Investors aren’t limited to only investing in the S&P 500 and the Dow Jones Industrial Average. Every week we share the market trends we are following. We are interested in whether the trends in those markets are continuing or if they are experiencing a temporary or complete reversal.
When we identify trends, we are only concerned about the price data and what it says about any given market. We don’t need to know why a trend has formed to invest, but our human nature wants to understand what is driving them. Each week we try to offer some perspective on what we think the most substantial moves are and what critical drivers are behind them. Here we look at what is going in our globally diversified, non-correlated Crystal Bay Ubitrend strategy.
Last week’s continuing trends:
- Soybeans
- Soybean Meal
- Sugar
- Mexican Peso
- Taiwanese Equities
Last week’s reversing trends:
- Rice
- Palm Oil
- The New Zealand Dollar
- FAANG Stocks
- German Government Bonds
What we are taking note of:
My weekly updates have been getting repetitive lately. There’s only so many times that one can keep pointing out the looming fiscal and monetary disaster. I dream of opening the Wall Street Journal one morning and finding a front-page story that outlines a cunning plan by the Fed and the Treasury to get us out of this mess. The plan is so simple, so obvious, and so clever! I slap my forehead in amazement. Then I wake up, and the nightmare is back.
This morning, the Wall Street Journal web site opened with a report on Janet Yellen’s confirmation hearing for the position of Treasury secretary. Ms. Yellen urged lawmakers to “act big” and put aside concerns about the mounting national debt. At 133%, the US debt-to-GDP ratio may be higher than the UK, Brazil, Spain, Portugal, or Mozambique, but it is still lower than Italy, Greece, Sudan, or Japan. We aim for number one!
The foolishness of national policy will be catastrophic to savers, retirees, and people on fixed incomes, but on the bright side, it’s creating an ideal environment for commodity investors. Not since the 1970s have we seen such a wanton disregard of the consequences of government profligacy. Big deficits and easy money policies of the Johnson and Nixon presidencies were bipartisan and popular until inflation took off and devastated stock and bond markets. Interest rates went to 20%, and stocks lost 45% of their value; it took them 20 years to recover the losses in real (inflation-adjusted) terms. President Nixon’s Treasury secretary, John Connally, later declared personal bankruptcy—the nation’s top fiscal policymaker couldn’t balance his own checkbook.
Only commodities provided shelter in the storm. Oil prices went from $3.20 per barrel to $125 per barrel in a decade; silver went from $5 per ounce to $50, soybeans from $2.50 per bushel to $10. The GSCI Goldman Sachs Commodity Index clocked annualized returns of 21% through the decade.
The signs are here, and the warnings are loud and clear, the road ahead is well marked. Woe to those who fail to heed the message.