investors are of any sign that their growth trajectories might be flattening....The technologist and futurist, Roy Amara, captured the essence of that route with a fairly simple statement: 'We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.' Amara’s law/ the hype cycle is illustrated in this graph....Amara's law describes the dotcom boom and bust of the late 1990s and early 2000s to a tee....In sum, tech stocks create unique opportunities and risks for investors. Due to the prominent role of inflated expectations in so many technology investments, however, tech also poses special challenges for long term investors....The only sensible course is to be wary of the initial hype but wary too of the later scepticism."

Paul Tudor Jones says we're in a global debt bubble -CNBC
"Billionaire investor Paul Tudor Jones said Thursday that the world has loaded on too much debt which could bring trouble across asset classes. 'From a 50,000-feet viewpoint, we're probably in a global debt bubble,' Jones said at the Greenwich Economic Forum in Connecticut. 'Global debt to GDP is at an all-time high.'....Jones is famous for making big macro calls. One of his biggest predictions came when he correctly called the 1987 crash. His hedge fund, Tudor Investment, reportedly manages $7 billion in assets....Global debt hit a record high earlier in 2018, reaching $247 trillion. 'I think this time it's going to be corporate credit and I think the breakdowns are something that we have to pay attention to in the last day or two,' he said. 'And they're really scary because, one thing about this credit bubble [is] we've had liquidity absolutely dry up in so many markets.'....'Zero rates and negative rates encourage excess lending. That's of course why we're in such a perilous time,' he said adding stocks are probably in the 70th percentile of overvaluation."

‘I Was Hoping to Be Retired’: The Cost of Supporting Parents and Adult Children -Wall Street Journal
"There is a growing number of baby boomers who find themselves caring for both their elderly parents and their adult children, rather than kicking back at retirement age. They face the strain of constant caregiving and derailed dreams, as well as added expenses. It’s one more reason why many Americans are entering their retirement years as unprepared financially as any generation in years. A 2014 study by the Pew Research Center found 52% of U.S. residents in their 60s - 17.4 million people - are financially supporting either a parent or an adult child, up from 45% in 2005. Among them, about 1.2 million support both a parent and a child, more than double the number a decade earlier. The squeeze is coming from both ends. With lifespans growing longer, the number of 60-somethings with living parents has more than doubled since 1998, to about 10 million, according to an Urban Institute analysis of University of Michigan data, and they are increasingly expensive to care for. At the same time, many boomers are helping their children deal with career or health problems, or are sharing the heavy burden of student loans....More than a third of people in their 60s who are caring for parents reported a 'moderate-to-high level of financial strain' as a result, a survey by the National Alliance for Caregiving and AARP found. "You have to finally get to the attitude that whatever will be will be. You don’t abandon family because something’s inconvenient," said Barb Strickert, who cares for her 83-year-old mother and 34-year-old daughter."

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11.15.18 - Here’s What’s Really Troubling the Market

Gold last traded at $1,215 an ounce. Silver at $14.26 an ounce.

NEWS SUMMARY: Precious metal prices rose Thursday on safe-haven buying despite a firmer dollar. U.S. stocks traded mixed as J.P. Morgan led banks higher, while declines in Walmart and Amazon added to losses in consumer discretionary stocks.

Apple falls into bear market territory -CNBC
"Shares of Apple, a bellwether for the technology sector, dipped into a bear market on Wednesday as the decline from its recent all-time high briefly totaled more than 20 percent. Apple, which fell more than 2.5 percent Wednesday, closed at $186.80 per share. The shares finished 19.99 percent off their record high of $233.47, clinched on Oct. 3; Apple's value has dropped to about $886 billion from $1.13 trillion at those October highs. Investors have grown concerned that the company will suffer declines in iPhone unit sales over the next couple of years. Apple began the month by reporting that iPhone shipments missed Wall Street expectations for the quarter and said that it will no longer report how many iPhones it sells...Daniel Ives, analyst at Wedbush Securities, told CNBC on Wednesday, 'As there's less transparency in the story, investors have feared that Apple's trying to hide decelerating unit growth. When you see general nervousness across the tech space, combined with expectations that Apple was going to carry the weight of the FANG names ... it's kind of been a perfect storm."....Analysts at both Guggenheim Partners and UBS on Wednesday cut their price forecasts for Apple shares and blamed lower phone sales expectations for a dimmer outlook."

apple Apple's fall is just a symptom - here's what's really troubling the market -Moneyweek
"Markets are rattled again. This time, fear has coalesced around smartphone giant Apple. The world's first trillion-dollar company is no longer a trillion-dollar company, and yesterday it fell even further from regaining its crown....Apple keeps selling more expensive versions of the iPhone. So sales might be flat, but revenues keep going up....The problem is that the tone of the market has changed. Things it would have brushed off in the recent past are now bothering it. Apple is not the only one. Goldman Sachs, for example, had a terrible day yesterday, falling by 7.5%....Investors are now so nervous that they are paying attention to any news that is less than perfect. You can point to all sorts of bad news, but what it fundamentally comes down to is that central banks globally are tightening up, and the Federal Reserve is in the lead, which makes things even worse, because it means a stronger dollar....I reckon it's going to take some serious good news - or at least a hint of a pause from the Fed - to pull the market decisively out of this particular glum mood."

Gold prices rise, shake off pressure from a stronger dollar as stock market slips -Marketwatch
"Gold prices inched higher on Thursday, shaking off pressure from a stronger dollar to hold on to a week-to-date gain as U.S. and European equities declined. 'Gold appears to have rejected the $1,200 level, as it probed below there on Tuesday and Wednesday but managed to close back above it each of those days,' analysts at Zaner Precious Metals said in a daily note. 'The rate-hike theme may have played itself out.'....The dollar strengthened against the pound as Brexit uncertainty boiled up anew as more senior members of U.K. Prime Minister Theresa May’s cabinet resigned, signaling more turmoil and ahead....Declines in benchmark U.S. and European stock indexes week to date have also helped to boost the precious metal’s investment appeal."

The looming threat to Trump's booming economy -Politico
"President Donald Trump faces a growing list of economic problems that could irritate him even more next year. Chief among them is a withdrawal from the economy's sugar high. Fiscal stimulus from the GOP tax cuts is likely to start running out. The Federal Reserve is expected to keep bumping up interest rates. And few analysts expect a divided Congress - facing soaring deficits and with its eyes on 2020 - to join hands and pass a big infrastructure package or sweeping middle-class tax cuts to keep the fiscal juice flowing. The collection of all these factors, coupled with jittery investors already worried about trade wars and a global slowdown, could deny Trump the kind of big economic growth numbers he loves to celebrate....The decline in fiscal stimulus will come as the Fed, much to Trump's displeasure, is likely to keep raising interest rates in 2019. The Fed is expected to hike rates again next month and several more times next year....Concern over waning stimulus and rising rates has some of Trump's advisers, including Kudlow, scrambling to avoid a round of auto tariffs on Europe and a trade war with China next year. Those concerns helped turn October into the worst month for the stock market since 2011."

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11.14.18 - Gold: ‘Best House in Bad Neighborhood’

Gold last traded at $1,210 an ounce. Silver at $14.08 an ounce.

NEWS SUMMARY: Precious metal prices steadied Wednesday on a flat dollar. U.S. stocks traded lower as shares of Apple rolled over and a decline in bank shares pressured the broader market.

In a chaotic 2019, gold will be the 'best house in bad neighborhood' -Marketwatch
"Are greater risks stacking up for investors in 2019?....'Equities appear to be in no-man's-land,' says Sean Darby, Jefferies' chief global equity strategist, who writes that Jerome Powell and co.’s intentions is the big thing keeping his clients up at night. And they aren't far off with those worries, according to our call of the day, which predicts 2019 will be a doozy for investors and advises they seek shelter in a much-neglected, glittering port. 'Being long gold has been a tough investment since 2012, and so often, when we see the yellow metal gaining traction, the [U.S. dollar] regains its mojo, and we see the inevitable reversal,' writes Chris Weston, head of research at Pepperstone Group. 'However, emerging warning signs can be seen that suggest 2019 could be the year where gold bulls finally get their day in the sun.' He predicts a 'capital preservation trade' will grip the world in 2019, reviving currency wars, which will boost gold’s safe-haven allure. From there, 'risk aversion will take hold, with a rampant flattening of the U.S. yield curve and a [dollar] flight will be in play.'"

gold Ray Dalio’s Faith in Gold Is Unshaken -Bloomberg
"Not even gold's second quarterly straight decline was enough to shake billionaire hedge-fund manager Ray Dalio's confidence in gold. Dalio's Bridgewater Associates maintained its holdings in SPDR Gold Shares, the largest bullion-backed ETF, at 3.9 million shares, and its stake in iShares Gold Trust, the second-largest, at 11.3 million shares in the third quarter, according to a regulatory filing Tuesday. Dalio recommends gold as a hedge against rising political risk. The hedge fund also added to its holdings in Barrick Gold Corp., Franco-Nevada Corp., Newmont Mining Corp. and Kinross Gold Corp. in the third quarter."

Recent Data Suggest What Could Be the Last Nail in This Bull’s Coffin -Mauldin Economics
"All good things come to an end, even economic growth cycles. The present one is getting long in the tooth...There's no doubt - none, zero, zip - this will happen. The main question is when....A new Bank for International Settlements study examined a database of 32,000 listed companies in 14 advanced economies to identify 'zombie' businesses...Looking only at US listed companies, about 16% qualify as zombies. So, we are actually more zombie-friendly than our average global peers....Worse, once you become a zombie company, you'll likely remain one....Keeping zombies alive hurts healthy companies....Many (possibly most) of these zombie companies should fail. And they will - either suddenly in a crisis, or in slow motion....That, my friends, is how recessions begin. If we're lucky, it will occur gradually and give us time to adapt. But more likely, it will spark another crisis given high leverage and interconnected markets. Not long before the last crisis, Ben Bernanke assured us the subprime 'problem' was contained. It reminds me of the old Hemingway line, 'How does one go bankrupt?' The answer: 'Slowly, and then all at once.'"

Midterms Signal It's Not the Economy, Stupid! -Samuelson/Real Clear Markets
"One lesson of the midterm elections is that economic growth is losing its power to unite the country and to reduce explosive conflicts over race, religion, ethnicity, immigrant status and sexuality. This is unfamiliar. Economic progress has been a routine part of our election narratives. The presumption is that a strong economy favors the incumbent party and a weak economy does the opposite....In a new book, 'Identity Crisis: The 2016 Presidential Campaign and the Battle for the Meaning of America,' political scientists John Sides of George Washington University, Michael Tesler of the University of California, Irvine, and Lynn Vavreck of the University of California, Los Angeles, argue that the last presidential campaign was a clash of identities....Political scientists Alan Abramowitz and Steven Webster of Emory University have coined the useful term 'negative partisanship,' by which they seem to mean that many Americans are more fearful of what the other party might do rather than enacting their own agenda....Of course, the economy hasn't permanently disappeared from political life. Given another recession (which, at some point, is inevitable) or financial crisis, its role would undoubtedly rebound. But meanwhile, it takes a back seat to today's hateful partisanship. One purpose of politics is to conciliate and to cooperate. On that score, we are in a bad place."

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