Something’s in the Air – 11/19

Something’s in the Air- 11/19

Another Stock Market Sell-Off.

The Drudge Report headline Thursday morning read, “STOCKS ERASE GAINS FOR YEAR; TRILLION WIPED OFF TECH; GOLDMAN: BOOST CASH.

Another wave of selling in the stock market was no surprise to our readers.

It’s been a rout in Nasdaq stocks.  We have already pointed out the good times are over for the popular FANG stocks — Facebook, Amazon, Netflix, and Google.

Meanwhile Goldman Sachs has dialed down its forecast for the stock market to merely “a modest single-digit absolute return” in 2019.

Forecasting a single-digit return may be optimistic for the likely performance of the stock market. 

Morgan Stanley recommends trading the stock market “like it’s a bear market rather than a bull.”

Our recommendation is to not trade it at all.  We recommend safety first.  When destructive market forces have been unleashed, we prefer the shelter of gold to playing dodge ball in the stock market.

And make no mistake.  Destructive forces have been set loose, including the Fed’s new interest rate regime.

Bigger still is the growing trade war.  When Goldman Sachs says to prefer cash, it is apparently stuck in the old paradigm definition of cash, the post-war Bretton Woods agreement.  King Dollar.  The Reserve Currency of the World.  All that.

But all that is history.  Much of the world is dissatisfied with the dollar reserve standard.  Much of the world is moving slowly away from it with bi-lateral and multi-lateral trade deals and settlement option.  Many nations are stockpiling gold reserves.

That movement has been low-grade, mostly unnoticed so far.  But in a trade war it can erupt into a megatrend overnight.

And with that in mind, our view of cash is something more enduring than pieces of paper with government printing.

Our preference is gold.

Meanwhile, both the Dow Industrials and the S&P500 are trading below their key 50-day and 200-day moving averages.

Gold, on the other hand, is above its 50-day moving average.  It is approaching it 200-day moving average.