Notice How Quickly Market Psychology Changed?
The comments below are an edited and abridged synopsis of an article by John Rubino
NAFTA deal; and unemployment fell.
Yet financial market psychology suddenly shifted from euphoria to fear. Interest rates spiked, and stocks tanked. Interest rates had been rising as inflation bumped against Fed targets, but traders only noticed when the 10-year Treasury yield pierced 3%.
The emerging market crisis, easily managed if the US dollar would go down, suddenly feels permanent as rising interest rates pull the dollar along for the ride.
When market psychology changes, it frequently does so overnight for those who weren’t paying attention. But for those who were, the change is actually long overdue.
The real question isn’t why is everything changing, but rather, why did it take so long? And if this is the start of another 2008-style Great Unraveling, how can we profit from it?
And how far out of control will central banks allow the leveraged speculating community to spin before they reverse course and start cutting interest rates and ramping up QE programs—and how deeply negative will interest rates have to go to stop the bleeding?
This is paradise for precious metals. Negative interest rates offset the carrying costs of gold and silver stored in vaults, making bullion superior to currency stored in bank accounts. An added attraction is the new generation of gold-backed debit cards and cryptocurrencies that add portability to these ancient forms of money.
History doesn’t repeat perfectly, of course, but this set up is close enough.