Weekly Update 20-May-2016
Most stocks were higher this week, while currencies, bonds, and commodities were mixed. As has been the case for the last few weeks, commodities were the most volatile assets, with crude oil showing the largest gains (up 5.7%) while coffee and palladium (off 3.3% each) had the largest losses.
The USD and CNY were the strongest currencies, up 0.9% each. The Canadian dollar was the weakest government-issued currency, off 0.9%. Bitcoin was weakest of all, down 1.9% to 10.9 grams, exactly where it was one month ago.
Among equities, only the HUI gold stocks, which fell 1.3%, were lower. Japanese stocks showed the biggest gains, rising 1.8%, followed by the S&P 500 and Euro STOXX, which gained 1.2% apiece. Bonds were mixed, with the short term SHY lagging USD cash (rising 0.7% while cash rose 0.9%) and the long term TLT falling 0.7% (not too surprising after the prior week's blockbuster 3.3% gain).
Despite crude oil's big rise, most other commodities were lower, led by coffee and palladium, and followed by silver, which fell 2.2% to 0.411 grams. Platinum was down 0.7% while copper broke even for the week, and cotton managed a 0.1% gain.
Looking through the charts this week, platinum and Bitcoin strike me as offering the most attractive risk/reward profiles. Silver needs to break out above its 2015 high of 0.45 grams to become technically attractive. Gold stocks have had a great run so far this year, but seem to be struggling at these levels, and may be due for a bit of a pullback before moving higher to test resistance around 6.5 grams. Most other stocks, bonds and currencies seem overvalued, especially the USD and its derivatives.
With the economic instabilities caused by extended ZIRP and NIRP, and the political instabilities of the upcoming US elections and the BREXIT vote, it makes more sense than ever to focus on reducing counter party risk. Gold, silver, platinum and Bitcoin are excellent ways to do this: gold for preservation of capital, platinum and silver for low risk profit potential, and Bitcoin (with careful position sizing) for portability, instant worldwide electronic transfer, and the potential for huge gains (though with a risk of total loss, as well.)
I will be returning from my Caribbean sailing adventure this week, and look forward to elaborating on these themes and answering your questions in the coming weeks. Thanks for your patience and support!