Market Update – The gold bugs should be very excited. If there is any whiff of Fed dovishness these markets could explode

I have uploaded a Markets podcast for August 18, 2018. Click here to go to the show archives page to get the links to the articles and media discussed and to listen, or you can listen on the link below.

Soft Commodities Hit Record Low With More Losses Seen for Sugar. The stronger USD is killing the prices of the softs and trops with most at decade lows. The economies of the emerging markets are disintegrating as the US Fed has continued to tighten. If the Fed was only concerned about the domestic economy, it should be even tighter.
-The battle rages in the 10-year UST futures market. According to the latest COT report, it is the most oversold in history. The large specs added 100k new shorts to their already massively oversized net short position. The Large commercials are taking the other side and I have to assume it is official intervention.
Fed May End Taper This Year Amid Regime Rethink. If the USFed even hints at a taper pause or provides any dovish tone, the overstretched markets may explode. According to the latest COT reports, the 10-year UST and gold are the most oversold in history.
-If the US Treasury is demanding the 10-year yield remain low, the USFed may have to rethink its fed fund rate increase strategy. Only 24 bps separate the 2-year and 10-year USTs
-For the first time I can remember the Large Commercials have actually net long gold exposure. The Large Specs are outright short for the first time that I know of, and when futures options are included the large specs. net short position is sizable and the Large Commercials are net long.
-I believe we could be setting ourselves up for a massive short squeeze in the gold, platinum, silver, and the 10-year UST markets. If the markets think the Fed could rethink its strategy in any way (even small), gold could easily pop $100 off the most recent low in a few days.
-As the dollar strengthens, USD-denominated assets will be well-bid. I think US real estate is cheap compared to the rest of the world’s developed and developing markets, particularly Asia. I base this primarily on cash flow numbers and price to household income levels.
-If the 10-year UST yield can remain below 3% or so, the only place to go in the US will be stocks and real estate.

Australia and Canada may have debt ratio problems, but the US looks very reaosonable

-Australian and Canadian household debt/GDP and personal income are at historic extremes. I guess that is because foreign money has bid up their real estate.

With low interest rates, the debt service ratios remain subdued. Currently, the US has the lowest rate this of century. More room to add debt.

-The current US household debt service ratio is the lowest it’s been this century. The US delevered a lot after 2008 as much of the debt was worked through and/or written off.
Jim Cramer with somber news for bitcoin. Both we and Cramer were correct in estimating that the bitcoin futures market would cause prices to fall. He is out this week saying equilibrium could be as low as $800-1,000. As usual, the crypto shills are whistling past the graveyard by attacking Cramer for his opinion. I personally think it’s going lower, but Cramer’s estimate is a bit harsh.
-Bitcoin keeps putting in bearish wedge after bearish wedge and I think 6,000 will give way soon to a price eventually as low as $4,700. Notice the trading volume is still high; thus I don’t see it it turning higher any time soon. But, I wouldn’t short a market that already has suffered. Never fight a wounded animal as it may surprise us in the short-term.