Thursday, March 26, 2015

Bacon Out of the Fire?

A few headlines from the Middle East:

Saudi's Bomb Rebels


Iran objects to the intervention


U.S. Aids Shia in Iraq


There seems to be an intensification of the conflicts in the oil patch.

The U.S. is reluctant to go back into the middle east in force.

The U.S. does not depend on oil imports like we did in decades past. If we import oil/energy it is from Canada and Mexico. We are not dependent on the middle east for oil.

The U.S. oil and gas producers are having a hard time being profitable with world and U.S. oil prices at the low levels of recent months. A disruption of Saudi supply would help U.S. producers if world prices rise. Some Canadian and Mexican oil could be diverted and raise U.S. prices.

The increasing tension between Iran/Shia and Saudi Arabia/Sunni may be increasing. And recent reports are of these nations buying large amounts of weapons.

Arms purchases

Regional Buildup

"The recent upgrades to military infrastructure and equipment, however, may not relate solely to Israel or Iran, both of whom have been quite stable in recent years, but may relate to a significantly decreased presence of the US Fifth Fleet in the region."


I am surprised that there is not more buying of the U.S. oil and gas producers. We may get our bacon pulled out of the fire by our producing rivals. It costs money to wage war. If one country attacks another, and those countries primary sources of revenue is oil, an attack on a rivals production will crimp their income as well as raise the price of surviving production.

The timeline may be months or years, but I the U.S. does not have the interest in the region that we did in times past and that will surely influence our desire for interventions.

gh






Thursday, March 19, 2015

U.S. Small Caps

I'm all in.

50% Emerging Mkts.
50% US Small Caps

On these latest developments in the interest rate and currency markets. And on the technicals of the IWM.

The Fed has our backs. The strong dollar is on their radar. And the Euro will bottom somewhere soon. And the Yen must pause. And this will be due to the Fed on hold even as the U.S. economy is gaining strength. A recipe for inflation. The first rounds of inflation are often intoxicating.

Time will tell.  I will limit my losses if wrong.

Control risk,
gh

Wednesday, March 18, 2015

BOOM!

What goes up, must come down...
Spinning wheels gotta go round.



The U.S. Federal reserve indicates a willingness to stay with low interest rates.

This is more of the currency problem. And a continuation and perhaps an escalation of the currency wars.

gh

Tuesday, March 17, 2015

Race To The Bottom

I just heard that the U.K. is going to cut taxes on oil exploration firms to encourage the find of more oil.  OIL  They are having a hard time because of world overproduction of oil. So they want to find more?????? Really?

Taxes have been under attack for decades. (Think Thatcher and Reagan's revolution....Tea Party)

Taxes have been under attack with the promise that lower taxes will stimulate investment and create jobs.
JOBS   JOBS   JOBS.  It has been all about creating jobs. Where are the jobs.

This is the infamous "supply side" theory. Well it works.... to a point. And then not so much.

The problem lately is that the price of goods continues to sag. Not a problem for a consumer with a job and money to spend, but a problem that makes the profits for producers more difficult. And who invests in plants and equipment with prices of the product declining?  Only those who recieve some bribe, like a tax cut. And what is the effect of more production? Why, it is more declining prices, of  course.

And technology. What is the point of technology? Answer: to reduce labor costs. That has always been the point of technology as it applies to industry. In the medical field it is different only because there has been someone to pay for the use of the technology. Think CT, MRI, PET, CABG, noninvasive surgery, etc.  What was the point of employer provided health insurance in the U.S. during and after WWII? Answer: to reduce the need for wage increases. Look what the wide availability of insurance did for medical science and discovery. The customers were there with money.

What was the point of the globalization of trade? Answer: to reduce labor costs. And the result is that prices for goods have come down, inflation is nonexistent. This all after a period of time when the central banks of the world came to the conclusion that they could create wealth by encouraging borrowing. With the help of the banks lending created consumer demand, and propped up prices of goods and paper goods, meaning the shares of producing companies. (Stocks are paper money) Wealth has become concentrated to a historic extent. Technology has made control of production easier for the few in control and directs profits to the fewest.

But the problem of unemployment persists, and it leads to popular discontent when it is noticeable. So now central banks in collusion with national governments (Japan, China, etc) are intentionally manipulating their domestic currencies with the aim of stimulating exports. This has been happening for some years. In the case of China is worked wonders until lately. But the economic sphere adjusts, and is always looking for a "better" way to make a profit, and that is often a shift to purely financial products that do little to put people to work.

It seems that governments around the world are afraid of the consequences of the lack of employment. But the world population continues to grow even as technologic progress can provide more goods with less labor input. But the answer continues to be to cut the taxes of the producers so they can produce more. And prices decline more, and the producers work for more bribes by bribing the political actors. The people feel further abandoned and discontented.

The answer is never to raise taxes on the rich, create common goods with the labor of the unemployed, or to give workers more for their labor so they can afford more, raising the prices of goods with demand for more labor. The answer is never to distribute the money that has accumulated at the top of the economic food chain through changes to the social system. Oh, no! That would stop investment in plants and equipment! What investment?

What if domestic (U.S.) taxes were made more progressive, ie, they went up as income went up, combined with limitations and or tariffs on imports, to increase domestic production of goods. The first country to do this would have an advantage, particularly the country that had the worlds predominant currency. Would the U.S. dollar go down versus the other currencies of the world in that scenario? It seems the answer is yes. Prices rise domestically, wages rise domestically, debts decline relatively, as interest rates rise to more normal levels. And real wages show a rise around the world. Bad for business, but a redistribution of wealth worldwide. And a rising domestic currency (apart from the US, where food is cheap already) makes local food cheaper, allowing locals to invest in more than their next meal. China would be forced to rely more on their own domestic consumption as would the world. The "invisible hand" is only benevolent when labor and people are mobile and/or the currency market is allowed to function independently. That is not a fact of the world social situation and is not likely to change anytime soon, except for the very rich.

As an item of interest. The British Empire started to decline at the same time the British abandoned trade barriers.

Perhaps we need a paradigm change. Democratic groups do not tend to have dramatic change without the drama. Alas!

gh




Monday, March 16, 2015

Putting Pieces Together

Water

Trend Change?

Food and Politics


Just thinking there will be an unexpected trend change in the materials and commodities.

(Probably just intowishin)

gh



Wednesday, March 11, 2015

King Dollar

Europe and Japan are depreciating their respective currencies. In the case of Europe it is to stimulate the Eurozone and increase employment, particularly in the peripheral countries, some of which are on the verge of bankruptcy. Japan has mountains of debt, needs to continue it's export machine, and has been fighting deflation for 20 years as their population ages and saves. Isn't that the story of the developed world, aging populations trying to save for retirement and infirmity?

A strong US Dollar makes imports less expensive in real terms. A strong dollar is a disincentive to manufacture for export as well as a disincentive to manufacture for domestic consumption. A strong dollar does nothing for meaningful employment in the U.S. in a world of mercantilist nations.
As the US dollar appreciates in value, the currencies of many smaller nations depreciate. As we import deflation we export inflation. A weak currency in any country makes it harder for people to buy the food that they produce, which will tend to get exported to the market that pays in the most valuable currency.  In the past we have seen rice riots around the world. Now we have war in the middle east with insurgencies rampant. They do not make war because they hate us. They make war because they have a hard time making ends meet when the rich nations use up the resources. And this is a function of the financial sphere moving money around to where the profits are. Money doesn't even look at a beggar in the street, not to mention the world. If you ain't got money you ain't got nothing.

The US Federal reserve is expected to start the process of raising interest rates this summer. This is the reason for the latest round of stock market selling. (which isn't that impressive so far)

Money follows the rate of return. If interest rates rise the currency usually rises. The U.S. Dollar is the reserve currency of the world, and is used the world over for transactions. Things will get cheaper for US, and cost more for them. This is only good for a short period of time. Perhaps those decades are past. Then the peasants riot, and take back what they can salvage. (Read P. Buck's "The Good Earth" for a lesson in macro-economics)

As far as the U.S. stock market lately there are few sustained trends.  The averages still go up, but the individuals are difficult to trade. The bloom is off the rose, so to speak, and has been for some time. Now it is just a matter of time.



I've been doing other things lately. It is spring, you know. Well it feels like it out where I live.

I am still holding for a bottom in the basic materials. FCX and CHK, AU, CDE, etc.
If you get a chance help out with NIOBF. It is keeping me afloat these days.

Take no prisoners,


gh

Friday, February 27, 2015

Elephant's Fighting





When elephants fight, it is the grass that suffers. This ancient proverb of the Kikuyu people, a tribal group in Kenya, Africa, is as true today as when the words were first spoken, perhaps thousands of years ago.

This is why I use technical analysis of markets. A close and sustained look at price and volume and how they can provide insight into the formation of trends, consolidations, and trend changes keeps this blade of grass from getting trampled by the elephants.

Here is a report on Bridgewater and how they supposedly plan to use Artificial Intelligence to trade more effectively.  They are chasing the holy grail. They all do. The problem that the successful hedge fund managers have is that they are too successful, meaning that they get too big. They are the elephant in the china shop. When they move they cause things to rattle. They have so much money to put to work that they cannot help but move nearly any market they get into. And if one of them finds a successful strategy it will immediately be copied by other large players and will cease to work.

This is where the tape reader and trend follower has an advantage. Watch the prices move, and watch the volume that happens as they move. Size creates volume. As the elephant moves into the water the water moves in waves.

Dalio and Bridgewater


Thursday, February 26, 2015

First Solar, Long Term

Here is a technical look at First Solar (FSLR) from a long perspective, and thus a potential long term "investment".....  Trade to me, but....

The chart notations pretty much tell the story. FSLR has been much higher in years past. But the credit contraction combined with the recent cheap fossil fuel energy has combined to depress the price of this stock dramatically. But the volume tells me of renewed interest. The news is of AAPL wanting to contract with First Solar to power an industrial plant of some sort. But the volume seems to say that this is the start of something big. And it is only a matter of time.

So I am doing this as a long term trade.  And a bet on a trend change. I have pretty good position, from about the date of the last time I mentioned FSLR, but if the "trade" or this investment starts costing me money I will abandon it. But it seems like a bottom is in. (I hate to jinx myself by saying that)

The intent of this post is to educate on the importance of paying attention to the volume that makes a price in technical charting, aka the interpreting of buying and selling interest in a security.


For right now I can't make the chart thing work......

try again,

there we go!

Control risk,
gh

Thursday, February 19, 2015

Copper Bottom

Copper looks like the price is bottoming. It hasn't been long since the recent lows, but price looks set to go up.
The decline in copper coincides with the strength in the US Dollar.

I think the dollar is set to decline.

Anecdotally, I was talking to a family member who is employed in the woods products industry as a log truck driver. He says that the lumber mills are buying all of the logs they can get, and working 24 hour shifts. He quoted a record number of log trucks unloaded at one of the local large sawmills very recently. 

If the economy IS stronger than expected and the Fed keeps rates lower than warranted, the USD should decline.

The housing stocks have been doing well.




gh