The Fed bashing continued when Druck said that "by most objective measures, we are deep into the longest period ever of excessively easy monetary policies. Despite finally ending QE, the Fed’s radical dovishness continues today. By most objective measures, we are deep into the longest period ever of excessively easy monetary policies. In other words, and quite ironically, this is the least ‘data dependent’ Fed we have had in history."
Wrong: this is the most data-dependent Fed ever, only the data is the daily level of the Dow Jones Industrial Average; this is also why as Druckenmiller added, the Fed "causes reckless behavior" and added that "the Fed has no endgame and the end objective seems to be preventing the S&P from having a 20% decline."
DYI Quick Comment: The Fed's won't be able to stop a 20% decline or as we go through the complete cycle from peak to trough for a 45% to 60 % decline!
If it wasn't clear already, Drucknemiller is very bearish stocks: "volatility in global equity markets over the past year, which often precedes a major trend change, suggests that their risk/reward is negative without substantially lower prices and/or structural reform. Don’t hold your breath for the latter."
The former Duquesne hedge fund manager, who averaged annual returns of 30 percent from 1986 through 2010, also agreed that negative rates are "absurd", said that he is bearish stocks, and concluded by revealing what his biggest currency allocation is. "Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation" he said, without naming the metal.
We know what he was talking about. Gold.
Despite the strong performance we have seen from the precious metals complex thus far in only the first few months of 2016, many fear that the move is already nearing an end. Readers should be aware that the potential for both gold, silver, and strong mining equities is much greater than the moves seen thus far. Indeed, a review of the metals and several valuation metrics over a longer time frame can provide us with clues as to what we should expect through the later part of this decade.
The only question that remains is: what sort of trajectory will the new trend take? We expect both metals to rise over the years ahead. For example, we expect that within the same time frame, plus or minus a year, gold will re-challenge $1,900 while silver makes another attempt at $50. Based on the numbers from current prices, we would be looking at a 54% rise in gold and a 194% rise in silver to reach those targets. Will the out performance in silver occur quickly, as shown by the green arrow above moving strongly down in its favor? Or will silver take its time and form more of a rounded topping pattern, perhaps moving evenly with gold for the next 1-2 years, before beginning to outpace its monetary cousin more earnestly in 2018?
Typically throughout history, the ratio does not stay at such elevated levels for more than a few years at a time. We can observe the importance of these trend changes below in the 35-year perspective, as typically when multi-year trends in favor of gold break downward, silver then begins to outperform relatively quickly. Silver out performance should thus be expected within two years at maximum.
DYI
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