12 Years of VP vs Noise

Sharing the ideas and experiences that have influenced our work

Look for Opportunities to Re-accumulate Gold Stocks

(from our Tactical of 11th October 2016) Goldminers have a notoriously high beta to the price of gold, and they didn’t disappoint last week, with the GDX dropping 13% vs down 4.5% for gold.  However, we have had a technical divergence buy signal for the GDX (chart...

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Real Yields Wildly Mispriced Given Stagflation Light

The US now has the worst combination of outcomes, poor growth and rising inflation.  Bond yields are now the most negative they have been in almost forty years.  Only in the 1970s during stagflationary episodes were real yields this negative.    We don’t see a high...

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Lower ISM Ahead, Weak Read for Stocks

The ISM Manufacturing Index came out at the beginning of the month and offers a dim view of the next three months for US manufacturing as well as for stocks.  The key data we focus on in the ISM is the relationship between New Orders to Inventory.  The ratio leads the...

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Bond Yields Diverge from Inflation

Bond yields are currently diverging in a very big way from economic fundamentals, and our valuation tools point to a rise in yields.  Normally, there is a very tight correlation between the change in the ISM prices paid survey and the changes in the 10 year yield. ...

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US Profit Margins to Fall Further

Equity prices are rising and being driven by momentum, but profit margins are set to fall further in line with late-cycle wage pressures and tightness in the labour market.  The biggest cost to businesses is the cost of employees, and the unemployment rate leads the...

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