I don’t like the publicity I’m seeing

It may sound strange but it has been demonstrated again and again that publicity can easily kill a bull in investment. Why? Because when there is publicity, likely everyone knows it and chases it as it is hot. So much so that it is often the time the hot trade or investment may have got all those who want to get in and the only ones left are those who want to sell. That’s usually the outcome when something becomes hot. Conversely, when there is not much interest in something or even better a lot of hatred seen with it, that’s usually a good time to see a bottom for the thing that no one wants. After all, everyone who wants to sell may have already sold and the only ones left are those who wants to buy. This is how the market works again and again. Before I tell you what I don’t like to see right now, let me first share with you why I like commodities as a whole as a long term trend. Basically we are seeing the extreme pessimism right now, so much so that even the top professionals are throwing in the towel to give up. According to Bloomberg, a slew of financial-services firms – Morgan Stanley, JPMorgan Chase, Barclays, and Deutsche Bank – have all either cut back or exited commodities trading in recent years. Earlier this month Wall Street giant Goldman Sachs announced that it is cutting back on its commodities business. Reason? Simple... The business uses too much capital for too little profit. In addition, Jamison Capital Partners LP, a $1.5 billion commodity hedge fund, told investors it was closing by the end of January 2018. It followed other big names that have closed in recent months, including Andy Hall’s Astenbeck Capital Management and Texas tycoon T. Boone Pickens.....Calling a bloodbath in the commodity sector at the moment is likely an understatement. But that’s likely good news for those who are patient enough for the game coming to them.

 As contrarian, I’m always interested in extreme pessimism for a potential turning point for uptrend or extreme euphoria for downtrend. Historically we had something similar occurred to commodities. In 1998, Merrill Lynch got OUT of the commodities business because they couldn’t make any money. By that time, the main commodity index had lost half its value since 1980. This turned out to be THE capitulation point, almost the exact bottom of the sector. In the next decade, the commodity index (The Rogers International Commodity Index) soared six times higher. So are we seeing the exact bottom for commodities now? I obviously don’t know. But I bet it is damn close to the bottom if not yet there. Since commodities involves tons of different things and are crazily volatile, I’m currently most interested in the God of commodities, gold! Not only in terms of the cyclicality it may have likely seen its bottom of the multi year severe correction; it is also a good insurance hedge against all types of risks, economic, financial and political ones. So I’m a long term bull for gold as always.
Having said that, I don’t like what I’m seeing in the near term. Gold has moved up quietly for nearly half a year without much notice. But lately all the sudden nearly everyday you hear talking heads speak bullishly for gold and how much they like it. Unfortunately this is not a good sign from the contrarian point of view. Believe or not, bulls are nearly always killed by publicity and I hate that when something I love becomes very popular. With this in mind, I’m expecting some weakening in gold in the next few weeks and hopefully that will silence all the talking heads.