Buyer’s Remorse Sinks Markets

The Fed Goldilocks propa­ganda worked on the day of the rate hike but when investors woke up the next day, a stare at reality caused a severe case of “buyer’s remorse.” Long-dated Treasuries fell 2.1% and the S&P plunged 8.54% this week. Speaking of drama, note the 31+% decline in Bitcoin! Virtually nothing except shorts against stocks and bonds gained value this week. It was truly one of the greatest “risk off” weeks in some time. While gold bugs are disappointed that the yellow metal isn’t performing better than it is, it managed a loss of only 0.52%, and silver did even better, shedding just 0.37% during the week. As Richard Russell used to say, the winners in a bear market are those who lose the least.

In that regard, I am thankful for the contributions of two shorts in Our Model Portfolio, those being Pro Shares High Yield Short (NYSE-SJB) and Pro Shares Short the NASDAQ 100 (NYSE-PSQ). With the carnage of this past week, those are the only “green” sectors in Our Model Portfolio, but they have played a significant role in enabling a loss of “only” 9.82% compared to a 22.9% loss in the S&P 500.

Note the dramatic decline in my IDW above, which fell to 187.68 on 6/17 compared to 192.66 on 6/9. While the market may have engaged in some wishful thinking that the Fed can actually pull off a soft landing with an aggressive 0.75% rate increase even as the economy appears to be heading into a recession, one wonders how much longer the Fed can engage in this hawkish endeavor without bringing the entire system down. That said, looking at the commodity items in my IDW, this week may have been the first to put a dent in the inflation dynamics. A basket of commodities represented by the Rogers Raw Materials Index fell 6.48%. Crude oil fell 9.46% and copper fell by 7.90%. With the monetary metals, silver and gold, losing very little compared to other items in my IDW, I have to wonder if we are not getting set for those metals to start to show their true value. Will we have to wait for the system to break down, triggering a new trend of endless QE events? Or will it simply be a measure of investment funds needing to go to gold and gold shares as the only profitable sectors left to run to? 

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.