When you find it nearly impossible to take your eyes off the headlines and the television, that’s when you need to look away. Granted, there is a lot to talk about right now. Geopolitically, the G-20 summit in Turkey looks more like a big shift in global strategy. Russia working with the USA and the European Union on a single coherent strategy to combat… whatever the threat is, that’s definitely a change to take note of.
There’s no obvious connection between events in the Middle East and commodity prices. Maybe there’s no connection at all. But that’s why you should force yourself to look at the chart below. On the surface, it has nothing to do with ISIS or terrorism. Is there anything going on below the surface? Is there a signal?
Commodity prices, as measured by the Reuters/Jeffries CRB Index, are at a 52-week low. They’re at a multi-year low, in fact. The ‘technicals’ on the chart are hideous. If you’re trading, the only ray of light is that the last two times the RSI on the CRB has gone below 30, small rallies have ensued.
Those rallies might be tradeable, if you have money you can afford to lose. But really what you’re looking for – at least what I’m looking for to justify having a punt – is a big reversal in the downward trend. I’m looking for it, anyway, because when someone has performed so dismally for so long, that’s the thing you need to keep your eye on. If and when it changes, the move will be big.
Normal catalysts for a big reversal in commodity prices are things like booming demand or GDP growth. If you look around the world, you’re not going to find a strong case for demand-driven growth in commodity prices. What else is there?
I can think of two: a much weaker US dollar, and war. Of the two, which one do you think is more likely?
October Fed minutes out today
You could see short-term US dollar weakness today when the minutes of the 27-29 October Federal Open Market Committee meeting are released. For monetarists, the release of the Fed minutes is always a big day. The minutes are mined for clues about the future direction of central bank interest rate policy.
In this case, the question will be whether the Fed is hell-bent on raising US rates when it meets again on 15 and 16 December. Public statements from Fed officials suggest the Fed wants to raise rates. The problem has been the underlying data in the US economy don’t justify higher rates. It’s hard to ‘normalise’ interest rates when the economy remains so ‘abnormal.’
Dovish minutes could lead to dollar weakness. But don’t forget the European Central Bank (ECB). In early November, ECB president Mario Draghi said, “A sustained normalisation of inflation could take longer than we anticipated in March when we first appraised the overall impact of our measures”. This suggests that the early December meeting of the ECB could also be quite ‘dovish’.
That’s where we are though, isn’t it? On the frontiers of an experimental monetary policy that’s failed in Japan for 20 years. The only question now is whether we’re in the middle of slow-motion depression as well. Or whether – driven by credit and debt markets – things can accelerate quickly to a crash.
Is the London Investment Alert really insurance?
The whole purpose of the London Investment Alert, which I started with Tim Price earlier this year, is to analyse financial markets for clues or price signals that tell us where things are headed. It was designed to be your source of alternative financial intelligence. It’s for investors who are looking for a second opinion on markets, a different perspective that you don’t find in the mainstream press.
Let me make an important point about how it’s possible for us to publish an alternative perspective like that: advertising. Selling subscriptions – which are our primary source of revenue (which pays for the research and all the support that goes into publishing advisory services) – is what makes it all possible. If we didn’t advertise our own services in our free e-letters, we wouldn’t be able to do any of the other work you read.
It’s really that simple. But I’ll answer the note below anyway. And by the way, there are now several thousand and paid-up members of Tim’s new service. Most readers understand that a business has costs that must be paid for. Otherwise it would be a charity. Or the government, where you collect revenues with the threat of imprisonment. Most readers understand the subscription fee they pay goes to offset the costs of running a financial publishing operation.
But any time I publish an advertisement for a service, I get letters like the one below. I publish them here because it gives me the chance to answer questions directly. It also gives me the chance to explain how what Tim is doing is fundamentally different than what you might expect from a journalist or analyst at a major firm. Here’s the letter:
“I object to your emails today which conclude that I am not bright enough to understand your previous perceptions of the financial world and have not bought a subscription to London Investment Alert. Furthermore Tim Price’s ridiculous email today that compares London Investment Alert to insurance is disingenuous at best…. at least with insurance I get cover and a payout if needed. With your London Investment Alert scheme, you get rich, all I get is information that you tell me is good (but not validated by any other authority!) Up until today, you guys had credibility with me, but after these two follow up emails you have confirmed that you are just another internet site scaring people into paying you money. I look forward to receiving Tim’s reply regarding London Investment Alert and insurance. Shame on all of you.
“Chris”
Really? Shame on us for telling you, for free, about financial ideas we think could change your life? Shame on us for thinking the research we do is valuable enough to pay for? Shame on us for asking you if you find it valuable? Shame on us for including advertising for own services in our publications?
I don’t see anything to be ashamed of. Nor do I think a reasonable person would. Name me another financial business where your best interests are as aligned with the way the business makes money. If you don’t like what you pay for, you have a money back guarantee. If enough people don’t like what we publish, we go out of business.
What’s more, we’re not managing your money and collecting a fee whether you make or lose money. We’re offering our ideas, backed by our own experience and judgement, and we’re putting our name on them. And we’re offering that on a purely voluntary basis, after you’ve had a chance to review our thinking and ideas ahead of time, for free!
I’d say that’s about as good an offer as you’re going to get in the financial world. It’s transparent. There are no hidden agendas. And it’s driven solely by your preferences.
To be honest, I’m surprised when I get notes like this. But as I said, it gives me the chance to clarify a few things. Relying on reader subscriptions allows us to maintain editorial independence. The only person we have to please is you. If we don’t, we lose you as a customer.
When I say ‘editorial independence’, I mean the freedom to publish forecasts and warnings you’re not going to read anywhere else. These warnings make some people uncomfortable. To some readers, even publishing these warnings damages our credibility. But that’s why editorial independence is so valuable: you can alert people to risks or opportunities while there’s still time to do something about it.
There’s no point in reading about a crisis after the fact. If you read a ‘post mortem’ of the 2008 crisis in the papers or see it on the BBC, it was too late for you to do anything about it. Most investors are at a point in their life where they simply can’t afford to be blindsided by another 2008. Tim is writing to you about risks in the financial system and the economy that you need to prepare for now.
There are two reasons you don’t see more people like Tim in the papers or in the industry. First, you risk embarrassing yourself and being lab led a ‘crackpot’ by challenging status quo expectations. For example, when Tim first put forward the idea that a ‘cashless society’ was a step on the way to Financial Martial Law, he was labelled as an ‘extremist’.
Then the Bank of England floated the idea of negative interest rates and digital cash in a research paper. That proved, to me anyway, that thinking about where the world is headed is worth your time as an investor. You won’t get every forecast right. But if you’re notthinking, then you’re much likely to become a victim during the next crisis due to simply not knowing about a threat or risk.
The second reason you don’t see warnings of ‘black swan’ events in the financial industry is that it’s not their business, in general, to warn you of big risks. Their business is to sell you financial products. Telling people that the financial system is more risky now than in 2008 is probably not good for business.
Yes, my business is selling subscriptions. But as I’ve shown you, Tim and I are fully accountable for our forecasts. If we make warnings that don’t pan out, we lose readers. If we don’t provide you with a genuine alternative that helps you make better and more informed decisions, we lose readers. Again, I don’t know of another business in the financial industry where the provider is more accountable to the customer.
As to whether better investment intelligence constitutes ‘insurance’. I think the reader is missing the point. The insurance is in having another opinion to counter mainstream financial thinking. Of course you don’t get a payout if Tim’s right. What you get is arguably a lot more valuable: the chance to save your money from a big disaster before it happens.
In that sense, it’s better than insurance. Of course, if you don’t value any of this work, the answer is simple: don’t buy it. I hope the inconvenience of seeing occasional ads doesn’t overwhelm the value you get from Capital and Conflict. But again, our business is fully accountable. If lots of readers objected to the advertisements and unsubscribed from the e-mail, something would be wrong.
As it is, Capital and Conflict has over 40,000 readers and growing. I take it to mean that British investors want a second or third opinion on the financial news. They’re smart enough to realise we’re coming at these stories from a radically different perspective. They include that perspective in their decision making. And if they find it more than useful, they may choose to subscribe to one of our other publications.
Anyway, sorry for the lengthy explanation. But from time to time, I explain how our business works because it’s obviously not clear if you’re new to the publication. The relationship between the free e-letter and the paid services is clear. We publish ideas we think can change your life for the better. We introduce to those ideas every day, for free.
If you like them and want to take the next step, you pick a publication or an editor aligned with your goals and your tolerance for risk and you subscribe. Hopefully it works out and you get value for your money. If it’s not for you or not what you expected, you get your money back.
Category: Geopolitics