Gold prices are now all about political uncertainty

"Buying gold is just purchasing a put against the idiocy of the political cycle. It's that simple." - Kyle Bass. 

Inflation is lower. Real rates for bonds are higher. Yet, gold is near all-time highs. It may not be the political cycle but the uncertainty cycle. The combination of trade wars and policy uncertainty, with talk of a new world order, drives gold buying. If you don't want to buy the dollar and you are wary of other currencies, gold is a good place to be as a safe asset. Can we place a valuation number on the price of gold? No, this is the difficult part of the process, yet uncertainty seems to be the key causal driver.

Words of trading advice from Larry McCarthy

"Higher prices bring out buyers. Lower prices bring out sellers. Size opens eyes. Time kills trades. When they're cryin', you should be buyin'. When they're yellin', you should be sellin'. Takes years for people to learn those basics, if they ever learn them at all."  - Junk bond trader Larry McCarthy.

This is a combination of trend-following and value investing. Higher prices will bring out buyers, which will lead to trends. At the extreme, when there seems to be extremes in sentiment, do the opposite. These are good thoughts to have in mind, yet execution is much harder than you may think.    

Adrian Day's six investing signs to watch

Adrian Day's six investing signs to watch for natural resource mining and extraction companies (from How to Listen When Markets Speak):

1. Underinvestment bias - Look for periods of underinvestment that could lead to shortages and higher prices 

2. Asset location - Diversify away from problem locations  

3. Production capacity - What is the capacity of reserves left

4. Price to free cash flow - Do not overpay for free cash flow 

5. Price to NAV - Do not overpay for ground reserves and the total value of assets 

6. Management - Look for stable long-term management that delivers on promises. 

Good, simple advice for making investments that can all be, to some degree, systematized. 

The explosion in housing wealth - what does it mean?

 

Forget about the stock market as a wealth creator. The housing market is generating a huge increase in household wealth, which should make everyone happy. However, this gain may come from the huge housing bubble, which has exceeded the bubble from before the GFC. So there is a bubble, and households may feel wealthier, but there is a catch. You cannot convert that wealth easily into cash unless you sell the home. The result is that households may have more wealth, but they cannot consume that wealth, and there is a likelihood that the value of that wealth will fall when you want to monetize it.