Friday, December 19, 2014

MolyCorp Squeeze

The short of MCP will get squeezed if the chart is telling me anything.
NOW.
gh

Thursday, December 18, 2014

Russian Tanks in Ukraine!

Was anyone startled at that headline. Of course not. No one reads this blog.

But, that small fact aside, I do not believe that the markets have to have any worries about Russia invading Ukraine. Not to say they won't do that, (if they aren't there already), but from the perspective of the stock market it will be a nonevent because the western nations will not respond militarily.
Some will jump on their soapboxes and accuse the US president of cowardice or "caving to terrorism" or some such nonsense. But the fact is that what has happened to the Russian economy lately proves that we do not have to shoot at Russia to defeat them. We can just starve them to death.

gh

Wednesday, December 17, 2014

Yellen and the Markets

The Federal Reserve met today and released the awaited statement. There was no change in the language referring to "an extended period" of low interest rates. Actually they did change some things. See HERE
But did they really change anything?


During comments after the meeting by Janet Yellen, the chair of the Fed, the stock markets declined, along with gold. The question is of inflation. When, the market wishes to know, is the Fed going to "rein in" inflation. And all are quivering in fear of a raise.

Let me answer that question.

You all know the difficulty of "pushing on a string". Yes?
That has been the analogy of the Fed trying to stimulate an economy that was not raring to go. In other words you can't make people borrow and create money if they don't want to borrow, or the banks don't want to lend. The economy is not ready to pull it's weight yet.

Think of a team of horses at work. An archaic concept, I know. But you cannot control a team of horses unless they want to pull forward. You can't push on a string...

During her comments Yellen made a one sentence statement that summed it up for me. She said, to paraphrase, "myself and the committee want to wait to raise rates until we are sure we can continue to raise rates in a continuing fashion".  To me that means they want the economy and inflation to be pulling at the harness before they try to control or restrain the economy.
When did Volcker raise rates? What was inflation doing when that hero of capitalism raised rates to rein in inflation? Wasn't it like 7% inflation?
We got a long way to go. Buy gold and real assets.


gh

Cuban Strategy

The political hacks are saying that this normalization of Cuba relations initiative by President Obama is a "poor trade" and they refer to the prisoner release.
The prisoner release is a token. Deals of a political nature have tokens to present to domestic constituencies. Do we think that Raul Castro gives a shit about his spy that is released? I doubt it. There are other considerations.

Take a look at a map of the world and pay attention to the Caribbean basin. Cuba sits at the entrance to the Gulf of Mexico. Now think of a Keystone pipeline bringing vast amounts of cheap energy from the northern U.S. and Canada. The supplier of that energy will gain tremendous influence being the supplier of energy to the region. Venezuela sits at the other end of that Carribean crescent. We know we can undercut them on price. Influence.

Secondarily, I think that once the Cuban people have a chance at prosperity and jobs that will come from an influx of US dollars into Cuba combined with modern technology and social media they will demand their rights as human beings. Socialism may persist in Cuba, but Communism and repression will fail. Straight Capitalism is doomed. Straight Communism has failed. A combination of socialism and capitalism is a vigorous hybrid.

Furthermore. When I have to make an important decision with a moral dimension I often ask myself, "What would Jesus do?". The answer in this case is most definitly not to continue a 50 year old embargo that has placed millions in poverty. It is time to reach out with peace and prosperity.

Let us think strategically and restrain our short sighted and tribal obsession with political conflict. For a change. I don't think the "hope and change" thing is dead. It just got chopped up with a hatchet job. Let us be progressive.

Energy Self-Sufficiency

Just a few words.

The energy independence of the U.S. will have large ramifications across the hemisphere.
In the same way that Cuba is moving closer, I can see all of S. America benefitting from a local energy surplus. From this standpoint the Keystone pipeline is appealing. I will leave the global warming argument aside. But from the perspective of the export of LNG to nearby neighbors it may be very beneficial from a security standpoint for a long time to come.

gh

CUBA

Cuba relations to normalize

Cuba cars...





The news this morning is of the coming of normalized relations with Cuba. You know, that island off the coast of Florida that is a country. Where Guantanamo is, the naval base and prison.

The country that drives all those vintage cars..... I see lots of those cars coming to the U.S. Among other things.
Like energy. We could easily export some of our energy to a nice Cuba.

And we can vacation there, like we used to long ago.

CUBA is an ETF. Lots of activity in that this morning. It barely broke out to new highs. I can't imagine how high it could go if it has been so moribund for so long.
There are surely other investments that would thrive if Cuba and U.S. normalized. It would take an expense off Russia's hands. They wouldn't have to support their comrades any longer.....

thinkin,
gh


Charts:

Monday, December 15, 2014

Middle East Unrest

This thought has been bouncing around my mind for a few days. If the Saudis cause too much turmoil in the oil world it wouldn't surprise me if the get attacked for their actions. Whether by Iran, or Russia, most probably by a proxy. But the end result would be the same. The U.S. would be reluctant to get involved. We don't need them anymore.

One refinery explosion or one terrorist attack in the Kingdom.....

From a technical perspective charts that go down this fast usually don't just stop and go sideways.....

The market gets wound too tight.

Playing with Fire


just intowishin,
gh

Sunday, December 14, 2014

The Last War

Here is a post from Zerohedge

This is what that post says....

"
UMIch Consumer Confidence Goes Euphoric - Highest Since Dec 2006
 


Submitted by Tyler Durden on 12/12/2014 10:10

The last time Americans were this full of shits and giggles was December 2006 - according to UMich latest survey of consumer sentiment. The indicator has risen for 5 straight months accelerating each time with the biggest surge since the mid-2011 US downgrade crash. At 93.8, smashing expectations of just 89.5 by the most since March 2013, for a 5-standard-deviation beat. Inflation expectations rose (as inflation plunges) and while both current and outlook indices rose markedly, it is the hope-strewn 'economic outlook' that exploded.

A picture paints a thousand words...

"
 
 

If your taste runs to conspiracies you will love Zerohedge. They rehash all of the latest conspiracies about politics and economics with regularity. And if you are looking for indications of an imminent collapse in the financial world, ZH is the place to get your dope.

It has been said that the Generals always fight the last war. This is meant to say that they learn their lessons from the war they were in, and prepare their armies according to those lessons that they learned. But the Generals on the other side do the same. So the next big war is inevitably different from the last because only a fool would fight a battle ones enemy is prepared to win.

Much the same in the financial and business world. The mistakes are in the past and the survivors learn from their mistakes and the mistakes of others. It is for this reason that the same manmade calamities rarely happen the same way twice. History doesn't repeat, it rhymes. And sometimes it isn't even a good rhyme.

I do have a problem with prognosticators of macro economic distress who base their predictions on what happened last time. All of the individual players who have some size are looking out for their own hides, and the last thing they will do is place their treasure or the assets they manage in danger from a known.
It is the unknowns that we don't know that cause the big problems. (Thanks to Don Rumsfeld) And what the conspiracy buffs talk about are the knowns.

The latest threat to U.S. finance seems to be related to the sudden drop in the price of oil. The oil industry in the U.S. has invested large amounts of cheap capital in the production of shale oil and gas over the last several years, and it is paying off in cheap energy costs. Now that the price of that product is dropping there are questions regarding which of these new drillers and energy miners will be able to survive these low prices for their products. I have heard that the high yield debt of the oil industry makes up approximately 20% of the corporate junk bond market in the U.S.  It seems inevitable that some of these companies will go bankrupt and default on their debts. Who is holding those bad debts is one question casting a pall.
Another is how long the price of oil will remain low. The Saudis seem to be resolute in holding their production at its present level. It is not in their immediate interest to support the price of energy now.
There is talk of the market finally reaching a "true market level" after long speculators are flushed out. Some of the big banks have apparently abandoned their commodity positions. The talk seems to be that energy could go much lower. That implies that those talking think there is still money to be made in the decline.
The problem with market solutions is that the market will now be waiting for supply to decline as producers shut down. And the market will tend to be short energy prices. But as the first indications come of a bottom in supply the market will move the other way. Not only the shorts will cover, but those who need the product will anticipate a shortage and stock up. A sharp reversal is possible.

The other side of the equation is demand. As the above ZH article is pointing out, consumer confidence is the highest in many years. This is not only due to low gas prices. It has as much to do with increasing employment numbers, wages increases in the works, and the paying down of debt that much of the workforce has been doing over the last few years. Debt is the last war. We won't make that same mistake for awhile. The Japanese haven't made that mistake for awhile either. (20yrs!)
The only people who make a mistake are the generals.
And the people in charge at the Federal Reserve could only be thought of as generals. But their mistakes have been widely studied as well. So perhaps there are few known unknowns there.

I can come to no firm conclusions or indications of the future course of financial markets at this time. The recent weakness in stocks, and it is only a few days of declines, may be no more than short term jitters over recent junk debt problems. But finance fixes itself. And energy demand and supply fixes itself. (Until the shale and frack gas runs out, and that will be several years) I do think we may see reversals in energy that are not expected. And we may see things in the stocks that are unexpected. The speculative reversals will probably be initiated from the political side of the jungle. I don't think consumer confidence will reverse. People are about ready to get on with the party.




Staying on my toes,
gh
 






 

Friday, December 12, 2014

CHK

Steady and heavy buying in Chesapeake this morning.
Bottom?

control risk,
gh

0854 PST
Bob Pisani just told viewers to "don't pick bottoms". What better indicator is there?


P.S. : I just want to say here that picking bottoms, and making brash comments like the above is reckless. I have some fun picking bottoms. But there is real risk in doing so. It is generally more profitable over the longer term to wait for a bottom to form, and for the trend to change.
gh

Thursday, December 11, 2014

Is The Dollar Done?

Gold has held up very well considering the strength in the US Dollar and the weakness in energy.

As we find a bottom in energy, we may find a top in the USD.

I think we are close.


Watch gold and silver soar as the dollar slips............


control risk,
gh

1230 PST: COVER YOUR OIL SHORTS BOYS!