Platinum is Cheap

Suddenly, US stock markets are becoming more choppy—rising a lot for a few weeks and then falling, also by a lot.  Last week, the S&P500 fell by a notable 2.23%. Volatility ticked higher, which one would expect to happen in a down week—the VIX index jumped a bit. But volume did not rise, as it usually does during a sell-off; instead it dropped off. This suggests that the weekly drop in prices was not due to a rush of sellers heading for the exits.

Technical analysis is showing markets that have changed somewhat from their former character. In the recent past, markets would grind higher in a controlled, almost mechanical kind of way. Then, after rising for a few months, they would drop back by a 3-5%. And then the entire process would repeat. But lately—say over the last three months—they seem to lurch upwards and then lurch backwards every two to four weeks, going nowhere. In fact the S&P500 is now pretty much exactly where it started at the beginning of the year.

Also this change in the technical character of the equity markets is indicative of many major market tops. In the past, when markets begin to “roll over”, they’ve done so not all at once, but in a process. And this growing roller-coaster pattern is very often the way that this happens.

In macro news, the bad reports just kept on pouring in. The Chicago Fed national activity index disappointed massively—falling instead of rising as predicted. Existing home sales missed. The house price index missed. The Richmond Fed manufacturing index missed. Durable goods orders missed; so did orders ex-transports. The Kansas City manufacturing index missed. And first quarter GDP growth also missed. On the positive side, PMI flash manufacturing beat estimates. Initial jobless claims and PMI services also beat expectations.

Finally, in a world where almost every asset is back to being over-priced using long-term historical analysis, one interesting asset stands out for its comparatively low price—platinum.

This metal is 15 times more rare in earth’s crust than gold, and yet today, you can buy it for LESS than the price of gold. Its use is roughly evenly split between jewelry and investment on the one hand and industrial applications on the other hand. Back in 2008 it plunged from about $2,200 per ounce to about $800 per ounce, which represented a 64% fall. This time around, it’s fallen from about $1,900 an ounce to about $1,100 an ounce. Since this is only a 42% drop, if recent history repeats (and a long overdue recession finally arrives), then the price could fall some more, say down to $700 or $800 an ounce. And if it did, this would become a screaming buying opportunity.

It takes a supernova to create platinum, so unlike diamonds which can be “manufactured’ in a laboratory, platinum can’t be manufactured by man. And this restriction on its supply, combined with its super rare status on earth, would make it a low risk investment at prices under $1000 an ounce.

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