Economic Outlook
While today’s headline jobs print was somewhat disappointing, with the Establishment Survey missing the expected print of 173K, rising by 161K, it was offset by upward revisions to previous months. But while the quantitative headline aspect is open to interpretation, the qualitative component of the October jobs print was – just like in the case of September – all too clear: it was ugly, again….continue reading HERE
Today’s videos and charts (double click to enlarge):
Gold & Silver Bullion Video Analysis
Bonds, Currency, and Stock Markets Video Analysis
Precious Metal ETFs Video Analysis
SF60 Key Charts Video Analysis
SF Juniors Key Charts Video Analysis
SF Trader Time Key Charts Video Analysis
Thanks,
Morris
website: www.superforcesignals.com
Despite the popularity of doing so, subtracting the percentage change in the CPI or some other price index from the current 
nominal interest rate will not result in a realistic or reasonable estimate of the current ‘real’ interest rate.
The method of real interest rate calculation summarised above is wrong in two different ways, each of which is sufficient to render the result invalid. The first and most obvious way it is wrong is that the CPI does not reflect the change in the purchasing power of money. This is not just because it has been re-jigged over the decades as part of an effort to minimise its value, but also because the entire concept of a “general price level” is nonsense. There is no such thing as a general price level because disparate items cannot be averaged. To explain by way of a simple example, averaging the prices of a car, a potato and a visit to the dentist makes no more sense than averaging the goods/services themselves. Clearly, a car, a potato and a visit to the dentist cannot be averaged.
However, even if, for the sake of argument, we assume that the CPI makes sense at a conceptual level and is a satisfactory estimate of the change in the purchasing power of money, we still couldn’t use it to determine the current real interest rate. The reason is that the real rate of return obtained from an interest-producing investment has nothing to do with the historical change in the purchasing power of money and everything to do with the amount by which the purchasing power of money will change in the future. For example, if you buy a 1-year bond today your real return will be determined by how much the purchasing power of money changes over the next 12 months; not by how much it changed over the previous 12 months.
So, when you see a chart showing the nominal interest rate minus the 12-month percentage change in the CPI, what you are looking at is NOT a chart of the real interest rate.
How, then, should the real interest rate be calculated and charted?
The hard reality is that there are some things worth measuring that simply can’t be measured. The real interest rate falls into this category. By taking into account money-supply growth and population growth and by making a guess regarding productivity growth it is possible to come up with a realistic, albeit very rough, estimate of how the purchasing power of money shifted over a long historical period, but it will never be possible to calculate the current real interest rate.
The best we can do is use the financial market’s average forecast regarding the future CPI in our calculations. In other words, the best we can do is use the TIPS (Treasury Inflation Protected Security) yield as a proxy for the real interest rate, since the TIPS yield is effectively the nominal yield minus the expected CPI. A chart of the 5-year TIPS yield is displayed below and discussed in the next section (in relation to gold).
The TIPS yield is not an accurate reflection of the real interest rate because it is based on the CPI and because the market’s expectations are sometimes wrong, but for practical speculation purposes it seems to be good enough.
…related:
How “Risk-Free” Bonds Will Trigger Bloodletting in Bonds, Stocks, other Assets
…for completing the EU trade negotiations. Interesting to note that there has not been much of a backlash from anti-free trade groups. Just the same we still don’t have free trade in Canada, just wait until you hear how much tariffs cost the Canadian economy each year. Hint, its a big number.
..also from Michael: Quote of the Week – Great Insight From Isaac Asimov.
Dear MoneyTalks Listener:
Last month, you got an invite from me to the recent Subscribers Investment Summit. I know some of you attended. I hope you found the event to be both enjoyable and informative. SIS is one of two specialized conferenced that I co-founded. The other, more “hard rock” focused event, is the Metals Investor Forum. It shares many characteristics with the Subscriber Summit. That’s no accident. I had very firm ideas about what events like this should look like and how they should be operated. Those ideas are reflected in the way the Metals Investor Forum is organized. I chose a wider list of newsletter editors to give you a broader analysis of different aspects of the resource and metals market. All the editors share one important characteristic, however. All of them, myself included, have subscriber supported newsletters. They are not advertorials They are paid by their subscribers, not the companies they talk about in their publications.
All the editors have the right to invite companies to present their stories at the Forum. Obviously, they want the companies chosen to reflect well on their publication and offer attendees some of their best ideas. The agenda at the Metals Investor Forum severely limits the number of companies that can attend. Those companies would not be a “first come, first served” list as you see at most events like this. It is a curated list, selected by the editors of the paid subscription newsletters who would also present at the conference. A company can’t present at the Subscriber Investment Summit unless it’s under active coverage by one of the paid subscription newsletters that host the event and the company must be invited by the editor. That’s the only way they get in.
What’s the attraction for the companies that present and sponsor? Simple. The companies presenting know that the audience is invite only too. The primary audience is paid subscribers to the newsletters, plus analysts, brokers and other invited parties. Companies know that the audience is there to learn and interact with them and that they are interested and active investors in the space. Companies find themselves interacting with current shareholders and attracting new ones. Management groups that have attended one of my events before already know this. We turn away companies at every event because the demand exceeds available space.
The attendee list fills up too. We had to close the RSVP list before the last Metal Investors Forum in May. I think we’ll have to do that again. You can’t wander in off the street. You can’t get in unless you have an RSVP for the event. And you can’t RSVP without an invite.
Here’s yours.
As you probably know, I’m a regular contributor to the Inside Edge premium service of Money Talks. I’ll be speaking at Mike Campbell’s World Outlook conference in February. As Michael kind enough to invite me I’m returning the favor by inviting you, as “a friend of Mike’s”, to the next Metals Investor Forum.
Meet face-to-face with Eric Coffin (HRA Advisories), Joe Mazumdar (Exploration Insights), Gwen Preston (Resource Maven), John Kaiser (Kaiserresearch.com), Jay Taylor (Jay Taylor’s Gold, Energy and Tech Stocks) and Jordan Roy-Byrne (TheDailyGold.com) as they present you with their market outlooks and strategies and introduce you to some of their favorite companies for the current market environment. It’s all at the Metal Investors Forum on November 12th and 13th at the Rosewood Hotel Georgia in Vancouver.
Commodity markets SOARED from January to August 2016. The resource sector has been going through a mild correction since early September. That looks like its bottoming now. Many successful explorers and developers are trading at a discount just as they begin delivering news from a busy exploration year. This is a real opportunity for savvy investors that know that timing can be everything in the market. The editors presenting at the Metals Investor Forum have selected companies they feel have the best chance to reward traders over the next few months. Traders that were wise enough to take the time to come and meet the management teams face to face and hear their stories.
Meet the CEO’s of hand-picked junior gold and base metals explorers and developers hand-picked by our editors. The conference takes place in a four star venue that was intentionally chosen to limit the audience size. This event always sells out. Our audience consists of well-informed retail investors, along with select brokers and fund managers.
That makes it a valuable networking day for our entire audience.
We want you to hear from companies that are carrying out some of the most exciting and potentially rewarding exploration in the sector. Companies with some of the best assets and potential out there across the resource space. This new bull market has already produced some spectacular gains – and Metals Investor Forum attendees heard about many of them early.
As we head into the winter in a strengthening bull market – the opportunities and profits that you potentially could be exposed to are phenomenal. DON’T MISS OUT!
This year’s Vancouver conference is Saturday November 12th and Sunday November 13th in the Spanish Ballroom and Ballroom Promenade at the Rosewood Hotel Georgia. The May Metals Investor Forum was many attendees first introduction to the entirely rebuilt Hotel Georgia and this beautiful venue. The feedback from attendees of the May show was fantastic. Many thought it was the best conference of its type in years, some said “ever”. Attendees got to listen to great (but short!) presentations in comfortable surroundings, interspersed with long breaks with catered coffee, lunch and dessert that allowed them to spend one-on-one time with management teams and other attendees. The November event should be even better.
Please join us for this exclusive event. Similar events cost hundreds of dollars for privileged access and networking—but this event is FREE. There are only a limited number of seats available–so don’t delay as we “sell out” every event.
Join us at this exclusive event:
When: Saturday, November 12th and Sunday November 13th 2016 from 9am – 5pm, with a cocktail reception to follow.
Where: Rosewood Hotel Georgia, downtown Vancouver
Tickets are very limited. Most of the seats are spoken for already but, as a Money Talks listener you still have a chance to get yours. If you act quickly. It’s free to attend but you MUST pre-register. Register today to reserve your FREE seat. ( And, please, only register if you do intend on showing up – this event sells out and we want to keep seats open for attendees)
Simply click on the link below to go directly to the registration page. You can also get more information on the event at www.metalsinvestorforum.com
RSVP Link: CLICK HERE or paste this url in your browser – https://metalsinvestorforum-nov2016.eventbrite.com/?aff=MoneyTalks
Eric Coffin
Editor. HRA Advisories
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I know Mike is a very solid investor and respect his opinions very much. So if he says pay attention to this or that - I will.
~ Dale G.
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I've started managing my own investments so view Michael's site as a one-stop shop from which to get information and perspectives.
~ Dave E.
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Michael offers easy reading, honest, common sense information that anyone can use in a practical manner.
~ der_al.
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A sane voice in a scrambled investment world.
~ Ed R.
Inside Edge Pro Contributors
Greg Weldon
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Martin Straith
Patrick Ceresna
Mark Leibovit
James Thorne
Victor Adair