| | | Fred Hickey, frequent cited expert on Bloomberg News and Barron's Roundtable, has been publishing his author extremely well-respected investment newsletter, The High-Tech Strategist, for 31 years. And he is more worried about the state of the financial markets today than he's ever been.
While his primary focus has been on analyzing Tech stocks, over the years he has expanded into macro trend analysis as the central banks starting increasingly intervening in world markets and distorting the price of money.
He now finds asset prices dangerously overvalued (within Tech and without) and worries -- as we do -- about the risk of a major market correction and possible currency crises.
Ironically, this lifelong expert in "all things technology" has concluded that gold (the "barbaric relic") is the sanest asset to put one's capital in these days -- both due to its safety factor and it's current level of undervaluation. He expects the precious metals to fare well during the downward market volatility he foresees, and he is now tracking the mining stocks closely as he predicts they will experience dramatic appreciation from here.
What’s happening to gold mining stocks right now is an amazing story. They're extremely undervalued. Just this year, we’ve seen the price of gold hold up during this market decline, yet the miners have been getting slaughtered.
One of the things we look at is the HUI-to-gold ratio, or the gold miner index to gold. That is down to 0.133. Now, that's lower than it was at the 20-year bear market bottom in 2000. It was slightly lower than that at the end of 2015, but we’re talking about near record lows here when the price of gold is up. It looks to me that gold is in a bull market. The charts look that way. It looks that we have higher highs and higher lows, and we’ve gone from $1,050 to $1,330. I think once we go over $1365, which is the old high hit in 2016, then more people will come on board and we’re likely to slingshot higher from there. But the miners have gone in the opposite direction.
I think there’s some reasons for that. One of which is that we have a huge short position built up in the GDX ETF. In the technology world, the Facebooks, and Amazons, and Netflixes, and Googles -- the FANG stocks -- they get propelled higher as the money pours into the ETFs. Well, it works the opposite way in the gold miner area where money has poured out.
In March of 2017, we had 510 million shares outstanding on the GDX. Just a week ago, it was 310 million, or a 40% decline. Now, a lot of that was short interest. We went up to 55 million shorts of a now-310 million share total. 20% of the total shares outstanding in the GDX were short. Now, that’s like Tesla levels -- one of the most favorite shorts on Wall Street. And why would that ever be in a market where gold looks to be in a new bull market? Gold certainly is up more than 20%. And the charts all look like it’s in a new bull market. How could anyone put out this kind of short interest?
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