The market is dead!

Stocks are dead !      (hint: follow the link)


Where have I heard that before? Seems like that was a classic headline back in the 1970's. (Right before that historic 80's and 90's rise)



And now I keep hearing that the bond market is a bubble.

These aren't the only places these sentiments have been popping up. It seems everywhere I turn the "clearminded" commentators are declaring that the stock market is going nowhere. And others of equal sincerity are declaring that the bond markets are in a bubble, in part due to their historic low yields and 30 year ascent.

If the bond market is a bubble and starts to deflate the money will flee that market. Where will it go??

And when people in the know. Especially those in mass media start declaring that the stock market is "dead", as a contrarian thinker I can't help but start looking for the long term opportunity in the same stock market.

Timing, as they say, is everything.....

gh

This is why Walmart workers are unhappy

The infatuation with Big Business must end. As voters and workers we must see that what is good for business is not necessarily good for US. Business will do what they do. They were born to do it! In the same way that an employer will get all of the work out of an employee for the least they can pay, we the voters and the citizens of the world must use the ballot box to tilt the playing field back in favor of wages and benefits. And tilt the tax situation in our favor as well. We must "use" the business owners the way they use us.


Let me be clear: Capitalism is the greatest system mankind has yet devised for the creation of wealth! It is just not a very good system for DISTRIBUTING wealth!

Read this:

http://www.project-syndicate.org/commentary/the-need-for-redistribution-of-wealth-and-income-in-order-to-save-capitalism-from-its-current-crisis-by-robert-skidelsky

My radical rant of the week.
gh

Black Friday?

Well, for a Black Friday things are looking pretty good.

Since my last post the leader of the Muslim brotherhood in Egypt brokered a cease-fire with Israel here.

His success in the international arena gives Mr. Mursi some much needed credibility abroad, although some discord remains at home. So as far as the stock markets go some of that middle east worry has been at least temporarily removed.

In this country we last saw Congress and the President making cooing noises and promising to co-operate to find a solution to the so called "fiscal cliff" that is approaching in January. The tone of the markets seem to be indicating that there is genuine optimism for some sort of solution that probably involves an inflationary solution.... Like a small tax increase and a small reduction of debt spending, or perhaps a longer term plan that phases in over years.(the best)

And finally, the Euro showed strength today. Greek yields on govt. debt continue to ease. (16%!!)

Volume was higher than I would have expected today. It being a holiday shortened day.
Some recent charts: RIMM from some time ago in a previous post

And lately:

And First Solar:

 And lately:

And maybe this is really a bottom in MolyCorp this time.... I know, it's a favorite. Bought around $6 this time. Somebody else is buying also......

They haven't all been winners. Chesapeake broke down.... And I had a pretty big position in IamGold (IAG) that hurt!
I have bought back into GASL again.....a small bottom picking postion to add to if it looks strong... Watching Anadarko Pete (APC) for clues....

Control risk.
gh

The election is past....

Oh, there was that Israel/Iran/Hamas thing that we presumed would happen after the election whatever the outcome.

Has it begun?

Video of the latest:

Another wildcard....

What would energy independence mean?

The news on the financial channels was this report from the Energy Information Agency that forecast the U.S. becoming energy independent within 20 years.

Here is the Bloomberg article:
http://www.bloomberg.com/news/2012-11-12/u-s-to-overtake-saudi-arabia-s-oil-production-by-2020-iea-says.html
and some excerpts:
U.S. oil output is poised to surpass Saudi Arabia’s in the next decade, making the world’s biggest fuel consumer almost self-reliant and putting it on track to become a net exporter, the International Energy Agency said.

Global demand for oil is projected to rise to 99.7 million barrels a day in 2035, up from 87.4 million last year, according to the IEA, which advises industrialized nations including the U.S., Germany and Japan. Today’s report projects trends to 2035. 　
If such a thing came to pass, what might it mean?
Well, presumably it would be good for the trade deficit. Oil making up one of the major areas of balance of trade deficit.

Energy independence would give the U.S. a comparative advantage in the energy intensive manufacturing industry. Steel and aluminum come to mind.

Oil and Nat gas could be exported according to the report. However I don't consider it a wise move to export ones natural resources. You are selling your advantage for a small profit. Value added industries usually add more employment.

But what really is on my mind is the question of what energy independence would mean for the U.S. dollar.

When the U.S. started importing oil in earnest back in the 1960's and 1970's we made deals with Saudi Arabia in particular that they would only accept payment in U.S. dollars for their oil. From that time on the world oil price is in dollars and most oil transactions are in U.S. dollars. If we are not buying oil from them anymore what incentive will they have to sell in our dollars? And if they begin accepting other currencies, that will make the USD less in demand around the world.

In addition, as we buy middle east oil they place the excess reserves in our US Treasurys. Keeping interest rates low. China does the same with their USD reserves, as Japan. As the USD loses relative value our imports become increasingly expensive, reducing the flow of USD to China and this reduces the excess reserves that they place in US Treasurys. At present interest rates have been kept artificially low by China, Japan and the oil exporters, while the USD has been kept artificially high.

As those world dollars are freed up those dollars will make their way back to this country. We will sell more to the world, imports will be more expensive, interest rates will tend to rise as the economy picks up. But we may lose the crutch of having the worlds reserve currency! In other words I would expect US Dollar weakness.

Long term stuff.gh

Snake oil salesmen

Here is a must read.

http://www.thebaffler.com/past/the_long_con/print

gh

The day after....

Don't you hate hangovers?  Yesterday we were all guessing reasons why the stock markets were up. I think it had a lot to do with the election pending. In retrospect I suspect that everyone thought their man was going to win, and as a result were optimistic. So it is possible that both sides were buying in anticipation.... Today may be a "sell the fact" situation. Yesterday was "buy the rumor"....

There is renewed talk of the European situation this morning. Something about the greeks voting on the austerity issue.... And comments by Mario Draghi about a German slowdown.

Looking at the intraday trading I see lower volume on some of the individual new low.... Not a sign of panic. This may be just the traders on the losing side of the election causing concern among all traders.
I can't imagine the really big players gambling on the outcome of a 50/50 election...

Sitting tight. For now...
gh

ELECTION DAY

Markets up strongly today. Everyone has their opinion of why. Most have some opinion to the effect that the markets are anticipating the candidate of their choice winning and thus the markets are forward looking.

Well First Solar is up strongly today... I would find it difficult to believe that Romney would be a solar power president......

Gold and silver also up strongly. Is the gut check in silver over. Time will tell.

control risk
gh

The Present Guilded Age

The author of "Plutocrats", Chrystia Freeland, was on CNBC today. I am always surprised when they have anyone on who talks of the "class war" thing. And Michelle didn't even shout her down! The producer may have told her to behave...

The gist of Ms. Freelands comments was similar to the points I amateurishly made in a recent op-ed piece. (See 10/17, "What this election is about".)

It is gratifying to see others coming to the same conclusion I have.

I bought her book on my Kindle after seeing this:

http://www.cnbc.com/id/15840232?video=3000125521&play=1



Enjoy
gh

The King speaks

It is wise in my experience to pay attention to what the bond markets are doing when trying to divine the future of equities and other assets. And when the king of the bond market speaks it pays to listen and try to understand.

As long as the political process is a popularity contest we can continue to get what we ask for in politics and the economy. The new normal is here, but the American people want that old normal. You know, the one where the economy grows 5% to 7% each year. The one where property values go up and prices at Walmart go down. That old normal where the stock market consistently makes 8% to 15% a year, more in the good years. That old normal where we were all young and strong and healthy and had a boundless optimism that helped that bubble to grow. DOH!

The old normal was not normal. The old normal that we wistfully long for was the result of years of declining interest rates and increased consumer consumption based on consumer debt. The stock market gains were the result of increased consumer debt combined with declining real wages for the workers and increased profit margins for corporations. The low inflation was due to the increased import of goods from the low wage parts of the world, combined with those countries loaning our money back to us and influencing currency values.

In other words, we borrowed to continue our lifestyle. And now we need to pay the money back. But so far the only debate we are having is over who is responsible for the debt and who has to pay it back. Those that advocated for low interest rates over the years are often those who have profited from the increased debt that resulted. But they say they were just good businessmen. They were smarter. Those who are left holding the bag should have known better. But the rich are few and the bagholders are many. And historically that is a situation that is ripe for tragedy.

That is why I advocate for higher taxes, balanced budgets, national health care and social security that everyone pays for. This leads to a net national savings that can be used in time of emergency. Kind of like funding FEMA.

Here is Bill Gross:

http://www.pimco.com/EN/Insights/Pages/Time-To-Vote.aspx