Bullshit Detectors at the Ready!

The US dollar is finally bouncing and so are Treasury yields. One of several legs that could get kicked out from under the S&P 500’s potentially bearish table is a firming USD. But that can take time to wear away at the market, beginning with exporters and over played global technology large caps. As for rising yields, that can benefit certain sectors like Financials and Energy and impair others, like some segments of Healthcare, Utilities, etc. So rotation, as opposed to a scary bear phase, may be the play indefinitely.

Here’s the 10 year today. Is this a final suck in for the pop in yields we’ve had surrounding the FOMC? If it keeps going up sooner or later it will change the trend (duh… ). But for now I am staying balanced between what would like rising long-term yields and what would not (and of course a lot of ‘long USD’ stuff).

tnx

Yet people are going to pound us with agenda and bias. The loudest and most strident mouths (outside of Trump’s non-stop campaigning of cartoons to his base) are going to tell you that a massive bear market is starting… or gold is going to get destroyed by the strong dollar… or stocks will follow yields to a great new phase transition… or gold is going to da moon with inflation.

Speaking of gold, those who hate the idea of an asset that sits there doing nothing but provide liquid stability in times degenerating – or disappearing – paper and digital products will talk about interest rates and the dollar. Yet here at nftrh.com we have accounted for a strong dollar and I am just fine with gold, not as a pricing mechanism or casino play, but for what it is; a nugget of stability.

If the USD rises and coincides with contraction in the economy and the markets positively correlated to it then gold will go up, or go down way less that most everything else. Why? How can that happen if yields are rising? It can happen if the yield curve is also rising, which as of now it of course isn’t. Sorry gold bugs, but the North Korea tout ain’t gonna do it. I shorted gold once and the miners 3 times amid the North Korea noise to hedge, make some profits and though not intended, ultimately prove a point. It is macro fundamentals that drive gold. Watch the relationships between yields.

yield curve

Lazy analysis is going to try to paint you by numbers and give you easy answers. Unfortunately, that does not work unless the analyzer gets lucky for a pot shot here and there. The market is getting interesting and you need a lot of different tools with as little bias against any one of them (okay, I’ve betrayed my bias against Dow Theory, ha ha… ) as possible.

Bullshit detectors at the ready!

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