Be Afraid

Gold and Silver up sharply today on high volume.

This seems ominous.

it probably ties into that Yen thing.

gh

Strong Yen Coming?

A few months ago I noticed a tendency for strength in the Japanese Yen. The chart shows a rising triangle pattern in the context of a long decline. The decline in the Yen has been intentional on the part of the Japanese govt. and central bank. For many years it has been possible to borrow in Yen and invest at higher rates of return around the world. The so-called "carry trade".

Any hint of that trade coming to an end has been hard on world markets. But in the meantime many of the countries of the world have tried to get a piece of that action by lowering interest rates and reducing currency values in an effort to stimulate their own economies. This is the problem with worldwide free trade. The race to the bottom in the effort to stimulate. The same problem occurs in the individual states in the U.S., as the states cut taxes on business and starve state government and public service as they try to attract businesses to the state. But I digress.

A rise in the Yen seems to be correlated with a rise in gold. And a decline in the US Dollar.
The chart has been marked with the areas of correlation.

There is a trade in here somewhere..........

Timing and loss control are the most important to trading.
Control risk,
gh

Later addendum 0845 PST:

One scenario that fits a strong yen would be a resurgence of inflation in Japan and a rise in Japanese interest rates that came from the reversal of the yen carry trade. In essence this would be the Japanese exporting their inflation to the world. The yen would rise and the USD (world reserve currency/peg) would fall.
gh

Even later 0902 PST:

So, I Google "yen carry trade". And this is one of the entries that caught my eye:
Yen Carry and US Stocks
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DECK Indicator Breakout?

I continue with my only somewhat "tongue in cheek" focus on what I lovingly call the "DECK Indicator".

I have noticed over the last year or so a tendency for Deckers Outdoor stock price to lead the DOW averages. Not that it is IN the Dow. Just that the intraday price seems to lead the averages. Sometimes by minutes and sometimes by a couple days.

here is today:

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Doings in Elk Creek

Elk Creek niobium


USGS, Elk Creek Ore Body

I will not advise anyone to buy this stock. This is speculation at it's riskiest.
But, I am buying again, after selling before the breakout at $0.20.

The chart and the price action is right, FOR NOW. The stock is still illiquid. But any large selling at .50 is being bought.

Again, don't buy this stock until it is at least up to $2 or so.

gh

Inflation Expectations vs. Dry Bulk Rates

Here are some charts of the Baltic Dry index, and charts of prices of gold and Dryships (DRYS)

The question is what happens to dry bulk rates when the US Dollar declines or there is a general expectation of increased inflation.

Just thinkin',
gh

Pattern Trading

There are certain price patterns that immediately catch my eye. One of these has formed intraday in GOL today.

When the price stays "locked" in a tight range at the top of a rising triangle there is often a sharp move up. Sometimes the price moves down out of the small triangle, and in those case watching the volume can be invaluable to make a decision to stay with the recent trend or not.

Here is the chart:

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IRBT

IRBT may be getting ready to scream higher.
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Perceptions of Federal Reserve Chair

Janet Yellen, the Chair of the U.S. Federal Reserve Bank answered questions today after a meeting of the Fed and a release of the monthly Fed statement of intent.

It occurred to me that a lot of what the markets and what onlookers and decision makers get from press conferences Q/A sessions is a visual portrait of the Federal Reserve as represented by the image of the Chair of the Fed.

What was the gestalt image of past Fed chairmen?

I remember Paul Volcker as a large man. I remember and have heard that the markets had a fear of Volcker. He was tough and would shake things up. He raised interest rates mercilessly and killed inflation in the 1980's.

Alan Greenspan was something of an academic. He is known for his verbal contortions that left markets wondering what he actually meant to say. But he kept interest rates low. The phrase "Greenspan put" was coined to represent the fact that Greenspan would lower rates to keep markets calm whenever needed. He had a Yoda-like quality. We just knew that he knew what was best for the U.S. economy.

Ben Bernanke. Also known as an academic, presided over the aftermath of the great financial crisis. Bernanke was a student of the Great Depression of the 1930's and was expected not to make the same "mistakes" that prolonged that economic downturn. Namely by raising interest rates too soon.

Janet Yellen. Bernanke's successor and former vice-chair of the Fed. So far the image is of a soft spoken person with a liberal outlook regarding monetary policy. Yellen's image fits her reputation.

The question in the back of my mind is whether the world can stay confident in this latest Fed chair. The financial world expects the Fed to take the necessary steps to control inflation if and when it rears it's head. Inflation is a monetary phenomenon. Meaning that if a currency stays strong, inflation is low.
Will the world keep confidence in the U.S. Dollar. Will a break in confidence cause inflation and would a lack of confidence in the Fed Chair cause the break?

I have no conclusions. Just questions.

gh

EEM likes the Fed.....

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Brazil

There is buying in a couple of Brazilian stocks that I watch today. GOL, an airline, and PBR (Petrobras).
Perhaps the soccer games will come to a pleasant conclusion and Brazil will not devolve into a revolutionary cauldron. (Smirk)

The news is usually worse than the reality. The news is for mass consumption after all and intentionally dramatic. Whatever the case may be, there is some buying of Brazil today so I did some bottom picking in GOL, a favorite of mine due to the sharp moves it makes on occasion.

GOL

As always, control your risk,
gh

Sunpower!

SunPower broke out as expected.

 

Enjoy,

 

gh

 

Sunpower

Sunpower (SPWR) appears ready to break out and up to the next level. A look at the long term chart would indicate that it has potentially long way to go.
This is one of Cramer's favorites.
The charts:

control your risk,
gh

High Dividend on Oil

A few posts back I pointed out PBT . As well as the chart and dividend of PBT.
They raised the dividend from .08 to .12 cents per month a couple weeks back. Oil prices remain strong. World and middle eastern events will likely cause the price to stay high or higher over coming months. And world demand and demographics are in favor of higher energy prices over the coming years. There are also questions regarding the sustainability of fracking, particularly for oil, and the high cost of the practice will limit supply if prices go lower and put drillers out of business.

When PBT was trading at $13.50 the yield was 7%.
Now the yield is suddenly 10%. The price will be $20 for a yield of 7%.
And oil shows no signs of let up.

Just sayin'

As always buy on the way up and control your risk,
gh

Deck Indicator this A.M.

Deckers is down this morning. ON NO volume.
I see no urgency in the selling.

Does this mean the DOW is going to find traction here. At least for the short term.

This is a test of the DECK indicator....

This is only a test.

Surprise! DOW down

I have watched Deckers Outdoors and use it as an indicator for short terms moves in the DOW. (Carefully)

Here is a side by side chart comparison of DECK and DIA.
5 minute bars for four days up to a few minutes ago.

I present the facts and you decide................

gh

TP still alive

THE NEWS IN POLITICS THIS MORNING

is of the loss by Eric Cantor to a Tea Party challenger.

The Tea party lives on. Worldwide. The recent elections in Europe were surprising in the strength of the populist conservatives. (Xenophobes)

The Tea party taps into the unrest in the economy and attempts to lead by laying blame. I ignored the markets for awhile (they are boring lately) and did some writing. I have been wading through Piketty's book, "Capitalism in the Twenty-First Century" lately. The book is mostly a recap of historical research on wealth inequality by a study of tax returns and wealth as related to national incomes. The book is an economists case for most of the things about wealth and capitalism that I have come to intuitively derive over the last couple decades of trying to earn a return on my capital through speculation. I felt if I could think like a rich person I should be able to profit from the actions of rich crowds. Or something crass like that.............

MY THOUGHTS ON TEA PARTIERS AND CAPITALISM:

TEA PARTY STILL ALIVE

The news in politics this morning is all about the surprise win in Virginia of the Tea Party challenger over incumbent Eric Cantor. And the story line on CNBC is of the worry of the stock markets that increasing wins by Tea Party candidates may presage changes in the United States. Those changes would presumably be related to less govt. spending, lowered taxes, and of course restrictions on immigration, among other items.

I have thought for some time that it is tragic that popular opinion can lag economic reality for extended periods of time. Leaders of political parties must exhort their followers to rally by using radical and sharp language and ideas if they want to keep the movements alive. This is the case with the Tea Party today. The economy is starting to mend. The U.S. economy will likely never return to the heady days of the 80's and the 90's. But those decades were fueled by the debt that the Tea Party abhors. Yet Tea Party leaders demand change in government and taxes. Change that would increase the debt of govt. and would avoid paying for the bills that have been incurred by Social Security, Medicare, and the safety nets in general. I seriously doubt they have any intention of cutting military budgets. The recent VA "scandal" has highlighted the point, to me at least, that the loudest and most vocal proponents of lower government spending are the loudest proponents for more service to veterans. It is a the only position for a red-blooded American populist to take.

The winner in Virginia is on television this morning speaking of his vision for the country. He is an economist. His speech is filled with references to Friedman and Hayek. He longs for a return to free market capitalism. I didn't hear him mention God, I mean of course Ronald Reagan, the god of populist free market Americans. Particularly those who care more for emotion than facts.

This country has had almost 35 years of propaganda to the effect that government is bad, free markets are good, debt is bad (we only hear that when the economy crashes), and that if only we as country would return to free market principles things would return to normal. Meaning that the middle class would prosper, small business would prosper, big business would prosper, the lazy would get jobs, and the Mexicans would stay on their side of the fence. Just like in the good old days.

What were the good years?

The best years for this country were the two decades after WWII. The reason for that, in my opinion, has much to do with the rest of the world being reduced to rubble. We were the supplier of goods and capital for rebuilding. And we had the money to invest after the large government debts run up during the war that were used to put people to work in the war effort. The workers had cash to spend. Demand was worldwide.

Another reason for those good years was the attitude in the country left over from the 1920's and 1930's that was pro-worker. Union membership was strong and labor had the power to demand and recieve a fair portion of the profits. Thus the profits were widely distributed.

Another reason for those good years was that this country had just consolidated it's expansion from east coast to west coast. The previous 100 years capitalist expansion had been fueled by the cheap land and cheap natural resources of an undeveloped continent. There is no better way to stimulate an economy than cheap inputs and the freedom to be greedy that a capitalist system permits. There is nothing wrong with that greed, in it's place. Greed is the motivator of human behavior that continues expansion after basic needs have been met.

In those good decades of the 50's and 60's the U.S. was a strong and still young country. But those were also the years of cheap energy. Energy in an industrial economy is one of the main inputs to the economy. The oil shocks of the 1970's brought forth the importance of low energy prices to an expanding economy as the economy contracted and stagnated in the face of higher energy costs. The government of the time made the decision that the dollar was slowing the economy. Nixon took the country off of the gold standard when he closed the window on British redemptions of gold. The dollar plummeted and inflation took off. But eventually the Federal Resere under Volcker raised interest rates dramatically, shocked the economy and at the same time shocked the oil exporter countries of the middle east with greatly reduced demand, and thus prices, for oil.

Inflation was broken, energy was cheap again. But in the turmoil of the 1970's inflation the Tea Party idea was germinating. And populist candidate Reagan, after the Nixon betrayal and the malaise of the Carter years, was a runaway winner with his vision of a return to the good old days. But populists and their followers always need a scapegoat and the goats in this instance were the government that had caused the inflation as well as those union workers whose wages had risen along with that inflation. Small government and no unions were the marching orders. So the assault on the federal government began with a move to reduce tax revenues. But the voters, being generally ignorant of the bigger picture, and voting their own pocketbooks kept the entitlement spending, demanded that their Social Security remain strong (SS payroll taxes were increased-a middle class tax hike) and Medicare was not so important to a young country so it was generally ignored. The Cold war remained a force for continued govt. spending on big ticket defence so military spending increased. What is a govt. to do if people demand spending yet refuse to pay more taxes? Borrow, of course.

Reagan's policies caused a sharp increase in government debt. If you are in doubt of this find a chart of government debt over the decades since WWII and notice the sharp angle upwards in the early 1980's.

And not only govt. debt increased. Changes to the banking laws and repeal of Glass-Steagal improved the ability of the banks to create more debt and market that debt to the general public. Buying on credit, once reserved for only one or two big ticket items like house and auto, became commonplace. And the profit margins for banks increased. Increasing competition among banks caused a reduction in lending standards and loans to poorer and less able borrowers resulted. This, combined with the ongoing assault on workers wages, was catastrophic to the balance sheets of middle-class America. Private debt skyrocketed.

As the purchasing power of the consuming middle classes waned in the early 2000's and as the domestic pressure on wages had reached it's limit, and after the third world economies got over the debt crises that the western banks had saddled them with, the western corporations went to the only primary input into the capitalist system left. Namely the cheap labor in the third world. Technology was exported wholesale to China. And China embraced the change and bought US treasuries and kept the consumer and US govt debt load manageable and sustainable with low import prices and low inflation. And the free market voters went along with the scheme. As long as the good times continued it was free market capitalism at it's best.

But here we are in 2014 after the greatest financial debacle in world history just a few years past. Consumer debt levels are largely unchanged. Only replaced by student debt as desperate new workers go for a college education as the only way to have a shot at a middle class standard of living. Even as the jobs go to the cheap and highly educated third world workers in an increasingly technologically oriented world economy. The debt is still there. Public and private. Yet the war on workers wages continues, the war on taxes to control the debt levels continues and the Tea Party candidates continue to promise that austerity will stimulate the economy.

How will austerity heal an economy that is overloaded with debt? If there is one thing I know about free market capitalism it is that markets for goods are needed. There must be demand for goods and services. If there is demand no amount of regulations or taxes will deter a capitalist from turning a profit. It will happen. But with a large class of the population deep in debt there will only be marginal demand. The stimulus that has been a growing feature of the past couple decades of govt. intervention in the economy has been an attempt to put the last primary input into a capitalist system, ie, more money. But that can only be a temporary measure. And as the population has expanded from coast to coast and the cheap resources have been used and as the land for housing is in short supply and water for populations is an issue as environmental change is an increasing reality the era of cheap economic inputs and easy money is over. Capitalists must adapt to lower profit margins. People must adapt to lower standards of living as measured by consumer goods and change to a model of sustainability with a focus on more longer term life choices like accessable heathcare and a diversified choice of retirement savings. The country will have to eventually make the same social choices that the crowded countries of the world made a generation ago. That is a move to a sustainable public/private partnership that promotes saving on a national level by investments in a broad safety net of healthcare and retirement systems at the same time as workers are empowered to get a higher and fairer share of national profits. Most do not consider paying taxes to be a form of saving. It is. A government system that is not in debt has the ability to stimulate when and if needed. But debts must be repaid for the ability to continue. Taxes are necessary and must be just. The only thing to keep in mind is the difference between taxes on small profits and tax rates on large profits. Remember, it is profits that are taxed. If profits are overtaxed business will go elsewhere if they can, so the system must be closed. This means that trade tariffs and restrictions on imports must happen. It is a tragedy that international corporations can move around the world to extract the primary resources of capitalism (labor, natural resources, and energy) and keep the profits and move on. Taxes must be progressive, wages must be robust as a percentage of profits, and business must be protected from international raiders.

This is a socialist system. A socialist and democratic government protects the middle classes and promotes the business that helps organize the workers into productive endeavors. Socialism that is based on the will of the voters will protect the nation and it's inhabitants while saving for the future.

But it all comes down to the will of the people. They must decide. And populism and populist enchanters only decide after a calamity has struck. Unions were popular AFTER the economic crashes of the early 20th century. Social Security and socialism in general were the results of free market capitalism gone awry. Free markets caused the latest great crash. But the Tea Party supports many of the same things that caused the problem. And too many people still drink their Tea Party Kool-Aid.

　
GOOD DAY!

AU, Reading the Tape

Agnico-Eagle has pulled back recently. I have a small recent position and am waiting for some buying enthusiasm to come back before adding to my position.

Today the price of AU broke to a several day high. But the enthusiasm did not get high, as evidenced by the volume on the new highs. So just the fact of a new high in price does not get me bullish on the stock. To the contrary, it may need to go down some more before substantial people think it is a good buy.
Or it may drift up and the volume will come in at new longer term highs due to the many who may think they are missing something.

In any event there is not any reason at this time to add to a position in this stock from a strictly speculative standpoint.

And that is what "reading the tape" is to me. I am often wrong, but somewhere in the averages I seem to come out ahead, so I must have an edge there somewhere.

Keep it simple, Stupid.
That is what I often tell myself. Right before I remind myself not to BE Mr. Stupid!
gh

The Big MOS?

Mosaic is a fertilizer company. Potash in particular. The agriculture space if hinting at sign of inflation. The world is eating better and richer, the prices of meats are going through the roof. Economies in general seem to be doing better. Demand for food will likely not decrease.

Profile of MOS here thanks to Yahoo! Finance.

Chart here thanks to ghickey:

(The chart is why I like the company)

I just bot a little bit.

gh

Add to IRBT

On May 16th here I picked a bottom in i-Robot. (IRBT)
Well I was lucky, so it is time to add to the position and see if we can get a resumption of the trend up.

Today:

An add today will put my average price somewhere around that low IRBT made a few days ago. I'll use that support in my favor with a larger position.

Of course I always "watch the tape" for unusual activity and adjust as needed..........

Controlling risk,
gh

Deck Indicator Up

For some time I have noticed what appears to be a correlation between what the DIA does and DECK.
The Decker's Indicator is up today and may indicate the direction over the coming days.
Or not.....

Here it is:

control your risk,
gh

Interest rates to rise

As I am preparing this post Mr. Joe Terranova is recommending a buy on TBT, the short bond ETF.

I concur. A few posts back I picked a top in the long bond. The market backed and filled around that top and now is set to decline. The ISM numbers today show a pickup in the economy. Interest rates have only on way to go. UP.
The chart of TLT shows the magnitude of the treasury rally that had people wondering why. It amounts to a 50% retracement of the previous move down. Typical of short covering.

The recent action in gold says the same thing.

BUY TBT for a long term play.

And keep an eye on volatility. The worries of the stock market may return regarding higher interest rates and the longevity of the ZERP ZIRP...... Zero Interest Rate Policy, not Zero Rate Policy!