Morning Call [6:26am ET] For whatever reason, there are big money interests that would like to see a stronger US Dollar and weaker Euro. How better to accomplish that than to float the story that the recent European bank stress tests were a classic fraud of non-reporting of the specific dubious government debt holdings that investors ought to be concerned about. That happened in today’s Wall Street Journal with the immediate effect of weakening the Euro, equity prices in Europe, equity futures in the US, commodity prices and precious metals.
Here is part is what the WSJ reported:
…it is impossible to gauge the number of banks that excluded portions of their sovereign portfolios from their disclosures, or the overall effect of that practice…. But the exposure to government debt of at least some banks, such as Barclays PLC and Crédit Agricole SA, was reduced by a significant amount, according to industry officials and financial filings made by the banks. Adding to the haziness, the stress tests' reported sovereign-debt levels differed, sometimes widely, from other international tallies and from some banks' own financial statements…. the findings undermine a primary goal of the stress tests—namely, to reassure investors and bankers world-wide the soundness of Europe's financial system. "That would certainly be unhelpful to people's perceptions" of the tests' credibility, said UBS banking analyst Alastair Ryan. Reducing banks' reported holdings of government debt "was clearly helpful for the thing [regulators] were trying to achieve: convincing you that there's not a problem." … Representatives of several banks said they were simply following the guidance provided by the Committee of European Banking Supervisors, the London-based group that coordinated the tests. A CEBS spokeswoman declined to comment…. The stress tests' upbeat results—only seven banks flunked, and were deemed short of just €3.5 billion ($4.51 billion) of capital—initially soothed markets. But fears have flared up again as heavily indebted countries like Ireland and Greece continue to struggle. Among other warning signs, the costs of insuring many bank and government bonds against default in countries such as Portugal, Ireland, Greece and Italy have jumped above their pre-stress-test levels.
Bloomberg Magazine played basically the same story this weekend:
…Even after a 750 billion euro ($960 billion) bailout for the weaker economies in the euro zone, investors are skittish about sovereign debt -- and about the banks that hold the region’s government bonds… A default by Greece could trigger the collapse of banks with large sovereign-bond holdings, says Konrad Becker, a financial analyst at Merck Finck & Co. in Munich. “A default by one EU country would lead to an evaporation of trust in banks,” he says. “If investors aren’t willing to invest in banks anymore, then many banks will go bust in months, not years.” … The new concern about the fragility of the region’s banks comes as politicians and regulators are eager to claim progress in fixing the global financial system, almost two years after credit markets cracked, Bloomberg Markets magazine reports in its October issue… The European Union has stress tested 91 lenders, giving 84 of them passing grades. In the U.S., President Barack Obama in July signed the biggest package of new U.S. banking laws since the Depression. The Basel Committee on Banking Supervision, meanwhile, is readying new capital and liquidity rules for world leaders to agree upon when the Group of 20 meets in Seoul in November… Europe, however, faces a special challenge in righting its banks: the sovereign-debt crisis. Europe’s largest financial companies hold more than 134 billion euros in Greek, Portuguese and Spanish government bonds, according to a tally in May by Bloomberg News based on interviews and company statements.
I have a strange sense that late last week some people knew this story was coming, and decided to sell their Barrick (ABX) and goldminer stock index (GDX). Based on how that trading unfolded, I referred to it in the blog at the time as a market manipulation. But, let’s leave my possibly unfounded concerns for now and instead focus on how this latest attack on the Euro might play out.
As the European bourses opened this morning, the Euro had been under pressure, particularly against the Yen. Then the major French banks (BNP and Societe Generale) and the big mining stocks began to weaken, followed by the UK and German banks. Silver and then Gold prices started dropping…
EURJPY chart:
Forex monitor:
European bank stock trading monitor this morning:
Spot silver chart:
Spot Gold chart:
Forex price table:
This picture does not look good for the Bulls… But, more importantly; it looks like an organized scheme to knock markets down. We’ll just have to watch to see if the story of the possibly buggered European bank stress test has legs.
Stay alert.
CTA Trading Desk Post-Close Report
A negative news article questioning the thoroughness of bank examiners, European stress tests prompted aggressive traders to book profits after the sharp low volume advance last week. Although prices declined moderately (S&P-1.15%) volume was very light indicating big institutions were not particularly active on the sell side, preferring instead to let prices fall back a bit before increasing their long positions.
Generally speaking, there is a shift away from risk into safety occurring in the capital markets when US Bonds (TLT+2.10%), the US Dollar (UUP+1.05%), and Gold (GLD+0.71%) are all moving higher together. Fixed income markets and the greenback normally will relinquish gains prior to an upside reversal in equity prices; therefore it rarely pays to anticipate a meaningful intraday stock market turnaround before the “flight to safety” rally unwinds with money flowing out of bonds and the dollar.
Given the short-term overbought condition of the stock market, mild profit taking today was to be expected. As long as the S&P can hold above 1080 odds favor higher prices once this reaction runs its course.
S&P 1080 has been a key area for quite some time. With the 20- and 50-day moving averages both meeting in this general zone, expect Bulls to step in and defend this level if prices decline to this price tomorrow. Assuming the S&P finds support at the 1080 test, expect buyers to target the 200-day moving average at 1115 on the next upside assault.
Have a great evening.
– Patrick Veech
Comments
Re: Gold [Short]/ Adding EDZ/ UUP
Bev- You read Friday's 'pitch' correctly and just hit a triple.
Euro stress tests
I totally agree Bill. I thought the exact same thing this morning when I saw that story in the WSJ. It's a puppet game where people are just deciding that they want the Euro/banks etc. to go down today. This is old news though. Many people (myself included) thought the tests were a joke and just a publicity stunt. Why is this article just coming out now?
Re: Gold [Short]/ Adding EDZ/ UUP
Thanks 2nd... here is the final EOD chart on GLD.
http://www.screencast.com/t/ZmIwMjY1Z
Silver is looking real nasty.
Cara 100 Ratings Changes
Good morning.
MBT - Mobile TeleSystems downgraded to Neutral from Buy at UBS.
ORCL - Oracle upgraded to Conviction Buy from Buy at Goldman. Target $27
Re: Gold [Short]/ Adding EDZ/ UUP
Bev, was trying to go back over your old charts but no link remains. Anyway that they can be made permanent? Nice call on UUP.
Re: Gold [Short]/ Adding EDZ/ UUP
Thanks Les and I am sorry about those links, had some problems with my Screencast account will try to repost them for you again shortly.
Re: Gold [Short]/ Adding EDZ/ UUP
Les try these links.
UUP 1 min: http://www.screencast.com/t/MDZjY2ZjN
UUP daily: http://www.screencast.com/t/OTNiMDk0ZDk
SPY daily: http://www.screencast.com/t/NWE0YTRkYjkt
Catch up with everyone later.
TMV
Just wanted to clarify on my "short TMV" post from Friday. I had shorted out right the ETF TMV which shorts 30yr treasuries. In a sense I am went long bonds for the time being.
[http://caracommunity.com/content/bill-cara%E2%80%99s-blog-sept-3-2010#comment-68523]
Re: TMV
Bev- I've seen folks making similar trades recently. what is the advantage of shorting TMV over just going with TMF - the carrying costs of the short position is less than the "decay" costs of holding the 3x long position?
thx!
jb
GSK: UK watchdog calls for Avandia recall
Don't know whether this means there is a chance the FDA will go against the advisory committee's earlier recommendations, but it's a possibility.
From yesterday:
0830 ET gold +6
Something happened at 0830 and gold spiked up thru 1159. Now at 1157. Silver also made a move. Whatever the reason, it hasn't affected oil, or the SPX...
EDIT: we might see gold making a new high today...now 1261.
More bank crime stories
"The investigators discovered that the banks ran dedicated units to systematically aid the undetected transfer of money through the U.S. banking system. They did that by removing identifying coding on fund transfers so they could evade automated U.S. bank computer systems designed to spot money flowing from a sanctioned state."
http://tinyurl.com/28nucoj
It seems these banks are nothing more than criminal enterprises.
http://tinyurl.com/2925wus
No one went to jail.
Cara 100 Update
NOK - The stock is up before the bell on a 180 degree (Overweight from Underweight) upgrade at Morgan Stanley, which notes that the average selling price of their handsets could grow next year for the first time since 2000.
ORCL - As reported previously, Goldman added Oracle to its Conviction Buy List. The analyst believes Oracle's hiring of ex-Hewlett-Packard CEO Mark Hurd is a positive near-term catalyst and expects the company to benefit from the improving macro environment. Shares are Buy rated with a $27 price target.
TEF - Barclays takes Telefonica to Equal-Weight from Overweight due to valuation after recent share price strength.
Visual Guide to Deflation
This site makes the concept simple regardless of one's views.
http://tinyurl.com/2cwlbo8
Re: Visual Guide to Deflation
DENSA Seal of Approval
Thanks, George.
Cara 100 Update
TXN - Texas Instruments downgraded to Below Average from Average at Caris to reflect concerns of order moderation and a negative earnings revision cycle.
Re: More bank crime stories
We can only pretend to change human nature for so long. Just like Uncle Ben sweated for a time, even going to Barney F to get some schooling in the art of smoozing, with the Feds one product operating from a SWOT perspective operating more in the OT part, I agree if when and as they are thrown under the bus, they will rethink human nature and how it fits in with this thing called economics. I can only hope at this point!
Does anyone see it differently?
edit:
No rush on that question...my GDXJ is doing OK this morning.
USD/JPY - Forex
Low in the last hour 83.51 - 15yr low
Re: Visual Guide to Deflation
Quite interesting George, thx. One should also read the comments, where many people in essence say the whole thing is wrong.
One fellow asks why, as a measure to fight deflation, doesn't the government simply print money (as opposed to borrow it), and lower income taxes so people have more money to spend? Any comments?
Re: Visual Guide to Deflation
I do think that people should draw their own conclusions per my phraseology. The Fed doesn't print money, however, and doesn't want any more bad assets on it's balance sheet. The Treasury does print money. Both do have the survival instinct as they are just people and do desire to keep their jobs and reputations. This isn't Zimbabwe.
Mining Stocks Ratings Changes
EGO - Eldorado Gold downgraded to Neutral from Outperform at Credit Suisse (pre-open).
IF THIS IS TRUE
ALOHA!!
If this is true ...
Gold and gold mining shares were an average of around 25% of world financial asset between 1921 and 1981. Today, gold and mining shares are only 0.9% of world financial assets.
then there is a huge malinvestment that begs to be corrected.
Then if this guy has changed his mind then he is only ten years too late to the table. Wow ... all that and in the end a lousy 489.34% profit! Hummmm???? Is that really talent, because now he sounds as if he has been reading the Bill Cara Blog.
LINK: http://tinyurl.com/29nujvs
Earlier today I looked at the POG and saw it at $0.80+ then the USD spiked up but none of the other currencies I follow were confirming the drop in the POG, so as I waited a bit all of a sudden the POG went up $1.40 then what seemed an instant it spiked up $10+ and is now up $12+ at $1260.90, while the USD has come off its highs a bit. All currencies are confirming the POG spike now except the Yen.
Still you have to ask what is this constant up trend in the POG since 1999 telling us? Once again I will say what I have been saying for many years is that gold is saying the monetary system is in trouble. Its not about possible COMEX defaults or inflation or deflation. Please get rid of those "diversions" since gold has already proved that it can rise in the face of deflation, since that is what many here and over at the Rosey & Keen Show keep saying we are in, yet the POG continues to rise even in this gigantic deflationary World. Do we trade prices or inflation vs deflation debates? Is it really about inflation and deflation or is it truly about the fragility of a fiat monetary system that is failing? A ONE WORLD FIAT CURRENCY will never solve such monetary transgressions since nobody will want to own LIABILITIES and that is all the global fiat money has as its basis is liabilites based on never ending increasing debt.
As Bill has laid out today now we are back at the debt issues of the Euro. Add in Obama has hit a new low on his Approval Rating. His business tax incentives he is offering stinks to high heaven as a ploy to get votes for the DEMS who are clearly in trouble of becoming politically obsolete in less than one term. Don't you love the last minute 'wishy-washy" fiscal policy now that November is looming? I mean the first Obama Jobs Summit didn't even invite the NFIB, representing small business. All they had at their Fake Jobs Summit was union bosses and Fortune 500 CEOs and Lobbyists. These guys would throw their Mothers off a cliff to get re-elected! As I said way before the Obama vs McCain Presidential Race, Obama will become the first black President and the last simply because of his political and monetary bias and who he chose to advise him during his campaign and after. He has performed in an abysmal manner and as far as I can tell his only bright spot was when he made a speech about student loans last April whereby he called banks "middlemen" and detrimental to the future of education in America. It is too bad he did not extend that thesis to the entire US economy and monetary system, but how could he since he is owned ... a bank cartel Uncle Tom. That's right Oprah ... What America needs is truly innovative leadership that will not lay down for the banks in order to dig our way out of this bottomless monetary pit and as long as we re-elect the status quo the pit is our home and we can spend the rest of our days on the sofa watching Oprah re-runs and reading the Audacity Of Hope!! I can only HOPE and pray that someday within my lifetime a President will be elected who ran on the campaign platform of eliminating the US FED. I have a feeling the US FED will be eliminated, but not by savvy US voters. There are no accidents and the "herd" believes that US Debt can do no wrong. It sounds like a formula for yet another monetary crisis. Only it will never be labeled a MONETARY CRISIS but something like a "medium of exchange derivative clearinghouse failure" or maybe "quantitative liquidity constriction". That way we will all feel safe and cozy so we can keep watching American Idol. Just be very wary of anything coming out of Washington DC with the word EMERGENCY!
Re: Visual Guide to Deflation
Si02 said: "One fellow asks why, as a measure to fight deflation, doesn't the government simply print money (as opposed to borrow it), and lower income taxes so people have more money to spend? Any comments?"
I guess you'd have to stop people from reducing their debt levels, which they are now hell bent on doing. The comments you posed here were relevant to the period following the savings and loans scandal. Enough money was thrown at the problem that while debt levels were slowed temporarily, they did not reverse at any time following this crisis, before simply resuming their upward trajectory.
http://www.debtdeflation.com/blogs/2010/09/05/back...
return M0 to debt ratios back to where they were in the 1950' and 60's and I would hazard a guess that the US butts up against the phenomenon that Kaimu has been harping on about for some time - a destruction of monetary wealth.
Cara 100 Update (Final)
SLB - price target cut at Credit Suisse to $78 from $80 reflecting SII merger. Maintain Outperform rating.
Re: Visual Guide to Deflation
ALOHA!!
No Les ... all I care about is that we do not base our government and our money and ultimately our lives on DEBT. But we have. As anyone here who has had huge debt can attest it is no way to live ones life. I myself learned that lesson the hard way. I guess American banks and politicians think they have "sovereign immunity" when it comes to debt. They go against Nature and God, as it is said in the US Constitution and the Declaration Of Independence, in that belief.
Interesting point of view, if it were true
http://thetechnicaltakedotcom.blogspot.com/2010/09...
edit:
It may be I am just saying, it would be interesting. Toot Toot
US TREASURY MAGIC
ALOHA!!
Well the US Treasury, as reported on Sept 2nd, has withdrawn $10.648TRIL from its Federal Reserve Account with a little less than a month to go in FY 2010. In order to fund that withdrawal the US Treasury has issued $8TRIL in marketable debt, yet they have only collected $1.4TRIL in net tax revenues.
That is called "sovereign accounting immunity" ...
There is this incessant talk of raising taxes, especially on those rich people who make more than $20,000 a year, yet not a peep about cutting spending. Can you really have your cake and eat it too?
IT ALL WORKS ...
Re: Visual Guide to Deflation
Hi Les, I just scanned the article you posted and will have to get back to it. One thing of note is that their first graph portrays M3 as a discontinued series, which it was as of 3/26/2006. One might think of this as some conspiracy, however; MZM is used in it's place. I have attached the MZM Fred Graph (note log scale!!) of MZM.
Re: Visual Guide to Deflation
Also their depiction of the dramatic M2 spike is one way. I think that a more accurate depiction is a log scale as attached. Statistics can be presented to make many points. Anyway, interested parties can decide for themselves.
Re: Interesting point of view, if it were true
Why would a Business property firm see value in a decrepit residential space?
SANTA ANA, Calif., Sept 07, 2010 /PRNewswire via COMTEX/ -- Grubb & Ellis Company (GBE, Trade ), a leading real estate services and investment firm, today announced that it has established a strategic alliance with Kettler Inc., one of the Mid-Atlantic's largest real estate and property management firms, to provide residential property management services nationwide.
"We are excited to expand our best-in-class property management services to include the multifamily residential space," said Jack Van Berkel, executive vice president and chief operating officer of Grubb & Ellis and president, Real Estate Services. "Many of our clients have told us that they are looking for a service provider that can provide solutions across all asset types and throughout the lifecycle of their ownership. Kettler's residential property management capabilities combined with Grubb & Ellis' comprehensive real estate services platform will enable us to lease, manage and dispose of all asset classes on behalf of our clients."
GBE
Grubb & Ellis Company (Grubb & Ellis) is a commercial real estate services and investment management firm. The Company operates in three segments: Management Services, which includes property management, corporate facilities management, project management, client accounting, business services and engineering services for unrelated third parties and the properties owned by the investment programs it sponsors; Transaction Services, which consists of its real estate brokerage operations, and Investment Management, which includes providing acquisition, financing, disposition and asset management services with respect to its investment programs and dealer-manager services by its securities broker-dealer, which facilitates capital raising transactions for its real estate investment trust (REIT), tenant-in-common (TIC) and other investment programs. In July 2010, Grubb & Ellis Company acquired a 100% interest in its Las Vegas affiliate, Grubb & Ellis Las Vegas.
Re: Interesting point of view, if it were true
gforce -
"Why would a Business property firm see value in a decrepit residential space?"
It's all about the management fees and commissions. If you can't make money selling, it's time to get into the leasing business. Around here, brokers are locking onto existing tenants with contracts to renegotiate terms and thereby nicking landlords 5% of duration rent with a base rental discount to stay put. They didn't happen before the banking crisis.
Nonfinancial Debt with Adjusted Monetary Base
Supporting the earlier post by Les. It seems as though Nonfinancial debt is rolling over even with the spike in the Monetary Base. People don't seem to want to have Credit crammed down their throats.
Re: Visual Guide to Deflation
The critical bit missing from the "guide to deflation" is how money is created in the first place. Its a simple concept, but one that most people do not understand because it just makes no sense. But it's true. Read the following very carefully:
* 95% of our money is "bank credit" money.
* All "bank credit" money is created by BANKS, from thin air, when people or companies borrow money.
implications are:
* when people borrow money from a bank, brand new money is CREATED - by the bank!
* when people DEFAULT on or REPAY debts, money is DESTROYED.
* increased borrowing is the primary cause of inflation
* destruction of bank credit money is the primary cause of deflation.
Our crazy twisted system requires people to go into DEBT in order for money to be created, and when they go out of debt (which we'd all like to do), money is destroyed. If there was NO DEBT, there would be NO MONEY.
Since 95% of all dollars in existence were loaned into existence by banks, it is likely that some poor schlub's "promise to repay" (credit card, auto loan, mortgage, etc) is what backs the dollar in your pocket. Each dollar has a "debt slave" attached to it who has promised to go out, get a job, and work to repay that dollar. That's why Kaimu calls us "debt slaves" and refers to this as a "debt based money system."
As I said, a crazy, twisted system which should be killed if possible.
Apologies if you already know all this. Clearly the guy who wrote the "guide to deflation" didn't, however.
If you'd like this explained more fully (and have 47 minutes to kill), watch the following video:
http://video.google.com/videoplay?docid=-255015645...
Re: Interesting point of view, if it were true
Interesting business strategy to make hay while the sun shines...even better to build homes while the paint drys or I am guessing a revised business plan would say as much. lol
edit: I was referring to GBE's business plan if they were to continue to enter the residential space.
Treasury Bills: The New Opium
Jim Rickards covers trade imbalance between the West and China here:
http://tinyurl.com/396cd2y
He draws comparison to British use of opium to stop the silver draw down in trade with the Chinese and U.S. use of Treasuries now in a similar fashion. Catch his new interview at KWN too. Fascinating especially when he outlines the potential to settle with gold based on reset using GDP metrics.
http://kingworldnews.com/kingworldnews/Gold.html
Chinese gov't officials can take out the Fed whenever they choose by simply demanding payment in gold or else hyperinflate the dollar. Let's hope Hillary doesn't suggest default until a new administration is in place. QE cannot be reversed without gold payment or hyperinflation. It's going to be a currency event, not an economic deflation/inflation event like what davefairtex's economic textbook would suggest.
Cheers.
QQQ or now QQQQ
Its volatility index has not breeched its 600 day moving average, linear, that is on the five day look; lets contain our enthusiasm here. lol
It is up approximately 12% though; its enough to make one sweat.
Re: Treasury Bills: The New Opium
Dr. S - "Chinese gov't officials can take out the Fed whenever they choose by simply demanding payment in gold or else hyperinflate the dollar."
Oh really? Presumably the "hyperinflation" of the dollar would be the result of the Chinese dumping all their treasuries on the open market at once. Ok, let's say they do this. How can we respond, without using the Fed to buy them all?
One simple remedy that would be bad for freedom, but would easily source the trillion dollars required to pay off the Chinese would go something like this.
Step 1: draft an executive order to change requirements for all 401ks and pension plans to invest ONLY in treasury securities: this is a "national security" issue, since China is engaging in an Attack on the United States.
Step 2: schedule that change to start within a 1 week timeframe
Step 3: stand back and watch the banks fall all over themselves to front-run the public. Treasury market stages a massive rally.
It's only a trillion dollars. Here in America, we have that lying around in the cushions of the sofa... :)
Right now, it's deflation. Once we're not in deflation anymore, I'll be the first one to say so. I honestly don't have any axe to grind here one way or the other. Do you?
GDXJ
Sold some at 32.54, could be a mistake and my CB was 26, but as Bill says no profit is to be looked at askance. I did in my better moments set up a buy back lower priced however.
SPX
Looks to me it has plenty of support at the 1096 level; of course easy for me to say today. Some look at the SPY. In my opinion if we close above 107.58 this is bullish. Of course the rest of the story is more popular these days.
Re: Visual Guide to Deflation
Hi Dave,
What a great video! From feathers to beads to gold to the Fractional Reserve System creation. About 30 minutes in, he poses 4 questions and then some possible answers. Here are the 4 questions. Fast forward Dave's link 30 minutes to hear the author's responses.
1. Why do governments choose to borrow money from private banks at interest when govt's could create all the interest-free money it needs itself?
2. Why create money as debt? (Subquestion of his - Why not create money that circulates perpetually?)
3. How can a money system dependent on perpetually accelerating growth... be used to build a sustainable economy?
4. What specifically needs to be changed?
PM Update
So far there are no positive divergence [accumulation] on the 1,5,15 time SPY frames. The indicator is in lock step with price so the selling could last another day or so. The dollar looks a little shaky but still shows it under accumulation. If anything changes I'll give a heads up.
APEI - best higher education play
I spoke with APEI/IR and verified that only 22% of their revenues come from title 4, the gov't student loan program. (This means they will have fewer disgruntled students graduating deep in debt than do their competitors. Pentagon always and other public agencies often simply pay tuition costs).
They are regionally accredited, which is said to be more rigorous than the national accreditation which most online universities have.
36% of their students are first responders (non-military) which is growing faster than their (larger) military student base.
they price their tuition at in-state public university rates, while competitors price at private university rates (he maintained). Their focus is 100% online (less costly than campuses) and they largely eschew expensive online "lead aggregators" preferring to win students through word of mouth and social networking. Lower costs, lower prices!
They differentiate themselves from other online universities serving the military through having been founded by a retired marine, having 3 generals on their advisory board and 1 on their board of directors.
APEI's major competitors are Univ. College Maryland and (overall market leader) APOL University of Phoenix.
I originally bought a few days before Cramer recommmended it some while ago. It ran up from 30 to over 40, then crashed with the latest student marketing/loan scandal. I think it's completed bottoming, and with good lobbying should avoid impact from measures possibly introduced versus the industry generally.
Disclosure: I'm biased because I own the stock. No other financial ties. DYODD
Harry Dent's Outlook
¹²Exclusive Interview: Harry Dent's Outlook On Demographics, Debt, And Deflation
By Brett Owens | 3 September 2010
This morning I had the fortunate opportunity to speak with demographic trend expert and economic researcher Harry S. Dent. It was a great conversation and we covered a lot of topics, including the demographic outlook in America, the inflation/deflation argument, potential inflection points for the stock market based on spending wave turning points, and more. I took copious notes, and I've been following Dent's research for a bit now, so here's a very detailed summary of our interview, and some topical background info in case you're new to his brand of demographic analysis.
Harry Dent's Previous Successful Bull Market And Depression Predictions
Beginning in the late 1980s, Dent began touting a bull market in US stocks that would go higher and further than most believed. He reiterated that call in 1992— a time when many analysts were very bearish (hard to believe in hindsight, but true— many bestselling investing book titles from the early '90s were doom and gloom). Impressively, he stayed bullish during the early to mid 2000s— again a time when many (including me) thought the stock market bubble had burst once and for all. Dent's analysis told him that there was one big last gasp for the party, thanks to boomer spending hitting its peak.
He did have some very high price targets on the Dow that weren't hit— some folks are a bit down on him for this, but I think that's missing the point of his research. Longer-term index-price predictions are very difficult. I'm more concerned with accurately predicting the direction of the trend— and he's been quite spot-on in this regard.
Dent's longer-term warning alongside these bullish predictions, though, has always been that another Great Depression would follow the boom of the '90s and '00s, sometime from 2007-09. Now, right on schedule, we're on the other side of the boom/bust peak— and into our current depression. As you can see from the chart below, consumer spending peaked in 2008, and is heading downward. According to Dent's research, this trend should be in play for some time. Why? Glad you asked.
How Demographics Drive Spending Trends (and Hence, Stock Prices)
Dent's research shows that human spending habits follow very predictable patterns throughout the human life cycle. Individuals typically hit their peak spending between the ages of 46 to 50 (see graph below). These spending waves drive the economy, as well as stock prices. In the US, as you can see, there's been a very tight correlation between family spending, and stock prices.
Peak spending rolled over for the first time in 2007— and the stock market rolled with it. If the economy continues to follow the spending wave, we're in for another lean 12 years, as the next peak spending pickup isn't scheduled until 2022 [[that's also about right on target for the 80-year market cycle— so start saving now in order to invest ahead of that anticipated big market surge of the 2020s: normxxx]]! This is due to the fact that baby boomers are now past peak spending— and we've got over a decade until the next "baby boomlet" hits peak spending stride.
Re: Visual Guide to Deflation
Is fractional reserve banking evil?
It grew out of the Italian renaissance, and made the West productive and rich. Should gov't create the money? How well do they do in other spheres?
It's just that banksters have captured their regulators, not that fractional reserve banking is evil, IMO.
Re: Visual Guide to Deflation
Is fractional reserve banking evil?
It grew out of the Italian renaissance, and made the West productive and rich. Should gov't create the money? How well do they do in other spheres?
It's just that banksters have captured their regulators, not that fractional reserve banking is evil, IMO.
Re: SPX
Support for the Bullish case from Trader's Narrative.
http://tinyurl.com/2cahxx5
Re: Visual Guide to Deflation
Jock - "Is fractional reserve banking evil?"
Well if you're a banker, certainly not.
Banks get paid interest on money they create from nothing. Tell me why that's a good thing again - except for the bankers, I mean. What do they do to "earn" this money? Thrifts charging interest I understand, but remember, bankers don't have the money they lend out. Why do they get to charge interest?
Why must money be based on debt? Besides giving bankers an earning opportunity, I mean.
We have inflation today when the bankers run things for their benefit. How different would it be (besides the bankers not getting paid interest) if the government controlled the money supply? Under the glorious Fed, 1913 money is worth 4% of what it was. This is Grand Banking Success?
I feel that banking is not evil, as long as bankers are actually lending something. When they are able to create money from nothing, and "earn" money on that, and when all money that exists has to be borrowed into existence, well I think that IS evil - or at the very least, a system that tends to benefit bankers at the expense of society at large.
This is more than just regulatory capture. This is a flawed system that REQUIRES an ever-increasing level of debt servitude to function properly.
Re: IF THIS IS TRUE
RE: "If this is true ...
Gold and gold mining shares were an average of around 25% of world financial asset between 1921 and 1981. Today, gold and mining shares are only 0.9% of world financial assets."
These are the numbers I searched for for a long time. Where do you get info like this?
Re: Harry Dent's Outlook
I used to follow him and while the general concept is sound, predicting stock markets from demographics alone doesn't work. This is the same guy who yelled Dow 36,000 back couple of years ago and now he is saying Dow 6,000. Gimme a brake! No credibility and no shame.
Re: Treasury Bills: The New Opium
davefairtex -
Doubtful Chinese would dump U.S. Treasuries but rather THREATEN to dump treasuries while demanding payment in bullion. Instead of eviscerate the 401(k)s and trigger another Revolution, simply reset the gold price and pay off the Asian peril with all that Fort Knox gold. That devalues the dollar and removes runaway interest payments equal to the U.S. GDP all in one clean swoop. Timmy just resets the price of gold from $45 to $6,000 and Walla! No special Mickey Mouse treasuries required.
Forcing the 401(k) money into special treasuries just transfers debt from foreign invaders to heavily armed domestic fiefs. Has it helped Japan any to have all its insane debt be internal?
Remember U.S. sailor Steve McQueen yelling "What the Hell Happened?" with a bullet in his gut in the Chinese Emperor's palace square at the end of The Sand Pebbles? That could be the average American Joe with a 401(k) if the U.S. doesn't eventually give the Chinese the Fort Knox gold.
I'm holding my 'cash' in Yuan since it can't go down and only up relative to the dollar. When it unpegs it will be like winning the lotto.
Don't let my mention of textbooks perturb your well considered ruminations. I just like to rile you up.
Cheers.
Edit: Why do you think Wall Street set up GLD and SLV etfs?
Re: SPX
The support holds indeed but the TLT is raising steadily today. TBT is only slightly over my stop now. I'm thinking the pause will take more than 1 day and I would not be surprised if bulls gave up to 50% back before the pause is over.
FD: long in LT accounts, cash in ST accounts.
From my friend
OK, they got price into the bear flag, because we see two 3C positive divergences on the 1 min chart (market makers), I'm assuming this is not random price action, but rather a bit of manipulation. You can now see the two red negative divergences and 3C is a bit more clear as we've had an hour of a trend rather then the see-saw up and down inside the bear flag.
You'll want to watch volume in reference to price moving down. The biggest volume spike of the day was at 2:15, 2 minutes later we saw the start of the reversal of that small uptrend into the flag. I'd think that this will lead to a pretty fast sell-off once the longs start selling losses-(this is relative when I say "fast" as we are looking at a one minute chart, but it has to start somewhere).
Any way, keep an eye on volume and price-$110 on the SPY is going to be a psychologically important area and it's bound to have all kinds of orders on the books there as it's a whole number. I'd think any real volume spikes and acceleration of a downside move would occur under $110 SPY
http://2.bp.blogspot.com/_gGhyx-JKKA8/TIaETfSQ7LI/...
Re: From my friend
GLD: GLD is a perfect example of a false breakout-and the volatility I mentioned we may see this week. We got a break down from an ascending wedge-which means all is fine in the conventional technical analysis world, and then a new high outside of the pattern, leading the Joes to believe it's a failed pattern. I think it will fail and the investment and short covering today caused will fuel the downside move.
Re: From my friend
"I think [GLD] will fail and the investment and short covering today caused will fuel the downside move." - Bev
Even with the bullion banks closing up their prop desks and no longer holding the price underwater?
Forex markets are wild
Volatility today in forex trading has been significant. Strength in the Yen has been massive. Capital has moved to bonds.
I also exited the long gold positions for the most part. I may go back in within minutes, but I don't care for the action.
Re: From my friend
Dr Strangelove... I don't have an updated GLD chart for today with his leading indicator on it but once I do I will post it. It was showing last week a negative divergence [distribution] while the price rose. I have added to DZZ today during this rally.
His indicator is definitely something special. About two weeks ago when oil was tanking his indicator showed oil was really under accumulation [positive divergence]. So I started to add a position and that following Wednesday when the oil inventory was really terrible oil suddenly dropped but reverse for no apparent reason within 45 mins. I had my stops off and held during that drop. Then oil began that rally we just recently saw.
So I am playing GLD the same way until his indicator shows a positive divergence [accumulation] for GLD. This just maybe a short term correction coming up. But I do know the Gold Boat is differently listing to one side so I plan to try to capitalize on that.
Re: Treasury Bills: The New Opium
"I'm holding my 'cash' in Yuan since it can't go down and only up relative to the dollar."
Yes it can.
Back in July of this year, Chinese officials said the yuan(renminbi)would have greater flexibility. Since then yuan has actually gotten weaker VS the dollar, when everybody thought it would be the opposite with the yuan rallying VS the dollar.
Chinese officials have made it clear to the markets that the yuan would not be a "ONE WAY STREET".
Re: From my friend
Bev, you mention an ascending wedge in GLD but I don't see it. What time period are you referring to? Also, on your charts you have an indicator behind price that doesn't seem readily familiar to me; can you explain what it is? Thanks.
Re: banksters
Doesn't every industry operate for its own benefit? How is fractional reserve banking any worse than any other aspect of financial services? ALL financial services are based upon moving money around and getting paid for it. Banks have costs, just like other businesses. Had it not been for banking, the West would never have become rich or productive. In islam, thou mayest not charge interest. How well have islamic countries done economically?
It's a bit more subtle than simply tagging fractional banking as a tool of the devil.
As alluring as is Ron Paul's book "Abolish the FED" that would be like "unilateral disarmament" in an age when all other countries HAVE a central bank, and many follow mercantilist policies. So, IMO, that's a bogus question too.
Should central banks intervene and set rates? Should maintaining value of currency be a major goal of a central bank? Should inflation be tolerated? targetted? Does the US FED recognize ANY limits on its freedom to intervene in the economy and distort markets?
Should excess concentration of private banking power be assessed and dealt with? Is the US too far gone to take control of these issues? Is gold therefore the best asset class to hold? THESE are the key questions, IMO.
FWIW
I see a lot of discussion here about Gold
and I want to chime in. While the T/A on GLD and GDX is dicey and some may try to play a triple top here, let me just say that the sentiments on gold are still low considering the price action. We are relatively far from gold euphoria last seen in May or June.
I cannot rule out a break out here, just like the one that happened in SLV or SLW (frankly, I missed that play but I was not shorting it at least).
FD: I hold a core position in GDX (50% allocation) and not planning to short PM.
Re: From my friend
Michael3442
http://www.screencast.com/t/ZmIwMjY1Z
I posted this chart today of GLD at 7:44AM note the red lines. As for the orange indicator on it that is my friend's own creation. I am really taken back by how well it works.
Re: From my friend
Where is this GLD false break-out? We are less than $1 off the all-time high and we gapped up today and held the gap. On top of that we were solidly green in the face of a solid red day for equities. RSI is below 70 for D/W/M. I just don't see it.....That's not to say we don't pullback and close the gap or even a bit more, but I don't see the impetus to be short GLD longer than an intraday time period at this point, otherwise it's just trying to pick the top IMO.
Re: From my friend
And where do you see the rising wedge? Thanks.
Gold sentiment
from Mark Hulbert:
http://www.marketwatch.com/story/gold-timers-showi...
Re: Treasury Bills: The New Opium
"Chinese officials have made it clear to the markets that the yuan would not be a 'ONE WAY STREET.'" - Seamus
Chinese officials know better than to run the yuan below the USD. The pressure is to unpeg and rise against it. The yuan has slipped lately but only about half a percent. Both currencies are losing buying power together but for how long before the U.S. is forced to default on its treasuries?
"In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of." - Confucius
Be patient, grasshopper.
Re: From my friend
BillySundance.. here is my chart.
http://stockcharts.com/h-sc/ui?s=GLD&p=60&yr=0&mn=...
Re: Gold sentiment
What he failed to mention is his sentiment goes to 70% when gold reaches major tops. I believe we are fairly close to one time-wise but not sure about target. It could be much more, don't forget the December 2009 blowout. If for some reasons bonds crumble big time, massive money will go to gold.
Re: From my friend
I am just not seeing the false breakout on that chart.
Weakness in middle of last week looked to me to be due traders reallocating out of the safer havens like (TLT, GLD, Utilities) and into more risky sectors as the broad equity indexes lifted off. If GLD does sell off as you expect - are you looking for the S&P to fall with it or to rise? I for one would get more bearish if I see GLD begin to relinquish it's safe haven status and start correlating more closely to equities.
What I have been seeing as far as intraday movement on GLD and GDX over the last month is some excellent shakeout moves that have not been allowing momentum players to catch much of the upward movement unless they are willing to hold overnight, generally.
Re: Gold sentiment
SLV has given a Triple RSI sell alert. GLD and GDX may not be shorts at these price levels but they aren't buys either IMO.
When I see "Captain Cragen" pushing gold in a commercial on Fox News Channel, my spidey sense starts tingling.
And TLT has given a Triple RSI sell as well.
IOW, risk is increasing. Interesting times.
Re: Gold sentiment
jack, bev and all; I remember the Gold top in 1980 when everyday it just went higher and higher until one day it didn't. Wonder if these blow-off tops are usual and perhaps someone has more history. Anyway, from Kitco, here is the 1980 chart. If a blow off top does occur, gold will have a long way to go straight up before it does.
Too much fear leading to plain ole' bad investing decisions
Like:
1. Buying gold at near an all time high while at the same time the Dollar is at a 15 year low against the Yen. Something's gotta give.
2. Buying 10 year treasuires when they're yielding 2.6% and the economy is still growing by at least 1%. Even w/ anemic US growth, inflation extinguishes any gains over even the very short run, so your "return of capital" is hardly assured in this deceptive "flight to safety" trade.
3. Shorting the SPY when it hasn't posted an aggegate net gain in going on 11 years, but corporate profits have almost never been stronger, not to mention balance sheets of the S&P 500, post-bailout (including banks!!). Talk about beating a dead horse. XOM makes more money that half the GDP of eastern Europe and is probably more powerful geo-politically, too.
4. Plowing the little bit of risk capital folks are willing to deploy to places like China (don't forget, they're still communists) and South America (more communists) when the currencies of those countries are fickle and manipulated perhaps even moreso than our own tired US $. A great way to lose assets in one fell swoop, and regardless of their performance.
Keep your eyes on the prize!!
Organized crime a threat to Mexican Mining?
I didn't used to think so, but this LA Times article has me wondering. Organized crime (you can't call them just "drug gangs" anymore) have disrupted production at Mexico's largest natural gas fields. Couldn't they similarly spoil some miners' days? (There was already a case of $2M in dore bars being stolen from TRY.TO's Andorinhas mine in Brazil.)
http://articles.latimes.com/print/2010/sep/06/worl...
You may have to subscribe to get this, but subscribing is free.
Anybody living or working in Mexico with experience, or opinion that's relevant?
2 trading days in a row
Vad,
2 trading days in a row I have seen an interday set up on 1 min chart. Thank you! Have not traded real money yet. You are right, it does not matter which way you think the stock is going. Watching the herd, Bear E
Re: Too much fear leading to plain ole' bad investing decisions
Hilarious and my sentiments as well. Except for gold. I don't see any strong correlation between gold and yen, and since you mentioned, the GLD:FXY looks very bullish for gold.
A fish stinks from the head and dies from the mouth
Krugman has lost all credibility:
http://gonzalolira.blogspot.com/2010/09/why-paul-k...
Beware of Greeks Bearing Bonds
Fascinating Vanity Fair article out today on the state of affairs in Greece. What a Byzantine Labyrinth! (7 web pages long!)
http://www.vanityfair.com/business/features/2010/1...
Re: Too much fear leading to plain ole' bad investing decisions
Not hilarious and not my sentiments at all. Especially the part about "corporate profits have almost never been stronger, not to mention balance sheets of the S&P 500, post-bailout (including banks!!)".
If one trusts the balance sheets of banks and Enron before that, then one might still believe in the tooth fairy. Better to heed Felix Zulauf who says the price to book of SPX companies is well outside the historical norm and will revert to the mean or below in the future. Recovery will depend on a fix to the universal debt problem.
My 2 cents: The sand castle will have to rebuilt on a much firmer foundation with more mortar added to the watery mixture.
My added nickel: (not original, thank you Kyle Bass)...Have you ever solved a problem by kicking the can down the road?
tobyt,
good evening, hope things are well... restarting position(s) in past bio we had.. with ' zgen ' being taken out tonight for its phase II value, I have to believe the worm has turned.. Pharma needs the juice, and apparently, ( as you and I have agreed ) those $ 5.00 range bio's are starting to look mighty good to the boys with the cash, especially those now trading very close to their ' cash/per/share ' levels ( also love the flat-line chart ) ... best of trades to you, baz.
baz22
pouring in central texas, have never had more rent houses vacant/for rent since 1990, sign of the times even tho this area is holding up pretty well. I will probably do my "conservative" play tomorrow on SGEN, stock is about 12 and the oct 12 1/2s are 1.40 or so..... a mouth watering 11/12% return for about five weeks/sold some more ARNA 3 puts for next fri, .35 too much $ for under two weeks no matter how the fda meeting goes, similiar to the $5 VVUS puts I have been selling for a few months, MYGN looks interesting down in here also, thanks for updating me on the bios/the best of "trading" to you from a "positioner"
futures 2:30am - no need to guess
S&P -1.40 / -0.13%
Level 1,089.80
Fair Value 1,091.23
Difference -1.43
Nasdaq -1.75 / -0.09%
Level 1,855.75
Fair Value 1,856.55
Difference -0.80
Dow -28.00 / -0.27%
Level 10,310.00
Yesterday's $ intervention has its flow on effects. The US still has the power to move global markets - though not with the free and fair price discovery mechanism we expect.
Gold and silver still gunning for new highs.
Re: banksters
jock - "Doesn't every industry operate for its own benefit? How is fractional reserve banking any worse than any other aspect of financial services?"
Of course every industry operates for its own benefit. Miners dig up ore from the ground, and provide metal. Manufacturers change raw materials into finished products. Retailers order products from around the world, maintain inventory, and provide a convenient place to shop. All these industries provide something to you that you DO NOT HAVE initially. They bring something to the table, and transfer it to you when you give them money.
Banking is the only industry that can legally charge you interest for something YOU provide - that promise to pay. This really seems like an equitable deal to you?
If a retail store charged you money for a product that YOU supplied, would this make sense to you? Of course not, nobody would buy into something that absurd, but we do this in banking because its a cleverly hidden shell game. The law gives bankers the legal power to turn this "bank credit" money into FRNs which must be accepted as legal tender. I wouldn't mind having this power too - converting "dave credit" I created from thin air into FRNs - but they'd arrest me for counterfeiting because I don't have a "bank charter."
Of course banks have absolutely no interest in giving up this ability. It's way, way too profitable. And it gives them control over the economy. Tighten credit, cause a recession. Loosen credit, and create a boom. You think this power is lost on the politicians? And they are persuasive advocates for retaining their power, using fear to keep their monopoly on money creation. The USG plays this same game with terrorism, or wars on drugs. And we fall for it again and again. Sex sells, and so does fear.
Last point. No matter how you slice it, the requirement that we ALL have to be in debt, and pay interest to banks (who created the money from nothing in the first place) in order to have a reasonable money supply is simply absurd. If you can explain why this is a reasonable system design, I'd love to hear about it. While you're at it, you might want to explain why the artifacts of our current system: having an ever-increasing amount of debt, resulting in an ever-increasing interest burden, and built-in side-effect of constant inflation is good too.
futures 4:15 am
S&P -1.90 / -0.17%
Level 1,089.30
Fair Value 1,091.23
Difference -1.93
Nasdaq -1.00 / -0.05%
Level 1,856.50
Fair Value 1,856.55
Difference -0.05
Dow -22.00 / -0.21%
Level 10,316.00
Euro autos dumped. French banks absolutely hammered.
USD/CHF just made parity. USD/JPY just dived to a new low.
Wondering if the trendline resistance on Uncle Buck developing these last few weeks hold. $ and treasuries still the safe play, or is this herding for a new slaughter?
The Finviz futures show an increase in Corn, Coffee, Oats and Wheat this last week. The bad harvests in Russia (China too I think this year) along with feed lot speculation are catching on. Perhaps the reason meat futures have been sliding at the same time. Check out DBA's action yesterday. Looks interesting.
Illini
Jim Sinclair, is that you?
I take it your long gold, own the physical, have a bunker stocked w/ canned food & firearms and are just waiting for the revolution, right?
By the way, even Enron would have survived if got a bailout.
Pardon my extreme cynicism. I suppose you can always find someone willing to focus on a single aggregage metric to make the bear case vs stocks. I'm just investing in the market I see, not the one I want...and what I see looks pretty silly cheap and should be bought aggressively for the long run. After all, there's no return to be had anywhere else. We are all humble seekers of yield. But make no mistake - wherever you park you dough - its ALL RISK CAPITAL.
Re: Illini
nebish,
It is your comment,
"I'm just investing in the market I see, not the one I want...and what I see looks pretty silly cheap and should be bought aggressively for the long run. After all, there's no return to be had anywhere else."
Which got my attention.
The "long run" is what brokers fall back on after their recommendations tank.
I just had a similar comment to a good friend when he said, "Real estate has bottomed in parts of Florida and should be bought at the current cheap prices."
IMO, their is no such thing as a bottom and "cheap" while relative to the past can quickly become "expensive" relative in the future.
The market you see may be influenced by data or policies you cannot not see.
As the Sgt ued to say on Hill Street Blues, "Be careful out there."