Stock markets turning around, while PM dives
Posted by Frugal on April 25th, 2008
As I have said back in March, I believe stock markets probably have temporarily turned the corner. However, precious metals are “fulfilling” their anti-market function, uncorrelating to the rise of markets, and falling.
I’m tempted to say that HUI may bottom at around 370 to 400 level, which could be reached today. But even if it bottoms here, it will very likely touch this level again later in June (if not in May) I believe. Currently I don’t plan to buy until my model generates the next buy signal. Indeed, my model generated a sell signal when GDX was 48 about 2 or 3 days ago, except that I wasn’t watching (duh!). It’s an amazing trading model, but I need to keep track of it on a daily basis AND intra-day basis, since just a single day delay will make ALL the differences in accumulating gains and preventing losses. It does make intuitive sense, since the faster you act on information, the better positioned you should be. And changing my model from acting at the closing to acting at the next day after closing will make all the differences in the world.
No questions that I’ve lost a lot in my own investment this year. Again, my portfolio allocation has come to “save” me. With a previously terrible showing in my company holdings, it has come back greatly and salvaged my bets in PM (or anti-bets against general stock markets). Certainly, the plan was for “hedging” through anti-correlation of the assets. The only problem is that I’m still net down overall, since my company stock peaked. Assuming that the stock market rally still have legs, I’ve got some room to recover hopefully.
Now, I would only wish that I got out always at the peak of the two uncorrelated assets that I hold at the different time. That is probably the hardest thing to do ever, if it is even possible, since performing such feat itself is staying away from the disciplines of asset allocation.
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May 2nd, 2008 at 1:59 am
Dear Frugal,
One thing I cannot comprehend is that we are witnessing a recession or we are, in fact, in a recession but the equity markets still rally on poor corporate earnings,poor personal consumption expenditure, poor consumer sentiment as well as the housing bubble as well as the credit bubble.
is it due to speculation or that the additional liquidity injected into the financial markets by the Fed has found its way to the equity market so that the excess liquidity fresh from the printing money has been doing the magic ? or that the loose monetary policy, enhances fiscal stimulus as well as the additional rate cut by the Fed of another 25 bps have converged to become the magic touch ? In this investment climate when the dollar continues to tumble whilst the prices for food, energy have all shot up as well as other commodity prices so that the impact of inflation has become very massive that we may not only witnessing recession but probably stagflation instead and even with the dollar as the world’s reserve currency could not save the U.S. from a recession that how could we have a revitalied stock market?
Are we in for another South Sea Bubble? or going through bubble cycle? and very likely Ben Bernanke is repeating the same old game of Alan Greenspan by keeping the Fed Funds rate to the ground ( 1% ) so as to jet up the economy irrespective of hyperinflation or stagflation?
I personally believe we may be in for a big storm.