We Are Beginning To Approach The End Game

With tremendous volatility continuing in global markets this summer, John Williams, of Shadowstats, released an incredibly important report which contained an ominous warning.  Below is a key portion of this tremendous report, and King World News wanted to pass it along to our global readers:

Here is the ominous warning from John Williams of Shadowstats:

Beginning to Approach the End Game.  “Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system.  The financial system still remains in the throes and aftershocks of the 2008 panic and near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government.  Further panic is possible and hyperinflation remains inevitable.

Typical of an approaching, major turning point in the domestic- and global-market perceptions, bouts of extreme volatility and instability have been seen with increasing frequency in the financial markets, including equities, currencies and the monetary precious metals (gold and silver).  Consensus market expectations on the economy and Federal Reserve policy also have been in increasing flux.  The FOMC and Federal Reserve Chairman Ben Bernanke have put forth a plan for reducing and eventually ending quantitative easing in the form of QE3.  The tapering or cessation of QE3 is contingent upon the U.S. economy performing in line with overly-optimistic economic projections provided by the Fed.  Initially, market reaction pummeled stocks, bonds and gold.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/3_John_Williams_-_We_Are_Beginning_To_Approach_The_End_Game.html

Gold Panic & The Accelerating Great Collapse

With enormous volatility in key global markets this summer, John Williams, of Shadowstats, just released an incredibly important report which contained an ominous warning. This tremendous report also had a powerful chart as well, and King World News wanted to pass it along to our global readers:

Here is the ominous warning from John Williams of Shadowstats: “U.S. Dollar Remains (the) Proximal Hyperinflation Trigger. The unfolding fiscal catastrophe, in combination with the Fed’s direct monetization of Treasury debt, eventually (more likely sooner rather than later) will savage the U.S. dollar’s exchange rate, boosting oil and gasoline prices, and boosting money supply growth and domestic U.S. inflation. Relative market tranquility has given way to mounting instabilities, and severe market turmoil likely looms, despite the tactics of delay by the politicians and ongoing obfuscation by the Federal Reserve.

This should become increasingly evident as the disgruntled global markets begin to move sustainably against the U.S. dollar. As discussed earlier, a dollar-selling panic is likely this year—still of reasonably high risk in the next month or so—with its effects and aftershocks setting hyperinflation into action in 2014. Gold remains the primary and long-range hedge against the upcoming debasement of the U.S. dollar, irrespective of any near-term price gyrations in the gold market.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/27_John_Williams_-_Gold_Panic_%26_The_Accelerating_Great_Collapse.html

No gold trader should ignore these odds

Gold traders should never forget that fundamentals are of import primarily for the long-term investor—and nearly irrelevant for the short-term trader.

To be sure, this is hardly an earth-shattering insight, and it applies to all markets, not just gold .

But, like everyone else when markets get overheated, gold traders in recent years became all too prone to overlook it. They were too quick to declare that short-term movements were entirely justified by the GCQ3 -0.01%  fundamentals — so long as the direction was up.

 GCQ3 1,411.80, -0.10, -0.01%



They were thus caught by surprise when gold fell several hundred dollars in just a few days’ time. Since the drop could not be justified in terms of any change in fundamentals, they cried foul. But short-term gyrations — neither up nor down — can never be justified in those terms.

So those crying foul are only half right in contending that, when gold futures fell by more than $140 on April 15 of this year, fundamentals at the close of that day’s session were not appreciably different than they were at the end of the previous session. But the same was true, say, three weeks later — on May 8, to be exact — when gold rose $25 in a single session.

Consider a fascinating recent study published by the National Bureau of Economic Research in Cambridge, Mass. Entitled “The Golden Dilemma,” its authors are Claude Erb, a former commodities portfolio manager for Trust Company of the West, and Campbell Harvey, a finance professor at Duke University. They studied all the fundamental justifications for a gold bull market of which they were aware, looking for any that justified gold’s historical short-term fluctuations.

They came up empty: Regardless of how gold’s fundamental value was defined, they found that gold’s price fluctuated wildly relative to that definition.

Consider, for example, the commonly held belief that gold is an inflation hedge. That’s tantamount to believing that gold’s price remains more or less constant in inflation-adjusted terms, of course.

But that is manifestly untrue: Gold’s real price fluctuates wildly, regardless of the currency in which gold’s price is being expressed. For example, a ratio of gold’s dollar price to the U.S. Consumer Price Index has risen as high as nearly nine-to-one over the last three decades and as low as less than two-to-one.

Note carefully that we can’t wriggle out from underneath this conclusion by arguing that the CPI under-reports inflation’s true magnitude. For example, Erb told me in an interview there has been just a big a fluctuation in gold’s real price over the years when using alternate inflation measures like the one that has been advanced on John Williams’ Shadow Government Statistics website.

The same conclusion emerged when the researchers focused on other fundamental justifications for a long-term gold bull market, such as currency debasement, the threat of hyperinflation, money supply growth, and so on.

If not fundamentals, then what should traders turn to for insight into gold’s short-term movements? The traditional answer, of course, is technical analysis.

Unfortunately, the track record of the short-term gold timers tracked by the Hulbert Financial Digest provides little reason for hope that technical analysis is the answer. Consider their track records, as summarized in the accompanying table.

Last 5 years Last 10 years Last 15 years
% of gold timers making more money than buying-and-holding 8% 0% 0%
% of gold timers with a higher monthly Sharpe Ratio than buying-and-holding 15% 0% 0%
Average annualized gain of all monitored gold timers 3.4% 5.4% 3.7%
Gold’s annualized gain 11.0% 15.9% 10.9%
Average monthly Sharpe Ratio of all monitored gold timers 0.07 0.09 0.04
Gold’s monthly Sharpe Ratio 0.17 0.23 0.16

The results are, to say the least, awful. The best overall record of success comes at the 5-year horizon, and even then only 15% of monitored gold timers have beaten buying and holding gold on a risk-adjusted basis. And even that depressingly low percentage disappears when we focus on longer periods such as the last 10 or 15 years.

Furthermore, as you can see, the average gold timer produces a return that isn’t even close to buying and holding.

The bottom line? Those who invest in gold are on the horns of a big dilemma.

If they decide not to trade, and simply buy and hold gold for the long term, then they must face squarely the daunting prospect of having to live through plunges as big and scary as that seen earlier this year.

And if they decide nevertheless to try their hand at trading, they must instead face squarely the historical odds that suggest they most likely will fail.

We would all rather not be faced with a dilemma both of whose horns are so unsatisfying. But wishing does not make it so.

Source: http://www.marketwatch.com/story/no-gold-trader-should-ignore-these-odds-2013-06-03