Still Waters Run Deep

By: Erik Swarts | Fri, Feb 14, 2014
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Still Waters Run Deep

Back in October and November of last year, we speculated that the conventional wisdom going into a prospective taper was widely being viewed by participants through a broken prism. When Goldman declared gold a "slam dunk" if and when the Fed pivoted from their policy stance, we greatly disagreed and considered the taper broadly "bullish" towards inflation expectations and those assets closely associated with what we perceived to be a gathering reflationary tide.

"In the end, further stimulus was just more causative smokescreen for those wed to a poor investment idea. Today, as the precious metals and commodity sector continues to languish in the smoldering ruins of those hitched to this false narrative, we ask ourselves what likely will be the next upside catalyst for these assets. Does further easing provide such causative propellent and make much sense in the shadow of what transpired with QE2 and QE3? From our perspective the opposite appears more likely." A Closer Look at Gold & Silver 11/27/13

While the initial December taper was the bell that returned Bernanke ringside from another round of sparing with disinflation and the greater specter of deflation, it also signaled to the market that the Fed expected firmer and more sustainable growth; henceforth, the significant still water reservoir of monetary accommodations accumulated since the financial crisis, may finally have the potential to exert inflationary pressures that so many were concerned with years before.

Having said that, we find it ironic - but fitting (considering the remedial wisdom of the inflation/deflation debate), that the inflationistas who foolishly rode their investment theses to an ephemeral crest in 2011- have been completely silenced by dogmatic attrition just as the tide starts to roll in.

If nothing else, the market never fails to project a wicked sense of humor.


A few things to consider

CCI CRB Monthly Chart
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CRB:SPX Yearly Chart versus Core CPI Monthly
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USDX CRB Monthly Chart
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Gold versus Silver, GDX and SIL Daily Chart
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BKX:SPX 2006-2009 versus XAU:Gold 2011-2014 Monthly Chart
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BKX 2006-2009 versus XAU 2011-2014 Monthly Chart
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SPX 2006-2009 versus Gold 201102014 Monthly Chart
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XAU:Gold versus GSPBK:SPX Daily Chart
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SPX:S&P500 Bank Index Weekly Chart versus GSPBK and XAU Weekly Chart
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Gold:TNX versus Gold Monthly Chart
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10-Year Yields 2013-2014 versus 1994-1995 Chart
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Australian $ Gold Weekly Chart
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Australian Dollar 2009 versus 2013 Chart
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TIPS 2009 versus 2013 Chart
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Silver versus NASDAQ 2002-2003 Daily Chart
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Silver Miners versus NASDAQ 2002-2003 Daily Chart
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2013 Silver versus 1992 Nikkei Daily Chart
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CCI CRB versus SSEC EEM Monthly Charts
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Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

Copyright © 2011-2014 Erik Swarts

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