Revisiting SMOEC, and updating some of the old excel charts for you guys
I've since begun tracking SMOEC (SIlver - MOney - EConomy) in trading view because its automated and easier, but there's some fun things in the excel charts also
As you can see it's been pretty flat, and has technically been flat since April 2020
Why use nominal GDP? I made SMOEC as a way to measure silver valuation levels without touching CPI at all, given the changes over the years to how it's measured. So Real GDP is a no go for me
The next step is to divide the silver price by said ratio and then you have what I call 'SMOEC' ("smoke")
I do think there is some subjectivity on how you draw the long term support line, so I've drawn both of my interpretations here
The blue support line above indicates a floor price of ~$18.30, while the more conservative green line indicates a floor closer to ~$17.05
In my previous excel charts I was basing my work more off of the blue line, just to be clear as we move to those
The 1st of the two excel charts shows the SMOEC ratio translated to dollars, for ease of understanding where we are in historical context
The blue line below is the same as the blue line the trading view chart above, it shows the floor price over time
Orange is the silver price
Green is the median valuation of silver over the trailing 20 years, this level has played a role as an important inflection point a few times, currently $34.56
Gray is the 2011 peak translated over time, currently $124.50
Red is the 1980 peak over time, currently $381.71
So with Silver at $21.17, we are currently 24% above the capitulation floor valuation,
but the median is 63% higher, the 2011 peak equivalent is 488% higher, and the 1980 peak is 1703% higher than we are today
Hence why silver remains a good asymmetric upside trade
And note all of those values are based on monthly closes,
If I were to use intraday values, the 1980 peak today would be equivalent to $545, and the 2011 intraday peak would be $131
Finally here's a chart of #silver as a multiple of it's SMOEC floor valuation since the year 2000
At 1.16 it's trading at it's 10th percentile over the last 20 years, meaning it's only been more undervalued 10% of the time
And lastly here's the same chart going back to 1970
The 1980 high really blows the chart out in terms of scale, as it traded over 20x it's floor value
Hence the very long bear market that followed, it was a bubble
2nd one, new homes but using median prices, still up 15% from a year ago
And finally, the chart that matters most, all home prices, remember that existing homes make up the vast overwhelming majority of homes, it’s not even close
Still up 19% over last year, with a new print coming next week
The fed is in danger of crashing the housing market. The mortgage payment index adjusted for #inflation is now at a record high
Do I think that nominal home prices in the US will decline on a year-over-year basis? I still don't think so and here's why 👇
(click chart to zoom)
The mortgage payment index is comprised on 3 things: nominal home prices, interest rates, and inflation
Thus there are 3 ways this chart can decline back into the safety zone below the yellow trend line
1. Home prices decline 2. Mortgage rates decline 3. Inflation stays high
If you are expecting the fed to cause another 2008 by willingly hiking us into oblivion (a scenario they explicitly talk about never allowing to occur again), then you are expecting number 1, a home price crash
We're in the zone currently that's kind of the "overflow" area that marked the previous 2 tops in the fed funds rate. You can see the fed funds rate in the chart above (the teal colored line)
Fed funds rate peaks when we risk going into a federal debt spiral
It's possible the 5yr yield declines, providing room for further hikes
The top of the "overflow" line is roughly aligned with: Fed Funds + 5yr = 4%
As of 5/6/2022:
Fed funds: 0.83%
5yr yield: 3.06%
Combined: 3.89%
If the 5yr falls to 2.67% we'd have room for 50bp more in June
I'm back from my week not posting, and here's my forecast for the #inflation numbers on Wednesday 5/11
I forecast the #CPI headline to be 8.2% year-over-year, down from 8.6% YoY in March
Month-over-Month that's 0.35%, down from 1.24%
Core CPI I predict 5.6% YoY, down from 6.2%
This reading should give the fed some hope that inflation is dying down, but we've also heard that before, if I'm right with my call of 0.35% for April, the red line is where the trailing 6 month inflation would be
We've had pauses on this journey before, so can't trust 1 month
Nearly the entire decline this month is caused by a decline in used car prices. The transitorians cited used cars all last year to explain away inflation
Curious to see if they cite it to discount the slowdown in #inflation as well, I wouldn't hold you breath on that one though
One not so great aspect of it right now is that it’s still in ICO stage, meaning only @KinesisMonetary can sell it
That shows a lack of confidence in the price. They “temporarily” suspended trading of KVT for users two years ago
I just question what “temporary” means in this regard. Sounds like a similar time period to “transitory”
Actually longer now, transitory was only one year for the fed’s usage of it
Not saying KVT can’t be a good investment, I just very much question the price that some people seem to be paying for it, I legitimately think it would crash 80-90% if they let it freely trade right now
But if metals go up a few multiples the valuation would make more sense