Published: June 9, 2016 9:08 a.m. ET
Something wicked this way comes?
Splashed across the front of The Wall Street Journal last night was an interview with hedge fund manager George Soros, who made a fortune by taking down the British pound in 1992. According to those in the know, Soros has been selling stocks and buying gold and gold miners. In other words, heading for the hills as he frets about the global economic picture.
That interview hit hours after the Dow climbed above 18,000 and oil prices pushed further out past $51 a barrel. Perhaps it didn’t help a jittery after-hours mood, because it’s all starting to unravel this morning. A further word on Soros from Pragmatic Capitalism’s Cullen Roche, who offers some advice on “guru worship” in the wake of that WSJ story.
“We simply don’t know how bearish or bullish he actually is based on his recent comments and publicly available information,” says Roche, who pointed out this tweet:
But things, yes, could be described as a little tense out there. “Weaker dollar, higher commodity prices, depressed bond yields and expectations of a U.S. rate hike delay all attributed to the most recent gains, and investors are wondering whether the rally is sustainable and if new record highs are achievable,” says Hussein Sayed, an FXTM chief market strategist, in a note to clients.
Sayed says he’d be a bit worried about U.S. stocks moving higher from here “without support from real fundamentals,” such as earnings growth.
Our own Thomas H. Kee warns of a big pullback, simply because smaller investors are trying to carry this rally on their own, as institutional investors take every opportunity to sell into rallies inspired by “good news is great.” Check out his latest.
It remains to be seen how deep this unwinding will get today. It could reveal even the smaller guys have had enough with these potshots at stock records. Our call of the day is heading the other way, with a prediction that commodities — a big source of so much optimism — are due for a super bull market.
Believing that may require pushing through a summer of discontent without heading for the hills or wherever it is Soros takes his vacation breaks. Oh, of course — it’s the Hamptons, where the cheap seats are running out.
Key market gauges
A little teardown is revving up in premarket, with Dow YMM6, -0.41% and S&PESM6, -0.47% futures lower. In Asia, ADOW, -0.44% the Nikkei NIK, -0.97% closed in red, while a festival closed trading China and Hong Kong. European stocksSXXP, -0.93% are in the red.
Pressure on the dollar DXY, +0.53% is persisting, while the New Zealand dollarNZDUSD, +1.6391% continues to get a bump from the NZ central bank decision to hold interest rates steady. Gold GCN6, +0.65% is up a little.
Brent LCOQ6, -1.37% and WTI oil prices CLN6, -1.41% are still above $50, but have ceded some ground.
The call
Adam Sarhan, CEO of Sarhan Capital, says nearly every commodity market in the world is headed for a new bull market.
Sarhan sees several factors supporting his view, such as a weakening dollar, which tends to be bullish for commodities. In addition, the current rally for most commodities is pushing on six months, and in oil’s case, investors don’t seem to care about OPEC inaction. What will stop this, he says, is an economic slowdown or a recession, which would cut into demand.
Gold, silver, oil and soybeans are best placed for this big rally, he says, providing a couple of charts to back up his views:
Sarhan Capital
Sarhan Capital
“We are open to any outcome, but until we see any meaningful selling in commodities … we are in the early stages of a new bull market for commodities,” he says.
But he adds a warning: “Of course, as is the case with any investment look, mind your stops, because if a new wave of selling emerges and commodities roll over, then this will be the most vicious bull trap I have ever seen,” says Sarhan, who also asked a few portfolio managers what they thought. They weren’t all convinced.
Sarhan chatted about the call with MarketWatch in an email, but also wrote that in his latest column for Forbes. Read the full column here.
Link: http://www.marketwatch.com/story/brace-now-the-super-commodities-cycle-is-gathering-steam-2016-06-09