Global economic momentum improving, but don’t ignore disconnect between stocks and Doctor Copper

Global-Momentum-

Global economic momentum is improving and looks set to surprise on the upside in 2014. However, Doctor Copper should not be ignored. Copper has frequently been dubbed the metal “with a Ph.D. in economics” for its uncanny ability at forecasting the global economic cycle. When the global economy expands, industrial output increases and demand for copper pushes its price up. The converse happens when the global economy contracts. Global stock prices have anticipated this favourable state of affairs and have priced in much of 2014′s growth potential.

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U.S. stock market: due for a correction

Regardless of how the economy performs this year, I suspect the U.S. stock market is due for a correction, perhaps as soon as the first quarter of 2014. Sentiment is very bullish and fund managers have piled into the market en masse to avoid under-performing their peers or their benchmarks. People generally believe the Federal Reserve has managed to rescue the economy. The market has moved straight up for one year with at most very shallow pullbacks. I believe the time is ripe for the market to rattle some nerves.

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Has the secular bull market in gold ended?

April 22, 2013 by · Leave a Comment
Filed under: Economics, Finance 

As people gradually realize that gold is neither an insurance policy against the ill-effects of central bank money printing, nor a safe haven with which one can weather a crisis in the financial markets, psychology in gold will fundamentally shift. If, within the next few weeks, gold and silver do not re-take previous support levels with strong price action, we can safely conclude that the current secular bull market is over. The next one may be decades away. In the meantime, financial assets will outperform gold and silver and will be better long term investments.

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Bretton Woods, Gold, and the current monetary system

April 17, 2013 by · Leave a Comment
Filed under: Economics, Finance 

The current global monetary system is the first ever experimental, truly global fiat currency system totally unbacked by gold. In this article, I describe how this system evolved from the former Bretton Woods system established after World War II. Nicknamed Bretton Woods II, the current system has become notorious for engendering asset prices bubbles, periodic inflation, and general price instability.

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Gold and silver break multi-year support

April 16, 2013 by · Leave a Comment
Filed under: Finance, Investment 

Gold and silver have broken multi-year support. Usually, such a strong move down will lead to a quick counter-trend rally. However, I suspect that such rally will fade and new lows will be established. If the secular bull market is over, prices should slowly drift downwards and reach an eventual target of gold in the $700-$1000 range, and silver in the $10-$15 range.

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