For those of you who have not listened to it, I suggest you go to the web site of the Korelin Economics Report.  There, at the link below, you can listen to a “round table” discussion a few of us had yesterday afternoon, following the Federal Reserve meeting; joining Yours truly and show host Cory Fleck were Rick Ackerman and Gary Savage.

Boiling it all down, the $64,000 question (or more or less, depending in your portfolio!) is how long the Fed will be able to keep inflating the markets before either gravity or an accident/Black Swan event bring everything tumbling down.  Nobody knows the answer to that.

But what was reinforced yesterday is that pretty much nothing is going to alter the Fed’s game plan to keep everything levitated by hook or crook.  Thus, it is very unlikely that anything that were to significantly upset the markets would come from the fed itself.  Yellen and her crew will continue propping things up because they have no other choice. 

So, while there remains the ever-present possibility that some accident some place (as I wrote in the latest issue, one has to give the nod to China as the most likely potential culprit) will bring everything tumbling down, at least for a while, it’s foolhardy to try to bet against Yellen and her wave of liquidity. What we must continue to do is pick our spots, find the best value/greatest probabilities, and find those companies/areas that won’t get crushed if/when things do finally unwind.

Before I get to some additional RENEWED RECOMMENDATIONS, I want to add some fresh thoughts on “The Odd Couple.”

Generally speaking, I believe we are going to see gold now outperform Treasuries for a while; and, further, see gold/silver mining shares outperform the metals themselves. As we have seen earlier this year, when gold has popped at times due to “safe haven” flows, the stocks don’t necessarily go along for the ride. But even before yesterday, the tiny gains in the metals have been considerably outdone by the miners. 

And with the markets now getting more of a whiff of the confluence of factors — rising stock prices generally, an ever-accommodative Fed, stronger metals, the ratcheting up of longer-term inflation expectations, a resulting real interest rate that will slip further into negative territory — I expect mining shares will do much better.

This morning, gold has surged higher still, on top of gains yesterday that should have been much larger, in line with stocks.  Technicians are looking for it to close above two key levels.  First is the major $1278-1,280/ounce level, through which it broke down a few weeks back.  I don’t think that will be a stretch; we’re up as I write this to a bit above $1,290.

Next — and being less of a technician than some others, I’m at more of a loss as to why this number is significant — some gold pundits have the $1,288 area pegged. 

Whatever its significance, it to me would be important to close above today more so because it will simply show that gold bulls made it through the day able to hold on to the lion’s share of overnight gains.

In a broader sense, the MOST important thing where the precious metals are concerned is that yesterday was a day that began to change the PMs’ underlying “narrative” on Wall Street.  Generally speaking (and I’ll be writing about this in more detail in the very near future) markets have been of a mind that the environment was much like the latter 80’s and much of the 1990’s.  Massive credit expansion and monetary inflation were confined almost entirely to the stock market, and to bonds second.  Inflation, by the standards back then, was subdued; and for the most part, commodities, including the precious metals, were unexciting.

Thanks to Mrs. Yellen, the thinking of many has now taken another step or two toward the realization that we are going to shift to more of a pattern that marked the late 1970’s. This will change the above in the sense that rising price pressures WITHOUT any near-term Fed attempt to slow them down is going to turn the equations at trading desks and with money managers into one where they must increasingly make decisions about shifting allocations even beyond what has happened thus far in 2014.

Bonds won’t get crushed any time soon in this environment; the big difference between now and the 1970’s, of course, is that back then there was no such thing as quantitative easing!  But neither are bonds likely to rally much more, barring something like a major escalation of the troubles in Iraq, a deflationary implosion in China or some such thing. We’ll stick with our reduced positions in IEF and TLT; if nothing else, they are cheap “insurance” against a broad stock correction, with little downside risk. But as I said earlier, thanks to Yellen, we’re going to have more of a feeling on Wall Street now that a 70’s-style strategy is suddenly a bit more appropriate.

RENEWED RECOMMENDATIONS

Over the coming few days, I will be adding several more individual companies to my recommended list, so stay tuned.

But for now, I am adding back two ETF’s that we have traded into previously, when we wanted a broader sector participation in the PM’s. They are:

 1. The Global X Silver Miners ETF (NYSE Arca-SIL); Yesterday’s close — $13.19

This ETF focuses on the Solactive Global Silver Miners Index; it owns shares in companies worldwide that are engaged in silver exploration and production.

 2.  The Market Vectors Junior Gold Miners ETF (NYSE Arca-GDXJ); Yesterday’s close — $40.23

This other “oldie” focuses on junior/mid–tier companies that develop and mine gold resources primarily, but also silver in many cases.  Unlike during the initial phases of past rallies for the sector generally, these types of companies have shown more upside when there have been moves. Part of the reason is that most of the “majors” have been so badly damaged in Wall Street eyes by the mayhem since 2011, asset write-offs, losses, etc.  Second, the majority of the smaller companies are simply cheaper.

Some will want to pile in very aggressively into this sector; but, you know me. I am more inclined to take smaller, surer steps.  Further, I will be adding some more individual companies down the road, once it becomes more apparent that this move will have some greater legs. With the likelihood that, eventually, many a good company will soar multiple times in value, there needs be no hurry to load up the truck today.  Though we can’t dwell on or become paralyzed by such a possibility, it still remains (albeit less so) that a deflationary shock will hit at some point.

FOR NOW…

Conservative accounts should take a 2% allocation each in SIL and GDXJ.

 More aggressive/growth-oriented accounts should put 3% in each.

Both of these are started as “Accumulate” — each has gapped up this morning; whether they pull back briefly or not remains to be seen.