Last week, we got an unofficial announcement from the Chinese Government that was totally overshadowed by Mario Draghi’s bazooka but was probably more important. As Reuters reported, China is preparing for an unprecedented overhaul in how its banks treat non-performing loans.
You may remember, dear reader, that I have called a bear market for equities. How am I doing so far? Well, the S&P 500 is up 13% from its February 11th intra-day low (1812). That sure doesn’t look good, does it? But I’m still convinced I’m right. I haven’t shorted the market yet, and won’t until the S&Ps break that February low. So this rally hasn’t hurt me, it’s just annoying to have to wait.Maybe Wall Street still has inventory to unload, as David Stockman says.
One of the world’s largest reinsurers, German Munich Re, is boosting its gold reserves in response to the punishing negative interest rates being imposed by the European Central Bank.
Why do you have confidence in the value of the US dollar? Because, you say, it’s backed by the US Government, the most powerful institution on earth, with the biggest military and the most powerful economy. Feels good, right?
I think that was it…the correction in gold that I called mid last week. Yes, it’s still overbought. The drop was only about $50 per ounce, top to bottom. But I think the uptrend may now resume. Because this is not a gold bear market, dear reader. It’s a bull.
The bulls were doing cartwheels after January retail sales were released. The consumer is back, they said, after a weak holiday season. Now, not so much. February retail sales were released today and the news is not good.
This Wednesday, we have another meeting of the Federal open Market Committee (FOMC) to set monetary policy for another six weeks. Please do not sit on the edge of your seat, dear reader. I can confidently tell you that nothing important is going to happen at this meeting or the press conference to follow. The market may decide to react to nothing but that is a different matter.
Central banks became net buyers of gold in 2010 and their ownership has increased every year since then. But not Canada. Canada’s official international reserves last released by the Bank of Canada (BofC) on February 23, 2016 show gold reserves at zero.
The head of the European Central Bank (ECB), Mario Draghi, promised to do ‘whatever it takes’ and today he delivered–an absolutely stunning package of monetary madness that would have been unthinkable just a few short years ago.
As we have noted many times, bull and bear markets are defined by investor psychology. There is no better indicator of investor sentiment than margin debt. When people are willing to borrow to buy stocks, they have to be bullish.