Something strange happened on Friday: as a result of the 20% YTD surge in the price of gold and "surging demand", BlackRock announced it had temporarily suspended the creation of new shares of its $7.8 billion gold Exchange Traded Product IAU "until additional shares are registered with the Securities and Exchange Commission."
The "berserk" iron ore market has created a tsunami of utter idiocy and short-covering across many sectors, most egregiously - dry bulk shippers. DRYS is up 18%, DSX up 20%, and NM up 25%, but Eagle Bulk (EGLE) is the big winner as the mania underlying iron ore combined with an earlier filing said to amend forebearance as the company tries to find financing alternatives, spiked the stock up 340% in 2 days.
Up 340% in 2 days... back to unchanged on the year...
Shortly after JPMorgan's historically correct forecasters unleashed their "short stocks" prognostication, we joked that if only Goldman would go "long" the S&P500, then the confusion about what is really going on would be eliminated instantly. And so the alarm bells on this bounce should be ringing loud and clear as Goldman just told its portfolio manager clients that "S&P 500 calls are more attractive now than at any time on record."
I don’t trust this rally.
Few analysts realize that the sharpest, most aggressive rallies occur during bear markets. The reason for this is that during bear markets, investors tend to go short (borrow shares to bet on a collapse).
So when the market rallies even a little bit, it often will go absolutely vertical as these individuals panic and cover their shorts (which increases the buying).
Consider the Tech Bubble. When it burst, we had THREE monster rallies of 17%, 33% and 16% in just SIX months time!
Last October, BofA looked at Europe’s €2.6 trillion in negative-yielding debt and discovered something “stunning”: Savings rates were going up not down.
Don’t believe us, just have a look at these three charts: