Billionaire hedge fund manager John Paulson says he will pull his money from the market if Kamala Harris wins the election. “Fox Business”.
When Warren Buffett (Berkshire Hathaway) sells billions of dollars worth of Bank of America stocks I prick up my ears.
Is this a warning of just banking stocks being vulnerable, a portfolio adjustment or of the entire market being vulnerable?
They have sold off $7.2 billion worth of BoA over the past two months. They still own 10% of the company.
In addition, they have bought $235 billion in short-term treasury bonds. In my opinion an excellent hedge against a potential falling market and interest rate adjustment.
An opportune moment to have a look at the Buffett Indicator.
This indicator is derived by dividing the Gross Domestic Profit (GDP) into the total value of the US Stock Market.
| As of 30 June 2024 the figures were | |
|---|---|
| US Stock Market Value | $57.5 Trillion |
| Annualized GDP | $28.42 Trillion |
| Indicator value | 202% |
This is approximately two standard deviations above the historical trend.
“Given that the stock market value represents the present value of expected future economic activity, and that GDP is a measure of the most recent actual economic activity, the ratio of these two data series represents expected future returns relative to current performance. (A bit similar to the P/E ratio of a particular stock.) It stands to reason that this ratio would remain relatively stable over time, increasing slowly as new technology creates more efficient returns from labor and capital.”
The main takeaway is that this ratio in June was close to its highs meaning the general markets are extremely vulnerable. This ratio is obviously not the only indicator used by Buffett.
Here is an old Buffett Indicator value table:
The indicator was 202% at June 30th 2024. Yikes!!!
Below is the chart of the S&P500 in an uptrend since 2022. How vulnerable is it?
Could we have a MELT UP from here because of inflationary pressures or a COLLAPSE because of a lack of liquidity and velocity in the market?
With a 0.5% interest rate cut, a melt in my opinion is more likely as the inflation monster may be awakened.
The only possibility of a meltdown is collapsing consumer confidence and a failing economy. This depends largely on the outcome of the elections and the intention of the powers that be.
From the FED’s site, the chart below shows the collapse of the M1 Velocity of ‘money’.
“Calculated as the ratio of quarterly nominal GDP (GDP) to the quarterly average of M1 money stock (M1SL)
The velocity of money is the frequency at which one unit of currency is used to purchase domestically produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.
Consider M1, the narrowest component. M1 is the money supply of currency in circulation (notes and coins, demand deposits, and other liquid deposits). A decreasing velocity of M1 might indicate fewer short- term consumption transactions are taking place. We can think of shorter- term transactions as consumption we might make on an everyday basis.”
Federal Reserve Bank of St. Louis, Velocity of M1 Money Stock [M1V], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/M1V, September 18, 2024.
Is this the chart of a healthy economy at its core? Could the Plunge Protection Team be holding up the market until after elections? I have no Idea. We just follow our system. See reference here
BITCOIN AND GOLD
BTC:GLD: gold outperforms Bitcoin. This situation is reversing. I expect a change in the next few days.
ETHUSD we are out. There are signs of a reversal, no buy signal yet.
BTCUSD: Buy. Still early days but looking like a plausible entry.
GOLD AND SILVER STOCKS
Gold stocks are outperforming gold.
Silver stocks outperform silver.
GOLD AND SILVER
The 0.5% cut in interest rates Wednesday afternoon has had almost no effect on the metals prices. Both came off marginally Wednesday afternoon but appear to be recovering today. I would like to see a stronger pull back for technical reasons.
From an economic point of view both should have increased in price. I would like to see consolidation here for a more secure springboard to higher prices.
I am happy with the silver consolidation and feel that a significant break out can safely happen, catapulting it well into the thirties.
I fear that gold may have run too far too fast and would like to see consolidation here.
Silver to Gold Ratio
Silver is outperforming gold.
GOLD TO USD
Gold is outperforming the USD but looks overbought so expect a reversal.
A LOOK AT THE GOLD AND SILVER CHARTS
| Today | Last Week | |
|---|---|---|
| Gold Price | $2,575.00 | $2,546.00 |
| Silver Price | $30.85 | $29.37 |
| Gold:Silver ratio | 83.60:1 | 86.58:1 |
| Gold Miners bullish percent index | 83.97 | 78.57 |
| Dollar Index | 101.02 | 101.53 |
| Dow:Gold Ratio (BahaUS 41,975.00 Gold price, $2,574.00 ) | 16.31 | 16.04 |
| Current USA inflation rate (Dept. of Statistics) | 2.5% | 2.9% |
Gold’s low of the week was $2,546.00 and the high was $2,600.00, now trading at around $2,575.00.
The Gold Miners Bullish Percent Index is 85.71.
- Gold Monthly: is a hold. We bought in at $1,800.00 in October ‘23 and have held it to date. It looks overbought but the indicators are mainly positive. Rate of change is decreasing.
- Gold Weekly: is a hold. Money is still flowing into gold. The chart is rolling over but not a sell. (Chart below).
- Gold Daily: is a buy. It is looking overbought but we follow the signal
The low for Silver this week was $29.70 and the high $30.79, trading around $30.78 at present.
- Silver Monthly: Hold. Signals encouraging.
- Silver Weekly: We are out of weekly silver. Indicators have turned positive. We await a clean buy signal. (Chart below).
- Silver Daily: A buy was triggered last Friday. The indicators look overbought. There is a positive cash inflow.
Our partner has stock of both gold, silver and Goldbacks in our vaults available in Panama. Please contact us for more information.
A video by Mike Adams on the Goldbacks.
Well worth a look!
On the Stockcharts.com charts, the blue vertical lines are our proprietary system buy signals and the red vertical lines are system sell signals – for information purposes only
Please contact us to arrange the purchase and storage of your gold and silver requirements in a safe, insured location outside of your jurisdiction.
If you are interested in an overview of Fort Kobbe, you may want to have a look at this video: Mike Brown, Director, Fort Kobbe, International Vaults, A DotCom Magazine Exclusive Interview
This is my interpretation of the market and is not to be taken as financial advice. Before making any buy or sell decisions I recommend that you consult with your professional financial advisor.
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