You tend to make more money if you are looking at things before the move rather than chasing the move that just happened.
If you have followed along I have been talking about the impact of "inflation" on both sides of the "real rates" equation. How an RoC in nominal yields could cause an opposite initial move than many have been told to expect.
There have been many many much explaining of "value rotation" etc on why small caps outperformed recently but I will not dwell on that. The stuff that people didn't want/own went up the most. It feeds in also to @Weston Nakamura recent posts on short squeezes etc.
With that in mind watch them yields. You will notice that a lot of my posts tie together.
I made a recent post asking if people would buy this asset. The poll is below 2:1 voted for no. That chart was of DE10Y the German 10Yr Bund. The replies generally said "I don't know the timeframe" "big gap have I missed it" all valid points. But the chart looks very similar to the current gold chart, and people tell me I am mad to short gold.
This chart looks so much like the current gold chart which everyone wants to buy - "you want to short this?". So are you also shorting bonds against your gold longs? This is the US10Yield, yields are the inverse of bond prices. If this breaks out that is bearish for bond prices.
So the charts look very similar but the difference is there is not a cottage industry selling books or storage fees etc for treasury bonds. There are plenty of shills for gold books.
Let us add to the stories. Cast your mind all the way back to Friday, the boards were red as the eye could see. The story of reflation is overbought, even the gamma monkeys were talking greek this and that about vixperation vanna something or other and the wind will be turning. Yeah, that didn't end well if you raised cash and didn't buy the Friday dip.
Let us move to a current story "treasury issuance" will force yields lower because it all has to be bought.
What if that story doesn't turn out as expected either. What if the issuance is bought and it is a sell the rip event in bonds in reverse to the buy the dip in equities on Friday? How can the chart of gold that everyone wants to buy look exactly like the US10Y chart but everyone wants to short it i.e. buy bonds?
I guess you can say gold has a much better PR department than the Treasury.
I calculate all of my own volatility and VoV levels for things that I watch closely (Gold, Oil, US10Y, Copper, etc) but a showed several other volatility measures you can find on TradingView so I have listed them below.
VIX - SP500
VVIX - VIX of VIX
RVX - Russell2000
VXN - Nasdaq
GVZ - Gold
OVX - Oil
VXAPL - Apple
As I said in the video type VX in search and most of the major ones are there. Please share if you have any others.
Does someone posting "I think the dollar will go up" actually mean "I missed the dollar falling"?
Does someone posting "when small caps do this for this long..." really mean "I missed IWM going up 40%"
"Can someone tell me the bear case for gold..." after gold has fallen 11% from the peak.
Last week Raoul said "reflation is overbought" and then 11 videos about inflation followed on RV in the next 10days.
The individual user posts to me say reflation is nowhere near overbought because it feels like people are not in the trades. Unless you count BTC which I count as reflation/riskon not "validation... bitcoin is eating the world".
This stuff is really hard and maybe 2020 is finally starting to weigh on me and I need a break.
edit: I just want to add in no way am I saying the individual posters were wrong. Not at all. I simply feel like I was writing a similar answer to all three questions.
edit 2:
It may also tell everyone that I am too long inflation. That I have been in these trades and need to take profits :)
Wow! I have an account on eToro which is the European (but started in Israel) precursor to Robinhood. The USP is "social trading" meaning it has a FB'esque feed. Also each asset AAPL FB BTC etc has a feed and people can post about them. Also if the person chooses you can see all of their current and historic positions which is super helpful to determine why they might be arguing for or against something.
Two years ago I found a piece of research hosted by Goldmoney. It was produced by Stefan Wieler and Josh Crumb. There are a total of 4 pieces and I am concentrating on the 3rd.
If interested download each of the PDFs as it is only a summary on the website. In the research, Stefan breaks down the reliance on oil of the gold miners. Directly via diesel etc for machinery and power at a remote mine site. Also indirectly rubber for huge machinery tyres lubricants and even the need to shift humans from habitation to mining sites. The scale is important the reliance per company is different as well as different sites within the same company. It is very interesting so go and read it and all the others if interested in this space.
TLDR the report says on average "energy" cost makes up ~50% of gold production costs. Oil and oil derivatives and by-products make up the majority of this cost.
Josh Crumb always highlights the "long-dated energy to gold cost". For this, I use 5 year GC (gold) futures prices against 5 Year BZ (Brent Oil) futures prices.
The scale on the right is how many barrels of Oil will 1 Oz of gold purchase.
The scale on the right is how many barrels of Oil will 1 Oz of gold purchase.
Orange is the long-dated price which will remove as many of the short-term volatility of market movements. If we look at the 1 year forward purple line at two points this year 1 Oz of Gold could buy 48 barrels of Oil. That is amazing for your margins if you produce gold and consume oil.
The shift from red to green on this chart is Nov 6th 2020. On that date, gold reached ~$1960. It has again reached ~$1960 earlier this week and pulled back. The gold price if I am being kind has moved "sideways", in solidarity with my gold bulls.
The oil price, however, has broken out.
This is where we have to separate the narrative "stimulus" "money printing" "Weimar" "hyperinflation" "own gold and gold miners to save you from the craziness". From the fundamental reality. Gold miners output (gold) could buy multiples of their main input (oil). Going from mid 20s to high 40s of barrels. Right now we are heading from the high 40s to 30s of barrels.
There will be a time to buy gold and gold miners again, it is just not right now. Patience is important.
Has anyone else noticed since Raoul called out that everyone is on the same side of the boat regards "reflation", more than half of the videos released on RV proper and RV youtube channel are about inflation?
Hmm so I am calling out the doyen @Raoul Pal but I want to highlight different timeframes. I am trying to show that "reflation" could reflate a whole lot more.
I tried to make this video 3 times and was strange to touch every point while keeping it a short video. So I have just dumped the whole thing here but a 22minute "ain't nobody got time for that"....
TLDR: Expensive can get more expensive. 250% gains might colour your view. #BTFD
I want to say a huge thank you to @Moritz Heiden for indulging my questions and adding additional charts to his awesome Exchange Portfolio post.
Also the CFTC data has updated and their is still a net short position on SPX and a net long position on US10Y. Eeek!
