After Silver and Gold, Only 1 Stock Truly Hedges Inflation

 

CME is an Inflation Hedge

CME declared a first-quarter dividend of $0.66 per share, a 10% increase from the prior rate of $0.60 per share

Lesson 1: When a headline uses superlatives like ONLY, be skeptical. That said, for us there is only 1 stock. And that is because we understand the business.

One of the stocks that will do very well in a rising rate environment is CME. Why? Because the majority of their revenues comes from interest rate products. Look it up yourself, Google is your friend.

In a rising rate environment more businesses will be hedging. That's just a fact.  Add to this a mandate by the Government to put the OTC markets out of business opined on here previously and you have a recipe for growth at CME. In short, buying CME is an inflationary hedge. Today they raised their dividend. Can't short bonds? Then buy CME stock. .

Here is an excerpt from an interview MarketSlant contributor Vince Lanci gave for his 2016 trading picks. My Comments in [brackets]- Soren K.

How would you invest $100,000 in 2016?
“I don't recommend these without a full analysis of risks to anyone. Execution and selection are key,” warned Vince Lanci, adding that the following breakdown is how he’d broadly allocate his 1-year speculative portfolio in 2016.

10% BUY CME STOCK

“If rates rise, CME earnings will benefit as businesses return to hedging interest rate risk,” he said. [ Grade A+ CME opened 2016 at $87.53 per share and ended at $115.39.- S.K.]

25% BUY VOLATILITY

“It will increase this year as a function of policy confusion. Buy options not VIX baskets. Bonds, stocks, precious metals, oil, grains,” he said. “Yellen's recent statements said as much: QE is done but easy money isn't.” [Grade: D+ the VIX is on serious lows, so being more specific would have helped here Vince- SK]

15% BUY SILVER

“If you are bullish gold, buy silver,” he said. Lanci added that precious metals financing has dried up and as base metals mining slows, silver as a byproduct will shrink.

[Grade B+ You were right, and it's especially laudable that Silver retained its better performance considering the end of year swoon in both markets. Historically, Silver swings wider in both directions. So you were right. Why only B+? Because you missed Palladium!- SK] Full interview HERE

FWIW- Handicapping the Handicappers

Take note of Vince's metals opinions even if you disagree, ignore his long-term volatility projections, flip a coin on energy, take note if he has an opinion on Exchanges or REITs

  1. Vince knows commodities and metals specifically pretty well.
  2. His thesis on Silver is valid and based on different forces on the metal. He's written many times on Silver as an investment and a manipulated product here and in Zerohedge. 
  3. We know he knows volatility, and perhaps his bias blocks his own objectivity there.
  4. Historically he is very good at energy as an arbitrageur. But it should be noted, his 2016 energy call was not a good one. He's not a directional genius
  5. He rarely opines on stocks unless he has good research behind it. And his CME call was in no small result of his relationship with the principals at ER Desk whose real research we are not privy to, but Vince is. He is also tight with a REIT fund manager and 2 macro commodity funds. Finally he runs family money out of Echobay after "retiring" in 2008.

Overall: His metals acumen is good even directionally, especially when he gives both sides of the story. His volatility stuff is useless to the lay person even if he is right. 

  • If you want us to look at other pundits and predictors for their biases, strengths, and weaknesses email all of us at  SorenK@marketslant.com  
  • If you want their track record assessed, then you are a lazy idiot. We deal in decision analysis, subjective probability, and patterns behind the data. ROR is just math.

Commodity 2016 Performance Grid

 

 

Exchange NewsWire

via ERDesk.com

BATS 4Q16 adjusted EPS rose 33% y/y to $0.40. Adjusted EPS excludes tax-adjusted amortization and other costs. Revenues increased 7% y/y to 105.4m while normalized EBITDA rose 9% y/y to $68.2m.


CME declared a first-quarter dividend of $0.66 per share, a 10% increase from the prior rate of $0.60 per share.


ICE Clear Europe Paul Swann will retire from his role this year. Swann will be replaced by Finbarr Hutcheson, currently president of the ICE Benchmark Administration (IBA) and former CEO of NYSE Liffe.


FMDQ OTC, the Nigerian OTC securities exchange, is partnering with S&P Dow Jones Indices for the development and publication of co-branded fixed income indices.


NSE and NCDEX might shut down the Power Exchange India (PXIL), according to moneycontrol.com


Deutsche Bank will close US OTC swaps clearing business.


Bursa Malaysia will launch a new private market for SMEs


LSE has issued guidance, through its Global Sustainable Investment Centre, for good practice in Environmental, Social and Governance (ESG) reporting.


DB1 SME new segment will be named Scale and is planned to be launched on 1 March


Nasdaq: Nikolaj Kosakewitsch will take over as head of Nasdaq Copenhagen on June 1, replacing Bjorn Sibbern.


NCDEX will tighten audit checks at warehouses to ensure the quality of deposits.


Tower Research Capital acquired a 20% stake in McKay Brothers, a firm that builds microwave radio systems used by high speed trading firm.


KDPW_CCP: central clearing obligation of selected PLN OTC derivatives takes effect today
 

 

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Anonymous (not verified)

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Anyone with half a brain knows this puppet monkey, this Charles Evans of the Chicago Fed, knows nothing, can do nothing, in terms of increasing rates...All their BS talk about raising rates 3 times this year? lol....keep dreaming. There will be ONE rate increase this year and it will be in December. Other than that, these old Zionist blow hards are just bellowing smoke out of their fat wrinkled asses....Nothing will happen until the end of the year...Barring some inflationary catastrophe
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bob barker (not verified)

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This gold price is also so low it will deter nobody. As you mentioned that client buying all that silver has just as many people like him who will be buying gold because of its low manipulated price, all metals investors see as a gift.We all know what kind of a scam and fraud these gold and silver "certificates" issued by these parasitic fraud banks (who don't have a single physical ounce to back up the paper shit they sell) are, so people with any common sense will buy the hard physical metal. The scrap gold market has run dry; these stupid gold buying places are dropping like flies, because nobody sane, in the right mind is selling at this laughable 1230 level...To get more gold on the market, the price will have to increase SIGNIFICANTLY. Gold Maples Eagles and Buffalos are selling at record levels from the mints too.
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Soren K.

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lets assume they have the gold to back it up... ill raise the stakes. Now assume that gold they have is already borrowed from a CB. Follow? And even if it is not. The greatest trade is to be short paper and long physical in the end. This way you own the OPTION to honor the contract (debt). That's the JPM long game
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Anonymous (not verified)

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Silver maple leaf demand at independent locations is near all time highs; the 17.70 price is a gift to people wanting to invest in silver on medium, large and massive scales. I just recently assisted one of my clients in acquiring about $2.9 million in physical silver bullion of all - it will be shipped and stored out of country of course. It is not safe to keep that kind of assets in metals anywhere within North America or Europe.
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Soren K.

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the maple leaf is the best of coins to buy. almost as liquid as the Eagle at a lower premium. It is the way to go IMHO