At a Turning Point

Regarding this week’s markets, you get the sense that we may be at a major turning point for asset classes, as Michael Oliver has been suggesting. His view is that we are likely to see a switch out of equities into T-Bonds and gold. As you can see from the key market table above, there was a bit of a movement on the week into U.S. Treasuries but on Friday when equities dropped hard, yields rose, meaning money came out of the long bond. And of course, with the major smackdown over the past three days, Michael’s view of money flowing from equities to gold hasn’t taken place yet. Perhaps what has to happen is for investors to really understand that the equity bull market is over.

Long bull markets like this one die hard, with seasoned investors exiting first while retail folks keep piling in. It’s hard for most folks to think the bull market will ever end, especially younger investors who have never seen a serious bear market. And those who have, saw how quickly the Fed juiced it back up in 2009 with massive levels of liquidity. What they lack is a perspective that could help them understand at zero interest rates, this game is nearing its end and when it comes it will exact a very heavy price on the longs. In his 360 Weekend Report Michael focused on the 50-day momentum average for the S&P 500, noting that the threshold downturn point was at 4409 last Monday, but that number rises by 3 points each day. The S&P finished at 4432.99. With the key S&P number rising by 3 points a day, that level would be reached by Thursday, September 23.

But, what about gold? Michael remains long-term bullish, given that annual momentum remains positive. But for nervous Nellie investors, he wants to see gold not fall below $1709 because it could take it a bit lower, though he thinks in any event it will hold above the March 2021 low of $1673. What we bulls need to see, according to Michael, is a $1,825 price during the next quarter for the next leg up of the bull market to get underway. And I’m convinced the economic and market fundamentals for gold are extremely bullish. Peter Boockvar makes my case when he says, “I’ll repeat again my belief that while the sharp pace of inflation increases may slow, we have a problem if it slows to a level even around 3%-4% on sustainable basis because the world is just not set up for that. Not current monetary policy, not interest rates, not debt levels, not equity valuations and credit spreads, not profit margins and certainly not income growth to offset it, just yet.” In other words, the Fed will have no politically viable choice but to continue its hyperinflationary money printing trajectory, leaving gold, silver, and other tangible assets as wealth saving possessions.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.