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Market Sentiment

Market Sentiment

“…The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to…

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Gaps are Appearing in the Gold Market

Gaps are Appearing in the Gold Market

The gold market continues to act as if the forces of supply and demand don’t exist. The number of claims per ounce of gold stored at COMEX’s vaults have reached a high of 110 per physical ounce. Meanwhile, record levels of physical gold have been flowing into Hong Kong and Shanghai. One of the biggest sellers of the yellow metal to Chinese buyers has been the well publicized GLD ETF, which has been selling off its physical holdings. Numerous other…

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Earnings Growth Compared To Market Returns

Earnings Growth Compared To Market Returns

In theory, the S&P 500 should rise in line with earnings. In practice  this does not happen. While this comes as no surprise, the scale of the difference is astounding. Period Earnings Growth S&P 500 Returns 2003-2013 148% 68% 1993-2003 16% 137% 1983-1993 5% 179% Across three decades the date shows that the S&P 500 has almost no correlation to earnings growth. The current period, 2003 to 2013 has seen the fastest earnings growth but the slowest S&P 500 growth….

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Derivatives Market Reaches New High

Derivatives Market Reaches New High

A combination of fractional reserve banking, bank leverage, money printing, derivative manufacturing and government borrowing has been the reason behind much of the global GDP growth over the past 40 years. This market is now worth a staggering $1 + quadrillion,  that’s $1,000,000,000,000,000 of essentially worthless derivatives where buyers only need to put up a fraction of the purchase price. Add in $250 trillion of government debt around the world and things start to look pretty shaky. During 2012, the…

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A Recovery Built on Thin Air

A Recovery Built on Thin Air

You could be forgiven for thinking that the economic recovery is under way in the UK. Gross domestic product grew by 0.7% in the second quarter and the National Institute of Economic and Social Research expects growth of 1.2% for the year as a whole. Meanwhile, British industrial output grew at the quickest pace in more than two years in June and house prices have expanded 4.6% year-on-year – driving the UK’s average house price to the highest level ever. However,…

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China Saved the World in 2008 but now it’s About to do the Opposite

China Saved the World in 2008 but now it’s About to do the Opposite

China is getting the world’s attention again. Unfortunately, this time it’s for all the wrong reasons. Earlier this month, shock waves rippled through the financial market after the Chinese overnight interbank lending rate – Shibor – surged to 8.29% from 5.98% literally overnight. Shibor is a useful proxy for liquidity in the Chinese credit markets and like Libor in Western markets, a sudden spike signals a reluctance between banks to lend to each other.  This could be for a multitude…

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