Thursday, August 30, 2012

Markets waiting for Bernanke's words?

Markets have been quiet lately. It is summer. But the talking heads keep saying that the markets are quiet also because they (the markets) are waiting for the Federal Reserve chairman's pronouncements at the Jackson Hole conference. The Bernank is going to talk tomorrow.

So where are we, sentiment wise, in the stock and bond markets. Since the great crash of '08 the markets have looked to the Fed for reasons to rally. Usually on the prospect of cheaper money/easing of interest rates/ or more "Quantitative Easing". Of course it has been some time since interest rates were lowered because they really can't go any lower. And the economy of the U.S. seems to be picking up. The latest reports from the retailers were nearly all above expectations and show strong gains year over year.(pricing power?)
Oil is holding up/ gasoline is up. (energy inflation) Corn and soybeans and the grains in general sky high due to the drought. (Food inflation) The Euro is showing signs of a bottom. At least for the time being. (USD weakness)
Lots of inflationary forces at work. Gold strong over the last couple weeks. Ditto for Silver.
And the talking heads are telling us that if Bernanke doesn't give up more cheap money the stock market will decline.
The Fed has stuck to their line about "doing everything neccessary to prevent deflation" or something to that effect for years now. But if there are inflationary forces starting to work, is it really reasonable for the markets to expect more easing/cheap money?

I don't think so. I think the Fed/Bernanke will say the same things they have been saying. With the intent to get inflation well under way before they take the chance of a hawkish bent. This means they will let inflation go for awhile. It won't take further easing to get things going. All they have to do is stand pat.

And if the markets were worried they wouldn't be sitting near all time highs.

Waiting. gh

Wednesday, August 22, 2012

big government?

Here is something I picked up at "The Big Picture" this morning. Originally from Bloomberg.

This is something that every O'bama hater/Tea Party moron needs to be cognizant of..(Cognizant means "aware")...

And that spike in the middle is from the Census workers.

Interesting, huh?

Friday, August 17, 2012

Emerging Markets?

It seems for some time now all I hear on CNBC are various commentators talking about the strength of the U.S. stocks vs. the weakness of the emerging markets. Emerging markets were all the rage a few years ago and then fell along with the credit implosion. They have remained relatively weak since then. Probably due to the specter of weak China/ weak U.S. demand.
One of the indicators that I use, (a contrary indicator) is when all of the commentators are leaning one way, no-one seems to be taking the other view, and the markets in question are generally out of favor. And then of course there is the issue of timing. A market can remain out of favor for a long time.

But in looking at some charts I've noticed a continual rise in the index of Emerging Market Bonds. Of course the U.S. bonds have done well as have most bonds in the world with the notable exceptions of the Euro area countries that are having solvency problems. The general "safe haven" of the U.S. is probably due to our status as the largest economy and the reserve currency of the world. So why would Emerging Market Bonds continue to rise?
Here are the charts of EEM (emerging market index) and EMB (emerging market bond index)....

Comments welcome.

Thursday, August 16, 2012

Speaking of triple tops...

In the following chart there is a "triple top". Actually it is just a resistance point that has been hit three times now in the context of what appears to be a larger rounded bottom. The part that makes this look like a bottom is the volume. The volume has been much larger as this bottom formed. Making me think that big players are putting on a longer term position. I try to be going in the same direction as the elephants. It is easier to avoid being trampled that way.

I actually heard on the telly last week that one of the larger hedge fund managers had reported a new position in Chesapeake Oil and Gas. Which is probably in the same group as GASL the fund....

the chart:

The precious metals also look a lot like this chart. See GLD, SLV....


Wednesday, August 15, 2012

Vouchers would become another handout to corporate insurance.

My grandaughter starts kindergarten this year. She and her mother are excited. As am I. In the course of registering for kindergarten her mother was presented with a list of things she would need to purchase in the way of supplies for the school year. Among those items were such things as: 15 glue sticks, 6 pencils, 6 black pencils from Office Depot, 2 boxes of markers, Kleenex, dry erase markers, a large box of sanitize wipes, a package of Playdough, coloured pencils and a box of 24 crayons. The list was much longer. All of the supplies are to be placed in the common supply to be used as needed.
I can understand the need to place the supplies in a common supply. Some of the parents of some children will not be able to afford some things and it would not be nice to deny some children the opportunity of participating in class activities on the basis of their parents financial ability. That is only right.
But the fact that the school system is asking parents to buy basic supplies to conduct a class is disturbing to me. It seems that a school district, given the money to buy the supplies could bargain with wholesale suppliers and get much better prices. As it is the parents of the students are being forced to buy at retail prices for the supplies needed in school. Doesn't this raise the cost of the education?
I suppose this ties back to the American horror at paying taxes. Rather than everyone paying a small tax and allowing their representatives at the school to purchase supplies, we prefer "pay as you go". With the unintended effect of paying higher prices for the things we need. Thus the consumers of school supplies are forced into the arms of the retailer, prices are driven up for school supplies due to the increased retail demand, and the overall cost of school supplies is raised. Not to mention the time and expense each parent will incur.
In this country we are doing the same thing on a much grander scale in our provision of medical care. Some of our leaders are trying to do away with Medicare as a government administered medical plan and move to a system of "vouchers" where we get a cash credit to use on the open market to purchase medical insurance. In fact driving customers to the insurance companies.
The Veterans Administration uses their bargaining power to good effect in their negotiations on drug prices. The VA is able to get much more favorable prices for many of the drugs they supply to veterans. The large drug companies fight tooth and nail to prevent such a system from gaining traction nationwide. But the savings are apparent in the VA system. Those type of savings could be enjoyed on a much grander scale. But it would require us to trust our elected representatives and to demand that they diligently work on our behalf. Medical care, just like school supplies, are needed. They both have cost. That cost needs to be managed.
I wonder if Americans are so engulfed in self-doubt that they think we can't do something on a grand scale anymore. We could have an efficient, cost effective medical system that served all of the citizens of this country. But it will have to be WE. We can't go about controlling our costs by giving government money, through taxes, to individuals and expecting them to get a good deal on their own. Big insurance and big medicine will take the money, give the least they can and then they will lobby the government to give the individual MORE money to spend on health care. That is how it will happen if we delude ourselves into thinking that the "free" market will produce low prices in a commodity that everyone needs. It is corporate influence on Congress that is pushing the privatize Medicare idea. The corporate idea of "privatize" is to put tax dollars in their shareholders pockets. Do you think they will welcome a cutback in that government money in order to economize? Do you think they will embrace cutbacks in re-imbursement? If history is any guide, no! You can look to the defense establishment for your answer.

Later that night:
And while I was cruising my fav blog sites I found this one:


The "Dreaded Triple Top".

Below is a link to an article that comes from "The Street".  A well known financial site. It has been my experience that "triple tops", which occur when prices reach a previous high for the third time, are bullish. While there are often pullbacks from these highs, quite often after the pullback prices go up past the triple highs and a new run higher ensues.

Think of it this way.  The first time prices reach a high it is just that prices have gone up until the market as a group decides they are too high, there is a lack of buying interest and an increase in selling that drives the price down. Profit taking, to use the common parlance.

But in any rally there are those who still believe in the rally and will buy more as the price gets "cheaper".  So the selling declines, bottom pickers step up to the plate. Short sellers may cover. And for whatever reason the price goes back up. In this case the price goes up to where it was before.

Now, on this second move to the old highs folks are smarter. They saw what happened last time prices got here so many will sell. Those that had bought near the first high will tend to want to get out even and some of them will sell. The short seller sharpies will look for a repeat of their last victory so will sell. But, again, for WHATEVER reason, prices find a bottom and go back up.

If they make it to the previous highs AGAIN you have to ask yourself this: "Why are they up here a third time?" If this market was truly weak, and the long term players were selling and getting out, why is this market up here for the THIRD time?

O'kay, maybe it is just up here for the same reason as the second time. And it will probably go down again for the same reasons. But the thing to watch for is if it comes up again and goes higher it means that it is NOT a "triple top". Just because price hits resistance three times does not mean it is a top. It is only a top when it goes down and keeps going down..... Only well after the fact can you call it a top!
But to me, when a market gets back to previous highs the third time I think: "If this market is so weak, what the hell is it doing up here AGAIN?!!

The link:

Thursday, August 9, 2012

Wages are embedded wealth

  1. The world is suffering from the war on labor that has been waged over the last 40 years. The war spread from the U.S. to Britain and around the world as a proxy war in Japan, Mexico, Asia and China. Now moving the war to Africa as politics permit. The profits of the war making parties were from the arbitrage of wealth differences in countries and regions. The U.S. was the golden goose. The golden goose is exhausted. All that is keeping the goose alive is tradition. The tradition of a U.S. Dollar as a reserve currency. As this adjustment period draws to a close the futility of saving in U.S. Dollars will dawn. This is all the more reason to borrow now and INVEST in our infrastructure. We can pay them back later in all those worthless dollars that will come flowing into the country as the world sheds them……
    What is one of the strongest countries in the world today? Answer: Germany. Socialist Germany…. Labor unions, etc…..
  2. Subversively yours,
  3. gh
From a submission on "The Big Picture".

Slinking back...

Well, I've felt a lot like a contrary indicator lately. Buy at the highs, and sell at the lows. And at all times feeling I was right! But when that happens and it has happened before I get out of my positions and stop trading for awhile. This time about a week. With only an occasional glance at the markets. When I come back and look things over I am struck by the strength that I see in the housing stocks, (they have been strong for some time now, but I was not a believer) the steel stocks, and to some extent the mining/manufacturing stocks.
And when I look at things I get the feeling that things may be shaping up for another commodity bull market. With all of the bad news about the economies of the world why would anybody buy steel? Same with silver. And gold is holding up, so far.... And there is some exiting of the long bonds, which are sensitive to inflation.
Natural gas still strong. I talked about GASL awhile back. It may be in the process of a breakout to the upside. ]
STLD in a good rally. A long term chart of SCHN looks good. FCX starting to come alive.
But SLW is one of my longstanding "tells". And if it is still valid as such it is leading silver higher. Charts below.

Time will tell. If the money starts coming out of the bond market in a serious way we could see the start of that long feared inflation. That was the sentiment in 2006... Do you remember??


Thursday, August 2, 2012

Markets still looking for a handout.

As long as I can remember in my trading life, (About 17 years) the stock markets have rallied on a promise of easy money from some government agency. Usually it was the Federal Reserve lowering interest rates. As the years went by the length of those rallies got shorter and shorter. At first they lasted for years. Then months to years. Then a few months. Now it is about THREE DAYS!

The markets were looking to Europe and the European Central Bank (ECB) today. The leader of that entity, Mario Draghi promised to look into developing a mechanism for buying bad debt from some of the countries afflicted over there. The stock markets around the world were disappointed. Whether the declines today were from the prospect of help not coming fast enough, or the prospect of another bailout coming, it is hard to tell.

One thing to keep in mind. Whenever a country prints money. ie, creates debt, the currency suffers. The currency in this case is the Euro. As the Euro continues to slide, the US Dollar continues to go up. That makes it cheaper to buy imports in the U.S. So our trade deficit worsens. A stronger dollar means that it will take less dollars to buy a share of stock as well.... A strong dollar means general deflationary conditions prevail. That can be a great thing when there is room to lower interest rates and stimulate borrowing and debt creation to counter act the currency strength. But interest rates in this country can't go any lower.  In fact, in Switzerland interest rates are actually negative. Meaning the bank charges you to keep your money in the bank. This is due to the Swissy's safe-haven status. The whole world is taking cover in the safer currencies, if there is such a thing, even gold and silver are showing the effects of deflation. Or the anticipation of deflation. The lesson is that as governments are unable to pay their bills their borrowing costs go up and that is felt throughout the world and in particular in the economy of the country in question.
In this country the anti-tax movement is counterproductive. The question is not about the level of debt. The question is about a governments willingness to pay interest on its debt. Will the country honor it's bonds....
Our turn is coming and the markets will anticipate that coming. The beast is slouching toward Wall Street.....So far the world trusts the U.S. Government debt.

Here is a long term look at the 10 yr US treasury bond. If the economy is picking up why does this chart look like this. This is a picture of deflation.  Period.


Wednesday, August 1, 2012

SLV. the big pic


HOG breakdown

Harley Davidson broke below a long term trendline this morning. I had been watching HOG as a proxy for the small cap stocks... Time will tell.
Treasury bonds are just scary. Why would anyone buy a 10yr US Govt bond that yields 1.5%?
Fear? A reality of low expectations for asset inflation? I don't know. Perhaps we have not seen the worst yet....


Gold and silver weak this morning as well. I may be that the big chart pattern plays out in a dramatic decline in precious metals....