Most Recent Audio: 29 May 2020

David Fuller and Eoin Treacy's Free (Abbreviated)
Comment of the Day

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May 29 2020

Commentary by Eoin Treacy

May 29 2020

Commentary by Eoin Treacy

Email of the day on risks versus liquidity

The trillions of US dollars / Euros / Yens etc. given to us by central banks and governments are like painkillers leading us to feel better than we should feel. The SP500 back at over 3.000 point. Stock markets look one year ahead, right? But aren’t we too optimistic? Consumers in the US are either without a job and or savings or they are saving more than usual, which is a serious headwind. Forty percent of people with a lower income have lost their jobs. As if all those SP500 companies do not need any customers, really? If large companies cut costs there is less income for other smaller companies. This domino effect is just starting, meaning even more people will be without job soon. Maybe I’m too negative, I really hope I’m wrong. Back to the stock market. To avoid a subjective vision on the stock market I’m looking for indices to give me an objective warning signal of a top. There are four indices I selected: ND100, Fang, VIX and AD/DE. I would like to hear your opinion and suggestions about this please. Looking forward to Friday’s big picture video. Have a nice weekend.

Eoin Treacy's view

Thank you for this question which I believe just about everyone has an interest in. I will distil it down to the simple question of whether liquidity provision trumps all other factors combined? It’s a big topic but the evidence over the last 12 years supports the view that the primary result of quantitative easing is to inflate asset prices. With interest rate suppression actively underway nothing has really happened to challenge that conclusion. Nevertheless, prices do not go up in a straight line indefinitely and someone is going to have to pay for the largesse eventually.

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May 29 2020

Commentary by Eoin Treacy

US Economic Outlook & Implications of Current Policies for Inflation, Gold and Bitcoin

Thanks to a subscriber for this report from Goldman Sachs which may be of interest. Here is a section:

Gold prices are well above their long-term inflation-adjusted averages. Over time gold has barely outperformed inflation with a real return of 1.0% before cost of storage and insurance, compared to 2.7% for 10-year US Treasuries.

The fascination with gold has existed since the Egyptians first used gold bars as money as early as 4000 BC. The opening paragraph of the late Peter Bernstein’s book, The Power of Gold: The History of an Obsession, captures the sentiment: At the end of the 19th Century, John Ruskin told the story of a man who boarded a ship carrying his entire wealth in a large bag of gold coins. A terrible storm came up a few days into the voyage and the alarm went off to abandon ship. Strapping the bag around his waist, the man went up on deck, jumped overboard, and promptly sank to the bottom of the sea. Asks Ruskin: ‘Now, as he was sinking, had he the gold? Or had the gold him?’

And

Even during shorter windows when inflation has been above 6%, gold only outperformed equities between January 1970 and June 1970, and then again between August 1973 and July 1982.

In other periods, when inflation has been less than 6%, equities have outperformed gold.

Eoin Treacy's view

This report recaps some of the most common negative arguments for investing in gold and they are relevant at some points in the broad market cycle. However, there is a cyclicality to gold’s turns at outperformance and the broad machinations of the global economy are currently at least as bullish as they were in the early 2000s.

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May 29 2020

Commentary by Eoin Treacy

An Investment Only A Mother Could Love: The Tactical Case

Thanks to a subscriber for this report by Lucas White and Jeremy Grantham for GMO may be of interest to subscribers. Here is a section:

Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area. 

The resources sector has been somewhat challenged by the decline in some commodity prices, particularly oil, over the last months. However, they represent a hedge against potential future inflation. They also have growth opportunities from an inevitable infrastructure global growth cycle; fuelled by a desire to support growth in the aftermath of the coronavirus.

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May 29 2020

Commentary by Eoin Treacy

Eoin's personal portfolio - Last updated March 27th

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.

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May 29 2020

Commentary by Eoin Treacy

Please note - Comment of the Day will be updated as normal on Monday but the office will be closed as Sarah will be away.