I’m hearing more and more confusion about the investment markets these days. The stock market won’t down, some say, and gold is going the wrong way. What’s going on?
Admittedly, if you have to make money in this market your situation gets much harder. Most of your money should have been made when it was easy. Now it’s tough. The markets are a mess and make little rational sense. Gold should be going up and “the market” should be going down. But the opposite is happening. See below.
An ill effect of QE is the gross manipulation of widely followed market indexes like the Dow Jones Industrial Average. The Wall Street establishment manipulates the Dow and S&P to confuse investors with mixed signals; they do so to lure idle capital into shark infested waters, so they can feed off the carnage.
I caution you not to bite.
Market manipulation and investor confusion are major tactics Wall Street has employed for a very long time. They do it all the time, and they’re doing it right now. (see my book for details.)
That’s why I tell people to follow my blogs and the 15-51 Indicator. Because it’s not yet widely followed by the Wall Street establishment, there is very little market manipulation in the 15-51i. That’s the reason it tells a completely different story than the DJIA — and a much truer picture of Market reality. Below is the same chart as the above but with the 15-51 Indicator in it.
Strength is softening because growth is weakening – which started with a surprisingly low fourth quarter 2012 growth rate (just +.4% during the Christmas quarter.) The 15-51 Indicator predicted that softness in September when in began its correction. Those who have read my book know how the 15-51 Indicator is built, that it is an above-average portfolio designed to outpeform the Dow Jones portfolio over the long-term. And now it is proving to be the leading stock market indicator, as the Dow is clearly following its path seven months in arrears.
Based on Market fundamentals, stocks should be going down (like the 15-51 Indicator is) and gold should be rising. The 15-51 Indicator is ahead of the game. But gold is down sharply again this week. Why?
I hate to say it, and I’m not suggesting it’s 100% of the reason for gold’s decline, but now with a wide variety of gold exchange-traded funds (ETFs) the price of gold is manipulated now more than ever before. ETF’s make shorting gold easier, and therefore, open to more people (increased demand). This is probably the reason short positions for gold are at record highs.
Manipulation – it’s a bigger factor than most consider.
Now I understand that a slowing economy generally reduces demand for metals used in the production of goods, like copper, silver – and gold for jewelry. I get that. But gold is down 12% in the last two weeks in what can be considered nothing short of an awful investment environment, as highlighted by these headlines from this week’s news:
• Retail Sales Fall as Consumers Stick to Essentials
• China GDP Growth Slows
• GE Warns of Europe Weakness
• IMF Cuts Global Growth Forecasts
• Fitch Downgrades U.K. Rating
The most important element to making investment decisions is to make them for the right reasons and to base those decisions on what’s actually happening in the marketplace. (Let me know if you need help with this.)
I understand how easy it is to question yourself and/or your method when you see “the market” and gold doing something they shouldn’t be doing. It’s easy to think you’ve missed a piece to the puzzle that would have prompted you to buy into the Dow at 13,000 – a move that would have earned you 12% in just a few months.
Don’t persecute yourself. That piece of the puzzle doesn’t exist. Buying into Dow 13,000 is a pure gamble, total speculation. That’s not investment. Investing is easy and requires no luck. Market timing demands luck because it is not based on Market fundamentals, which investors rely on to make long-term decisions.
The global economy is shrinking and the fiscal position of sovereign states continues to weaken. These conditions are bad for stocks and good for gold.
Mass market manipulation is only temporary; and when “the market” corrects – so will gold.
Stay tuned…