In search of intrinsic value

Guido Romero Rank: 135 Followers: 2 Votes: 0 Years Member: 7 Last Update: 20 August 2014, 21:13 Categories: Relative Performance Charts
Gold / Gold Stocks

Aug 21/14 - Amongst Western currencies, the Canadian $ is the one closest to breaking long term support. The oil price has broken down on the daily and is due a bounce. Bullion funds as well as precious metal funds are all sporting gaps some 5% below current levels. It is a symmetry that reinforces the probability that the gap will be closed - hopefully sooner rather than later.

July 8/14 - I am finding negative divergences everywhere I look in the oil segment. Oil companies, service providers, refiners... everywhere! On top of it, the market does not seem to believe the latest news that ISIS (or the Islamic State) is now in possession of nuclear material in Iraq.... something is definitely rotten in the oil patch....

June 24/14 - It is my opinion that the price of oil is key to maintaining the derivative pyramid standing. The technical picture of the price of oil is horrendous however. The fundamentals are even worse. In fact, the fundamentals of oil are so dismal that not even fomenting a revolution in Ukraine (gas) and claiming renewed fighting in Iraq (oil of the light sweet variety which is the most prized) is having an effect on the price of crude. The technical picture for WTI is still remarkably weak. It is my opinion that a break down in the price of crude could be a 'Lehman' event for the general market. In my opinion, a drop in oil prices will engender an unwinding of several Trillion $ worth of derivatives bringing about serious dislocations in the credit markets... hence the interest on the part of central banks and Western governments to prop the price of crude any which way they can...


100 - $SPX since 1980

The S&P is the benchmark I use to illustrate and buttress my argument.

101 - US$ purchasing power versus CPI

105 - 30years US Treasury Bond since 1980

110 - $SPX, the 30yr US TBond and the US Dollar since 1980

120 - $SPX and gold since 1980

125 - Gold since 1980

126 - Gold bullion inflated by the purchasing power of the US$

130 - $SPX valued in terms of gold bullion

135 - The 30yr US Treasury Bond valued in terms of gold bullion

140 - $SPX valued in terms of $XAU the gold mining company share index

Oct 7/13 - This is the power of the Fed. By simultaneously giving trillions to the banks and keeping interest rates artificially low, it can induce corporate re-financing thus boosting the nominal value of the stock market. The direct ramification of this policy is the devastation of purchasing power thus abetting inequality.

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