Luke Gromen: Central Bank Gold Buys Accelerating
Luke discusses his background as a research analyst which led him to work in institutional account sales. He was a founding editor of a data aggregation newsletter and spent twenty years in research for institutional clients. In 2013, he started his newsletter which aggregates a lot of public information into a macro theme. They focus on finding anomalies where the data and market show diverging themes. They look for those critical details that others might miss.
Whereas everything is in a bubble, Gold is arguably the cheapest asset relative to history. The day to day valuation doesn’t matter much in a longer trend. Investors should watch the value of gold by comparing the market value of the United States official gold holdings to the amount of foreign-held treasury bonds outstanding. Investors need to realize that there is a considerable paper gold market and its purpose is to dilute the demand for physical. A document was released by Wikileaks that is a 1974 State Department brief discussing the creation of a “cash settled” futures market to reduce the demand for gold. The very existence of this market is the manipulation.
Most market participants view history as linear rather than cyclical. “It’s different this time” is among the most dangerous words on wall street. Ultimately understanding how greed and fear drive markets are just human nature and unlikely to change.
Tensions between the U.S. and China are unlikely to improve. It’s a matter of national security for the U.S. to limit China’s activities. So there are two major powers tied at the hip, and both are not likely to give up much to the other.
Talking Points From This Week’s Episode
• Gold is arguably the cheapest asset in history.
• Purpose of the cash-settled futures market in gold.
• Human nature is the key to understanding markets.
• Tensions between the U.S. and China will persist.
Time Stamp References:
0:40 – Luke’s industry research experience.
2:15 – Started his own research firm and newsletter.
3:00 – Study a lot of data to locate contrary trends.
4:30 – His thoughts on gold this year.
5:40 – Sovereign debt bubble risks.
7:30 – The paper gold market purpose.
10:00 – Investors fail to notice cyclical markets.
12:40 – Political risks – China and the U.S.
14:30 – Investors are not calculating the risks.
Luke Gromen began his career in the mid-1990s in Research at Midwest Research before moving over to institutional equity sales and becoming a partner. While in sales, Luke was a founding editor of Midwest’s widely-read weekly summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.
In 2006, Luke left FTN Midwest to become a founding partner of Cleveland Research Company. At CRC, Luke continued to work in sales and edit CRC’s flagship weekly research summary piece (“Straight from the Source”) for the firm’s customers.
In 2014, Luke left Cleveland Research to found FFTT, LLC (“Forest for the Trees”), a macro/thematic research firm catering to institutions and individuals that aggregates a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks.
Luke also provides strategic consulting services for corporate executives. He is a graduate of the University of Cincinnati and received his MBA from Case Western Reserve University and earned the CFA designation in 2003.