"Inflation is when you pay $15 for the $10 haircut you used to get for $5 when you had hair." - Sam Ewing
The Golden Age in Greek mythology was a beautiful period to live in. As legend had it, this was a period of time where people never had want, work was leisurely, and peace reigned. Men lived like gods, and there was no struggle or strife. Makes me wonder if quantitative easing was around back then, given that the Fed seems to think we are in or about to re-enter a time when asset values will never fall, the economy is improving, and money is plentiful for all.
Of course, the Golden Age was fantasy. However, I do think we may re-enter a period where gold has its own Golden Age.
Take a look below at the price ratio of the SPDR Gold Trust ETF GLD +0.10% relative to the S&P 500 SPDR ETFSPY -0.50% , overlayed with the ratio's 20-day moving average (MA). As a reminder, a rising price ratio means the numerator/GLD is outperforming (up more/down less) the denominator/SPY.
The ratio appears to have bottomed in early June, and has essentially kept up pace with equities after severe underperformance for three years straight. Yellen and the Fed have made it a point to reassure markets that on balance, they believe inflation risks are transitory and that low rates must remain in place for an extended period of time.
If we assume inflationary risks are not transitory in the short term, then that means the Fed may ultimately be behind the curve and be considerably lagging in terms of responding to inflation (which I personally do not believe is a real threat just yet). Gold tends to do well in negative real-rate environments, whereby inflation is higher than interest rates.
We may be on the verge of that happening again, which in turn explains some of the more recent strength in commodities generally. Our equity-sector ATAC Beta Rotation Fund BROTX 0.00% is currently overweight materials relative to the S&P 500 as momentum persists there, consistent with the idea that inflation expectations are altering.
So while the Golden Age never actually happened, the Age of Gold still might for those interested in diversifying away from the honey-badger U.S. stock market, which doesn't seem to care about risk until it actually does. I don't know about you, but when I look at a chart of Newmont Mining NEM -0.66% , that sure does seem like an interesting spot to position in.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
The fund as of 08/04/2014 does not invest in any of the following investments: NEM, GLD or SPY. Fund holdings are subject to change and are not recommendations to buy or sell any security. Current and future holdings are subject to risk.
The Fund's investment objectives, risks, charges, expenses and other information are described in the statutory prospectus, which must be read and considered carefully before investing. You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfund.com. Please read the Prospectuses carefully before you invest.
Diversification does not assure a profit or protect against a loss in a declining market.
Mutual fund investing involves risk. Principal loss is possible. Because the Funds invest primarily in ETFs, they may invest a greater percentage of its assets in the securities of a single issuer and therefore is considered non-diversified. If a Fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual fund. The Funds are expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains. This means that investors will be likely to have a higher tax liability. Because the Funds invest in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities. The Fund will bear its share of the fees and expenses of the underlying funds. Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds. The Beta Rotation Fund is new with no operating history and there can be no assurances that the fund will grow or maintain an economically viable size.
All investing involves risks. Investing in emerging markets has more risk such as increased volatility, relatively unstable governments; social and legal systems that do not protect shareholders, economies based on only a few industries and securities markets that are substantially smaller, less liquid and more volatile with less government oversight than more developed countries. Investing in small cap companies involve additional risks such as limited liquidity and greater volatility than large companies.
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
A moving average (MA) is widely used indicator in technical analysis that helps smooth out price action by filtering out the "noise" from random price fluctuations. A moving average (MA) is a trend-following or lagging indicator because it is based on past prices.
The S&P 500, or the Standard & Poor's 500, is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices.
MA(20) = 20 day moving average (marketwatch)
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