Thursday, March 12, 2020

Quick Commentary On This Morning's Action

As I type the major averages are trading down roughly 7% across the board.

While like many days of late this is no doubt unnerving, just know that this is what markets do when the realization that recession is near, or here, hits.

Per last night's message, we're presently at work reviewing our core asset mix and tweaking where we see fit.

As I type, our 100% core mix is off 1.96% on the morning. 

While the usual suspects -- SJB, FXY, FXE, FXB and GLD -- are doing notably better than the market this morning, only SJB (inverse junk bonds) is in the green (+5.5%). 

No doubt many traders are surprised by gold's (GLD) 3% decline this morning: We're currently experiencing what's called a liquidity event, where the proverbial babies are thrown out with the proverbial bathwater. Traders meeting margin calls, and hedge funds running "value at risk" models, for example, are likely having to sell some of what's been their very profitable gold positions to generate cash. Also, central banks are the largest holders of gold in the world; it can be used to manipulate their respective currencies if they so choose.

Beyond short-term liquidity issues, etc., gold (historically speaking) is an asset to own during uncertain times, particularly when interest rates are being cut and printing presses are running.

Note it's choppiness during the last two bear markets:

Gold in orange, stocks in white:

I'll circle back later today with a video update...

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