Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
Pretty please with sugar on top, let the markets correct
Because this week I did the very thing that exposes my dark side by shorting leveraged mid-caps (MIDU) and this morning got long a VIX vehicle (VIXY) while it was still negative. Before that I shorted the Euro (EUO) and longed the USD (UUP), which are sort of the same thing, and raised a lot of cash. When I have anti-market or bear positions and the markets get a kick save I get disturbed. It’s a psychological vulnerability I have.
I’d rather do this the easy way instead of the usual way bearish positioning goes. I will not make money if the market crashes, but I’ll lose a lot less of it as the portfolios are constructed right now. From here I have the option to go back to bull boy or increase bearish positioning, pending setups and indicators.
So… I am ready for it. I was out for the last 1.5 hours of the day and the last thing I wanted to see when I returned was the market up and that is for two main reasons:
US stock market breadth is fading
The US stock market has bad breadth as participation thins out markedly. Below are a few examples.
Equal weight SPX is fading headline SPX per this chart which we feature occasionally in NFTRH but update the status of most weeks.
In the midst of work uncovering a target for the US dollar that will surprise many if it comes about, of taking a hard look at the messages of long-term Treasury yields and the yield curve, defining potential macro outcomes (inflation, Goldilocks or deflation) based on these indications and planning strategy accordingly, NFTRH 662 got a little out there with a discussion of the mindset that is behind the name of the Notes From the Rabbit Hole service.
The mention of John Hussman (I could also have put the estimable Jeff Snider or the Robert Prechter of yore in this piece) is not meant to insult. It is meant to simply state that a fiduciary manager like him, honestly following his work, is not geared to make significant gains during high risk market phases.
Gold miners require a unique macro-economic backdrop
When gold stock bulls complain about a “smack down”, a “hit” or a “smash” against the poor gold stock sector what they should be thinking about is what a relatively small market the gold stock universe is compared to the multitude of galaxies populated by cyclical and risk on stocks and commodities and the massive bond market. The gold stock sector’s noise to trading volume ratio must be far and away the biggest bull market on the planet (I know because I am part of it :-)).
And once in a while the sector actually warrants all that noise. Like in 2001 when markets were beginning a bear phase and economies were faltering. Like in Q4, 2008 when gold stocks were crashing to unwind previous inflationary excesses, leading stocks and commodities into a terrible crash and rebounding first. Like in March of 2020 when the miners crashed and ‘V’ bottomed to lead what is to this day an ongoing economic recovery born of the inflation that gold and gold stocks first sniffed out.
Gold is okay, but not yet unique
There are times when gold is an okay inflation hedge, while under-performing the likes of industrial metals, oil/energy, materials, etc. During those times, if you’re doggedly precious metals focused you should consider silver, which, as a hybrid precious metal/industrial commodity, has more pro-cyclical inflation utility than gold.
But as I have argued for much of the last year, if the inflated situation is working toward cyclical progress (as it is currently) then there is a world full of trades and investments out there to choose from, many of which are trouncing gold (which, as I have belabored for the better part of 2 decades now, is not about price but instead, value) in the inflated price casino.
The latest ISM Report on Business shows one negative among the important areas as employment declined. Now, before we get too excited about that gold-positive reading let’s also realize that manufacturing employment is still growing, new orders are briskly increasing, backlogs are up and customer inventories are down. In short, manufacturing continues to boom.