May 11, 2014
Here are some good links.
When Stocks and Bonds Disagree , on TheReformed Broker.Com.
Why United's Jeff Smisek Is Perhaps the Worst CEO in the Business , on HuffingtonPost.Com.
However, when looking at the less-than-stellar job the UAL CEO, Jeff Smisek, has been doing since he took over the reigns of both United and Continental back in 2010, it seems trust plays a key role. As, no one --not his investors, nor his employees, nor his customers -- seems to have any."
A new Gilded Age ahead: Thomas Piketty's 'Capital in the Twenty-First Century' , on Rabble.CA.
Buy Gold at $70 Below Melt Value... , on DailyWealth.Com.
Indian Stocks: Better-than-350% Upside Potential , on DailyWealth.Com.
Rahul said that the opportunity today was much better than it was in 2008...
On Stansberry Radio this week, he told us: 'Valuations are at 15-year lows.' Meanwhile, the upcoming election 'has the potential to put up strong leadership, which could actually be the tipping point for India.'
As usual, when markets are near a bottom, investors are afraid to get in. And that's the case today. Rahul said he hears all kinds of excuses from investors... 'India has too many problems, too many fees, X has to fix itself, Y has to fix itself, etc.' But Rahul quickly points out that "when everything is fixed and everything looks good, that's the time to sell, not to buy.'"
May 10, 2014
Here is a note from Rich Kolon.
In addition, the Russell 2000 has been acting very weak the last few months.
Despite all the monetization of US debt and trash mortgages by the Federal Reserve, which has definitely fueled the speculation feeding this bull market, the big banks are otherwise just storing the cash, and not lending it out into the economy, which historically is their function. This will eventually doom our economy and the value of the dollar.
The US government would rather guarantee a $1 billion loan to the Ukraine, but does nothing about $250 million debt owed by Detroit. This defies common sense, and therefore suggests the sinister nature of those making these decisions.
It only makes sense when you believe the big banks do not have genuine American wellbeing at heart.
And of course they are major campaign contributors, which suggests why politicians don't act for real American's interest as well.
Here are some good links.
Partners in Ethanol Crime , on WSJ.Com.
Rather, the EPA wants to prop up the larger multibillion-dollar RINs industry. As the agency explained in the Federal Register, fraud was undermining the ethanol mandate—some gallons were going unsold—and to defend their business refiners "limit their RIN-related business relationships to those parties that they are confident are generating valid RINs." The EPA is worried this harms smaller producers."
The Rich Man’s Bubble is popping and no one gives a f*** , on TheReformedBroker.Com.
Ukraine Crisis: Why Hasn't the US Gone After Gazprom? , on Minyanville.Com.
The People Who Burn Bitcoins , on BloombergView.Com.
Promising as the gains in professional and technical services might sound, they might not bode well for employment elsewhere. A lot of the growth is in the areas of computer and management consultants -- that is, people who help businesses figure out how to make do with fewer workers."
The Great Unwatched , on NyTimes.Com.
Is that what Blue Chip got? Oddly enough, it wasn['t sure. 'You'd ask a media company where an ad was running and they'd say, 'We can't pull that list,'' Ms. VanHeirseele said. 'Or they would give you a massive list but you had no way of telling if it was accurate.'
So Blue Chip hired a video verification company called BrandAds to track the campaign for the mom-related product and find out where the ads were placed. At that December meeting, BrandAds delivered its report, and Blue Chip finally got a peek behind a curtain.
'We looked at this data and my jaw dropped,' Ms. VanHeirseele remembers. 'And then I felt a little sick to my stomach.'"
Why Only One Top Banker Went to Jail for the Financial Crisis , on NYTimes.Com.
Greenberg: Is Twitter a Victim of Wall Street? , on Minyanville.Com.
Then came Twitter's IPO last November at $26, or $14 billion, with the stock getting bid as high as $73, or a ridiculous $40 billion.
It's now around $21 billion, likely on its way much lower.
In the end, I blame this not on Twitter but on Wall Street. Twitter's mistake, I would argue, was going public. At that point it became fodder for the Wall Street overhype machine, which has a history of taking good names and products and somehow making them appear as damaged goods."
May 9, 2014
Tobby Connor sends along this posting:
"So far my 2014 expectations are playing out pretty much as planned, with a few adjustments. With the threat of war in the Ukraine I think the final bubble phase in stocks is now off the table. I doubt we can get the euphoric buying pressure necessary to generate a parabola as long as tensions in Eastern Europe continue to escalate. No bubble phase in stocks = no capitulation phase in gold. The Ukraine event was a game changer.
Just to refresh, I predicted we would see an initial rally in the commodity markets during the first quarter, followed by a corrective move into early to mid-summer. Once that corrective move was finished I'm expecting a much more powerful rally in the commodity markets during the second half of 2014.
The initial rally arrived right on cue as the CRB broke through its three-year downtrend line during the first quarter.
I'm pretty confident commodities have now begun that corrective move that I was expecting in early summer. As oil is the main driver of the commodity complex, and it led the CRB out of the 2012 three year cycle low, it is now leading the CRB down into that summer correction.
While the intermediate tops have been erratic over the last three years with no clear pattern, the intermediate bottoms are clearly making higher lows signaling that the three year cycle is still advancing.
While we may get a countertrend bounce early next week I'm not looking for a final intermediate bottom until oil tests its three-year trend line sometime in the next 3-5 weeks.
Barring the manipulation in the metals market last year gold would have printed a similar consolidation pattern as oil. And now that the three-year bear market in the commodity sector is coming to an end the precious metals should also participate during the powerful rally that I foresee for the second half of the year.
Just a little more patience is called for as I don't think the summer correction in commodities or the precious metals is finished just yet, although I do expect the metals to bottom slightly ahead of the rest of the commodity markets.
Considering the damage that has been done to the physical market by the manipulation last year I believe the biggest gains during the second half of the year will come in the metals and I think traders will get an opportunity in the late May or early June to enter long positions in preparation for the resumption of the secular bull market.
To sample the premium newsletter consider clicking on the subscription button at the top of the GoldScents home page and try a one week trial of the premium service that includes daily and weekend market updates.
April 27, 2014
Tobby Connor sends along this posting:
"At the beginning of the month I theorized that stocks were about to enter a final bubble phase, and that during that process gold should deliver a capitulation phase to end the three year bear market. This is a follow up to see how things are playing out now that we have another month's worth of price action behind us. For stocks it still remains to be seen whether or not they have one more surge higher into a final top. If one just looks at the NASDAQ it would appear that stocks have begun moving down into a bear market. However as I pointed out in my previous article it's not unusual to have one, and sometimes two very severe corrections before a final leg up in a ending bubble phase. As I pointed out in my previous article the NASDAQ had two back-to-back 10% corrections before a final 34% surge into that 2000 top.
So we have to ask ourselves, is the NASDAQ rolling over into a new bear market or is this just a final correction before one more surge higher? From a long-term perspective this looks like just a normal pullback to the 200 a moving average after a particularly powerful move over the last year.
I think at this point one still has to give the benefit of the doubt to the bulls. The fact that the Advance-Decline line is still making new highs suggests that this is probably a consolidation in preparation for a break above that 1900 resistance zone.
That being said we now have the potential for the banks to start diverging from the general stock market. As I've noted in the past it's not unusual for the banking index to diverge for several months as stocks put in their final top. So if we see the S&P breakout to new highs over the next month or two but the banks continue to lag this would be a strong indication that a final bull market top is forming.
As most of you know my thesis for this year was that stocks would put in a final bull market top sometime this year, probably in the first half of the year, and that during this process liquidity/inflation would begin to leak out of the stock market and move into the commodity markets. We saw that process begin in January as the CRB index delivered a strong initial surge and broke through its three-year downtrend line. After this initial surge is complete commodities should move down into a major yearly cycle correction in early summer followed by a much stronger move in the second half of the year. I think that midyear correction has probably begun.
As oil is the most important global commodity it tends to drive the general commodity index. So when oil begins to move down into that yearly cycle correction the rest of the commodity complex should eventually follow as they top out one by one and follow oil lower.
On Friday oil broke below its major intermediate uptrend line from the January bottom. This trend line break should signal that oil has begun moving down into its yearly cycle low. The CRB should soon follow oil lower, and I doubt that it will move above that 2012 high before rolling over into that intermediate degree midyear correction.
How does this pertain to gold? To begin with I think the capitulation phase that I theorized in my previous report is probably now off of the table. For that scenario to come to fruition, the previous daily cycle needed to drop to the sub $1200 level before bottoming. It looks like gold probably put in that daily cycle low on Thursday at $1268. So does this mean that gold has bottomed and the next bull leg is ready to begin?
While it's possible, I tend to think gold probably still has one more mild leg down before the larger intermediate cycle forms a more lasting bottom. Generally speaking the intermediate cycle in gold usually runs between 20 and 25 weeks. A bottom on Thursday would only be week 16. Also most intermediate cycles have at least four, and sometimes five daily cycles nested within them. As you can see in the chart below the current intermediate cycle only has three daily cycles so far. Unless gold can do something to confirm a short intermediate cycle I think we have to assume gold still has one more daily cycle down before this intermediate decline is complete.
Now that the capitulation phase is probably off the table I think the most likely target for a final intermediate bottom would be in the $1260-$1240 range somewhere around the end of May or beginning of June.
If however gold were to rally very quickly back above the $1331 level by the end of next week then we could entertain the idea of a short intermediate cycle and a final end to gold's three-year bear market. This scenario would probably require that the stock market has put in a final bull market top, and as I noted at the beginning of this article, I'm not convinced that has happened just yet. I tend to think the moves in stocks and gold recently have been greatly influenced by the tensions in Ukraine. If conditions improve I would expect stocks to resume their trend higher and gold to continue down into a normal duration intermediate bottom in late May or early June.
Over the next 1-2 months commodities should move down into that midyear correction in preparation for a very powerful move up during the second half of the year. Gold should follow the rest of the CRB index down into that yearly cycle low, but I will keep an eye on it over the next week or two as the situation in Eastern Europe may push gold into a divergent path from the rest of the commodity complex.
To sample the premium newsletter consider clicking on the subscription button at the top of the GoldScents home page and try a one week trial of the premium service that includes daily and weekend market updates."
April 20, 2014
Here are some good links.
The People Who Burn Bitcoins , on Minyanville.Com.
'Gods' Make Comeback at Toyota as Humans Steal Jobs From Robots , on Bloomberg.Com.
Value investing works, why isn't it more popular? , on TheGloveAndMail.Com.
Congress is about to give these energy stocks a big boost , on GrowthStockWire.Com.
If the House and the Senate approve the bill – which is a strong possibility – we would see an immediate $160 billion in spending by big energy companies. That would lead to windfall profits in the industry..."
Up 300% from the "Shift" in Oil Production... More Gains Ahead , on GrowthStockWire.Com.
Penn Virginia now has a 10-year drilling inventory in the Eagle Ford. This inventory continues to grow as the company finds more reserves.
And since 2011, Penn Virginia's oil production in the Eagle Ford has grown almost fourfold."
Weekend Edition: 4-19-14 , on GrowthStockWire.Com.
No business in history has ever deserved to be worth this much... and certainly not an Internet retailer. Retailing is an absurdly tough business. It's akin to business suicide. Amazon – the most dominant Internet retailer in the world by a huge margin – produces a return on equity of only 1.5%. And yet investors are paying 20 times book value (today) to own this stock. I doubt those investors are going to do well over the long term..."
High-Frequency Trading Marks High Water of Financial Corruption , on HuffingtonPost.Com.
Renewables, Nuclear Must Triple to Save Climate, UN Says , on Bloomberg.Com.
Investments needed to keep climate change within safe limits would shave a fraction of a percent off annual global growth, the UN said yesterday in the third part of its most comprehensive study on warming. A delay in stemming rising greenhouse gases will cut chances to limit the global temperature increase, add to costs and lead to increasingly reliance on unproven technologies, they said."
Wealthiest Pay Higher Taxes With Scant U.S. Economic Harm , on Bloomberg.Com.
'In advance one always hears the squeals of the oxen who would like everyone to think they are about to be gored,' said James Galbraith, an economist at the University of Texas at Austin. 'Then it turns out that they are only nicked, and life goes on.'
The U.S. government is projected to collect more than $3 trillion for the first time in the fiscal year ending Sept. 30, a 9.2 percent increase over last year, according to the Congressional Budget Office. CBO forecasts another 9 percent rise in 2015 and estimates that more than half of the increases in revenue stem from tax law changes."
More Americans see middle-class status slipping , on BostonGlobe.Com.
According to Gallup, the percentage of Americans who say they’re middle or upper-middle class fell 8 points between 2008 and 2012, to 55 percent.
And the most recent General Social Survey, conducted by NORC at the University of Chicago, found that the vast proportion of Americans who call themselves middle or working class, though still high at 88 percent, is the lowest in the survey’s 40-year history. It's fallen 4 percentage points since the recession began in 2007."
Michael Lewis On '60 Minutes' Says Stock Market Is Rigged , on HuffingtonPost.Com.
The advantage adds up to less than a second -- in some cases a fraction of a millisecond -- but thanks to the powerful computers masterminding the trades, it's enough time to make serious money.
"One hedge fund manager said, 'I was running a hedge fund that was $9 billion and that we figured that the, just our inability to, to make the trades the market said we should be able to make was costing us $300 million a year.' That was $300 million a year in someone else's pocket,' Lewis said."
Michael Lewis feels no shame as 'Flash Boys' curdles tempers , on BostonGlobe.Com.
So anything that increased the transparency to investors of what was happening to their stock-market orders and gave them control would be good.
And in terms of regulating Wall Street, I think things like: Why allow brokers to own stock exchanges at this point? You know, they don’t need to own stock exchanges. You create a stock exchange - a market that’s owned entirely by intermediaries - it just ends up being a market for the intermediaries. The technology has made it possible to get rid of them.
And that's basically what IEX is doing. And that's what will happen naturally if there's more transparency, I think."
The Federal Reserve Has No Integrity , on PaulCraigRoberts.Org.
During the month of March the Fed and the big banks implemented aggressive intervention against the rising price of gold and the plunging value of the U.S. dollar. Events in Ukraine may have stimulated demand for physical gold and selling of the U.S. dollar, but it was mainly further erosion of the U.S. economy, as reflected in more deterioration of economic data released during March, that pushed gold up and the dollar down."
The Wolf Hunters of Wall Street , on NYTimes.Com.
An Engineer’s Eureka Moment With a G.M. Flaw , on NYTimes.Com.
In one deposition, Mr. Cooper confronted Raymond DeGiorgio, the head switch engineer on the Cobalt, with the differences between the original switch and the replacement. While Mr. DeGiorgio said he saw the differences, he could not explain why the part had been changed without a corresponding change in its identification number."
April 1, 2014
Tobby Connor sends along this posting:
"As most of you know by now I believe we are going to see a big surge in inflation this year. As I've noted in my previous articles the first leg up in the CRB has run its course and broken the 3 year down trend that's been in place since 2011. I think it's time for the second leg up in that inflation.
The two-week dip in the CRB has cleared the overbought conditions from the initial surge and I think we will now get one more push to test that 2012 high before commodities experience a more significant pullback this summer to set up the big inflationary spike that I am anticipating to occur during the second half of the year.
And don't forget, any move above that 2012 high will turn this three year cycle right translated. CRB yearly outlook 2 The previous three year cycle was also right translated.
That is confirmation that the secular bull did not expire in 2009 as some analysts suggest. I believe we still have two more big legs up before the commodity bull is done. One should top at the end of 2014/early 2015 and the last leg up should top sometime around late 2017 or 2018.
Those that want to trade hard assets should probably stick with general commodities for the next few weeks though and leave the metals portfolio alone for now. As far as I can tell, virtually all of the other commodities are trading naturally and I don’t foresee a 5000 contract dump in the middle of the night to knock the sugar market back down.
Precious metals on the other hand are being heavily manipulated right now. When gold was turned back down and lost the breakout above the September FOMC manipulation top, that was a warning flag for me to take profits in our metals portfolio. The pre-market attack last Monday to break the intermediate trend line confirmed, at least for me, that the precious metals were again under attack and the forces at work in this market were going to try to extend the bear market.
Notice how gold is now deviating from the rest of the commodity sector. I don't think this would happen in a natural market.
I believe the metals are being set up to take a massive beating when the CRB drops down into its summer correction. During that correction gold will be moving into its yearly cycle low (YCL's are the most damaging correction of the year for any asset). I fully expect the forces controlling the gold market will try to break that double bottom and take gold down to $1050.
Notice that gold's yearly cycle is left translated. Left translated cycles more often than not make a lower low. You have to hand it to these guys; they have played the metals market perfectly over the last year and a half. They managed to manufacture a completely artificial bear market, and now that they have turned gold's intermediate cycle back down they have set the stage to take gold down to $1050 this summer which has been their goal all along.
And I think the motivation for this is the same that it has always been. The profit potential after releasing the gold market is much greater from the $1000 level than it is from the $1800 level. Make no mistake the entire purpose of this year and a half long bear raid has been to manufacture a lower D-wave bottom, thereby increasing long side profit potential. In the process they’ve managed to also make some good money on the short side. I think they’ve also intentionally damaged the physical supply side of the metals market knowing that that would exacerbate the rally once the manipulation was released, and the secular trend allowed to resume.
Not only are these guys having a banking cartel manufactured lucrative short trade, they have damaged the physical market enough that we will likely see a huge move from $1050 back to $1800-$2000 over a 4-6 month period once the manipulation is removed at the yearly cycle low.
I think over the next three months J.P. Morgan, HSBC, and Goldman Sachs are going to stretch the rubber band so tight in the metals market that when they finally release it it's going to generate a surge comparable to what we just witnessed in the coffee market. Unlike the coffee market though, the metals market is big enough that these players can take large positions and make serious money off of that move.
On a more short-term time frame, and confirming my big picture outlook, notice that the bearish engulfing weekly candlestick was confirmed by a strong downside push this week.
I'm up in the air as to whether or not gold is ready to bounce out of its daily cycle low on Monday. Now that I am convinced the manipulation is back in control of this market I just can't trust anything to happen naturally. Heck they already broke the natural daily cycle low that occurred last Thursday and have stretched this cycle way past its normal duration. There's no telling how long they can make this cycle stretch. $1280 is a logical support zone but they may very well break that just to take out all of the buyers that will likely come in at that level. And while the miners did bounce on Thursday and Friday signaling a possible impending cycle bottom, it's also conceivable that the bounce over the last two days is nothing more than an oversold bear flag that will breakdown quickly.
Despite the partial reversal in the GDX weekly candle, the big picture tells us the rest of the story. As you can see any time over the last year and a half that the miners have dropped below their 10 week moving average, especially if it occurs late in an intermediate cycle, it has almost always signaled that an intermediate degree decline has begun. So I wouldn't get my hopes up that the banking cartel is going to release this market and a third daily cycle is going to recover to new highs. I think these guys are intent on pushing gold to $1050, and I think they probably have it set up to accomplish that this summer. Notice how the mining stocks are still making lower intermediate lows, and lower intermediate highs. The sector needed to move above last August's high in order to confirm that the bear market was over, and the cartel aborted that move before it could happen.
Once gold does get a bounce out of the impending cycle low I intend on taking a large short position in mining stocks to play that move into the yearly cycle decline. For now though I continue to recommend staying on the sidelines in this market, and I would strongly discourage trying to catch the bounce out of the impending cycle low. We simply have no idea when the cartel is going to allow that to happen. It may start on Monday, or it may begin once gold tags $1280. Or the cartel could even drag gold all the way back to $1250 before they allow a short-term bottom to form and gold to generate a dead cat bounce.
Predicting where this market is going to go in the short term would require inside information as to the banking cartel's intentions next week. Unfortunately I doubt they are going to send us a memo on that. However I think we can probably assume that the third daily cycle once it rolls over, is going to be devastating to the precious metals market. And I expect we will also have a fourth daily cycle before the yearly cycle low is complete. That fourth daily cycle will probably take gold back down to $1050 and a final bear market bottom if the cartel has its way.
So while I know this is tough to hear, as most of you are gold bugs, I am confident that the banking cartel has a purpose, and that purpose is to set up what will probably be one of the most lucrative long side trades in the metals of this entire secular bull market. Our job right now is to be patient and wait for that yearly cycle low later this summer. I think that low is going to drop at least down to retest $1200, and if the cartel has its way, they will push gold back to $1050 before this is over.
To sample the premium newsletter consider clicking on the subscription button at the top of the page and trying a one week trial.