Chris Martenson: Welcome to another www.chrismartenson.com podcast. I am, of course, Chris Martenson and today we are talking with Frank Barbera one of the top experts on precious metal mining companies and editor of the very well respected Gold Stock Technician newsletter. In his analysis for investors, Frank overlays a macro outlook on top of a highly rigorous technical analysis and employs a market-timing approach to reduce the inherent volatility within this very high beta sector. So for many years now, Frank has also managed private equity capital most notably for the Caruso Fund with particular focus on precious metals, energy, currencies, all things of, I know, intense interest to our listeners here. Frank, we’re delighted to have you here. With all the recent action in gold, we have a lot to talk about.
Frank Barbera: You bet Chris. Thank you for having me.
Chris Martenson: Oh, my pleasure. Now, you know, gold’s up a 180 dollars an ounce since early July. What do you see as some of the key drivers behind this? You know, how much momentum does this run up have in your estimation?
Frank Barbera: Well, strangely enough, you know, I know there are a lot of people out there who are saying that gold could be a bubble and that maybe it’s going to come down sharply. Right now, I would strongly disagree with that. I think when you take a survey of what’s going on in the world and you look at Europe. Europe is in the midst of a major banking crisis, a banking crisis that could have widespread contagion from not only Europe but back to the United States through the credit default markets. And the U.S. also has, as we’ve seen now, major debt problems and a very difficult situation in terms of an economy that seems to be relapsing back into recession and that, once again, is putting massive pressure on the Federal Reserve to try and do something to ameliorate what looks like is shaping up to be another hard landing. You look at all of these factors and what it adds up to is gigantic uncertainty. And it is that uncertainty which is under painting the move higher in precious metals. Another important point which your listeners should really take into consideration is the fact that this is a climate where because global growth is slowing, short term interest rates especially here in the United States are really locked at zero.
Now, depending on what metric of consumer prices you want to look at – let’s say we take this fairly horrible CPI that’s constructed at 2% inflation. Right now you have negative real rates in the United States. And if you go back over a historic period of time and you look at negative real rates and the price returns on gold, gold does very, very well as long as short term rates are in negative territory. Now when short term rates are normalized and they move above the rate of inflation that at that point can become a problem for gold. I don’t see any way that that’s going to happen for the longest period of time especially when you start to look at some of the recent economic data that’s coming out of the States. We see very weak employment. We see GDP backward revisions as far as 2003; they went back just recently to downwardly revise the GDP data, the recent quarter coming in at about 0.38 with final demand at around 0.08. So you have a comatose growth situation here in the United States. No growth, chronically high structural employment - that is a situation where it’s impossible to see how short term interest rates are going to start to move up. So I think negative real rates are here to stay and gold will continue to surge.
Right now, Chris, the other thing that’s really amazing about all this is like you said, we’ve had this strong move up in precious metals prices, in gold prices. But remarkably, from a technical point of view we really have not seen any kind of bullish enthusiasm. It’s slowly starting to creep into the market over the last day or two but I look at dollar-weighted call-to-put options data each day and that tells me a lot about how much money is flowing into calls and how much money is flowing into puts. And, right now, even though we’ve gone to $1660 on the gold price we have not seen those call-to-put ratios move up to readings near two and a half or three to one, which would typically tell us we’re getting into a frothy market. They’ve been hovering around 160, 170, and that tells me that there’s still plenty of room to go. Also, on a momentum basis, if you look at moving average convergence, divergence, which is called MACD or RSI. We’re seeing strong momentum confirmation by the move up in the precious metals - outstanding relative strength. To me this tells me that gold could easily surge in coming weeks towards the 1800 level and I have really very little doubt in my mind that we’ll see 2000 over the next two to three months. So I think the price is going sharply higher from here.
Chris Martenson: So against that though we see that the USD is up about a full tick today, up almost 1.4% at 75. It looks like a decent pop for the day but it seems almost maybe stuck in a range. How are you looking at the dollar now which is the anti-gold?
Frank Barbera: Well, that’s a good point and I’m glad you brought that up. The one caveat I would have with gold in the short term is that you could see a very short-lived pull back. So this is not something that I think investors should really be terribly worried about but I could see something, for example, like the GLD pulling back towards maybe the 155 to 160. We’re at 160 right now but about the 155 to 156 area. So you could have a couple more days of strength in the dollar and you might get a few more days of short-term weakness in the gold price but I think within a couple of days were going to make another low in the gold market and then from there the price will turn higher and begin another large trending move to the upside. So in the very short term I do think we’re going to see a little bit more dollar strength. The dollar index is at about 75.02 as we speak here on a Thursday morning up about a buck. I think you could see a push up towards about 77.5 maybe 78 over the next four to five days.
And, now there’s one other little caveat. The dollar is showing a very, very weak pattern. When we talk about poor quality rallies this is really the textbook definition of a poor quality rally. So I’m not really that sure that we’ll even make a move to 77 but I’m allowing for the possibility that it could do that over maybe the next week or so. That could correlate to some kind of a short-term period of weakness in the gold price and at that point then I think we’ll probably start to see signs of a reversal back to the downsize in the dollar and a reversal back to the upside in gold. So, you know, one of the things I would really recommend to listeners is to not worry too much about short term moves. This is one of those times you really have to think big picture. If you’re very concerned about getting the best price, break up the capital that you have into smaller increments and dollar cost your way into the market in stage tranches because trying to put too fine a point on any of these markets right now is not the greatest idea. But, for what it’s worth I do think we’ll see a little more bounce in the dollar and short term pullback in gold and then I think gold will reverse higher.
Chris Martenson: You know this fits largely with what I’ve been telling people as well. I’m also noticing for the dollar that something very unusual has happened. The past 24 hours I think we’ve had three central bank interventions on behalf of the Swiss, the ECB, also Japan. I see the Japanese…
Frank Barbera: Japan, sure.
Chris Martenson: Yeah, the Yen’s down 2.3% on the day against the dollar. That’s big. That’s a giant move. So some of this dollar bounce is really engineered, you know, it’s manufactured in a central bank near you, so…
Frank Barbera: That’s exactly right.
Chris Martenson: So does that account for some of the poor quality of this rally that you’re seeing. It’s really – you know, central bank interventions have a really bad habit of sticking. They don’t stick well.
Frank Barbera: They don’t stick well and that’s exactly the way this pattern looks like it’s going to play out. What I notice is that more or less between January of this year and early May of this year the dollar was in a strong downtrend. It kind of pushed down to new multi month lows and got very oversold. In any market, when a market gets very oversold, if it can build a solid base and then come out of that base with a vengeance and move up very quickly that’s where you get your best rallies. When a market sort of languishes near the lows, what tends to happen is that oversold condition dissipates and then will over time the more it languishes and the more it lingers near those lows, when you finally do get a rally the market tends to get very overbought very quickly and that’s exactly what we’re seeing in the dollar. The lows, the oversold, maximum was on May 2nd and May 3rd. It’s been compressed and lingering down near the lows through June, through July, now we’re in August and we’re getting a little bit of a bounce, and what I see happening on my technical indicators is that we’re moving up and getting overbought very quickly. That tends to make it very self limiting. And, frankly, 76.5 is very strong resistance. That’s the high that we saw on May 24th and also on July 11th. Maybe we go up and take out those highs by just a few ticks for just a few days and then turn down but this looks like it’s going to be very labored and really a short run affair. And my suspicion is that if it does turn down later in the month of August in the dollar, it may turn down into some kind of massive break to the downside because this is a chart that’s hovering just above 30 to 40 year lows.
So a renewed move to the downside here in the dollar during the second half of 2011 could end up bringing about a stunning decline. So this is something I think that your listeners should be very attentive to, keep a strong watch on the dollar, and start to think about if it starts to turn down, and there’s nothing wrong with waiting for some confirmation. I usually – even though I’m kind of geared towards looking for turns in the market I usually like to put money when I actually start to see a trend develop. So there’s nothing wrong with waiting for confirmation but most Americans really need to stop thinking in the same kind of dollar-centric terms that they have over the last, you know, the bulk of their lifetime. It’s time to start thinking about deploying assets and deploying savings into different kinds of currencies. You look at, let’s say for example, the Canadian dollar, the Aussie dollar, maybe the Singapore dollar, and the Swiss Franc, those are all fairly steady currencies. Some people might be interested. I don’t work for them but I personally have an account at Everbank and when I get my paycheck in every two weeks I usually allocate some of it into different currencies. That’s one of the few banks in the United States where people can go to open up multi-currency bank accounts. You can save in currencies other than dollars. And, I think that’s an idea whose time has come. So that’s one way of hedging dollar weakness.
Chris Martenson: Yeah, you know, I’ve been with Everbank for a number of years myself principally in Canadian dollars at this point.
Frank Barbera: That’s exactly right.
Chris Martenson: Yeah, that’s worked out really well for me.
Frank Barbera: A sidebar – and again, it’s another one of those personal choices people can think about but, you know, Canadian banks – this always becomes an issue with reporting because when you open a foreign bank account whether it’s a Canadian bank or a Swiss bank, you know, you have to do a lot of extra reporting to both the Treasury and the IRS and a lot of people don’t feel that that scrutiny is really worth it. So that’s where Everbank makes a lot of sense but I happen to be a big fan just to go on the record with a plug: I love the Canadian banking systems. They have four or five large money center banks there: Royal Bank of Canada, Toronto Dominion, Bank of Montreal. There’s a lot of good places up there where you can look at those banks and say, gee, these banks have great balance sheets. The country has low debt, and they have very conservative lending policies. They never really did anything reckless with regard to real estate lending over the last few years. And, so, you know, that’s a very – that’s a real sea of tranquility in terms of just wanting to park money some place. It comes at a big price in terms of reporting requirements, which is always a personal decision but that’s another idea by the way.
Chris Martenson: That’s right. So to summarize here you think for the new few weeks or a period of time the dollar is the best horse in the glue factory. The chart is a little bit weak. And, if I was going to pick an event that would support the idea of the chart being weak and why people are leery of the dollar it’s because, you know, the fed is now the last central bank that’s not really tossing another QE bundle into the party. So I think everybody’s sort of anticipating that. I certainly am. I’m looking at the stock screen right now. We’ve got all the major indexes down over 2%. It’s pretty much a red blood bath here on August 4th. We’re seeing the commodity index get hit hard. Its’ beginning to look, smell, and feel a little bit like 2008 all over again. Do you see any similarities there or is this different?
Frank Barbera: Well, I’ve been writing – and I’ll take a little credit – I’ve been writing in my newsletter over the last few weeks the Gold Stock Technician, Chris, and I’ve been warning my readers that the market was building a head and shoulder top. In the last letter that I sent out I told – which went out over this Sunday - I told them I thought that the market could have a very violent move down this week, a mini crash, and that seems to be exactly what we’re getting. My target was about 1155 on the downside for the S&P on this move. And, I think we could see 1120 intraday but a close around 1155. This market, the equity markets, have left a major top, a cyclical top, a reversal pattern in place. This looks like equities globally are moving into a major bear market and that does have me thinking that the Fed may move to the next round of quantitative easing even though it’s going to be interesting to see how they justify it because it seems like such total madness, I mean, in terms of what the actual effect will be. How can this possibly be good? In other words, it’s just going to drive up commodity prices and when you look at an economy that’s already growth challenged and slipping into recession, how does driving up cost for consumers re-kick start any kind of growth on Main Street. I don’t get it but that’s probably where they’re going to go and that will definitely help gold.
The other thing that seems to be – that listeners should be aware of is when you look at Europe – yesterday before I left I had the top ten banks of Italy, the top ten banks of Spain, and the top ten banks of France on my screen, and you could just look. You know, one after the other. The charts are from the upper left corner to the lower right. It’s just a straight 45 degree down angle on all these banks.
Chris Martenson: Ugly.
Frank Barbera: Ugly – so Europe is in a major banking crisis and guess what? American banks, even though the numbers are not huge, in terms of the credit default swap liability, American banks have about 56% of that liability. I think the big issue is so some of this could be referred into our banking system over time and that may be another catalyst that pushes the fed towards more easing. But I’m beginning to think that when you look at the size of the problems that are besetting Italy and Spain in terms of rising yields, the fact that it’s going to be very, very difficult to bail out economies that are that large, you know, I think you have to start raising the odds in terms of Germany maybe pulling out of the Euro or forcing the ejection of some of the smaller countries within the Euro. It seems to me that something tectonic is on the way in terms of the currency markets. And I think if something like that does happen, maybe some kind of a realignment in the Euro block ,that could indirectly be a trigger for a massive dollars sell off because I think if they reconfigure the Euro into something that is a very liquid, more conservative, less debt-laden currency then I think that could be the trigger to switch selling onto the dollar. So something to watch for, you know, in the weeks ahead.
Chris Martenson: So here we have more pressures building. It turns out the QE2 didn’t really do what maybe we hoped. Certainly, maybe it stopped something worse from happening but it certainly didn’t make any magic happen and that was $600 billion not including the other $200 billion that the Fed was recycling through principal and interest payments throughout the MBS part of the portfolio. So here we have eight hundred billion, didn’t do it, and there’s more weakness ahead. So I think people are rightly beginning to question, well, what’s another round going to do? And, it’s a fair question. So we sit here and we see recently gold has moved up strongly. I’ve noticed that silver had surprised by looking as if it was going to behave as a monetary metal there for a few days now. Now it looks like its behaving like a commodity again today. We’ve got a lot of red all over the screen. So, you know, a lot of our listeners have a question, which is, you know, they love gold and they’ve been in mining stocks. You’re a specialist on those. Now historically, I used to trade mining stocks a lot. They were nicely leveraged to the price of gold all during the 2000 to 2007 timeframe which is when I was principally in them, and they make bigger swings in whichever direction the metals move – nice high beta behavior. But, they’ve been lagging the returns of the metals themselves. So with gold now making all these new highs many analysts I see are – they’re just increasingly bullish and anticipate some big move upwards in the gold stocks eventually. You’re sounding a much more cautionary note; why is that?
Frank Barbera: No, I’ve been very negative on the mining stocks which, believe me, is not easy when you write a newsletter called the Gold Stock Technician.
Chris Martenson: I imagine not.
Frank Barbera: It’s not good for newsletter sales, you know? So, but anyway, no. you know what I found Chris is really I’ve been watching the mining stocks since 1983 so a fair amount of time that I spent watching the group. I have a wide variety of unique technical indicators on the sector and as I started to see the stock market topping out over the last two to three weeks I wrote my readers a note to say the mining stocks are also very overbought. Mid July we saw one of the second most overbought readings on the XAU, on the arms index in five years. And that kind of reading is a big warning and so I’m not surprised to see them going down. The last letter I put out I told subscribers that I thought the mining stocks could get cut in half in here and I’m going to stick with that. I think we’re looking at a 30 to 50 percent decline over the next six months. The XAU, which recently peaked out at around 220, I think you could see that close to 110 before this decline is complete.
So, now, why is that? Really, the truth seems to be that a lot of these assets have been very, very highly correlated and that mining stocks are a risk on asset. Now there are a lot of very competent analysts out there that have been strongly recommending them, pointing to the idea that the stocks are, quote, cheap. When you look at Barrick Gold or Newmont Mining you see 13, 12 times earnings, multiples relative to cash flow that are near multi-decade lows. I don’t disagree with any of that. I think that the mining stocks are a great value on the fundamentals.
On the other hand the equity market looks like it could be heading for a very substantial decline and I think that mining stocks – they have not shown the ability, at least not yet, to decouple from the equity market. Now, clearly nothing is cast in stone and I sort of evaluate this day to day but, you know, if you look at the past data it really suggests that they’re going to get hit if the market goes down.
And, at some point I think what you’ll see is I’m looking for a bear market in equities over a period of a couple of months. I think during that period of time you will see gold go through the roof, the physical metal. I also think you’ll see some nice upward progress in silver. I’m in the camp where I think silver is going to act like a monetary metal. Sure they may pull back here in the short term but I think there’s a real opportunity there for silver to turn the corner especially if we get another Jackson Hole special come the end of August with Dr. Bernanke and more QE. I think silver will light up like a firecracker. But, the mining stocks they need to simply fall to a bigger discount to the underlying metal. And, at some point then if we end up getting into a really strong dollar movement of the downside I think that’s when you might down the line a bit you see the mining stocks turn.
Now I also want to make another point that’s very important. I think that ultimately this shakeout in the mining stocks, we don’t have to put numbers on it but let’s call it a substantial decline. Once that decline is over I think they will reach a low probably into the first quarter of next year in 2012 and from that point I think you’ll see a multiyear bold market in the mining stocks where they play catch up to where they should be and then to where metal prices will be. So I think that it’s going to be very volatile and right now they’re decoupling and that decoupling may stretch out dramatically but then they’ll eventually catch up. So I still see an enormous opportunity there but I think that mining stock investors may have to wait awhile to capitalize on that opportunity.
Chris Martenson: Yeah, I like this because it confirms my own reasoning and thoughts. Of course, I love what you’re saying, on March 8th I put out a piece called the coming route and it was a macro analysis of what was just going to happen. I thought to the markets as the feds QE liquidity went away and all of those treasury invoices that were being stuffed in the upper right corner of Geifner’s desk as they tried to maneuver under the debt ceiling, those were going to come roaring out and have to go out and suck up liquidity starting right around now. All of this put together, I think we’re in for a really weak period coming into fall. I mean we’ve just got some – the liquidity piece as we would need to see just aren’t there. The economy is not on its own legs. Its’ not spinning out cash. We look at excess reserves of banks. They’re all just parked there. They’re not being lent out. So the fed was the source of cash. They were cycling it through the federal government. Both of those doors are either mostly closed in the case of the fed or all the way closed in the case of the federal government. So here we are and without that liquidity I just couldn’t identify where we were going to see that deport from. Bang – it’s playing out as we see it and I don’t know that the fed has any other opportunity or options before except to just open those flood gates again and what do they do.
Frank Barbera: In fact, Chris, when you look at some of the past examples where we were in other countries that were in situations like this, this feels to me like Argentina 2001, 2002, where the economy, where the deflationary pressures who’ve come to the end of the stimulus cycle, the deflationary pressures, the pressure on the global system to unwind is huge, and we may see a bout of contraction. In Argentina what happened was over two to three years that period of contraction became more and more and more intense and the government had to write more and more and more checks to maintain the status quo. They had a currency board at the time. People were saying that the Argentina peso, that they had dollarized the economy, that the peso was strong, because it was a part of a currency board, and yet the government kept writing checks, and then eventually it blew apart, and the currency dropped 70 percent in six months. Inflation went from something relatively small to north of two hundred thousand percent over 18 months, and money just evaporated. And, that’s when all of the banking system problems really came out and you had situations where they did the colorito in terms of limiting withdraw from the banking system. And, you know, we’re at that phase now where it’s those deflationary pressures that are asserting themselves again. The fed is out of bullets and monetization is going to be the answer that comes down the line. I don’t know when it’ll kick in but in my heart of hearts I really think that’s where it’s going to go.
Chris Martenson: Yeah, I don’t know that there’s many other options at this point and we’ve long – I think the time to actually affix this was 1995. That’s when Greenspan implemented the sweeps to effectively eliminate reserve requirements in banks and allow them to really go and have a party and so we’ve never really suffered through the hangover yet. This one will be a doozy I think. So, you know, I want you now to put yourself in those shoes then of the average investor who’s looking to protect capital, their wealth in these really uncertain times, maybe even looking for a little upside embedding on a secular bull in precious metals. What’s your advice?
Frank Barbera: Well, you know a couple things – first of all, I would say the traditional advice for precious metals in terms of an asset allocation is five to ten percent. I would say for most individuals that’s probably too low. I think you should start to think in terms of 15 to 20 percent. Personally, I’m way higher than that and you also should think about diversifying your precious metals. Think in the country. Think about out of the country. Think about different kinds – I’m not a big fan of most ETFs. I will go on the record and say that I am comfortable with Stefan Spicer and the Central Fund of Canada and his other product which is the Central Gold Trust, GTU. Those are PFICs and they have reporting requirements but I think those are reasonably good assets because they’re allocated gold. The key thing about gold is that it must be allocated. If it’s not in your possession and you’re going to have some kind of a conduit between you and the gold quite honestly Central Fund and Central Gold Trust and Central Fund of Canada, GTU and CEF. Right now, those are the only ones I’ve been able to get enough personal comfort with to feel okay, I’m comfortable owning these securities even in a crisis. That’s not to say anything negative about the various spot products. I just haven’t had enough time to understand them but then I would not – it’s my opinion and it’s just one man’s opinion but the GLD and the SLV feel like from what a lot of experts have said more paper gold or at least unallocated gold. Some of the sub custodial arrangements there have been questioned. And so I think you have to be very careful and judicious how you think about your metal holding.
Another asset class that doesn’t get a lot of attention and a lot of thought but I think deserves a place is the currencies. There’s a lot of different venues to that. You can go to Ever Bank or you can look at some of the global bond funds. I’m going to give out three global bond funds and on this I do want to – I do have to mention that I am a fun manager. I’m the co-manager of the Sierra Core Retirement Fund. The symbol is SIRIX for the mutual fund that I am attached to. We’re a fund of funds and from time to time we may have investments in these funds. Right now we don’t as a matter of fact. That’s because the dollar is rallying but I wanted to mention three very good quality global bond funds which investors should at least have on their radar. The symbols are – and I’m going to give them from the most conservative to the more risky. The Paid In Global Bond Fund is PYGFX. This is a very, very conservative fund. It pays about four percent yield and it has a substantial portion of the portfolio outside of dollars in foreign bonds’ so you earn interest on the foreign bonds and then you earn interest on the rising currencies against the dollar.
The next is the Templeton Global Bond Fund – TEGBX, which is the retail share class. That is one of the best performing mutual funds, period, and its compounded money around 11 to 12 percent per year over a very long period of time with very, very low volatility. And, what they end up – traditionally, they’ve had around 20 to 30 percent of the portfolio in high grade, triple A corporate Korean bonds, things like _____ [00:32:58] bonds and Samsung bonds that pay around six percent. And, so you get the rising Asian currencies and you get the yield on some of the Asian corporate bonds. That is one of the actually my favorite funds out there in the fund world. It does have a one percent back end load and I will tell you though of 11 to 12 thousand mutual funds that I look at that is one of the few where the pay on the backend load is a good idea. You’re getting management that knows what they’re doing and most other vehicles cannot deliver that.
Then also Deutsche Bank has a global enhanced bond fund – SSTGX, which has knocked out around nine to ten percent annual total return. Again, a nice dividend and has a nice yield of around three and a half percent and it very conservatively managed. There are others Pimco, Oppenheimer have good global bond funds – PFUIX and OIBCX is the Oppenheimer fund but, yeah, they’re a little bit more volatile and they’re for more risky investors. So the ones I just mentioned are a little bit more conservative. In my fund that’s what we tend to deal with. We look for conservative vehicles and our whole fund is oriented for conservative investors.
Chris Martenson: You know it’s – this is an area that I think also people should be wary of and look a carefully because, you know, there was – I think it was -- what was it Reserve America was the money market fund, very conservatively run, it turned out they had a boatload of Lehman bonds right up to and through to the crisis. And, of course, they broke the buck and it took two and a half years to settle that before people saw their money again. I’m not saying that anything you’ve mentioned here is in that class but some of these bond funds out there are holding some junk. The ones you’re mentioning I say are all holding really high quality stuff. Is that true?
Frank Barbera: They’re highest – they’re generally high end. If you look at the portfolio single A, double A, triple A paper, money market funds in general – I deal a lot with TD Ameritrade and this is, again, this kind of goes back to the whole Canadian banking theme. TD Ameritrade phased out it’s money market funds a year and a half ago. And, what they did is when investors when you have an overnight sweep as a TD Ameritrade client and your money goes basically into a FTIC insured bank account as Toronto Dominion Bank. And, so they realized in their – in where I give them a lost tread at being ahead of the curve – that they could have been reached for yield anymore to keep those money market funds at once. So they just phased them out. Very few mutual fund families and very few brokers have really done that. Instead a lot of them have reached for yield and in the process they’ve ended up buying a lot of European banking debt, which is now embedded in these money market funds. So you definitely need to look at what’s in your money market fund if you still have one because in some cases they’re holding some really junky paper. And, if you look at the charts of these European banks it’s definitely not something that one would take a great deal of comfort. I cannot speak for any other firm but I am – you know our firm, we only custody with TD Ameritrade. I’ve been a TD Ameritrade customer for years and years and I don’t want to sound like a commercial for really anybody but, again, they have a very conservative approach to things as do most Canadian firms and those are ideas that people might want to think about.
Chris Martenson: Oh, fantastic, excellent advice there too. So here we are. We’re near the end of our time. Do you have any final words for the listeners today?
Frank Barbera: Well, no, I think we’ve covered it all. You know, I’m ultimately worried that when the dollar does begin to fall should it break down that we will see a bare market in yields here in the United States. So I think bond investors – you know, right now bonds are in an uptrend in terms of price and a downtrend in terms of yield and it doesn’t show any sign at the moment of really reversing but I do notice that the ten year bond yield at about 2.47 this morning is all the way back down to multiyear generational lows. It’s just an interesting point to think about when you look at long term trend changes in markets. I used to work with John Bollinger or many years and John always used to tell me, especially when I was much younger he said Frank think in terms of M tops and W bottoms. Often long term trends will exhaust with a double top on the upside, think gold in 1980 it made a big M top at the 1980 highs. In 1999, at the bottom it made a big W bottom. If you look at treasury bond yield they made in a major lull in October of 2010 at around 220, they moved up to around 360, and now they’re within hailing distance of that 220, 230 lull at 246.
This could be the right side of a big W bottom on interest rates. It may take a few weeks to turn out and begin to reverse up but I look at the long term chart and I noticed it as rates are coming back down to test the former rows most long term momentum measurements are not confirming the match of the lows. So there’s a positive divergence shaping up on some of the weekly and the monthly charts on bond yields and that tells me that we may be very close to the end of the bull market in bonds. There may be a month or two away but it’s an area to be very careful with in terms of domestic dollar bonds. And, global bonds, you know, Asian bonds, different animal, different type of thing. We’ve already seen European bond markets have been wrecked but that’s an idea that I think people have to keep a very close watch on is where are rates going and if rates do make a turn that would be very inflationary in the U.S.
Chris Martenson: All right. Well, that’s I think very wise and I think great observations. So listen it’s been a pleasure and I really hope we can do this again. You know, so much is happening so quickly that we’re going to need all the eyes and advice that we can get at this point. It certainly seems like things are speeding up and we might be heading into a hard landing as you put it. So best of luck.
Frank Barbera: It was my pleasure Chris.
Chris Martenson: And hope to talk to you soon.
Frank Barbera: Thanks so much.
Note: Listeners interested in the conclusions expressed within this interview will also want to read Chris' recent report on The Screaming Fundamentals For Owning Gold And Silver, which takes a deep dive into the data behind the supply and demand imbalances in the bullion markets.
