A Classical Rebound from Oversold Extremes

Beginning on Wednesday last week, the stock market started a rebound from extreme oversold conditions that was just as volatile as the sell-off that preceded it. Such a rebound was to be expected, but unfortunately it cannot really tell us what is likely to happen next. In the meantime, the S&P 500 Index has reached a first level of resistance, so we should soon know more.

 

 

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Fundamental and Market Prices

Last week, we called for a rising gold to silver ratio. On Wednesday, this ratio hit nearly 80 before backing down a bit by the end of the week. It did not happen with a rising price of gold, rather it was a function of a falling silver price. On Wednesday, the silver price was down $1.22, or -8%. By the end of the week, it had rebounded along with the gold price.

We said we thought silver was overpriced at $15.31. Read on, for our take on $14.53. But first, let’s discuss the concept of the fundamental price.

 

gold-and-silver-bars

 

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Hurting Consumers and Workers Alike

So Donald Trump wants to keep “cheap” (foreign made) goods and services from reaching Americans! But the rub is that when barriers to trade are established, such as tariffs or quotas, folks are deprived of the chance to save and then purchase items they would like to have with the savings.

Not only is this vicious but it is counterproductive. It prevents Americans from spending their funds on goods and services at home or elsewhere.  And that impedes commerce no less so than a highway bandit does.

 

highway robberyHighway robbery in progress. Here an 18th century wig-stealing gang is setting to work (gold, silver and wigs were the most popular items targeted by highwaymen. Wigs were horrendously expensive at the time and very fashionable).

Image credit: Thomas Rowlandson

 

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A Decline in Excess of 50%

DELRAY BEACH, Florida – It’s hot in Florida. Steamy hot. Hair curls and bodies go limp. The “relief rally” continued on Thursday. All over the world, stocks gained. So did oil and commodities. The Dow was up 369 points – a 2.3% move. Chinese stocks were up by about 5%. Why?

U.S. GDP numbers for the second quarter came out higher than expected. The economy grew by an annual rate of 3.7%. And influential New York Fed chief William Dudley said the argument for a rate increase in September was “less compelling.”

 

William_C_DudleyNY Fed president William Dudley, indicating the height of the Federal Funds rate between thumb and forefinger, now and forever.

Photo via sincomillas.com

 

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The Original Non-PC Politician

Godfrey Bloom was UKIP’s party whip for a long time, and for many years served as a member of the European parliament for UKIP. Ironically, although the party has solid electoral support in the UK, it has yet to make an inroad into Westminster due to the “first past the post” electoral system. It has always had a much greater representation in Strasbourg – at an institution it would prefer to abolish.

 

Godfrey-Bloom_1850647cGodfrey Bloom: “The State is an institution of theft”

Photo credit: Frederick Florin / AFP / Getty Images

 

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Differences and Similarities

No one should attempt to treat Ayn Rand and Murray N. Rothbard as uncomplicated and rather similar defenders of the free society although they have more in common than many believe.  As just one example, neither was a hawk when it comes to deploying military power abroad.*  There is evidence, too, that both considered it imprudent for the US government to be entangled in international affairs, such as fighting dictators who were no threat to America.  Even their lack of enthusiasm for entering WW II could be seen as quite similar.

 

Ayn Rand, famed writer and founder of the Objectivist movement

Photo credit: Cornell Capa / Magnum

 

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Stripped Gears

DELRAY BEACH, Florida – “The Donald” breathed a sigh of relief yesterday. He and other rich people got a break from the beating they’ve been taking: Stocks bounced, with the Dow ending yesterday’s session up more than 600 points.

 

rusty gearsThe gears have been stripped, and they look rusty…

Photo credit: Jonathon Cianfrani

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The Things that Produce Real Wealth vs. Phantom Wealth

Our friend Michael Pollaro, the keeper of long-term data on the true money supply and author at Forbes as well as occasionally a guest author on this site, recently sent us the following chart of a relationship he keeps a close eye on. It depicts the annual change rate in new orders for non-defense capital goods and compares this series to the Wilshire total market index.

 

piggyPhoto via thedailysheeple.com

 

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This Is the Start of the Sell-off, Not the End

BALTIMORE, Maryland – Is Donald Trump broke yet? We don’t know. But at the end of the first quarter, investors held about $24 trillion in stocks. Stock prices are down about 10% since then… leaving the rich $2.4 trillion less rich.

 

Do I look broke to you? I have a helicopter landing pad with me at all times!

 Photo credit: Charles Sykes / AP

 

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Planners Meet to Discuss the Impossible

The Jackson Hole pow-wow takes place this weekend. A more revolting get-together of actual and armchair central planners (i.e., the advisors to the planners, many of whom see themselves as planners-in-waiting) could hardly be imagined. One has to wonder how much more damage they will be allowed to inflict before someone finally says “enough!”. The parlous state of the global economy and the series of booms and busts we have experienced over the past 20 to 30 years are almost exclusively their doing (some of the responsibility has to be shared by politicians and other bureaucrats, who have hopelessly over-regulated and overtaxed economies, especially in the developed world).

 

fischer1Fed vice chairman Stanley Fischer, one of the keynote speakers at the Jackson Hole conference – more on him further below

Photo credit: Simon Dawson/Bloomberg

 

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