RADOM MARKET MUSINGS

 

Once upon a time there was a popular song with the line: "I wouldn't last a day without you." That was a story about a love affair the singer didn't want to end.

Well, that line could be turned around a bit given the market's recent reaction to the terrible tragedy in the Ukraine and all the bloodshed in Gaza.

Investors seemed to be bothered by horrible news about one day. And that for all intents and purposes appears to be the meme of this market so far this year. "We hear and feel ya, but our focus is just somewhere else for now."

And many, many people obviously don't want this market love affair to end either. So what's going to finally change investor focus? At the moment nothing. As we said in our post Taos Jones Averages, it is what it is until one day it isn't.
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Here are two charts from a recent report by 90-year-old Richard Russell, the father of market newsletters. Russell says gold can go to $10,000. But whatever it does, he ain't selling. And on any price weakness below $1,200 he might even be a buyer.










Gold miners versus gold bullion. We've discussed the gold mining stocks before. Look at the charts and draw your own conclusions. Our point here is more to inform than to recommend. It's like the difference in the English language many fail to distinguish between the terms imply and infer. We imply, you infer.

In more pragmatic terms, you're on your own. So get use to it.
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A South African gold mining firm signs deal with gas company to bring cheap energy for their mines.

Gold miner AngloGold Ashanti (NYSE:AU) has signed a $140 million agreement with natural gas infrastructure business APA Group (ASX:APA) for a natural gas pipeline to supply the remote Tropicana and Sunrise Dam gold mines in Western Australia.

The 292 kilometer Eastern Goldfields Pipeline will connect AngloGold's mines to APA’s existing pipelines and is seen saving the South African miner millions of dollars in energy costs.

“Gas power generation is expected to reduce cash operating costs at both sites by between A$25-$30 an ounce,” said Michael Erickson, AngloGold Ashanti’s senior vice president in Australia.

The companies said engineering, design and procurement work has begun, with construction expected to start in February 2015. Gas transportation services are due to commence in January 2016.
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Investors can often accurtely anticipate an event. What they can't often accurately anticipate, it seems, is the consequences of that event. 

At the beginning of the year many macro investors anticipated higher interest rates and falling bond prices owing to the massive ballooning of money sloshing around the world as central banks continued to print the stuff.

Moreover, the Fed contributed to this outlook with its announcements about future monetary policy, the start of its tapering program and its constant reassurances there would be enough time for everyone to get to the life boats if they were needed.

As has been noted, the Federal Reserve's balance sheet exploded from $950 billion in 2008 to its current $4.3 trillion, a number that  for most is totally incomprehensible. 

Take the case of big U.S. banks. One of the stories in the news today is how tighter lending standards, much of it most likely owing to the cumbersome effects of Dodd-Frank, have apparently helped these giants clean up their loan losses, seemingly a good thing.

Tighter lending standards may lead to, as one analyst put it, claiming "In the worst of times the best loans are made," better quality loans, but they also lead to less expansion or economic growth, supposedly what the Fed's easing has been all about.

Investors cite numerous reasons for the economy's slow recovery, a recovery most agree that has been below historical norms. Some of that may stem from the recession itself which was deeper than historical norms.  

But that's not the complete answer. Despite what its proponents might say, the heavy-handed Dodd-Frank Act has played a bigger than accepted role.  

You can't have it both ways, at least not for long. And that's exactly what the Fed has done.