A Comprehensive Discussion of the Economy and Financial Markets

The Incrementum Fund’s advisory board has held its quarterly meeting on January 10, and the transcript has just become available. Readers can download the transcript via the link below this post.

 

 

Unfortunately two board members (Dr. Frank Shostak and Rahim Taghizadegan) were unable to attend this time. We hope that you will nevertheless find the board’s discussion of a wide range of topics relevant to today’s financial markets interesting.

 

1-Gold vs commoditiesGold rises to an all time high against commodities – a strong sign that economic confidence is waning – click to enlarge.

 

We would especially point to the debate surrounding central bank credibility (or the “confidence bubble” as Mark Valek refers to it), which we believe is probably the most important subject investors need to confront these days. As we have recently mentioned, Jim Rickards has as always made a number of very interesting remarks on the finer points of Fed policy.

He inter alia pointed out that the Fed’s flexibility tends to be hampered in election years, as it doesn’t want to be seen as influencing the election outcome. This could be especially relevant this year (a similarity to the years 2000 and 2007/8, we might add), as it happens just as the economy and the markets appear to be at a crossroads.

 

2-DXYUS dollar index, daily – the board’s consensus was that the dollar would no longer make much headway against major currencies, as the Fed was likely to soften its stance. So far this seems to be the case – not even the ECB and the BoJ were able to put pressure on their currencies beyond a single trading day – click to enlarge.

 

Recent moves in the gold price and the fact that a number of other markets have also begun to act in a manner that seems no longer consistent with what the planners would presumably like to happen, certainly appear to indicate that the irrational faith of market participants in the “central bank put” is slowly but surely crumbling.

 

3-SPX vs. CommoditiesThe growing gap between stocks and commodities – this is a divergence crying out for mean reversion – click to enlarge.

 

Inevitably the “inflation vs. deflation” debate was revisited as well. Deflationary pressures are currently enormous. On the credit side, low-rated debt is in crisis conditions, while commodity prices are going down and consumer price increases remain well below the arbitrary “targets” set by central banks. This provokes the usual reactions by the central planners, which in turn is apt to build up ever greater tension in the markets (especially as it becomes increasingly obvious to all that their methods are not working).

 

4-breakeven inflationUS 5-year breakeven inflation rates have been under pressure for years and have been plumbing new lows for the move in 2015 – click to enlarge.

 

How long will this trend continue? Ironically, after the Fed’s rate hike, the US yield curve has flattened even further. This greatly undermines the “everything is awesome” narrative and indicates that the promised series of rate hikes is highly unlikely to happen.

 

5-yield curveThe US yield curve has continued to flatten following the Fed’s rate hike – click to enlarge.

 

6-junk bond yieldsA “stealth” credit crisis has been underway for some time – these days it is no longer as stealthy as it used to be – click to enlarge.

 

As always, all kinds of markets were discussed and one unavoidable topic was crude oil – is there anything on the horizon that could reverse its trend? There is nothing obvious, but at some point the market will have discounted every eventuality. Global demand is actually at a record high, and with producers pumping all out because they need the money, there is no longer any spare capacity. This creates a set-up in which surprises are possible.

 

7-March CrudeWTI crude – a relentless downtrend – click to enlarge.

 

As of January 10 when the meeting took place, the board’s consensus in terms of trade allocations consisted essentially of a bullish bias on gold and US treasuries and a bearish bias on stocks – in line with the members’ views on the economy and the expected reactions of central banks to economic developments.

In the short time since then things have actually played out that way, but these trends are all still young. Readers should keep in mind that when it comes to trading ideas, opinions can frequently and quickly change, depending on developments. We would however say that the essential elements on which these deliberations were based remain definitely in place at this time.

 

8-Incrementum Inflation signalThe proprietary Incrementum inflation/deflation signal vs. inflation-sensitive assets – click to enlarge.

 

Download Link:

Q1 Incrementum Advisory Board Meeting Transcript (pdf)

 

Addendum:

Please note that the transcript is dated “2015” – this is a typo, it should of course be 2016.

 

Charts by: StockCharts, St. Louis Federal Reserve Research, Incrementum AG

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • snake-charmerGold Price Skyrockets in India after Currency Ban – Part III
      When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.   Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
  • wads-of-cashGold Price Skyrockets in India after Currency Ban – Part II
      Chaos in the Wake of the Ban Here is a link to Part 1, about what happened in the first two days after India's government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days.     India's prime minister Nahendra Modi, author of the...
  • shopGold Price Skyrockets in India after Currency Ban – Part IV
      A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.   Indian jewelry...
  • very-bad-boyA Note on Gold and India – What is Driving the Gold Price?
      Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.   Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com   In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
  • gold-pm-fixIndia's Currency Debacle – An Interview with Jayant Bhandari
      A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).   Banned 500 rupee banknotes   The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
  • vigilantesWill the Swamp Swallow Trump?
      Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.   Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP   Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
  • santorinigreeceThere Are Two Types of Credit — One of Them Leads to Booms and Busts
      Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.   What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
  • train-to-hellAll Aboard! Trump’s Express Train to the Future
      Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.   Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...
  • jumpAttaining Self-Destruct Velocity
      Bad Monday Some Monday mornings are better than others.  Others are worse than some.  For one Amazon employee, this past Monday morning was particularly bad. No doubt, the poor fellow would have been better off he’d called in sick to work.  Such a simple decision would have saved him from extreme agony.  But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.   Good-bye cruel world! On this our planet,...
  • yellen_duct_tape_7-16-2014_largeGold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
      A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.   Initially, gold rallied sharply...
  • david_stockman_0Too Early for “Inflation Bets”?
      The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”   The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc.  We have...
  • workers-powerAbout that Economic Inequality
      Illusory Riches, Obvious Impoverishment I address this essay to two groups. One group is those among the liberty movement, who believe that there’s nothing wrong with inequality. These are often Objectivists, who unknowingly defend a regime that artificially suppresses working people.   And suddenly, you feel much lighter...   The other group is those among the Left who still call themselves liberals. They say they don’t like inequality, but nevertheless...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com