Was that the top?
Gold continues to frustrate. Not high enough to sell, not low enough to buy. Oh, you could make a case for long term prospects here, and I do, but we’re not in back up the truck territory. A three handle would do it.
At the moment we’re getting one of those days of deflation. Dollars are up relative virtually everything … other currencies, US stocks, XS stocks, gold, copper, oil, treasuries … a bunch of stuff that has nothing in common aside from prices being widely quoted in dollars.
FWIW I remain overweight USDT and COMT – cash, treasuries and commodities – and suspect the time is coming to move some of that into underweight stock and gold positions. But not yet.
The next Synthetic Systems update is due mid year. Until then, the previous versions remain in effect. Information that SS doesn’t reflect or hasn’t yet reflected indicates considerably more downside for stocks, though SS may help us out with timing. I indicated previously a lack of confidence in its super bullish medium term outlook for gold.
I continue to think gold got ahead of itself and used up much of its prospective advance … for a while. Gold has a reputation as an inflation hedge, but as we’ve seen over the past few years, it rises when inflation is happening, not when it belatedly reaches the CPI. By then, policymakers are belatedly on the inflation case and this means gold has less to fret about. I remain long term bullish.
So what’s behind the deflationary jag? Three things. One is that markets simply didn’t correct enough in the first quarter, leaving unfinished business, while the rally since then has momentumed itself clean out of control. Another is perhaps the growing realization that all the hype and handwringing about Fed independence under Trump Fed nominee Warsh was grossly overdone, and that Warsh will be considerably firmer on getting inflation under control than advertised. Another is now that inflation is becoming recognized as such, the incentives for firmer policy are growing harder to ignore.
https://www.telegraph.co.uk/business/2026/06/04/chinese-crackdown-on-western-finance-shakes-the-city/
Oh Dear
Oh Dear a lot
https://www.zerohedge.com/political/britains-borrowing-outlook-darkens-energy-shock-deepens
According to Bloomberg reportage, markets are now pricing in a Fed hike in December. The only truly striking thing about this is why did it take them so long?
As far as the Fed itself is concerned, if the case for rate hikes is apparent now, why would you wait six months to act?
The Fed absolutely should tighten no later than its next FOMC meeting. It’s already years late. The signal value alone – that the new sheriff will not kowtow not only to the Oval Office but to Wall Street as well – would be priceless.
Ah are we to see falling Gold prices due to higher rates???
Meantime China is getting on with it:-
https://carnewschina.com/2026/06/05/catl-to-deliver-first-sodium-ion-storage-systems-in-september-as-material-costs-halve/
Bloody Hell………… the Bears are leaving Chicago!
Mike
“Ah are we to see falling Gold prices due to higher rates???”
There’s no reason why gold prices should be affected more other assets. Media have it that it’s because it has no yield. But so do many stocks. At only 1.08%, the S&P has practically no yield. The NASDAQ only 0.56%. Nvidia 0.46%. Tesla 0.00%. Palantir 0.00%.
Yet whenever rates and yields rise and gold falls media add a knee jerk comment about it being due to gold’s lack of yield like it’s automatic form paragraph. The theory doesn’t even hold up. If you have a stock that yields a decent 3% and and bond yields move from 3% to 4%, the price of the stock should fall accordingly so it yields more too. It usually does.
Time to tell the PLEBS
https://www.carscoops.com/2026/06/oil-inventories-dangerously-low/
Don’t Buy Oil, Buy this Critical Commodity Instead
Not to take away from Badiali’s point – I completely agree with the value of not getting carried away by headlines – but you can have both. You can have it all. Unless you’re new to Financology, you know we’re bullish on physical commodities in general. The time will come to lighten up on oil, but barring unpredictable developments, we’re not there yet.
Equity Supply Surge: What Historically Comes Next
When insiders are selling, it generally means they think they’re getting rich prices for their stakes. From the point of view of the seller, they’re getting cheap capital at bargain prices. To infer that it might be the opposite from the point of view of the buyer isn’t a stretch.
IPO officially means Initial Public Offering. Unofficially it’s been said to mean It’s Probably Overpriced, or Insider Profit Opportunity.
My take is you can do number crunching and work out valuations, examine historical statistics and look at supply and demand expectations as Roberts does, or just look around and take measure of the level of excitement in the media about stocks. As it turns out, they all point to the same conclusion; stock prices are no bargain for buyers and are unsustainably elevated. Highly promoted ones especially so.
One of my top investment maxims is the more excited the media are about something, the less you should be. I like to buy somewhere between disdain and apathy.
Gold is now probing six month lows. There’s a good probability it dips below $4000. A smaller probability it dips significantly below that, but on Elliott Wave grounds I think this is the final leg down from the January top, and that anything with a three handle would be a bargain.
Stocks are off significantly too, along with broad commodities, these declines reflecting genuine dollar strength. Markets may be pricing in a hotter CPI and in turn a more hawkish Fed, compounded by a realization that Warsh’s chairmanship isn’t likely to be as easily pushed around as previously thought by not only the Oval Office but Wall Street as well. Warsh will be under pressure to ease by these constituencies but also to resist to demonstrate independence and credibility. Unlike most Fed meetings in recent memory, next week’s will be worth closely watching.
The more worried the Fed is about inflation the less investors have to be. For now I expect markets to continue to broadly follow the 2022 playbook.
Gold made it down as far as $4030.55 late yesterday.
And then … Trumped!
$4210.16
https://www.autonews.com/general-motors/an-gm-battery-energy-0609/
May CPI came in at +4.2% versus last year. About as expected but high enough to put big pressure on the Fed, though it never got back down to its 2% target in the first place. As I have been saying, it was premature to start the last cutting cycle in the first place, and it overstayed it too, having even cut its main target rate 0.75% in its last three meetings of last year and capped that with a new round of $40B monthly QE. Sow bad seed, reap bad crop.
This highlights one of the less recognized flaws of the Fed’s “forward guidance” policy. It invites the FOMC to make policy based on predictions instead of actual data. This way the Fed can base its policy on whatever it wants to, and then craft a forecast to suit. One can legitimately wonder whether Powell et al put off the hard part and dumped this mess into his successor’s lap, or into this mid-term election year. It’s either something like that or it’s just a truly abysmal forecaster.
MDFE:- For once Ford gets ahead of the curve.
One of the biggest baines of my life is the way the Auto ind has spent the last 30-40 years going with “Bigger is better”. Cheap hydro carbons + material costs have allowed “mission creep”. It was only America, but Europe followed suit.
Many have said that this was to entrap people in the insane prospect of buying a $100K Truck!
the car producers were selling ever larger debt by selling ever larger cars. Suddenly Ford has woken up.
Material costs are going to rocket, as i suspect the cost of credit what we are about to face is a “1973” crisis & people are no longer able or willing to sustain such excessive burdens.
Ford was caught on the hop back in the 70’s but they might have the right product at the right time, this time.
https://www.carscoops.com/2026/06/ford-electric-pickup-prototype/
I thought it was going to be another F150 size product but no. Suddenly at last at LONG last the tide has turned & cars are going to get down sized BIG time.
Am super pleased!
Mike
Americans have always loved big cars and manufacturers have been happy to cater to them. But what’s “big” may have been inflating. The only truly small cars these days are “sub-compacts” and they even needed another category for minis. Kinda like shrinkflation in reverse.
BTW:- GOLD IS GETTING KILLED!!!!!!!!!!!!!!!!!
Ha you betcha your bottom dollar it is. Latest reflections on that in my last couple comments above.
They took quite different paths to get there, but over the past year, in USD, stocks (VT) are up 21.39%, gold (IAU) is up 21.40%.
An index of commodity prices SPGSCI is up 24.24% over the same time frame. Is it so difficult to believe that the apparent movement of these three very different assets is mostly an artifact of having used a common unit to price them, and that most of this apparent movement is in fact a depreciation of that common unit? In which case inflation has been running far higher than the 4.2% the government reports for the CPI.
Bitcoin could be 50% undervalued
I suppose it could be.
Especially if you bought a truckload of it at twice its current price and are looking to unload it onto a gullible public.
“Bitcoin is likely priced well below its production costs.”
“That’ll encourage its miners to stop mining.”
“That could eventually create a supply shock that will drive prices up again.”
Most of the bitcoin that will ever be mined has already been mined … about 20 million of a potential 21 million. Production cost and new supply have almost nothing to do with price. In fact the supply of bitcoin grew from 0 to 20,000,000 as its price soared from pennies to thousands. Miners have already been leaving the business, converting their operations to running AI models. Bitcoin prices have risen simply because of a tireless media marketing campaign consisting of tech doublespeak, misleading jargon like “mining”, “digital gold”, pictures of gleaming golden coins (like the one up yonder), and predictions of massive price increases to come (like the one up yonder). Now there’s a new gee whiz tech man in town.
Bitcoin don’t disappear and a cutback in mining cannot induce any kind of “supply shock”.
More misinformation from the same source:
Treasury yields are sending a clear and terrifying message to Wall Street
First off, treasury yields topped out May 19, and are now lower than they were then. Next,
“Rapidly rising Treasury bond yields point to interest rate hikes, which is terrible news for a historically expensive stock market.”
this makes it sound as if the only action that matters is whether the Fed hikes rates, and that the only reason Treasury yields matter is that they “point to” those hikes. It’s the other way around. Treasury bonds themselves compete with stocks for investor allocations and directly affect stock prices, as well as determining the rates at which corporations borrow, and individuals for mortgages and car loans. Do you borrow or invest in Fed funds?
Finally, this piece implies that the only connection the Fed has to inflation is in fighting it, not causing it. No mention of the Fed’s decade of QE and ZIRP, its printing of trillions in 2020-2021, its multiple rate cuts while consumer inflation remained above its own 2% target, or its resumption of QE in December, which as it turns out is when oil prices actually started rising again.
Elon Musk became the world’s first trillionaire today
Why have oil and gold been trading opposite each other? Oil prices have fallen due to the anticipated reopening of the Strait of Hormuz. Counterintuitively, this means more inflation.
We have an interesting but typical market response. Lower oil prices imply lower inflation stats imply more dovish Fed implies more inflation.
So gold goes up.
The difference? Oil sits mostly at the very end of the inflation chain, gold at the beginning.
““At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at USD64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”
– Scott McNeely, Founder and CEO of Sun Microsystems”
McNeely was calling “ridiculous” the 10 times revenues valuation put on his stock in the dotcom bubble.
SpaceX is trading at 100 times revenues.
An insanely good post from the one and only Martin Hutchinson:
The Bear’s Lair: Bubbles Break Index Funds
“… To illustrate what I mean, suppose the world had already invented index funds in 1720, and one had been constructed on 1st January of that year to cover the major European Stock Exchanges in London, Paris and Amsterdam. …”
Excellent article, thanks. My favorite bit “……Investing in bubbles is dangerous, which is why John Bogle gave us index funds. Putting all your money in index funds that invest in bubbles is however just as dangerous, and without the thrill of buying Elon Musk’s brainstorms directly…”. Indeed.
Another author made a related point today about the inclusion of the new unicorns into the indices. He points out that the new gigantic IPOs are happening about the same time and are covered by the SEC “lockout period” that prevents any insiders from selling until early 2027. When the insiders get permission to sell, we can expect many to do just that. The littlest insiders are employees that were given shares and options. We may expect those littlest insiders to sell right away in Q1 2027, taking their windfall now rather than waiting twenty years and rolling the dice. The big tycoons will probably only sell parts of their holdings; they can afford to play the long game. Taken together these insiders might make a significant selling wave in Q1 that will feel just like a short squeeze with some panic selling when declining prices spur increase selling.
Your article above describes a completely separate and independent market mechanism that creates a self-reinforces price move across the index when a few big companies dominate an index. It amplifies downdraft and updrafts.
Taken together, Q1 may bring a crazy downdraft when the insider shares get unlocked and the selling wave brings down prices amplified by an over-concentrated index.
Aye, I like that one too … Hutchinson’s article had so many gems I hesitated to call them for fear of slighting the others. Also I had no idea such granular history of the South Sea bubble even existed. Hutchinson is economic historian extraordinaire.
I do remember well though the expiration of lockups being cited as a risk during the dotcom bubble, one which of course we now know played out. There are several factors that could play into a collapse of this one though that I wouldn’t want to hang my hat on any one. Just for instance the new sheriff in Fed town. Not to mention at these rarefied heights the only reason the markets really need to go down is that they’re too high to begin with. Synthetic Systems thinks we enter the next risky zone in the third quarter of this year, though I’m not bailing on stocks completely, but am definitely keeping the richest parts of the market at arms length.
The History (and Future) of Disruption
If one of these tera-cap companies are introduced into the major indices before the lock-out period is over, employees who would otherwise sell their stock can hedge their exposure, albeit imperfectly and perhaps inefficiently, by shorting the index. However, being that these companies are at the nexus of the massive AI bubble, the hedge may be more effective than expected since existing companies such as NVIDIA, Microsoft, Alphabet, Meta, et al. are such a large percentage of the indices.
If the newly-IPOed company’s stock crashes, there is a good chance that all of the other big players in the AI bubble will also crash in fairly close time proximity.
The menu of index options is fairly good. I don’t know the details of the conflict of interest rules, but the QQQ might be a good candidate. There might even be ETFs that focus on recent IPOs. If I understand correctly the S&P would take a while to admit them because it requires a year of public trading and a year of profitability, but your point is well taken.
If I were in their shoes though I’d hesitate to get cute with shorting the broad market … presumably they like the majority of ordinary investors want to be broadly invested. FWIW our Model Portfolios are designed to provide broad market exposure while underweighting the bubble areas.
I didn’t realize it but there are already options available for SpaceX which enable insiders who own the stock to hedge their positions if they so desire. But if OpenAI and Anthropic have similar lockout conditions as SpaceX, get immediately included into a major index, and lack an options market, shorting the index (through options to limit risk) is an indirect way to hedge a position.
I think shorting a general index using options if one has a large, illiquid position in a grossly overpriced AI stock such as the S&P 500 or NASDAQ is not being overly clever given how greatly they are affected by the AI behemoths and how overpriced the general indices are. I’m not suggesting that a person who has zero position in SpaceX, OpenAI, Anthropic, or any other grossly overvalued, illiquid stock should be short the market, the market being capable of remaining irrational longer than one can remain solvent and all that.
Btw by “options” I meant the menu of indexes one could choose from, as opposed to the financial derivatives puts and calls. But to your point, would that even be legal? It smacks of cheating to be locked up until a certain date and then doing an end run around the rule to effectively neutralize its effect. You could make the case that either these people are stuck with their positions or the rule is toothless. Not that it’s the end of the world for them; these insiders have had their positions for a while and even if the stock falls considerably below the IPO they’re looking at fat payday.
Bear in mind that the market effect of buying puts or selling calls is similar to selling the stock. If you buy a slug of puts or sell a load of calls, somebody is on the other side of that trade. The dealers don’t just assume the risk; they sell the stock to hedge their positions.
Here’s the precise timeline of when SpaceX insiders can dump their shares on retail investors
Gold is up sharply this morning, from just under $4000. Was that the bottom?
As I have been saying for weeks, gold under $4000 looks like a bargain. We can’t know whether it gets cheaper first, but it’s likely to be a lot less cheap in five or ten years.
The same can’t be said of US supercap stocks.