Can women change the world?
The world is changing- fast. The old certainties are being overturned at a hectic pace – and women are taking over. Here in the UK, we have only our second female prime minister in history (Maggie blazed the trail in the 1980s).
And over in the Labour party, a female politician vies for its leadership. We already have female First Ministers in Scotland and N Ireland. That would make it three out of four for the UK ladies. Five years ago, who would have believed this male-female reversal possible after centuries of male domination of the top ‘important’ jobs.
And not only in politics are the women taking over. In Big Business, women are ta the helm of many companies especially in the US. That is one big switch. The Federal Reserve has its first female head. Could the US get its first President this year?
But this increasing domination of women at the top is a reflection of the trend for more females than males entering university, especially in the traditional ‘arts’ degrees. My own field, physics and mathematics, is still male dominated, but I await the day when that statistic changes! Perhaps the photogenic attractions of Professor Brian Cox will do it.
In finance, we have a brave new world of negative interest rates where depositors are fined for keeping funds in a bank. And in Denmark, if you take out a mortgage the bank will pay you interest.
Yes folks, the world is certainly changing. In recent years, we have seen tremendous rewards for failure. That is unnatural. For centuries, failure would have meant head and body became suddenly separated. For instance, UK banks have lost shareholders a lot of money since the 2008 Crash, but managers have done very well with huge bonuses and golden goodbyes.
But I sense that this paradigm is ending with the takeover by women at the top. I believe this is a watershed moment in our history – with Brexit being the most visible and sudden shock to the old established order. It has shaken up the monstrous EU to its core. From a position of confident strength and growth pre-Brexit, they are now on the back foot in damage limitation mode, desperately trying to prevent any more defections.
And that is the motivation behind Draghi’s plan to step up QE to get more money into the hands of the people. Of course, all it will do is to pump us asset values to even more ridiculous levels.
And over in the Land of the Rising Debt, Kuroda-san has ordered more printing presses to be installed in the basement of the BOJ as our old deflation-hater friend Ben Bernanke is over there advising on how Japan can repeat his great success at the Fed in pumping up asset bubbles. Incidentally, this is why our short JPY trades are doing so well.
To my mind, we are now entering the last phase of the Great Asset Mania with stocks in their final melt-up phase. And this final thrust is being motivated by the prospect of interest rates being held lower for longer. Never mind their appalling overvaluation. Never mind the real prospect of the Bond Bubble being suddenly deflated. And never mind the real prospect of global economies facing a huge slowdown.
I believe this is the last chance for stock bulls to profit from a rising market. But when the top arrives, the decline off it will be majestic. Meanwhile, as a swing trader, I am riding the waves up.
Gold is turning
Three posts ago, I asked “Is gold near a top here“. This is very much a minority thought. But there are now increasing signs that indeed an important high at least has been made in recent days (or will do very soon). The latest COT data show that hedge funds now hold an all-time record high number of long futures positions, even exceeding the level at the famous 2011 top.
The rationale behind my contrary forecast is quite simple: when too many traders gather on one side of the boat and too few on the other side, the boat is usually in big trouble.
We are also seeing more uber-bullish forecasts – up to $5,000 I have seen. But last time, I pointed out that the sentiment picture was totally reversed from December when gold was trading around the $1050 level. Then, hedge funds held an all-time record low number of futures as they forecast gold would plunge below the $1,000 level.
Of course, this was a great time to be backing up the truck (as we did). But with the price rising only a meagre $300 or so and the sentiment picture extremely lop-sided to the bullish side, the scenario is a great setup for a ‘surprise’ decline.
And a decline would confirm that the December-July rally is only a bear market rally in a traditional A-B-C form
Wave A has a textbook five up , wave B is an A-B-C and when the decline off wave C high gets into its stride, I expect to see a five down -and if so, that five down will confirm the bear trend has resumed. Today, it is too early to forecast this, but that is my expectation. It is possible the market could continue its rally, especially if there is a major risk-off event in the next few days that clobbers stocks. But today, the odds do not look favourable.
But with today’s all-time record bullish sentiment picture, the end of the gold rally appears nigh – at least for now.
Crude hits my $45 target
As crude was making its $52 high in June, I penciled in a dip tot he $45 level and yesterday, my target was hit on the button:
Now, we should see support and perhaps a kiss on lower tramline but then a new decline to perhaps the $42 – $43 area. We shall see. But like gold/silver, this big rally off the $26 low is a bear market rally, not the start of a huge new bull market.
When the downtrend resumes, crude will follow most markets and head sharply lower.
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