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When Will Gold Go Up?

Gold broke US$2,000 in the summer of 2020, but soon fell back a few pegs. Many market watchers are now wondering, "When will gold go up?"
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Of all the metals on Earth, gold shines the brightest when it comes to holding its value and being a vehicle for building and preserving wealth.

In fact, the gold price has risen by as much as 700 percent in the last 20 twenty years. Despite that impressive increase, many investors are still wondering, “When will gold go up?”

The precious metal is a safe haven asset that performs well in tumultuous times, and there have been plenty of global crisis events in the past few years — most recently the socioeconomic fallout from the COVID-19 pandemic.

 

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There are plenty of gold bulls calling for the price of the yellow metal to double, triple and even quadruple the current figure. Nevertheless, answering the question, “When will gold go up?” is a bit of a guessing game, even for the most veteran gold market analysts.

That said, there are certain time-tested indicators for when gold will go up that market participants can track in order to make a more educated guess about the precious metal’s future price action.

When will gold go up?: Gold’s previous price performance

If you want to know when gold will go up, the yellow metal’s past performance is a good place to start. Let’s start with a look at gold’s price action during the coronavirus pandemic.

The gold price started off 2020 trading at US$1,527 per ounce, and by May the yellow metal was sitting above US$1,700, a price level not seen since late 2012. Later that summer, as the economic fallout and uncertainty surrounding the pandemic really began to sink in, the gold price broke the US$2,000 level on August 7 to reach an all-time record high of US$2,067.15.

However, the market couldn’t sustain that level for long, and gold had dipped below US$1,900 by the start of the fourth quarter. Pfizer (NYSE:PFE) and BioNTech’s (NASDAQ:BNTX) vaccine breakthrough announcement in November led to a 5 percent price shave, dropping gold once again below the US$1,800 level before it rebounded to just below US$1,900 by the close of the year.

All in all, gold closed out 2020 up about 21 percent for the year. According to FocusEcomics economist Steven Burke, its price growth in 2020 was strongly linked to the global impact of COVID-19. “The pandemic invoked unprecedented economic uncertainty, which led to a surge in safe-haven demand and, in turn, boosted gold prices,” Burke told the Investing News Network (INN).

Burke also pointed out that a return to certainty begets a stronger “appetite for risk” on the part of investors, which “bode(s) poorly for safe haven demand and gold prices.”

In fact, in the first quarter of 2021, the gold price fell by 8.1 percent to hit US$1,744 by the end of March. The main drivers of gold’s poor performance were high US 10 year Treasury yields on top of a strong American dollar. These factors contributed to a higher risk appetite among investors, which was evident by the increased demand for bitcoin.

Heading into late May 2021, gold broke through the US$1,900 level, with some analysts calling for a repeat of the summer of 2020 with another record-breaking gold price on the horizon. Gold’s lift in the second quarter has been partially attributed to comments from the US Federal Reserve that have market watchers believing interest rate hikes are not on the table — for now.

Investors interested in understanding when the gold price will go up should keep one eye on the Fed’s interest rate plans. Rate hikes are generally negative for gold because when rates are higher investment products that accrue interest are more profitable than the precious metal.

In July 2019, the Fed began cutting interest rates for the first time since 2008, dropping interest rates by a quarter point to a range of 2 to 2.25 percent. Since then, the Fed has slashed interest rates to 0 to 0.25 percent. As of its April 2021 meeting, the central bank had no plans to hike interest rates — in fact, some economists at the central bank are arguing for sub-zero interest rates.

 

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When will gold go up?: Gold supply and gold demand

Whether the gold price is sliding down or heading up, market participants are always on the lookout for the next catalyst that will drive the price higher.

Investors should continue to watch for destabilizing geopolitical events, the ongoing socioeconomic impact of the COVID-19 pandemic, future Fed rate changes and ongoing trade tensions between China and other G7 countries, including the US, Canada and Australia.

But what about gold supply or gold demand? The World Gold Council’s (WGC) 2020 report indicates that last year both gold mine production and total gold supply decline by 4 percent compared to 2019. The WGC attributes that slide to operational disruptions caused by COVID-19 lockdowns.

Gold bars and gold coins saw an increase of 3 percent in annual demand, while gold exchange-traded funds reached record year-end holdings of 3,751.5 tonnes, up 120 percent year-over-year. Overall in 2020, investment demand for gold accounted for more than 46 percent of total demand.

However, overall consumer demand for gold in 2020 was negatively impacted by the coronavirus pandemic, resulting in a 14 percent decline that led to total annual demand dipping below 4,000 tonnes for the first time since 2009.

Much of this was attributed to demand for gold jewelry falling by 34 percent year-over-year to a record low of 1,411.6 tonnes. China and India are the two largest markets for gold jewelry, and both countries’ citizens have seen their purchasing power decimated by the coronavirus pandemic. Traditionally, gold jewelry is responsible for 50 percent of global gold demand. However, in 2020 the jewelry sector only accounted for about a third of total gold demand.

On the industrial side, gold is used in electronics technology and is benefiting from the rise of nanotechnology. This demand segment was also impacted by COVID-19 lockdowns, with demand for gold declining by 7 percent in 2020 to 301.9 tonnes.

Over the past decade, central banks have become net buyers of physical gold. “Although 2020 marked the 11th consecutive year of net purchasing by central banks, it was the lowest annual total for central bank purchasing since that trend began in 2010,” notes the WGC. Central bank buying declined by 59 percent for the year, with most of that drop coming in the second half of the period.

Much like gold jewelry and industrial demand, central bank gold demand in 2020 was also negatively impacted by the coronavirus pandemic. Some central banks moved to liquify their physical gold holdings to better support their economies through the crisis.

The WGC expects gold demand from these segments to recover in 2021 and beyond as the world’s economies improve. In its Q1 2021 gold report, the council revealed that consumer gold demand was on the rise, with jewelry demand up 52 percent over the same quarter in 2020. Gold jewelry spending reached US$27.5 billion, which the WGC notes was the highest value for a first quarter since 2013. Gold demand from the technology sector grew by 11 percent year-over-year.

 

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When will gold go up?: Gold in the future

Gold broke through the US$1,900 level in Q2 2021, leading investors to dream of another Summer of Love for the precious metal. Will the gold price post a new record-breaking high in 2021? Many analysts think there’s enough support for gold prices to once again rise above US$2,000.

Byron King, who writes the Whiskey & Gunpowder newsletter at St. Paul Research, which is part of Agora Financial, told INN that he sees continued weakness in the US dollar as very supportive for gold. King thinks the gold price has the potential to repeat last summer’s performance. “Last summer we saw gold over US$2,000 an ounce. I expect we’re going to see the same thing again this summer,” he said.

Watch the full interview with King above.

Ed Moy, chief market strategist at Valaurum and former director of the US Mint, told INN in early May that he expects gold will trade between US$2,000 and US$2,100 by the end of 2021. Moy said that the demand for physical gold as an investment has led to higher premiums, with major gold retailers reporting sales of gold ounces already in that price range.

“So even though the spot price is well below that, to me the real price of gold is what the market is willing to pay for it — and they’re willing to pay up to US$2,100,” he noted. Moy also said that risk of inflation and uncertainty over when the economy will recover are both positive factors for a higher gold price.

Watch the full interview with Moy above.

Gareth Soloway, chief market strategist at InTheMoneyStocks.com, is even more bullish on gold. In a May interview with INN, Soloway pointed to US$2,860 as a price target for gold in the next year or two given the similarities between the supportive fundamentals right now and the 2007 to 2008 market.

“You have gold replicating to basically the tee exactly what it did the last time it broke above its high. It pushed through, then it pulled back … and then it just started to zoom higher — and that’s what I think will actually happen to gold,” he said.

Watch the full interview with Soloway above.

If the gold price continues to rise this year, breaking a new record high is a good possibility. And INN’s Twitter followers agree — at the end of May, we asked whether gold will reach US$2,000 again this summer. More than 87 percent responded in the affirmative.

Now it’s your turn. When will gold go up and break the US$2,000 barrier? Let us know in the comments.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 

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VIDEO — Frank Holmes: Bullish on Gold, “Perfect Storm of Inflation” Ahead

"I think it’s quite easy this year (for gold) to take out last year’s high. It’s very easy to do that," said Frank Holmes of US Global Investors.
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The gold price reached a new all-time high nearly 12 months ago, and as the summer months set in again investors are wondering whether it may do the same thing this year. 

Speaking to the Investing News Network, Frank Holmes, CEO and chief investment officer of US Global Investors (NASDAQ:GROW), said he thinks it’s possible for the yellow metal to set a new record in 2021.

“I think it’s quite easy this year to take out last year’s high. It’s very easy to do that,” he said.

 

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“And once people start believing that the Consumer Price Index (CPI) number is (an) inaccurate forecast of inflation — that there have to be other factors, which has happened in previous cycles — then all of a sudden gold will get a brand new element to it.”

Holmes explained that the CPI is understated because it doesn’t track food and energy. In his view, rising inflation is “baked in” for the next couple of years given the amount of pent-up demand related to COVID-19, as well as continued money-printing efforts around the world.

The US Federal Reserve remains seemingly unconcerned about inflation, and has repeatedly described inflationary activity as “transitory.” When asked if he expects any meaningful changes at this week’s Fed meeting, which runs from Tuesday (June 15) to Wednesday (June 16), Homes said he does not.

“I don’t see any changes. The stock market is acting still pretty resilient,” he explained. “I think it’s full throttle of printing money around the world — we’re talking about trillions and trillions of dollars. And you still have this pent-up demand, so therefore you’re going to have the perfect storm of inflation, and if you can borrow inexpensively you’ll be ahead of the curve.”

Holme also has a positive outlook on bitcoin, and he noted that enthusiasm and acceptance for the cryptocurrency are on the rise. However, he still believes investors should allocate a larger amount of their portfolios to the yellow metal, which he views as more stable.

“(Bitcoin is) very volatile; it’s much more volatile than gold — it’s six times more volatile. So I’d advocate 10 percent into gold and gold-related quality stocks and 2 percent into crypto.”

Watch the interview above for more from Holmes on gold and bitcoin, as well as the potential he sees for the US Global Jets ETF (ARCA:JETS).

Don’t forget to follow us @INN_Resource for real-time updates! 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 

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10 Top Copper-producing Companies

Codelco is in first place, and it’s followed by Glencore and BHP. Read on to find out the rest of the top copper-producing companies.
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Copper prices have made moves in 2021, rallying to record-high levels on expected demand growth amid a supply deficit.

While construction and electrical grids have long been big markets for copper, today the rise in demand for electric vehicles, electric vehicle charging infrastructure and energy storage applications are considered some of the biggest drivers of copper consumption.

CIBC analysts have forecast that copper prices will rise to US$5.25 per pound in Q4 2021 and into the first quarter of 2022. Prices are expected to average US$4.62 in 2021 and US$4.75 in 2022.

 

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Given those factors, investors may want to keep an eye on the world’s top copper-producing companies. According to the latest stats from financial market data provider Refinitiv, the following top copper-producing companies produced the most copper in 2020.

1. Codelco

Production: 1.76 million tonnes

The first top copper-producing company on the list is state-owned Codelco. As the world’s biggest copper producer, the company put out 1.76 million tonnes in 2020. Although there were concerns early in the year that operation curtailments due to the coronavirus pandemic would knock Codelco from its top spot, the Chilean company defied those expectations to meet its production guidance for the year.

In May 2021, Codelco announced the start of a US$1.4 billion project aimed at extending the life of its Salvador mine through 2068 by converting the underground mine to an open-pit operation. The project is a part of the company’s 10 year, US$40 billion plan to upgrade its many aging mines.

2. Glencore (LSE:GLEN,OTC Pink:GLCNF)

Production: 1.26 million tonnes

Major diversified miner Glencore produced 1.26 million tonnes of copper in 2020. After suffering an 11 percent drop in copper production for the first half of the year versus the same period in 2019, the company cut its annual production guidance for the full year to 1.23 million tonnes.

Rather than COVID-19 disruptions, Glencore attributed its production decline to its Mutanda mine being placed on care and maintenance in 2019. Operations at Mutanda, the world’s biggest cobalt mine, are set to resume sometime in 2022. In addition to cobalt, the mine has five copper production lines.

3. BHP (ASX:BHP,NYSE:BHP,LSE:BHP)

Production: 1.21 million tonnes

In 2020, BHP produced 1.21 million tonnes of the red metal. The Australian mining giant managed to keep its copper production numbers high despite the year’s COVID-19 disruptions and strikes at Escondida, the world’s largest copper mine.

Labor strife has continued for BHP into 2021 at the Escondida and Spence copper mines in Chile, although the company claims the current strikes have not impacted production.

 

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4. Freeport-McMoRan (NYSE:FCX)

Production: 1.08 million tonnes

Freeport-McMoRan recorded 1.08 million tonnes of copper production for 2020. Despite coronavirus-related production setbacks, strong copper prices helped to buoy profits for the company.

One of the company’s biggest copper assets is the Grasberg mine in Indonesia, the 10th largest copper mine in the world. The company continues to make significant investments in Grasberg to increase both its copper and its gold production.

5. Grupo Mexico

Production: 975,898 tonnes

Grupo Mexico’s mining division is the largest copper producer in the country. 2020 marked a year of record copper production for the company despite the global coronavirus crisis.

On its website, Grupo Mexico says expansion work at its Buenavista del Cobre mine in Mexico and Toquepala mine in Peru will make the company the world’s third largest copper producer.

6. First Quantum Minerals (TSX:FM,OTC Pink:FQVLF)

Production: 715,762 tonnes

Canada’s First Quantum Minerals produced more than 715,000 tonnes of copper in 2020. The company was able to increase its production guidance for the year despite temporary coronavirus shutdowns at its Cobre Panama mining operation.

In 2021, output is expected to be strong from Cobre Panama, as well as First Quantum’s other two key copper mines, Kansanshi and Sentinel in Zambia.

7. Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO)

Production: 548,074 tonnes

Rio Tinto’s copper production in 2020 totaled 548,074 tonnes. The company is one of the largest diversified mining companies in the world behind BHP — and like BHP, Rio Tinto was also negatively impacted by strikes at Chile’s Escondida mine. Rio Tinto holds a 30 percent interest in the project.

 

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8. KGHM Polska Miedz (FWB:KGHA.F)

Production: 543,672 tonnes

Poland’s KGHM Polska Miedz has operations in Europe, North America and South America, and says that it holds over 38 million tonnes of copper ore resources worldwide. In 2020, the company produced more than 543,000 tonnes of copper.

KGHM recently announced it’s cutting a few small assets from its portfolio, including the Carlotta copper mine in the US. In the first quarter of 2021, the company achieved its best operating and financial results in nearly a decade.

9. Antofagasta (LSE:ANTO,OTC Pink:ANFGF)

Production: 503,577.6 tonnes

Chilean copper miner Antofagasta operates four mines in Chile and produced more than 503,000 tonnes of copper in 2020. The company’s output was impacted by having to place its flagship Los Pelambres mine on care and maintenance, as well as by lower grades at its Antucoya operations.

Antofagasta recently pledged to cut its carbon emissions by 30 percent by 2025 by using renewable energy sources. By the end of 2020, the company reported that it was already powering 19 percent of its operations with renewable sources.

10. Norilsk Nickel (FWB:NNIC)

Production: 456,240 tonnes

Russia’s Norilsk Nickel produced more than 456,000 tonnes of copper in 2020. The company is also the world’s largest producer of nickel and palladium.

Moving forward, by 2030 Norilsk Nickel is looking to increase its copper production by 20 percent from its current level. The company is upgrading its production capacity at the Ruchey copper-nickel mine, replacing its obsolete Kola copper refinery with a state-of-the-art plant.

This is an updated version of an article originally published by the Investing News Network in 2016.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

 

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Slowly At First… Then All At Once

Slowly At First… Then All At Once

Authored by Lance Roberts via RealInvestmentAdvice.com,

Bull markets always seem to end the same – slowly at first, then all at once.

My recent discussion on why March 2020 was a “correction” and…

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Slowly At First... Then All At Once

Authored by Lance Roberts via RealInvestmentAdvice.com,

Bull markets always seem to end the same – slowly at first, then all at once.

My recent discussion on why March 2020 was a “correction” and not a “bear market” sparked much debate over the somewhat arbitrary 20% rule.

“Price is nothing more than a reflection of the ‘psychology’ of market participants. A potential mistake in evaluating ‘bull’ or ‘bear’ markets is using a ‘20% advance or decline’ to distinguish between them.”

Wall Street loves to label stuff.  When markets are rising, it’s a “bull market.” Conversely, falling prices are a “bear market.” 

Interestingly, while there are some “rules of thumb” for falling prices such as:

  • A “correction” gets defined as a decline of more than 10% in the market.

  • A “bear market” is a decline of more than 20%.

There are no such definitions for rising prices. Instead, rising prices are always “bullish.”

It’s all a bit arbitrary and rather pointless.

The Reason We Invest

It is essential to understand what a “bull” or “bear” market is as investors.

  • “bull market” is when prices are generally rising over an extended period.

  • “bear market” is when prices are generally falling over an extended period.

Here is another significant definition for you.

Investing is the process of placing “savings” at “risk” with the expectation of a future return greater than the rate of inflation over a given time frame.

Read that again.

Investing is NOT about beating some random benchmark index that requires taking on an excessive amount of capital risk to achieve. Instead, our goal should be to grow our hard-earned savings at a rate sufficient to protect the purchasing power of those savings in the future as “safely” as possible.

As pension funds have found out, counting on 7% annualized returns to make up for a shortfall in savings leaves individuals in a vastly underfunded retirement situation. Moreover, making up lost savings is not the same as increasing savings towards a future required goal.

Nonetheless, when it comes to investing, Bob Farrell’s Rule #10 is the most relevant:

“Bull markets are more fun than bear markets.” 

Of this, there is no argument.

However, understanding the difference between a “bull” and a “bear” market is critical to capital preservation and appreciation when the change occurs.

Defining Bull & Bear Markets

So, what defines a “bull” versus a “bear” market.

Let’s start by looking at the S&P 500.

Bull and bear markets are evident with the benefit of hindsight.

The problem, for individuals, always comes back to “psychology” concerning our investing practices. During rising or “bullish,” markets, the psychology of “greed” keeps individuals invested longer and entices them into taking on substantially more risk than realized. “Bearish,” or declining, markets do precisely the opposite as “fear” overtakes the investment process.

Most importantly, it is difficult to know “when” the markets have changed from bullish to bearish. Over the last decade, several significant corrections have certainly looked like the beginning of turning from a “bull” to a “bear” market. Yet, after a short-term corrective process, the upward trend of the market resumed.

So, while it is evident that missing a bear market is incredibly important to long-term investing success, it is impossible to know when the markets have changed.

Or is it?

The next couple of charts will build off of the weekly price chart above.

Identifying The Trend

“In the short run, the market is a voting machine but in the long run it is a weighing machine” – Benjamin Graham

In the short term, which is from a few weeks to a couple of years, the market is simply a “voting machine” as investors scramble to chase what is “popular.” Then, as prices rise, they “panic buy” everything due to the “Fear Of Missing Out or F.O.M.O.” Then, they “panic sell” everything when prices fall. However, these are just the wiggles along the longer-term path.

In the long-term, the markets “weigh” the substance of the underlying cash flows and value. Thus, during bull market trends, investors become overly optimistic about the future bid-up prices beyond the practical aspects of the underlying value. The opposite is also true, as “nothing has value” during bear markets. Such is why markets “trend” over time. Eventually, excesses in valuations, in both directions, get reverted to, and beyond, the long-term means.

While the long-term picture is relatively straightforward, valuations still don’t do much in terms of telling us “when” the change is occurring.

Change Starts Slowly, Then All At Once

“Tops are a process and bottoms are an event” – Doug Kass

During a bull market, prices trade above the long-term moving average. However, when the trend changes to a bear market, prices trade below that moving average.

The keyword is TREND. 

The chart below which compares the market to the 75-week moving average. During “bullish trends,” the market tends to trade above the long-term moving average and below it during “bearish trends.”

Since 2009, there are four occasions where the long-term moving average was violated but did not lead to a longer-term change in the trend.

  • The first was in 2011, as the U.S. was dealing with a potential debt-ceiling default and a downgrade of the U.S. debt rating. Fed Chairman Ben Bernanke started the second round of quantitative easing (QE), flooding the markets with liquidity.

  • The second came in late-2015 and early-2016 as the Federal Reserve started lifting interest rates combined with the threat of Britain leaving the European Union (Brexit). Given the U.S. Federal Reserve had already committed to tightening monetary policy, the ECB stepped in with their version of QE.

  • The third came at the end of 2018 as the Fed again tapered its balance sheet and hiked rates. The market decline quickly reversed the Fed’s stance.

  • Finally, the “pandemic shut-down” of the economy led to a price reversion in the market. The Fed intervened with massive liquidity injections and the start of QE-4.

Each of these declines only gets classified as “corrections.” The market did not sustain the break of the long-term trend, valuations did not revert, and psychology remained bullish.

Still A Bull Market

Today, Central Banks globally continue their monetary injection programs, rate policies remain at zero, and global economic growth is weak. Moreover, with stock valuations at historically extreme levels, the value currently ascribed to future earnings growth almost guarantees low future returns.

As discussed previously:

Like a rubber band stretched too far – it must get relaxed in order to stretch again. The same applies to stock prices that are anchored to their moving averages. Trends that get overextended in one direction, or the other, always return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average.”

The chart below shows the deviation in the market price above and below the 75-week moving average. Historically, as prices approach 200-points above the long-term moving average, corrections ensued. Thus, the difference between a “bull market” and a “bear market” is when the deviations occur BELOW the long-term moving average consistently. 

Since 2017, with the globally coordinated interventions of Central Banks, those deviations have started exceeding levels not seen previously. As of the end of May, the index was nearly 800 points above the long-term average or 4x the normal warning level. 

We can see the magnitude of the current deviation by switching to percentage deviations. Historically, 10% deviations have preceded corrections and bear markets. Currently, that deviation is 22.5% above the long-term mean.

Notably, the decline below the long-term average reversed quickly, keeping the “bull market” trend intact.

Conclusion

Understanding that change is occurring is what is essential. But, unfortunately, the reason investors “get trapped” in bear markets is that when they realize what is happening, it is far too late to do anything about it.

Bull markets are lure investors into believing “this time is different.” When the topping process begins, that slow, arduous affair gets met with continued reasons why the “bull market will continue.”  The problem comes when it eventually doesn’t. As noted, “bear markets” are swift and brutal attacks on investor capital.

As Ben Graham wrote in 1959:

“‘The more it changes, the more it’s the same thing.’ I have always thought this motto applied to the stock market better than anywhere else. Now the really important part of the proverb is the phrase, ‘the more it changes.’

The economic world has changed radically and will change even more. Most people think now that the essential nature of the stock market has been undergoing a corresponding change. But if my cliché is sound, then the stock market will continue to be essentially what it always was in the past, a place where a big bull market is inevitably followed by a big bear market.

In other words, a place where today’s free lunches are paid for doubly tomorrow. In the light of recent experience, I think the present level of the stock market is an extremely dangerous one.”

Pay attention to the market. The action this year is very reminiscent of previous market topping processes. Tops are hard to identify during the process as “change happens slowly.” The mainstream media, economists, and Wall Street will dismiss pickup in volatility as simply a corrective process. But when the topping process completes, it will seem as if the change occurred “all at once.”

Tyler Durden Tue, 06/15/2021 - 10:10

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