AFTERMATH OF THE US ELECTIONS

Yesterday has been a very volatile day. Gold spiked US$60 per oz before the usual suspects (central and bullion) came in and whack it back down to the pre-election level as most were shorting gold in preparation that Hillary will take the presidency. But in the retail market space, there was frenzy buying of gold, so much so that some retailers have to demand for more gold (source: KWN).

Meanwhile you have the banks coming in and talked up the US$ by restating that the Fed is still on course to raise interest rate in December when it tanked more than 1.5% points vs other currencies.

The unexpected result was of course the market spiking more than 1% after experiencing a limit down in the afternoon before the US open. Suddenly the market is receptive of Trump's plans which include making US infrastructure second to none. This of course entails more spending via debt issues.

So in this case, the inverse ETF failed to deliver the desired result yesterday. However, I believe there will be further volatility ahead such as the December 4 Italy referendum,where a Trump victory has emboldened the Leave-EU party. And in mid December we will know if the Fed will raise interest rate. News came out that Yellen will not be renewed a second term by Trump. So the inverse ETF is still an important tool as an insurance policy but never use it as a major investment (a 10% - 15% holding will suffice).

The miners did end in the green and as of this morning gold is also trending up.

Some analysts are predicting that the establishment, whose candidate Hillary lost in the election, will attempt to crash the markets so that Trump will be under pressure to include the establishment in his plans. This remains to be played out

Meanwhile something happened to the bond market. China sold off a large portion of US Treasuries yesterday, while the auction for the US 10 Year Note went badly. The 30 Year Treasury also saw similar sell off. And here's the question: How is the US going to finance her spending on infrastructure if US Treasuries are being dumped? The answer of course, direct printing of money and this will expand the monetary base, making gold attractive in the process.

As bond yields climb, the pressure will be on the stock market to deliver higher yields than bonds, and if this does not happen, then the overvalued stock market will fall. The current S&P is overvalued about 60% above historic average, so when it falls it will fall hard. Your inverse ETF then will ensure your investment is "protected".

The above is my opinion, you are encouraged to do your own research. Meanwhile, I continue to be bullish on precious metals, miners and inverse ETFs.