Whats Wrong, page-18

JID

Have you followed Hedgeye for an extensive period or only joined them recently? I am asking because I wonder how his past calls on gold have panned out.

I joined Hedgeye (for some of their products) in late November 2018 after seeing some of their posts on SeekingAlpha and being dissatisfied with having missed the best entry into our local midcaps (ie SBM, SAR, EVN, RRL) available for quite a while because I was reading too many bearish pundits, especially those who believed the USD POG would bottom out in December similar to previous recent years. I actually had bids in on SBM and EVN near the lows but lowered them in anticipation of further price declines and was keen to buy the other other two I have mentioned.

I guess what Hedgeye showed is that they were good at front running the US Fed, and had good insight into US, and world, economic data. Since the HE's model's predictions are to a large extent based on the rate of change of economic growth and inflation and policy, and they expect the US economy to remain in a situation where economic growth continues to slow while inflation either falls or accelerates, HE believes that the conditions will be supportive for the USD POG in the medium term (and negative for US equities).

However, it seems to me that there are other major factors affecting the USD POG, one of which you touched on (high govt gold purchases that have offset lowered gold demand from India and retail/investment demand in China and Turkey). Major issues faced by the EU could also be gold bullish.

Having said that it seems to me that there is still a question mark about what the US Fed will do in mid 2019, and now that we are post the Chinese new year celebrations I would expect some pullback in the USD POG going into the middle of the year. The drop often starts from around the PDAC meeting or a bit later like Easter.

Personally I would not be adding to my portfolio unless there are some good reason, eg believe that RSG (or some other goldie) had some major progress to announce. In my case I already have a major portion of my funds in goldies, so the potential upside is covered, while I have cash on hand to benefit from retracement. At some point later on I will probably throw in my remaining chips for, hopefully, the next upswing.

One thing to consider is whether there will be much of a pullback in the Oz based goldies given that there is an expectation that the AUD could weaken under a future ALP govt, or indeed any other govt, given the likely economic headwinds from a possible recession stemming from weak demand and a housing bust.

At present I plan to hang onto what goldies I have, even though I am not in love within my portfolio (too many weaklings with others that are fairly high risk). Perhaps Goldbear's suggestion to buy NCM is worthy of consideration for those who missed out on the better Oz based goldies, which now seem fully priced or over-priced (unless the AUD POG heads higher, which it may). I have yet to graduate to speculating in goldies that are only listed overseas.

loki