Energy & Commodities
Commodities have underperformed in the past year as the US economy gained traction and the need for inflationary and stimulative measures abated, though only temporarily. At the same time, Commodities had embarked on a tremendous advance and a pullback was to be expected. Interestingly, the past can tell us something about the future path of Commodities. The resource sector has been following a very similar path as the equity market did from 1987-1991. This comparison is one of several reasons why we expect commodities will make a major low within the next few months.
In the chart below we plot the S&P 500 and the Nasdaq with the Nasdaq/S&P ratio in the middle. Both markets made marginal highs several years after the 1987 crash and both markets corrected significantly in 1990. The Nasdaq’s correction was much deeper but it soon would begin a period of strong outperformance that lasted for nine years.
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I recently had a chance to speak at a conference where Dr. Ian Bremmer spoke after me. I was very impressed with his thought process and asked him to give me an outline of his speech to share with you for this week’s Outside the Box. It’s a shorter version of his powerhouse book, Every Nation for Itself: Winners and Losers in a G-Zero World. I highly recommend it.
And what, you’re asking, is a “G-Zero world”? In a word, it’s a leaderless world. A world in which, as Bremmer says, “Not so long ago, America, Western Europe and Japan were the world’s powerhouses. Today, they’re struggling to recover their dynamism…. But nor are rising powers like China, India, Brazil, Turkey, the Gulf Arabs and others ready to take up the slack…. If not the West, the rest, or the institutions where they come together, who will lead? The answer is, no one.”
And that means the world’s big problems won’t get addressed as effectively as they should, as long as the leadership vacuum persists. Talk about Muddling Through!
This book by Bremmer is going to make a difference, and I’m not the only one who thinks so –
“Ian Bremmer combines shrewd analysis with colorful storytelling to reveal the risks and opportunities in a world without leadership. This is a fascinating and important book.” –FAREED ZAKARIA
“Every Nation for Itself is a provocative and important book about what comes next. Ian Bremmer has again turned conventional wisdom on its head.” –NOURIEL ROUBINI
Tonight I am in Chicago, where I spoke at the CFA conference this morning. It went well. I will try to get a link for you later. It hasn’t been all work, either. David Rosenberg, Barry Ritholtz, and I all had dinner gigs, but we met up at the bar and just hung out for about three hours. Got to love O’Doul’s NA beer. Not quite the same as a good chardonnay but healthier for me.
I will hit the send button as I have to get up for a breakfast meeting with Sam Zell. We have never met and I am looking forward to it. He is quite the legend. I will give you an update on the conference next weekend. The reviews are coming in quite strong. It was interesting to see the European elections after the analysis we were given. There is so much that seems up in the air. You can almost feel the changes coming. I feel like the kid in the back of the car on a long road trip: “Are we there yet?”
Your holding out for a world that works analyst,
John Mauldin, Editor
Outside the BoxJohnMauldin@2000wave.com
Every Nation for Itself: Winners and Losers in a G-Zero World
Ian Bremmer
One beautiful fall evening in October 2011, I gave a speech on international politics to a group of Canadian business executives in Napa Valley, California. As part of the introduction, I included a few thoughts on the G20, the forum in which 19 countries plus the European Union bargain over solutions to pressing international problems. I made my case for why I believe the G20 is a dysfunctional institution that will create as many problems as it solves. The speech complete, I joined members of the audience for dinner on a beautiful terrace overlooking a vineyard. Our host, spotting an opportunity for lively conversation, seated me next to a distinguished looking gentleman I’d never met—former Canadian Prime Minister Paul Martin. This is the man who created the G20.
As Canada’s finance minister (1993-2002), then prime minister (2003-2006), Martin warned that Western dominance of international financial institutions couldn’t last and that the world needed a new bargaining table, one that welcomed leading emerging powers as full partners. Martin’s argument fell on deaf ears in America, Europe, and Japan—until the 2008 financial crisis made his point for him.
To Read More CLICK HERE
Eric Coffin Eric Coffin, editor and publisher of the Hard Rock Analyst newsletter, has never heard so much negativity from investors. “Everybody thinks the world is coming to an end,” he tells The Gold Report. As a contrarian, all the doom and gloom tells him the market is about to pull out of its tailspin. In this exclusive interview, Coffin talks about the hard-hit juniors in the Yukon and why it’s an area play he still believes in.
Companies Mentioned: ATAC Resources Ltd. – Bear Creek Mining Corp. – Columbus Gold Corp. – Ethos Gold Corp. – Kaminak Gold Corp. – Majescor Resources Inc. – Precipitate Gold Corp. – Prosperity Goldfields Corp. – Riverstone Resources Inc. – Silver Range Resources Ltd. – Smash Minerals Corp. – Strategic Metals Ltd.
The Gold Report: Eric, the gold bears recently outnumbered the gold bulls in Bloomberg’s weekly Gold Bull/Gold Bear Sentiment Survey for the fourth time in a year. Are you a bull or a bear?
Eric Coffin: I think the gold price is going to end the year higher, so I guess that makes me bullish, but I think of myself as agnostic.
There needs to be a return of calm to Europe for the gold price to move much higher. The currency pair trade between the euro and the dollar is going to be a big determinant to the gold price. There’s been more noise about the EU providing stimulus funds to offset all the government budget cuts in Europe. All of those countries have to deal with their debt loads. But it’s not realistic to think that they can cut their deficit and 3% off their gross domestic product year after year and realistically get any net growth.
The other side of that equation is that the U.S. has slowed down. That’ll help the gold price because a lot of goldbugs are riding on there being another round of quantitative easing. I’m not sure it’s going to happen. But as long as Federal Reserve Chairman Ben Bernanke keeps saying it might happen, that’s good enough.
TGR: Stagnant gold prices are translating to equities. Canaccord reports that “sector weakness in the gold equities over the last six years has typically ended with ‘V’-shaped corrections to the upside.” Do you believe that’s what will happen this time?
EC: I sure hope so because I’m on the buy side, not the sell side. I’m going to feel pretty dumb if it doesn’t happen. We’re still in a bull market for gold. In a secular bull market, generally speaking, coming out of a dip tends to be an impressive move.
TGR: Many Yukon junior mining companies are starting their 2012 exploration programs after completing off-season financing on buyers’ terms. What types of companies are getting financing?
To Read More CLICK HERE
This 31 Minute video below is Part I of a three part series on the current misinformation of Economc Growth between Gordon T Long (GordonTLong.com) and Ty Andros (Tedbits.com) with 26 supporting slides.
Highlights of the discussion include:
Why the presently accepted GDP measurement is ineffective in properly measuring wealth creation, national economic health and prosperity,
How the elements of Government Spending, Taxation, Stock Market changes, Export & Import trade balances and other statistical indicators are all being used to manage the perceptions of economic growth,
How Hedonics, Substitution and Imputation make GDP greater than it really is,
How the new game of “Imputation” is using notional numbers to represent growth with no money actually changing hands,
How bad data leads to bad decisions and too many bad decisions leads to fewer decision choices until the only choice is to lie,
How the current US growth rate is minimally overstated by 20%, even if you accept the illogical 1.54% Deflator for the US and the IMF’s 2.2% Global Deflator.
To Watch the Video CLICK HERE
The New York Times dredges up the open secret that no one is in the stock market anymore. Nathaniel Popper plaintively lays out the statistics and then consults a handful of sources to understand what’s going on…
Trading in the United States stock market has not only failed to recover since the 2008 financial crisis, it has continued to fall. In April, the average daily trades in American stocks on all exchanges stood at nearly half of its peak in 2008: 6.5 billion compared with 12.1 billion, according to Credit Suisse Trading Strategy.
The decline stands in marked contrast to past economic recoveries, when Americans regained their taste for stock trading within two years of economic shocks in 1987 and 2001.
Allow me to be of assistance as to why there’s no recovery in stock trading like there was after past recessions and crashes:
They sold us out. The NYSE and Nasdaq decided to go for-profit under the auspices of raising the money necessary to compete with foreign exchanges and other upstart trading pools. They needed to revamp the machinery of trading and modernize their systems. Apparently, this meant opening the back door to a host of ghouls and goblins who pay extra for the right to co-locate their servers and see the orders of the public in a speed that is somehow faster than real-time. This has enabled them to pick the pockets of mom and pop on every single transaction they make. And they do this under the guise of the dubious “liquidity” their activities are adding to the market. These thieves are the number one revenue source for the NYSE, after the snack bar, the gift shop and whatever concession they can command from the television studios that have set themselves up on the premises to capture all the inaction of the floor and its dwindling trader population. Why the exchanges couldn’t just be a public institution serving the well-being of the country I’ll never understand. They are now set up as a pimp, selling us and our orders to the most salacious and active johns they can find. This is how a high frequency trading robot based in Kansas, far from regulatory scrutiny, can drive a million “normal investors” away each month.
To Read More CLICK HERE
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