Financial Sector Mayhem: Buying Panic! Selling Panic! (GS)

Simply amazing.   After we were told that a Trump presidency would sink the markets, destroy relations with longstanding allies, foment distrust and enmity with Mexicans, Canadians, Chinese, Japanese, and nearly every other foreign power out there, start trade wars, unleash civil unrest and crush the world’s last remaining hopes… precisely the opposite has happened.   It appears that everyone is now lining up to kiss the godfather’s ring.   We won’t outline the entire host of predictions offered by the mainstream media that fell afoul of reality, but we do offer one, brief item and a picture.   The ‘item’ comes by way of the Goldman Sachs Group Inc. Analyst Index, a survey of Wall Street’s deepest thinkers on a range of issues.   The chart below shows the group’s answer to the question of which sectors would likely thrive as result of a Trump victory, which would wither, and those for which the analysts hadn’t a clue.  The cumulative tally is shown below – While much uncertainty abides (viz. the middle bar), the vast majority of responses pointed to favorable outcomes across the board – outpacing unfavorable expectations by a 3:1 ratio.   That is, analysts believe that…

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Hey, Gold Bug! Welcome to the Inferno! (GLD,TSLA,GS,XLF,FB)

It didn’t take long, that’s for sure.   Once the mighty Trump landed in the White House, it was time for Quinn the Eskimo and his merry band of goldphiles to turn-tail and run.   Apparently.   And while we may see a bounce here in the precious metals near-term, the fires of hell are only now being stoked for gold lovers – may they endure their agony gracefully.   Either that, of course, or they can sell. We had a friend several years ago who refused to heed our warning about an imminent selloff in the PMs.  He had just loaded up on silver as the metal was topping, and we warned him strenuously against the move.  Every sign and symbol associated with that metal was screaming ‘overbought’ at that hour, but this fella thought he knew better.  He piled his own life savings on top his father’s, which he was also managing, and spoke about the fortunes he was about to make.   After that, we spoke less.  He was embarrassed, and we understood.  When we did meet, he would ask our opinion, whether we thought the metal had bottomed, or if it was close to bottoming. We…

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CONFIDENCE RETURNS! [MONEY FOLLOWS] (GS,GDX,IYT,FB,UUP)

Not even Donald Trump shoots from the hip like we do at Normandy.   You will not get any straighter answers delivered on things that matter, without all the blather and hype, as you do here.   And more than that, you get it with a dash of humor, too!   So count yourselves among the luckiest, and possibly richest sons’a’birches in the investment world.  And all thanks to us.  The planet’s wisest and humblest newsletter publishers. You’ll remember that some three weeks back we tipped you off regarding the market’s likeliest reaction to a Trump victory vs. a Hillary win.  We even drew a picture for you that the bigwigs in management decided to post on our website.   The chart looked like this – Now, there’s no need to repeat ourselves and comment a second time on the extreme genius at work here in the halls of the Normandy Mansion, Maryland’s chic-est corporate castle, situated in the heart of the east coast’s grandest neighborhood, a Gatsbean delight if there ever was one.   But you no doubt noticed that the left hand chart that we developed prior to the election bears a striking – some would say ‘eerily…

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Helen Roper’s Revenge (FAS,GS,TLT,GLD,UUP,GDX,KWHIY)

The old lady’s loose flowing garments were testimony to her growing brood of kids and the tendency, as one gets older, to pay less attention to the body’s need for dietary discipline.   We’re speaking, of course, of everyone’s favorite landlady (and Stanley’s wife), Helen Roper, who in many ways characterizes the investment landscape we’re now passing through.   Helen, you’ll recall was a product of the post-war generation’s affluence and the yearning of many aging folk in the 60’s and 70’s to reconnect with their inner child and lead a more fancy-free, shame-neutral life than their parents.   A Generation of Teens   So, too, with us today, though we’ve taken Helen’s moral lassitude and free-thinking, love-me-dobedobedo to heights undreamt of in 1977.   And that’s also likely why our markets are so disconnected from reality, and will continue to be so until all of us have doffed for good the fat rings and frisky hairstyles of the late mamasita who never managed to get her Stanley.   Recovering from Vladimir   We’re now going to take a quick run through the trades we missed reporting while we were suspended in a borscht-induced hiatus this last quarter. We now…

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The Sachs of a McMorAno (FCX,GS)

    We have to open with a quick shout-out to long time reader and avid backtalker Jesper, who recently took issue with fellow scribbler Hugh L. O’Haynew’s assertion that we here at Normandy were fibbing (the language was far more scurrilous than that – shame, Jesper!) when we said we’d long recommended the purchase of U.K. Sovereigns.   Now, Jesper assured us that he was still amorous and loving of the crew here at Normandy, but, alas, Hugh’s a sensitive chap, and doesn’t take well to name calling. He asked me for a few spare Zoloft tabs and a hit of Ritalin – to which I gladly obliged – and then told me to set the record straight.   Here goes…   Now, Jesper, dear friend, you should know that a trip downstairs to the holy catacombs beneath the mansion that houses Normandy Research is no roasted marshmallow affair. It’s cold and damp down there, bud – enough to send a fellow to the sanatorium for a week. But Hugh implored us, and that’s where the records are kept, so below we went.     The work was onerous and the air was dank, but in the end we…

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Land of the Rising Gun Trade (KWHIY,GS,TLT,DJXT,DJXR)

  We’ve spoken numerous times in this space on the theme of war and its place in the current investment cosmology, and we feel it’s time to expand that coverage somewhat today.   There are a great many conflicts underway globally that America is only involved in tangentially, but we believe that’s about to change.   There exists, for instance, the standoff between Russia and Ukraine, where U.S. forces have been growing incrementally; between Syria and a host of anti-government groups in that country, in which American forces have participated to date in limited fashion – although Russia’s recent entry into that sphere likely betokens an upgrade of American force in the region.   You have the Saudi-Yemeni conflict, in which Iranian and U.S. armed forces have until now played only supporting roles. Iraq, Korea, the South China Sea – across the globe, American servicemen are stationed in a great many simmering and outright hot locations that are just now about to get hotter.     The situation is unfolding, we believe, in tandem with an understanding that we’re on the verge of a global structural financial event. When exactly that event will occur is unknown, so the great powers…

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Unheard of Leverage on Bond Market’s Decline (TMV,TLT,GS)

  Is it over?   Is that it?   Everyone’s asking the same question these days: was it just a ‘dip’? Can we get back in? Are we due for another swoon?   Everyone wants to buy back into stocks, and many have been waiting for a good entry point.   But their tender tummies couldn’t handle another dust-up.   So what’s the answer?   Here at Normandy, we say don’t worry. The stock market is poised to climb again, and one needs look no further than the bond market for proof.     This says it all.   It’s the iShares 20+ Year Treasury Bond ETF (NYSE:TLT) for the last six months, and as you can see, tremendous flows of cash came pouring into the fund while the panic was on during the summer months (red line).  More significantly for us, however, was how fast that same cash came racing out of the bond realm after the August 24th top (black square).   For us, that indicated that this was not, in fact, safe haven money seeking a place to dock while the storms were outside a’raging. Rather, they were funds that were temporarily parked from the get-go. This…

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The Goldman Sachs Strangle/Straddle Calendar Spread (GS, XLF)

When markets are falling, it’s generally bad news for Wall Street. Belt-tightening starts, brokers go commissionless, underwriting stops, layoffs follow, and while there may be a few trading desks that cash in on the tumble, by and large everything freezes up as folks slowly step to the sidelines and wait out the storm in cash.  That’s when Wall Street becomes a barometer of … well, Wall Street.   Consider a relatively recent example. Here’s a chart of the Financial Select Sector SPDR ETF (NYSE:XLF) prior to and during the great Lehman Bros. market meltdown of 2008/09.     The financials lost 84% of their value over the course of two years, bottoming in line with the rest of the market in March of 2009 and signaling a major retrenchment on Wall Street that cost tens of thousands of jobs across the banker/broker-dealer sector. Since then, it’s been a slow and steady rise to recoup less than half that loss, and Wall Street, of course, has itself added new jobs and business on the way.   No doubt some financials did better and some did worse, but there’s no denying the fact that a stock market crash of this magnitude will, of necessity, involve a complete…

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Assuaging Your Worries (XHB, GS, HYG)

The greatest risk any investor faces in a bull market is jumping early. We therefore want to dedicate this letter to reassuring you that despite all the noise, the bull is strong. And for those who are, indeed, considering selling – and even more for those who’ve yet to climb aboard, we say – We start this week’s shenanigans with a word on the homebuilders. You’ll remember that last week’s letter was all hot and bothered by the prospect of a homebuilder breakout above an ascending triangle, a technical development that normally brings with it a rush of excited buying. Well, looky here –   This is the SPDR S&P Homebuilder ETF (NYSE:XHB), and as you can see, the breakout (in red) occurred directly after our letter went out. Adding to the strength of the move, we saw the moving averages unfurl completely (in green), a development with profound long term implications for the stock and sector. With daily volumes on the rise and both RSI and MACD showing little sign of reaching ‘overbought’ levels, we believe the cruise is on for the homebuilders, and, moreover, expect the sector to ignite the rest of the domestic economy in the months…

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Anxiously Awaiting the Bull’s Advance (GLD, GS, FCX)

Do you remember the Mind Attack of 2015? Remember where you were? The anxiety you felt? The fear? As if things were closing in? Some say it’s passed, but I don’t know… There’s certainly something to be said for the last few weeks tension in international markets. Between ISIS’s latest hijinks, the ongoing war for Eastern Ukraine, Greece’s temper tantrum and the murderous rampage underway in West Africa, we certainly don’t lack for reasons to be antsy. And yet, at the same time, we also see a great deal of light. Start with the major market indexes. The Dow is a mere 84-points from an all-time record high. Huh?   That’s right – a move of just one half of one percent will set a record, yet who’da thunk it – what, with all the trash talk from the media. Consider also – Sentiment is strong – because it’s weak. How’s that? Take a look at the charts – This is the latest read from the American Association of Individual Investors (AAII). And as a barometer of Main Street’s excitement for stock ownership, it’s, of course, best used as a contrarian indicator. That is, high bullish readings (and corresponding low…

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