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Posts Tagged ‘Gold’

We Are All Traders Now

September 23rd, 2020 by Kurt L. Smith

Over the past couple of months, we have witnessed what it is like to be winners. Investors of stocks and bonds have watched their portfolios move higher with interest rates at or near historic lows, bond prices are unbelievable high. And the effects of high bond prices have reverberated across asset classes.

I pick on bonds because they are “fixed income”. There is only so much income a bond generates (it’s coupon amount) and for only so long (it’s maturity). So, when interest rates are near zero, the price of the bond is approximately, or near, the sum of all of its cash flows (coupons plus maturity or par amount).

A 1% ten year noncallable bond that sold at 100, would be priced at 110 if interest rates moved to 0%. At .50%, the bond would be priced at approximately 105, still a nice 5% gain from no-or-low interest rates to even lower rates.

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Time Marches On

August 7th, 2020 by Kurt L. Smith

Unfortunately, there is no finish line for investing. If there was, we could now declare stocks a winner, bonds a winner, gold a winner, real estate…well, you get the idea. But there is tomorrow to deal with, not to mention next year and years from now.

Investing is a longer period endeavor. Bond investors know this as every bond you buy reminds you with a maturity date. What will happen over the next year, or two, five or ten or more years? Bond investors confront this reality with every purchase.

Wherever you want to draw the line, financial assets have been winners. Year-to-date, last year or two, last five…they, for the most part, have been good times for you as an investor of financial assets.

All of that is in the past; investing is about the future. If investing were a race, it would be an endless one as time marches on. Decisions made can be worthwhile as well as decisions not made. Second-guessing can be debilitating and is to be avoided. That is why it is important to make sound decisions.

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Prepared?

March 5th, 2020 by Kurt L. Smith

From record high to worst week since the financial crisis in October 2008, stocks ended thirty-plus years of bull in dramatic fashion. The top bull in the better than best of recent asset pricing is taking the leadership role in the great deflate.

From a high of 29,568 on February 12 to an end of month low of 24,681, the Dow Jones Industrial Average has lost over 4,000 points with 3,600 of it in one week (source: Bloomberg). This is not your normal pull back. This is not the buy the dip (one more time!). This is the end we have been talking about since November 2017 in my letter, Top of Tops. In that letter I noted 23,500 as the all-time high turning point for stocks. The extra run since then was a bonus.

You all know I have been writing about asset prices being at the end of something. From the depths of the financial crisis in March 2009 to February 2020, it was quite a ride. A ride I believed would be over (in November 2017) but continued through Groundhog Day (after Groundhog Day) 2020.

Consequential? Unbelievably so. This isn’t even the worst part. From my point of view stock investors “haven’t lost anything” as they are still ahead of November 2017. No, the worst part is ahead of us because it involves the bond market.

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Better Than Best

January 24th, 2020 by Kurt L. Smith

Asset prices were high months ago and as stock prices continue to set records what appeared to be best is now better than best. What a great period to have been an investor!

Bond prices have been higher (and interest rates lower) but not appreciably. While prices have trended lower since their Labor Day high prices and low yields (per Bloomberg), movement so far is at the speed of a glacier.

Gold prices are also near their highest since their 2011 peak of $1921, trading at $1611 earlier this month. And then there are stocks, which appear to be in their own stratosphere. In my November letter I noted how both bonds and gold spurted about twenty percent to their peaks. I didn’t give stocks a chance for a similar nod; I was wrong.

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Bonds Rolled Over (Again)

November 18th, 2019 by Kurt L. Smith

From the front pages this summer, the story on bonds is they are no longer a story. Prices have rolled over as yields have risen and investors who bought on the price dips lately may be rethinking their commitment.

I have spent most of the last few years, as well as the last few months telling you this was the end of the run, not the beginning of a new one. The performance of the bond market over these years fits my description.

After several years of higher yields and lower bond prices, the bond market began a price correction late last year. But it was the performance of long-term treasury bonds in July and August of this year that received the out-sized attention. One of the longest treasury bonds, the 2.875% of 2049, rallied from about 100 in May, to 105 in July and 122 in August (source: Bloomberg, with prices rounded for conversation sake). Quite a move for a bond yielding less than 3%.

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Sell Bonds

September 12th, 2019 by Kurt L. Smith

The Select ApproachTM believes the bond market correction of the past nine months is now over.

Last month we talked about the giddiness of bonds and that giddiness delivered bonds onto the front pages of the major dailies. The New York Times on August 28th probably marked the high prices with this headline “While Wall St. Talks of a Recession, Bond Investors Make a Killing. You should have bought bonds. They’re going great.”

The NY Times also included a nice chart of year to date returns. “Thirty year Treasury bond +26.4%, Long-term bonds +23.5%, Investment-grade corporates +14.1% and Ten Year Treasury notes +12.6%.” Indeed, stellar returns essentially describes the bond market correction of the past nine months.

In order to reap the rewards of this year’s bond market moves, one must sell. Not your Select ApproachTM bonds, but everything else. This market move was a trade, and a short-term one at that, and now it is over. The bond market is in a long-term bear market since 2012. Prices move down (yields rise) setting the trend and in order for the market to continue to lower prices, a correction needs to occur. Ebb and flow happens but the important part is the direction of the trend for bond prices is lower.

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Correction Highs (And Lows)

July 11th, 2019 by Kurt L. Smith

For the past several months we’ve seen giddy up; now we are left only with giddy. Be it Stocks, Bonds, or even Gold, asset prices have generally had a nice 2019 bounce. To a large extent asset prices have peaked together. Unfortunately the rallies appear to be over, meaning lower prices from here.

How can that be? The news is great, prices are rallying and even the Federal Reserve appears poised to lower interest rates as yields have shriveled as US Treasury note and bond prices have jumped. The trend should be our friend and the trend is up, across the board for assets, right?

Wrong! The trend is not up. Despite nice gains for this year, assets are in the midst of finishing upward corrections. Gold, which peaked in September 2011 at $1921, bottomed in December 2015 at $1047 where it began a rally that may have recently ended at $1440 last month (all asset prices and dates per Bloomberg). While an additional advance may unfold, the next major move in my opinion is lower, to new lows rather than new highs.

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Thankfully, You Own Municipals

September 9th, 2016 by Kurt L. Smith

While interest rates may appear they will be low, perhaps forever, we are always encouraged when we look back over the past months and years and discover we’ve actually fared well. Municipals are indeed unique and that is why we can continue to scratch and claw, but most importantly make headway by investing in them.

Bonds, particularly municipal bonds have participated in a multi-month rally that was over-extended months ago. As a consequence, we believed stocks would also rally, continuing the tandem performance that has been a hallmark of the financial markets these past thirty-plus years.

Indeed the major stock averages have set many new all-time high marks this summer. Stocks may have a few more months to rally, but the bond rally may be over.  As conviction and certainty for low rates (forever) continued, the bond market appears to have made a top in price that may stand for many, many years. (more…)

Another Step Closer

March 3rd, 2016 by Kurt L. Smith

Markets go up and markets go down.  We all know this.  We should also know that we are fortunate to live in an era in which markets have trended higher for decades.  Unfortunately we now live in an age of asset bubbles with the largest bubbles of all, Stocks and Bonds, on the verge of a massive popping.

We have watched the popping of two asset bubbles over the past several years: According to Bloomberg, Precious Metals (Gold & Silver) and Oil.  Gold peaked in September 2011 at $1920 an ounce, falling 45% over the following four years to a $1046 low.  Silver almost touched $50 an ounce for the second time in its history and sold off to below $14.  Oil peaked at $147 in 2008 but sold at $107 just nineteen months ago and below $27 last month.  Markets do go up and down, but in today’s age of asset bubbles, one must be ever mindful of the tremendous downside risks that exist. (more…)

Same Old, Same Old

May 23rd, 2015 by Kurt L. Smith

Times, they may be a changin’, but it is difficult to tell by watching the bond market. New issues usually dominate bond market news and that continues to be the case. Corporate bond issuance continues on a tear while municipal bond issuance focuses on refinancings. Interest rates remain low. (more…)

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