clip & paste from my version of the investment committee letter just released, and i clip and paste, quote
on gold, we make some observations and we need to think more:
(i) Gold got clobbered; and we avoided part of the clobbering; the important part that enables us to still be “in the game”;
(ii) The popular explanations, whether main stream media and banks or internet blogs, may or may not explain the gold clobbering (e.g. impending Cyprus sales, likely Italian unload, USA economic recovery to trigger rising interest rate and tightening liquidity, margin calls, China slowdown to limit China gold buys, whatever) but cannot simultaneously explain the clobbering of silver, platinum, and palladium without invoking the “… the rest of the precious metals complex fell in sympathy …”;
(iii) We have a fear, and that being, the economically sensitive and industrially useful silver, platinum and palladium got clobbered along with ‘useless-but-monetary’ gold not because of sympathy or margin call, and not because of any of the popular reasons we read about, but because what gold may be telling us about the forward direction of everything else, in line w/ 2008 Great Financial Crisis. If so, we must be very careful regarding everything else – in other words, gold is simply acting as it is supposed to, as a leading indicator for everything else; and
(iv) At a very fundamental level we keep in mind several self-evident truths that makes us careful
a. Global ZIRP has been the norm for the past decade;
b. Government intervention, both reactive and preemptive, have been common;
c. Wandering pools of funds move from asset classes to other asset classes, from securities groups to other securities groups, and from geographies to other geographies, all the while paying reflexive attention to risk-on/risk-off;
d. Very few entities and nations are making long term investments and w/o long term investments, the quality of employment and merit of wages are suspect;
e. True economic recovery as opposed to liquidity-infused peppiness seem either absent or not enduring;
f. Each successive tranche of QE sequenced around the planet has had seemingly less effect over shorter periods of time;
g. Every successive wobble in the market of any geography at decreasing depth seem to generate immediate calls for the next tranche of QE of ever larger size; and
h. Under the circumstances, optically, volatility in sub-sectors (i.e. Apple, Japan, gold, etc) has been dangerous in frequency and amplitude, apparent market rationality has been and is either less predictable or unpredictable or at times ‘counter-predictable’.
i. In other words, all makes perfect sense if we are tracking “Fiat Money Inflation in France” script mises.org
We are engaged w/ a game where few wins, fewer still allowed to keep winnings, unclear rules are changed, always against the most, in the worst possible ways and side-ways, at the least convenient times, and there are no longer any null-positions. Ready or not, full-play on count of 3, 2, ...
First blood. Player 4 is eliminated. Remaining players, play on until your turn to die. Leveraged players first.
It’s all macro. It has been all macro since March 2009 and will be for some time in the future. Don’t tell me about P/E expansion because of this or that bottom up analysis or that the “real” economy is doing well.
Investment Committee
THEN ...
... and NOW
 |
