CTA Trading Desk Morning Report
[7:00am ET] Good morning.
The price of gold sank yesterday along with the price of crude oil, and the price of natural gas, and the price of copper. In fact many commodities dropped in price yesterday almost as much as gold. There is in fact a liquidity panic as banks are afraid of the forced deleveraging that political and monetary authorities are demanding.
I think we are all in agreement that it is not enjoyable to be holding any assets at a point when traders are panicking. But the point is, the panic is not about gold and it is not being caused by gold.
Traders who are holding cash and bonds (except the European kind) want you to believe that gold has lost its glitter. It hasn’t.
They will tell you there is no fundamental reason to be holding gold. If they were right, there would be no reason to hold oil or copper or other valuable assets that are dropping in price as much or more than gold.
All that’s happening is that traders who hold cash and bonds, which represent debts of others, want you to sell your perfectly good assets to them at the lowest price possible. Being panicked, you will likely be doing exactly what those traders want. Of course, if you have debts against the assets they want, there will be a point when they simply take them from you.
Strange things happen during panics. For sure, people misspeak.
Yesterday there was an interesting dialogue on BNN TV among some hedge fund managers and the host, the outstanding Howard Green. One of them, Jamie Horvat of Sprott, closed with a comment about China going into recession in 2012 that threw me. As I understand it, the growth of China’s economy this year was +9.2% and it will likely be +8.9% in 2012. Is that a recession or simply a mild slowdown from a rapid growth profile?
I then wrote one of the participants to congratulate him on a job well done, who then reverted: “Thanks, Bill. I think Jamie meant a ‘Chinese recession’ which is loosely defined as sub-9% growth.”
But, that’s not what Jamie said. Knowing that Sprott employs qualified professionals, I put the matter down to a mistake in speech, but one that will go on to become misinformation when repeated by others. I see this all the time.
For some reason, people want to hammer China. Last time I checked, however, China was doing just fine. If they have a problem, it’s a lack of buying from American and European consumers and businesses, further dragged down by a lack of international trade finance by American and European banks that made a series of imprudent decisions in real estate investments, sovereign debt investments, take-overs of insolvent competitors, distributions of exorbitantly high dividends and share buy-backs at a time when they ought to have been cutting back, not expanding.
So, let’s point the finger where we should, and it’s not China. Yes, China, like India and the other BRICs, is slowing, but not crashing.
Let’s have a look at a different scene.
Financial Times: December 14
Shipping: that sinking feeling
Last into the downturn, last out. That could be the fate of the world's shipping industry. In 2008, when the global financial system was sinking, tanker operators were merrily ordering new ships. These are still being delivered, creating a glut of container ships, tankers and bulk carriers, swamping many operators. Like the biggest ships, this market can take a long time to turn around.
International trade is mostly done by ships. So, keeping tuned to the following shipping monitors, and the stock charts, may help you with timing investment decisions.
But, you’ll just have to ignore the guidance provided by the Financial Times editorial staff. :)
Note that these are the closing prices from yesterday. Based on the early trading in the European banks this morning, there ought to be an improvement today.
It may be helpful to monitor the shares of SeaSpan (SSW), which is a huge ocean container carrier. Here is the chart going back to inception, over six years ago:
At the end of September, my feeling was we’d see a rally in SSW and in the S&P 500. I figured that surely the talking heads in politics and central banks could not use their bully pulpit to in fact bully the free market into believing that the economy was failing when the data was showing a mild trend reversal. How wrong I was. Give these Interventionists enough time to write and deliver their self-serving scripts to MSM, and sooner or later the mass market will believe them. International business, like share trading, is done on the basis of confidence, enough of which will lead to risk-on and a deficit of which will lead to risk-off. So, we now see the damage that the Interventionists have done in going risk-off.
I think they made a mistake. When times are tough, I don’t think it advisable to cut off the hand that feeds you. When times are strong, we can all afford to cut back. The problem is these Interventionists laid on a banquet when they didn’t need to and now they are taking the food from the table when the people are hungry.
In any case, when the food and oil and other commodities start flowing again from country to country, there will be a pick-up in shipping and, if we are watching, the evidence will probably be in the rising share prices of stocks like SSW.
If there is one fly in the ointment, it happens to be that the new ship inventory coming on-stream in 2012 will be more than the increase in goods shipped, as it was in 2011, which pulls down rates, and with it earnings, and then share prices. But the quarterly reports of these companies will tell analysts whether there is an increase or decrease in goods being shipped.
The biggest container shipping line in the world is A.P. Maersk [OMX:MAERSK-B].
Here is the chart:
I show these charts in hopes that some of you make comments so that we all can learn from one another’s experience and insights, etc.
As for me, I’d rather talk trading than philosophy because this is a tough market to figure out, and I need to focus on prices, but I do welcome anybody’s contribution here if it leads to greater self-understanding.
In fact, I’ll go further to say that over the years I have seen much improvement in the analytical and critical thinking skills, and communication abilities, of the blog participants, and I thank you for it.
Have a good day.
[8:05am ET] Good morning, Geoff here.
Yesterday morning before the open in New York, I wrote:
“The precious metals market is in a panic while the sentiment on the US dollar is very bullish. It appears that every ounce of gold is being sold in order to buy the dollar. These sentiment extremes usually mark a turning point, meaning that the dollar may be topping and gold/silver may be looking for a bottom. This price action is nothing new to those of us who have been trading gold for more than a few months. Gold is still in a long term bull market and is simply trying to shake out the weak hands in the short term. Those weak hands may be almost done selling at this point and a major puke day will mark the bottom so keep your eyes and emotions aware of the stress on those days.
When a trader feels the emotions of fear or greed build up within him, it is time to go the other way. Emotions are the downfall of most traders, so learning to deal with them is paramount to everything else if you want to survive. I have a feeling that many precious metal longs are going to be tested soon.”
Well, gold bulls did get tested yesterday. Gold opened weak and then was hit hard throughout the day as traders panicked. The price of gold fell close to $200 in just 4 trading sessions and I would call yesterday a puke day in gold. This was occurring while the US dollar looked like it was running out of steam. We sold a small amount of gold stocks but overall we were net buyers of gold related equities for clients that were underweight gold.
I also wrote in yesterday’s morning report that many of our Cara 100 stocks were consolidating at higher levels and that I was having a hard time selling them without a sell signal. Well, yesterday morning we got some sell signals in a few holdings that triggered stops forcing us to take gains. As the day wore on and the US dollar looked to be topping, we added some stocks to portfolios.
Yesterday felt a lot like the selloff at the end of September. Sentiment on the US dollar was too bullish and it was overbought which is how I would describe it today. With that in mind, I looked up what I wrote back then.
October 3rd:
“I remain cautious, but agree with Bill that traders need to be looking for value in both the broad equity market and especially the gold/silver miners where fortunes will be made in the future. I will be taking more bonds off the books and looking to place that capital into equities at value prices. Remember, with pain comes opportunity.”
That game plan worked well then as the market rallied hard over the next month, so we pulled out the same game plan yesterday. We took some gains in bonds, added gold into weakness for clients that needed more and bought some Cara 100 stocks (with sell stops in place).
If you agree that the dollar may be topping here, you might want to look at the material stocks in the Cara 100 list for a trade. A number of them are at support levels which gives you a clear stop area.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
| Symbol | Name | Last Trade | Change | Related Info |
|---|---|---|---|---|
| ^ATX | ATX | 1,755.30 |
 29.70 (1.66%) |
Components, Chart, More |
| ^BFX | BEL-20 | 1,992.88 |
 6.00 (0.30%) |
Components, Chart, More |
| ^FCHI | CAC 40 | 2,989.19 |
13.02 (0.44%) |
Components, Chart, More |
| ^GDAXI | DAX | 5,723.55 |
48.41 (0.85%) |
Components, Chart, More |
| ^AEX | AEX General | 293.81 |
1.66 (0.57%) |
Components, Chart, More |
| ^OSEAX | OSE All Share | 417.82 |
4.05 (0.98%) |
Components, Chart, More |
| ^OMXSPI | Stockholm General | 291.46 |
0.35 (0.12%) |
Components, Chart, More |
| ^SSMI | Swiss Market | 5,750.44 |
31.35 (0.55%) |
Components, Chart, More |
| ^FTSE | FTSE 100 | 5,396.47 |
29.67 (0.55%) |
Components, Chart, More |
| FPXAA.PR | PX Index | 852.40 |
1.40 (0.16%) |
Chart, More |
| ESI500000000.MA | IGBM | 821.43 |
2.48 (0.30%) |
Components, Chart, More |
| MICEXINDEXCF.ME | MICEX Index | 1,357.83 |
14.59 (1.06%) |
Chart, More |
| GD.AT | Athex Composite Share Price Index | 655.93 |
3.69 (0.56%) |
Chart, More |
http://finviz.com/futures.ashx
http://finviz.com/fut_chart.ashx?p=m5&t=ES
http://finviz.com/fut_chart.ashx?p=m5&t=ZB
http://finviz.com/fut_chart.ashx?p=m5&t=DX
http://finviz.com/fut_chart.ashx?p=m5&t=GC
http://finviz.com/fut_chart.ashx?p=m5&t=SI
http://finviz.com/fut_chart.ashx?p=m5&t=CL
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara on Trends & Cycles
Vad's Catch of the Day
Kaimu's Sound Money
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report
Jeff Borsato's Hidden Truth
Yesterday I posed this comment and question to the community:
gold gold gold!
Submitted by Jeff B (639 comments) on Wed, 12/14/2011 - 10:21 #102016
...I am bullish on gold because of its fundamental opposition to monetary debasement. Not because this or that nation is purchasing it.
...If anyone can explain in reasonable terms with historical proof that China buying gold is naturally bullish for gold I welcome it.
Re: gold gold gold!
Submitted by Bill Cara (3197 comments) on Wed, 12/14/2011 - 10:57 #102019 (in reply to #102016)Jeff B,
If you agree that gold-backed currencies are stronger and that there has been massive depreciation of fiat currencies, then you must agree that China's defense against competitive currency devaluation is to hold a greater percentage of its foreign reserves in gold. Presently, China holds the greatest amounts of foreign reserves, but one of the smallest (of the large economies) gold backing of its currency.
In order for China to fully hedge the competitive currency devaluation process that apparently is endless, the country will need to buy massive amounts of gold. Given that the stated policy of the government is that the people are advised to own gold and that the central bank and the Chinese people are buying large amounts, I do in fact think that China is a factor in the Gold Pricing Model.
__________
I agree with much of Bill's take, and it is an observation not articulated elsewhere in the blog sphere. My only concern is that in any pricing model, it is the sellers that are a concern, worthy of more attention than they normally get in the media. The sellers of large sums of gold are in many ways a hidden counter-party, which in a post MF Global world demands utmost scrutiny.
Great discussion as always,
jeff b
jeffborsato@caratrading.com
Comments
Econoday Today
RSI Summary as of EOD 2011-12-14
Accumulation Zone: Monthly 21, Weekly 9, Daily 26
Distribution Zone: Monthly 5, Weekly 2, Daily 2
gold 1566
I count 4 bounces off 1566 for the yellow metal since yesterday's low. The buck looks like it still influences where we go; not sure if 1566 holds if the buck breaks out again.
gold price trend
One of you sent me this link to ZeroHedge about the gold price trend, noting that in the past couple months the price has been falling but the 200-day Moving average is still rising.
http://www.zerohedge.com/news/about-gold-and-200-dma
Every week in the WIR, I give you the data, so this should not be news.
Here is my note from the last WIR:
The $GOLD 50-day Moving Average is now at 1709.75, see-sawing over the past eight weeks through 1700.55, 1705.48, 1715.80, 1726.65, 1730.61, 1739.01, 1745.96, and 1755.20, after lifting through 1752.40, 1749.24, 1746.12, 1727.24, 1696.68, 1668.30, 1638.92, 1609.57, 1583.23, 1561.02, 1547.06, 1534.44, 1524.51, 1520.99, 1519.67, 1518.88, 1511.83, 1503.25, 1491.59, 1482.74, 1471.10, 1464.16, 1455.58 and 1443.94, but still well up in 58 weeks from 1285.69. That’s bearish over the past two months or so, which were the conditions put in place, I believe, by central banks ahead of their coordinated policy actions a week ago to help their precious banks... Now they have played their hand, we have to watch for the result, which is likely to start moving the Gold price higher, within a few weeks... The 200d MA is 1611.62, up from 1603.48, 1594.27, 1587.63, 1577.28, 1566.05, 1556.72, 1548.26, 1542.08, 1535.09, 1528.51, 1522.65, 1513.83, 1502.73, 1492.60, 1481.12, 1470.32, 1458.81, 1448.25, 1441.07, 1434.23, 1427.23, 1419.44, 1415.79, 1409.84, 1402.82, 1395.65, 1387.91, 1381.62, 1373.62, 1365.93, 1357.61 and 1349.52 over 32 weeks, and up sharply in 59 weeks from 1193.73, and also rising. That’s bullish.
Another volley?
"China to Impose Anti-Dumping Duties on GM; "Fair Trade" Idea is Self-Serving Scam...
In response to inane tariffs on tires imposed by the US (and upheld by the WTO) China to Impose Anti-Dumping Duties on GM, U.S. Cars"
http://globaleconomicanalysis.blogspot.com/
------
This may be the beginning of a trade war. A lose/lose situation.
While US businesses are saddled with far too many handicaps that make foreign operations most tempting, such a duel is counterproductive.
What if we simply remove all taxes on US production and tax US foreign made goods delivered for sale here? This would at least be a job conservation move and perhaps a job grower.
Sales (consumption) taxes would take the place of corp taxation and are the most fair, IMO.
Grym
Container shipping info
This morning I remarked that new ship builds are growing inventory/capacity faster than the growth in goods shipped (yes, the latter is growing!), which is negatively impacting rates, and hence earnings, and hence share prices. This article gives some good info on that:
http://www.bloomberg.com/news/2011-12-14/record-bi...
Rather than listening to Bass and Chanos -- of course they are skilled analysts and communicators! -- or people like them who are talking their book, my recommendations here have always been to study the actual data and make up your own mind. That's all.
Any time I see evidence in this blog of analytical reasoning, I never question the conclusion, whether it be pro or con any subject. I hope you understand that I am not a talking head, but simply a facilitator of practical discourse.
Cara 100 Ratings Changes For Thursday
Good morning.
08:30 Initial/Continuing Claims
08:30 PPI
08:30 Empire Manufacturing
08:30 Current Account Balance
09:00 Net Long-Term TIC Flows
09:15 Industrial Production
10:00 Philadelphia Fed
------
AMZN - Morgan Keegan Initiates with an Outperform. Target = $210
FSLR - First Solar downgraded to Neutral from Outperform at RW Baird and lowered its price target for shares to $35 from $80 after the company reduced its 2011 guidance and issued a 2012 outlook well below expectations.
FSLR - PT Lowered from $70 to $42 @ Mizuho. Buy
PBR - Petrobras coverage assumed with a Buy at Goldman. Target $36
------
“The secret of business is to know something that nobody else knows.”
~ Aristotle Onassis
5 min cup and handle break
5 min cup and handle break out on ES. barring any bad news, looks like 1230 tgt on March contract ES. or not. anything can happen.
Weekly Jobs Report
here:
http://is.gd/nk6Nqb
Re: Another volley?
Grym,
Re: "What if we simply remove all taxes on US production and tax US foreign made goods delivered for sale here? This would at least be a job conservation move and perhaps a job grower... Sales (consumption) taxes would take the place of corp taxation and are the most fair, IMO."
I agree with you on all of this, but the idea of a consumption tax does not fly with most people, for some reason. They say it's bad for social equity in that the people who least can afford it are hurt most by it. In fact I disagree. With the current tax system, the high corporate taxes are made back by higher prices for goods, which we all have to pay in any case. The system is also filled with loopholes so that many corporations -- GE being the poster boy -- pay little or no taxes on account of various permitted tax avoidance schemes. So, I have advocated a low flat tax on personal income plus a sales tax. If corporations were provided income tax relief on the basis of domestic job hires, and higher taxes on foreign earnings, I believe there would be a quick return to job growth in the US. If tariffs on imported foreign goods were matched country to country to tariffs placed by those countries on US exported goods, the prices of foreign produced goods would increase, possibly to a point where domestic consumer buying habits would change. At the end of the day, Congress must be more helpful to both domestic employers and workers instead of favoring a select group of US exporters and investors who are engaged largely in foreign direct investment. Why Congress is so focused today on cutting government expenditures is beyond me. People need help today, not cuts in government programs. Government certainly needs to cut back its size, but there is no reason -- other than control over a larger bureaucratic machinery -- for government not to privatize, and let the free market system manage a larger portion of the economy, which they will do, on a competitive basis, much more efficiently. Why none of this is happening is because corporate lobbies have bought and paid for Congress. If Congress were to work for the voters and not Wall Street and the S&P 100 companies, the state of the nation would not be in its current deplorable condition.
Re: Container shipping info
Taking a different angle, might there be a current opportunity in the ship-breakers? A wave of new ships results in the beaching & retirement of older vessels... :)
TIC: China Net Seller Of US Treasurys In October
China's net holdings fell $14.2 billion to $1.134 trillion, following net buying of more than $11.3 billion in September. Analysts caution the data may not reflect the full spectrum of China's activity in the market, however. For example, Treasury earlier this year adjusted its estimation of China's holding based on use of proxies in other countries. Also, the net figure is a sum of the short and long-term activities.
Japan, meanwhile continued to be a heavy net buyer of Treasurys, accumulating them at record levels. Japan remained the second-largest holder of Treasurys, lifting its holdings to $979.0 billion from $956.8 billion in September.
Goldman Sachs views on US economy and jobs is not bearish
[Dec. 15] Alongside somewhat better employment data, a number of indicators of job openings or hiring intentions have picked up in recent months. These include the quarterly Manpower hiring survey, the Labor Department's job opening survey, actual and planned hiring by small businesses in the NFIB survey, consumer perceptions of job availability, and the Monster survey of online job advertising. A summary measure of these alternative indicators suggests that hiring activity has picked up to the best rate so far in the economic recovery, though it remains well below pre-crisis levels… Fourth-quarter real GDP growth is now tracking at 3.5%, according to our latest "bean count" of the economic data released so far this quarter. This is substantially better than we or the consensus expected just a few weeks ago. Insofar as faster growth is sustained, we should begin to see better hiring and employment growth… To be sure, employment growth has already looked somewhat better. Payroll growth, though still mediocre in historical terms, has averaged 143,000 per month over the past three months, while the employment estimate from the more volatile household survey has risen by more than 300,000 per month. New claims for jobless benefits have been drifting lower since the springtime, suggesting a relatively low and declining layoff rate.
Cara 100 Update
AAPL - is named a long Research Tactical Idea at Morgan Stanley.
BRCM - The tech stock is taken to Outperform from Market Perform with Wells Fargo.
CSCO - is begun with a Buy at Nomura.
JNPR - Nomura Initiates with a Neutral.
Very confusing junction indeed
On one hand there are clear signs of global slowdown and recessions are very likely in many countries in 2012.
On the other hand, the market sentiments have been awful for months and perhaps the bad news are priced in already (like the slow motion China market crash from 2008 peak mentioned above).
This is why I decided not to try to predict future anymore and concentrate on markets I understand a whole lot of better, that is gold.
What I see we had a panic selling yesterday and I reacted appropriately, going nearly 100% long gold and miners. I also bought more physical PM especially Platinum that trades at a nice discount to gold ($PLAT:$GOLD=0.9).
I will be quick to unwind it though if I see problems ahead.
What happened to HL?
It's crashing while everything going up. This one trade is not working.
China’s leadership transition indicates stronger RMB
The following notes have been taken from a free to download Dec. 2011 White Paper from Merk Investments (www.merkfunds.com):
http://news.yahoo.com/merk-white-paper-finds-china...
In 2012, China is poised to undergo a significant change in the official leadership structure of its country. Given that China maintains centralized government control over much of the country, even a marginal change in leader¬ship composition may have deep and far reaching implications for the economy and investors globally.
In the second half of 2012, the Party is set to hold its 18th National Congress and elect a new Central Committee. This new Central Committee will, in turn, appoint seven new members to the (currently) nine member PSC, which is arguably the most important leadership body in China, overseeing centralized government decision-making and yielding significant political control. The PSC is generally viewed as China’s core decision-making body.
We know the composition of the PSC post-transition will include Xi Jinping and Li Keqiang as two of the most in¬fluential members; the remainder of the PSC is less clear, but is likely to include an approximate equal mix of left leaning (CYL affiliated) and right leaning (Shanghai Clique/Political Dynasty affiliated) members. Notably, the incumbents Hu Jintao and Wen Jiabao, whom Xi Jinping and Li Keqiang will replace, are both associated with the CYL, while Xi Jinping is considered to hold a more right leaning view, while Li Keqiang is more left leaning.
Xi Jinping: the Not-so-Diplomatic Future President
Xi Jinping, an engineering graduate, is considered to come from a Political Dynasty and is generally associated with pro-growth policies. That said, his upbringing was quite different from that of other Party members who come from well-connected political family backgrounds. His father, Xi Zhongxun remains a controversial figure to this day, after lending support to the Tiananmen Square protests. Indeed, state run media avoid the topic of Xi Zhongxun altogether, likely because of the perceived negative implication that it may undermine Xi Jinping’s credentials as President. Xi Zhongxun was a vigorous proponent of economic and political reform. He previously held the position of Deputy Prime Minister in the early 1960s, but was accused of disloyalty to the Party and subsequently expelled as part of the Cultural Revolution. After “regaining favor” with the Party, he became the Governor of Guangdong, where he spearheaded the country’s first Special Economic Zone (SEZ), a model for which China’s recent economic transformation can be attributed.
Like all things political, not the least in China, Xi Jinping seems to realize that keeping his cards closely held to his chest may be advantageous. Observing the consequences of his father’s actions may be a key reason why he has intentionally steered clear of controversy and portrayed strong nationalistic sentiment. Nonetheless, he has implemented policies that mirror closely the ideals engendered by his father. For instance, while serving in key Party posts in the coastal provinces of Fujian and Zhejiang, he promoted a greater open market economy, increas¬ing cooperation with Taiwan and other Asian nations, and implemented policies that incentivized private sector development, such as relaxation of market entry criteria, simplification of new business registration, and financing incentives. Recent remarks regarding international dynamics, while reflecting a strong sense of nationalism, ap¬peared less than diplomatic. Regarding foreign criticism of China: “Some foreigners with full bellies and nothing better to do engage in finger-pointing at us. First, China does not export revolution; second, it does not export famine and poverty; and third, it does not mess around with you. So what else is there to say?” We believe Xi Jinping will place a greater focus on developing the domestic economy – not bowing to international (U.S.) pressure to allow the currency to appreciate. Having said that, we believe the development of the domestic economy will ultimately require appreciation of the currency, which we elaborate on below.
It could be argued that Xi Jinping’s upbringing has brought him closer to the Chinese populace. As alluded to above, his father was a controversial figure, and as a result of expulsion during the Cultural Revolution, he spent many of his formative years in a rural village. He therefore may have an appreciation for many of the struggles faced in such regional areas. Moreover, he has first-hand knowledge of the implications of overly authoritarian Communist policies that resulted during the Cultural Revolution and thus may have a greater appreciation for the collective, albeit highly centralized, decision-making process promoted by the Party. While Xi Jinping may not harbor the same sense of privilege that is often associated with those coming from political dynasties, it appears there remains a strong incentive to keep the status quo of political influence administered by the Party. As such, we don’t consider Xi Jinping likely to implement any radical reforms over the foreseeable future.
Li Keqiang: the Left-leaning Future Premier
Li Keqiang is associated with the CYL and comes from a much less affluent background than Xi Jinping, or any other Party member from a political dynasty for that matter. He is widely viewed as a self-made man. After being sent to a rural labor camp during the Cultural Revolution, he joined the CYL, earned a law degree and, subse¬quently, a PhD in economics. His educational background itself distinguishes Li Keqiang from other top ranking Party officials, the majority of which come from an engineering background. He rose within the CYL, ascending to become a protégé of current President Hu Jintao. Many believe Li Keqiang to be Hu Jintao’s preferred succes¬sor, as opposed to Xi Jinping (above).
Li Keqiang appears to favor economic development programs that benefit regional areas and distribute wealth evenly; during his tenure as Governor of Henan Province, he implemented several policies aimed at incentivizing increased investment into the poorer inland regions and instigated comprehensive measures aimed at improving the economic development and employment situation of the province as a whole. He also provided policy incen¬tives aimed at attracting talent and capital from the more affluent coastal areas. Notably, Li Keqiang has first-hand experience overseeing industrial and agricultural provinces, having held leadership positions in both Liaoning and Henan, giving him a good understanding of regional differences within the national economy as a whole.
We consider Li Keqiang to be more populist, with a focus on income disparity, particularly in regional areas, while retaining a strong focus on the development of the domestic economy and building the Chinese middle class. On the former, Li Keqiang has been actively involved in housing projects aimed at improving living conditions and has implemented unemployment insurance reform. His focus on the development of the domestic economy may be somewhat in contrast to that of many right leaning Party officials, who place more weight and reliance on the export sector as the driver of China’s ongoing growth. Combined with his strong affiliation to the CYL, we con¬sider Li Keqiang will advocate socialist ideals through more populist policies, focusing on developing China’s middle class, while upholding the core tenets of the Party.
Conclusion
Most notably, we expect an increased focus on developing the Chinese middle class and domestic economy over time, with less reliance on the export sector. In turn, political and economic realities are likely to force Chinese policy makers to allow the RMB to appreciate, to help manage domestic inflationary pressures, and thus maintain social stability. We consider that China has the ability to allow its currency to appreciate and put in place steps towards a free-floating framework, due to increased pricing power resulting from manufacturing of a wider range of value-added goods. Indeed, we have seen steps put in place to ready the country for appreciation of the currency, including conducting scenario analyses on local businesses, while concurrently increasing the internationalization of the currency. China is likely to become a global financial hub and a more attractive place for global business, as a bi-product of such initiatives. Such dynamics are likely to lead to ongoing strengthening in the Chinese currency over the foreseeable future.
-30-
Re: What happened to HL?
Good morning Jack Black - Mine accident at the Lucky Friday. A number of miners injured and mine has been closed for the time being. Happy Trading
Grandich: Gold to $2K before $1K
Grandich wagering 1 Million U.S. dollars (in a trust) that gold will hit $2000 before it hits $1,000 on the COMEX... by December 31, 2011... telling gold forecasters to put their money where their mouth is.
http://www.grandich.com/2011/12/a-million-reasons-...
Cara 100 Update
BRCM - PT Lowered from $40 to $38 @ RBC. Sector Perform
FSLR - PT Lowered from $56 to $36 @ RBC. Sector Perform
Re: What happened to HL?
Thanks!
I'm holding a sizable positions on HL. Hopefully will not get stopped out.
Re: Another volley?
Bill,
Thanks for filling out the picture.
"If Congress were to work for the voters and not Wall Street and the S&P 100 companies, the state of the nation would not be in its current deplorable condition."
I tried to get our mayor to remove taxes on local companies 20 or 25 years ago — they didn't — now nearly all manufacturers and many retailers are gone.
Your last line (above) brings me back to another "simple solution" of mine which, due to a lot of the same complications you listed, is also unlikely to be adopted.
We need to rework our Constitution to limit the accumulated power of Congress and return them to the original intent — to work for all of us.
Grym
Re: Goldman Sachs views on US economy and jobs is not bearish
"New claims for jobless benefits have been drifting lower since the springtime, suggesting a relatively low and declining layoff rate."
One could also surmise that in terms of making economies through payroll reduction measures this is a spent force as a way to juice profits. The low hanging fruit has been removed from the payroll and one wonders how many companies can continue to stretch the remaining workforce. We should expect to see a diminishing layoff rate from this point or we are headed for a depression, IMO.
Scottrade down?
Anyone else having problems or is it just me?
Edit: Back up now.
Re: Goldman Sachs views on US economy and jobs is not bearish
terryC,
"One could also surmise that in terms of making economies through payroll reduction measures this is a spent force as a way to juice profits. The low hanging fruit has been removed from the payroll and one wonders how many companies can continue to stretch the remaining workforce. We should expect to see a diminishing layoff rate from this point or we are headed for a depression, IMO."
Yes, it still takes nine to play baseball.
The printing company where my son works reached the point where they could not operate with fewer people. He could not even take single day off without the company coming to a halt. The result: They were bought by another company and he is training one of their employees as a back-up to his job.
We may see more of such condensation with layoffs of excess employees in many positions. My son was lucky to be the last one in his department to have survived with only a cut in his hours for the past two years.
This may be regional or in certain types of employment, I don't know, but I will remain very cautious adding to my PM as opportunities present lower prices.
Grym
GLNG
LNG shippers are a special case. There is a shortage of LNG ships and rates are rising rapidly. New builds are not on the near horizon.
This slump won’t end until 2031!
http://www.marketwatch.com/story/this-slump-wont-e...
By Matthew Lynn
LONDON (MarketWatch) — In retrospect, it wasn’t hard to see that the markets were becoming dangerously unstable. Germany had just adopted a new monetary system, and Europe was being flooded with cheap German money. Greece had signed up to a monetary union with Italy and France but was struggling to hold it together.
Financial markets had been deregulated. New technologies were transforming production and communications, allowing money to move across borders at lightening speed. And a massive new industrial power was flooding the world with cheap manufactured goods, blowing apart old industries.
When it all fell apart in an almighty crash, it was only to be expected.
A prophesy for London, New York or Berlin in 2012? Not exactly. It is a description of Vienna in 1873. In that year, in one of the great crashes of all time, the Austrian markets triggered collapses across Europe, swiftly followed by an equally spectacular collapse in New York. It was the start of what economic historians call the Long Depression, a prolonged period of volatility, unemployment and slumps that lasted an epic 23 years, only coming to an end in 1896.
I have been researching that episode for my new e-book ”The Long Depression: The Slump of 2008 to 2031." The parallels with our own time are fascinating. German unification, the adoption of the gold [euro?] standard, a German boom, Greece had just joined the Latin Currency Union,- an ill-fated attempt to merge currencies across Europe. Banking had been deregulated, the telegraph created 'instant' communications, allowing the European crash to spread [quickly] to New York. The U.S. was industrializing, transforming the global economy- much as China has transformed the present era’s economy in the past decade.
[History rhymes!?! normxyz]
Gold Decline May Be Foreshadowing A Market Crisis
http://seekingalpha.com/article/313989-gold-declin...
by Eric Parnell
While much has been made of the decline in gold this week, the much larger story may reside in what it is foreshadowing for the stock market in the weeks ahead.
The reasons for why the gold price is dropping may be signaling an impending crisis for the stock market. Financial institutions, including many across Europe, are scrambling to raise U.S. dollar liquidity. The critical issue here is that many of these same institutions were already facing solvency concerns due to their thin capital base and excessive exposure to at risk sovereign debt across the region. And now they are facing a mounting liquidity problem. This is inducing them to sell gold, which is among the most liquid assets, to raise liquidity. Given this backdrop, it's reasonable to wonder - have we seen this script before?
One has to look no further than the 2008 crisis to see how gold might be foreshadowing considerable trouble for the stock market. It was the summer of 2008 and the stock market was coasting along, although considerable signs of stress were brewing under the surface. In early July, gold plunged into a sharp decline, however, as the impairment of interbank lending markets had financial institutions scrambling to raise liquidity in a market where the ready access to low cost capital was increasingly drying up.
This slump won’t end until 2031!
normxyz,
Basing predictions on past events is tempting, especially when we see many similar conditions. However, we have far too many differences and they are being added to with the speed of light — literally with fiber optics allowing instant communication, world wide.
While I think our problems are huge and I am far from short term optimistic, I believe we have the means to adapt to the massive changes technology and globalization have brought.
IMO, We must realize things will never revert to the blissful post WW2 period. Technological productivity improvements have rendered many former well-paying careers obsolete. We may even have a permanent under class for most manual labor jobs are now done by machines or even robots and many machines are run by computers.
Those who are in what were formerly their best earning years are now temp or part time hires and may not have the resources to take time for retraining. Their best hope is probably starting somewhere at entry level and letting the employer train them to what he needs. Not an easy thing either if you have a family.
What may make your posting a reality is simply ignoring the new reality of global work competition — worker supply is high and demand is falling. So far I have not heard any in government addressing such issues with any other than band-aid ideas.
Grym
Props
FWIW my son is pretty good at 'the game'. He writes for Minyanville (vide infra) and has been pretty much spot on regarding the social media revolution and the role of socionomics in investing.
He bought gold at 600 and silver at 9, and is up around 16 percent this year in his private trading.
His comment today was that this is not a good market to trade, but for those with a long horizon should present great opportunity.
www.minyanville.com/businessmarkets/articles/stock...
Maybe the prices for vanadium, manganese, gold, and silver aren't so great today. We'll see how it turns out.
Re: This slump won’t end until 2031!
The idea that someone can predict today the exact time of the slump end makes me remember the ancient tale of Hodja Nasreddin teaching his donkey theology and explaining why he is not afraid to take the money from emir for accomplishing the task in 20 years: "Do not cry for it, because in twenty years, one of us will surely die – either myself, or the emir, or donkey."
To add irony, it's exactly 20 years from 2011 to 2031 - how's that for history rhyming?
Pakistani Proverb?
A physician told me a story from his country, about a poor young man who walked hundreds of miles to see a guru. The wise man told him, "I see that you are poor and despondent. It will not always be that way, only for another 14 years. After that, you will be used to it."
Re: This slump won’t end until 2031!
While I think our problems are huge and I am far from short term optimistic, I believe we have the means to adapt to the massive changes technology and globalization have brought.
True enough; but while things change; people don't!
What may make your posting a reality is simply ignoring the new reality of global work competition — worker supply is high and demand is falling. So far I have not heard any in government addressing such issues with any other than band-aid ideas.
I've been harping on this topic for almost a generation... the gradual replacement of workers by automata- seemingly to no avail even in my small sphere (I have been in IT since its beginnings, over 60 years ago). The lack of understanding in this area is seemingly total; and there is almost no impetus to consider or discuss this problem or do anything about it. Meanwhile, income distribution gets increasingly worse and borders on the obscene- have you seen where CEO's salaries went up about 40% last year ... plus perks and other benefits. The top gross was half a billion dollars ... that's the equivalent of 10,000 ordinary workers!
Pivot Point analysis midweek videoupdate
http://tradinglog.realitytrader.com/2011/12/nemos-...
Vale: big ship springs big leak
We’ve all been there. You buy something on the cheap made in China or South Korea, but as soon as you get home it breaks. Unfortunately for Vale, Brazil’s mining giant, the same thing seems to have happened with their 400,000 ton iron ore carrier.
The ship is part of the company’s brand-new fleet of 35 mega vessels being built at Asian yards – a wildly ambitious multi-billion dollar plan by the (ousted) former chief executive to cut freight costs.
But on its maiden voyage, two of the ship’s ballast tanks cracked during the loading process and the grandly-named ‘Vale Beijing’ is now taking on water in the balmy waters of northern Brazil. After two days, engineers have concluded that it’s possible to repair the ship but they are still not sure what caused the cracks in the first place.
MORE HERE:
http://on.ft.com/shVhZh
Why "The Rich Create Jobs" is a Lie
Finally, A Rich American Destroys The Fiction That Rich People Create The Jobs
http://finance.yahoo.com/blogs/daily-ticker/finall...
By Henry Blodget
The most important reason the theory that "rich people create the jobs" is absurd, argues Nick Hanauer, the founder of online advertising company aQuantive, which Microsoft bought for $6.4 billion, is that rich people do not create jobs, even if they founded and built companies that eventually employ thousands of people. What creates the jobs, Hanauer astutely observes, is a healthy economic ecosystem surrounding the company, which starts with the company's customers.
The company's customers buy the company's products, which, in turn, creates the need for the employees to produce, sell, and service those products. If those customers go broke, the demand for the company's products will collapse. And the jobs will disappear, regardless of what the entrepreneur does.
Using wrong indicator?
Ron Griess of the Chart Store suggests that the 200 day is the wrong technical indicator to focus on regarding Gold.Looking back to this run, he suggests the 300 day is the more supportive index:
http://www.ritholtz.com/blog/2011/12/griess-use-go...
Re: Vale: big ship springs big leak
LOL! Uh...how about cheap low quality steel assembled by less skilled but less expensive shipbuilders?
" The bitter taste of poor quality remains long after the cheap thrill of low price is forgotten".
Oh, and buy North American!
Oil Shale Gas
Like Gold stocks, "Oil has gone up this year, yet stocks of the producers are off 30-40%. The headline risk is killing equities, but it has also created a great buying opportunity. People are looking to governments for solutions, but politicians don't rule the world, capital markets do. Projects will be done because they make economic sense. There is low unemployment and shortages of labour in place like Wyoming and North Dakota. There is no infrastructure there because there is no history of energy production there. "
I read somewhere else that shale gas is going to create huge employment in coming years as we re-configure energy sources.
Re: Why "The Rich Create Jobs" is a Lie
What is the quintessence of a healthy economic ecosystem?
How to Stay Safe as Economic Growth Slows
http://trimtabs.com/blog/2011/12/14/bidermans-dail...
by Charles Biderman
"TrimTabs is issuing a press release tonight [12/14/2011] saying that economic growth in the US has been slowing since October and that wage and salary growth has turned negative, net of consumer price inflation.
"A US economic slowdown combined with a deepening European recession and slower emerging market growth is creating a deflationary investment environment. A deflationary investment environment is where return of investment becomes much more important than return on investment.
"As economic growth continues to weaken, former inflation plays have become big market losers. Gold prices peaked at the end of August, less than two months after QE2 ended. As economic growth started to weaken starting at the end of the third quarter, gold started falling.
"I would [not] recommend anyone buying gold today. However, when this selling spree ends, probably early next year, I would recommend buying gold again."
Re: This slump won’t end until 2031!
normxyz,
"True enough; but while things change; people don't!"
Well, in some ways they have. I saw it especially in the CEOs I worked with. Many of my clients were first or second generation owned manufacturing companies — cabinet hardware, furniture, fasteners, machine tools, and aero-space. then, I believe it began back in the 1970s hiring MBAs was "necessary" to get new ideas. These people didn't need to know the product, the customers, just the numbers.
From there it went to expanding the stockholder base from mostly local families who'd been loyal buy and holders that expected a fair return on investment. The audience became the fund managers, then analysts and eventually the M&A guys.
These outrageous salaries came in some cases with from an attitude much like movie or sports stars, golden parachutes replace performance rewards and today... well, you have seen the result.
When I began my business in 1966 companies were like families. It was common for some to have never worked anywhere else and forty-year clubs were abundant.
All that is history and we need to realize it has become every man for himself. My advice would be get a broad-based education and know that you will need to continually learn new skills to have any degree of job security.
Grym
Re: Vale: big ship springs big leak
Could be the fault of the naval architects as it appears this ship is a modified design of the Valemax. We shall see.
Re: Why "The Rich Create Jobs" is a Lie
What is the quintessence of a healthy economic ecosystem?
One with far less income disparity, where the fruits of increased productivity is shared among an entire enterprise ... and is not grabbed in its entirety by those at the top! Even Henry Ford understood that!
Re: Why "The Rich Create Jobs" is a Lie
"What is the quintessence of a healthy economic ecosystem?"
I would think healthy employed customers are both paramount and indicative.
Everything economic springs from this. If this is not present then a healthy economic ecosystem cannot exist.
Re: Why "The Rich Create Jobs" is a Lie
So how do you go about closing the income gap?
Re: Why "The Rich Create Jobs" is a Lie
Need to improve social mobility. It's all too cosy at the top.
Re: This slump won’t end until 2031!
These outrageous salaries came in some cases with from an attitude much like movie or sports stars, golden parachutes replace performance rewards and today... well, you have seen the result.
Actually, the reasons for those obscene salaries is that- in the U.S. at least- we have abrogated corporate responsibility. Once upon a time, corporations- including top execs like CEOs- were governed by their major owners, who sat on and chaired their boards. Today, those 'major owners' are faceless financial institutions who will just sell out of a corporation in an instant. So, the workings of the entire enterprise is left to the CEO, with no check on his greed!
Re: gold price trend
...the gold bull market is over.....
Couldn't help it; had to share this author's graph and commentary from seeking alpha
http://seekingalpha.com/article/313987-the-gold-bu...
fd: long CEF
uxg
The 2/5/2010 price range suddenly looks reachable.
Re: gold price trend
Ah... but you don't see any CBs selling gold!
Behind the Crash in Gold
http://www.economicpolicyjournal.com/2011/12/behin...
by Economic Policy Journal
"Medium to long term the ECB is likely to go on a major money printing binge. It is just putting the pieces in place, in stealth fashion. The ECB in trying to hide the steps they are taking to inflate have done a good job, but the stealth money printing is on the way. I explained how it is going down in this mornings EPJ Daily Alert:
"Nearly 26 billion euros of Italian bonds mature on Feb.1, with 91 billion euros of bonds falling due by the end of April. Banksters are not going to re-up on this stuff, they are trying to get out of it. This is where things start to get complicated.
"Last week Thursday the ECB’s Governing Council announced a plan to offer 36-month loans to European banks at full allotment and at fixed interest rates [around 1%]. The ECB also loosened up the eligibility requirements for collateral. This creates the opportunity for EU banks to buy sovereign debt, use it for collateral and lay it off on the ECB and earn the huge spread. This is going to be very profitable for the banksters and will result in the banksters looking like pigs buying up PIIGS paper.
"There is one problem with this plan, however. Banks in the eyes of EU regulators are over-leveraged and need more capital, so under current rules it is going to be difficult for banks to leverage up their balance sheets. But as Tim Geithner might say, getting around this problem is not rocket science.
"The fact that the reserve requirement was lowered suggests that the "capital requirement" will also be monkeyed with so that it won't apply relative to sovereign debt purchases.
"Lo and behold, we have this announcement today from Germany.
"Got that? Germany has reopened its rescue fund which can supply the capital banks need, which will then allow them to buy the sovereign debt paper that can be discounted to the ECB.
"Folks, the plan is in place. The eurozone inflation is coming. Bottom line, the Germans, French and Brits will be back buying gold and other commodities in no time."
Perhaps the ghost's will drive gold
toward that $ 1,250 mark I have wondered about for the past many months.. stranger things have happened. Eventually, all weak areas are filled. If so, that could put AEM, NEM and ABX about 15 % lower on a time relative basis. What a gift that would be.
Re: gold price trend
No, they lease it. The supply is still limited. The fundamentals haven't changed one bit.
There is a demand for $USD (we have seen that in the charts) which in turn pushes people from their most profitable positions (easily gold) and into something seemingly in short supply and going up ($USD).
Why? Somebody somewhere (bank or sovereign, surely not the real U.S. economy) NEEDS $USD.
I suspect some European entity(ies) need or want to get away from a shrinking Euro which has been predicted to go to $1.10. Who the heck wouldn't sell THAT?
If they flee to $USD then it produces demand and rising price for $USD until that demand is met.
The underlying fundamentals for PM's are unchanged (which is why lease rates are higher). This is sentiment (emotion) driven which produces a technical aberration in the charts, which them produces even more emotion.
Think bank run, gas line or yelling fire in a crowded theater. There may be plenty of gas, cash in the bank and no fire, but it doesn't matter.
Re: Behind the Crash in Gold
Faulty logic. There is no connection between "Germany has reopened its rescue fund which can supply the capital banks need" and "them buy(ing) the sovereign debt paper that can be discounted to the ECB." In fact, it's at least just as likely that the rescue funds will be issued under a) the strict condition of not re-engaging in sovereign debt or b) a lot of strings attached in a form of requirements to corresponding governments and collateral.
The Shanghai Fly checks in
Bill,
It's amazing how fast time goes by. It's been a year since my previous report to the community. A lot has happened since then and a lot is going on right now.
A year ago, my comments were mostly targeted towards Chinese inflation and the potential of a slowdown in the economy and certain bubbling sectors as real estate. Since then, inflation has not really abated and remains at a high level, expectations are that the economy will slow down further, and real estate and the stock market have had some hot air let out of it.
Faced with these new and changing conditions, I believe I may be of some help in making some sense of the current situation in the Chinese capital markets and economy.
First, monetary easing is on the agenda. Though inflation is expected to stay at rather high levels (5-6% official CPI), phrasing of monetary policy has switched to a more moderate tone and reserve requirements have been lowered already(http://www.bloomberg.com/news/2011-11-30/china-cut...). The effects of the previous tightening phase are showing in decreased lending, slower money supply growth and problems with small business lending. This is likely to provide many surprise jolts in the global stock market.
Second, valuations in the stock market have dropped,especially Chinese small caps listed in the US that have come back down to earth after the scandals earlier this year. http://stockcharts.com/h-sc/ui?s=$SSEC shows how the bear market is unfolding. The Shanghai Stock Exchange Composite Index is at 2180.9 now, pretty much back where it was when I first started writing to you. Some may suggest that Chinese equities are undervalued now by using the market P/E. The market P/E for the CSI 300 (basically the Chinese S&P500) including loss-making companies is only around 8, assuming Q4 earnings are normal. The market P/E for all A shares is 11. I believe this is highly misleading for several important reasons.
1) Unequal earnings distribution: Half of all earnings belong the financial sector. Another sizable chunk goes to resources and real estate. These three sectors account for about 75% of all earnings of listed companies in China. If we subtract these companies from the rest, then the market P/E for the remaining companies is 21.8.
2)The poor economic environment may not yet be reflected in these earnings, and a mild 20% decrease in earnings would mean the P/E of these shares would be around 27.3.
3)Many companies are still going public, whether in the mainland Chinese market or Hong Kong, as evidenced by the Chow Tai Fook IPO etc. If big companies are still willing to sell equities at these prices, either they really need money or they believe that market prices are still acceptable.
In light of the above, most Chinese equities have only reached fair valuations at best. The megacaps may be doing better, though such low valuations by the market for financial stocks may not be unwarranted(commercial banks have about 400 billion yuan of bad debt reserves on 53 trillion yuan worth of loans, a 23 trillion yuan increase from 3 years ago). With this in mind, it is safe to say that we should not be too eager to pick the bottom in Chinese stocks.
That said, expectations of easing monetary policy are strong and some real estate stocks are already showing signs of strength, with property executives reported to be entering the market. (http://www.bloomberg.com/news/2011-12-14/china-pro... )
Third, housing expectations have become a lot more rational. There are lots of opinions on the Chinese property market, but my personal take is that market participants have cooled down a bit over the past year. Prices will probably remain high in Shanghai etc as many people still aspire to work, live and invest here, but the real estate market should be more reasonable nationwide elsewhere. Real estate has reached a level where it is unlikely to greatly contribute to economic growth at least in the near future.
Fourth, the trade surplus and inflow of "hot money" is diminishing. Poor external demand coupled with a slowing real estate market is likely to pose macroeconomic challenges, something to see in the headlines for the new few months. A smaller trade surplus and hot money inflow will be a situation unseen since Q4 2008 and before.
Fifth, I believe Chinese small caps in the mainland market, Hong Kong market and US market may be worth a look now. They probably haven't hit bottom yet, but scandals and low confidence mean there might be overlooked gems. So now is probably a good time to pinpoint potentially good investments.
/Shanghai Fly
Re: This slump won’t end until 2031!
normxyz,
It has become quite common for the CEO to pick "his" board of directors. One year in the 1980s I worked on the annual reports for five companies. Each had several board members in common with two or more serving on at least three of the five.
It is the same as the U.S. Congress where they vote each other good pay and benefit packages and cover mistakes misdeeds from shareholders and constituents.
We need to make some drastic changes to this kind of "corporate incest".
Grym
Re: gold price trend
4ever,
I find the graph to be far from convincing.
Grym
Re: gold price trend
Even more curious that the author ends with disclosure: Long GLD. Is it what putting one's money where his mouth is means these days? (G)
Re: gold price trend
Vad, 4ever,
I just went back to re-read and saw this in the comments.
Apparently this guy was "making a joke". Ha,Ha — NOT! ;-(
Grym
so called "gold bubble"
LOL, gold is 10 years into bull market and barely anyone talks about gold as investment. At the same time other so called investments suffered greatly. This reminds me early 1990, when no one was talking about NASDAQ yet. It took 10 more years to develop NASDAQ mania. I think the gold mania is coming in the next 10 years.
My trading room opens now
Tomorrow is my last day at my company. I have been planning this for a while. Vadym, thanks for taking my call several yrs ago advising me to take my time.
I will be managing my own capital full time. Whereas I have been doing it part time while working up to this pt.
The biggest transition one has to make after the planning, trade strategy etc, is the psychological leap of not having paychecks coming in, as well as startup capital or cushion.
My deleveraging of all my debt and debt heavy assets is behind me. I am ready to go eat only what I catch.
Wish me luck.
Re: My trading room opens now
NYU...
I lurk, but always like your comments here. Start out eating Mac and cheese and end the year with fresh sushi Flown in my friend.
You have done the hard work already, now it is time to enjoy the ride wherever it may take you.. ..
Re: My trading room opens now
NYUGrad,
I believed then and believe even more now that you took the right path by not rushing in back then. You are much safer now, and meanwhile you worked out a lot of emotions and cultivated much more mature trader in you. Good luck, and if you need help or simply prefer doing it in company, you know where to find us. Our results speak for themselves, 7 out of 7 just today: http://tradinglog.realitytrader.com/
Rimm is done
For a while if not forever
No position. Just wanted to warn buy and hold folks. They revised down again. I think rimm managed the business the past decade thinking they deserved a monopoly
Re: My trading room opens now
Anyone trade es futures in your trading room?
Re: My trading room opens now
NYUGrad,
Having met you and followed up, you know for sure that I'm going to wish you good luck. I'm envious though. You're less than half my age!
Re: My trading room opens now
Thank you Bill, your well wishes mean alot to me.
You're still the wizard. Lessons learned here contributed to me even being able to attempt this. You have been instrumental in my learning path
The time is now. I only have this one life.
Distress Behind the Scenes in the Gold Market
http://www.minyanville.com/businessmarkets/article...
By Atlantic Capital Management Dec 15, 2011 10:50 am
"The fact that metal owners are now accepting negative spreads shows just how desperate the scramble for cash within the banking system has become. There is no doubt that gold’s struggle of the past few weeks is mostly related to a surge in demand for US dollars. The global banking system is choking on its overextended position, the imminent reversal of the rehypothecation scheme that pyramided so much money on so little true value. The name of the game in global banking is, and has been for 30 years, collateral.
"The crisis of 2011 ends up mirroring the crisis of 2008 simply because the banks have collectively changed their estimations and definitions of “quality.” Through the ever-present eurodollar market of wholesale funding, client-owned mortgage bonds were pledged repeatedly in a bank’s own funding arrangements – a process known as rehypothecation. The system and its regulators saw this as a normal course of business.
"After 2008, with mortgage-bond collateral nearly fully repudiated (shipped off to the Federal Reserve in its first experiment with QE), the European banks needed a suitable replacement. Sovereign debt has always been thought of as “risk-free,” having been enshrined in that bucket by the Basel rules going back to 1988, so it was a natural replacement. What should have been obvious back in 2009 was that not all sovereigns are created equal, and that risk can never really be described by a regulatory bucket.
"Once again, the list of quality collateral is shrinking, and so is the ability of various banks to gain exposure to vital cash. This explains much of the counterintuitive run to “safety” of US Treasuries. It has little to do with actual safety considerations; rather, it is a funding reality within the repo market. US Treasuries remain widely accepted, at the moment, as the preferable collateral for US dollar funding.
"This need for US Treasury collateral is so pronounced that it has kept the Federal Reserve on the sidelines since the summer. As a reminder, getting shut out of repo means bankruptcy, making the chase for collateralizing the primary consideration of every global bank in this challenged, dysfunctional marketplace.
"The requirement for short-term liquidity has logically bled into precious metals (an exact repeat of 2008 for gold). The physical shortage of actual metal is still ever-present, but is no longer validated by leasing quotations. This shortage was first confirmed and “announced” to the world in the form of futures market backwardation in silver."
feels every forum I checked is placing gold target at 1440 or so
this is making me very suspicious about that outcome and validates what Hubbert said about gold newsletters net 0.3% bullish.
Re: Distress Behind the Scenes in the Gold Market
zerohedge had a better explanation: http://www.zerohedge.com/news/negative-gold-lease-...
NYUGrad trading ES's
TD Ameritrade has a live trader Brad Agunus broadcasting as the "Shadow Trader" on their Think Or Swim platform. Brad is active trading the ES's. He uses a great system with precise pivot points, value area and volume. I trade TNA-TZA pair off the ES moves.
BearE
Re: The Shanghai Fly checks in
I have been thinking to write about China for a while. I currently stay in Shanghai and observe what is going on here and further in China.
The cost of living in Shanghai is very expensive. Specifically for the new comers, the rent for a decent apartment easily matches or be higher than the cost of the apartment in NYC. if you want to own a car in Shanghai, the cost of license is RMB56,000 or US$7K. Think about it, it could buy a new car in US. When I walk along the street, the help wanted ad almost is at the each front door of the restaurants. the dish washer monthly salary is up to RMB 2000(including the meals and accommodations). it is unbearable for the business I believe. the average Shanghainess monthly salary is around RMB 2000 TO 5000. The taxi driver's monthly income is around RMB 3000-4000+. If you go outside of Shanghai and stay in the second or third tier cities in China, RMB2k monthly income is a comfortable income. There is a trend that a lot of manufacturers moving out of Shanghai.
My point here is that the cost of operating a business in Shanghai is matching US city's.
China wants Shanghai to become a world financial hub. I think it will be. But it is at the other Chinese's expenses. China is good at to utilizing all of resources to build one goal to showcase its economic result. In my opinion, it is unfair and stupid. it has created a great controversy in China. The people in other cities have made a lot of noise that Beijing and Shanghai residents enjoy much better economical result than others, for example, Beijing 2008 Olympic Game.
I think China is facing hard landing next year (in 2012). Marc Faber in the latest Kingworldnews interview stated that the possibility of hard landing is very high. I happen to agree with him based on my hearings and experience. It is the consensus that the real estate sector is the most profitable sector in China. Local governments love the high price of real estates even they on the surface state that they want to control the price of real estates. But it is laughable because local government's fiscal revenue is from the sales of land and also it is contributing the local GDP growth. On this background, a lot of manufacturers starts to use their extra cash (phase I), working capital (phase II), bank loans (phase III), private high cost financing(shark loan)(phase IV), goes to real estate sector. In the past four months, there are numerous cases in China that the owners of business either committed to suicide or escape oversea. My personal business investment in a furniture shop is not performing as well. The other business partner is closing their other shops.
China may not be as strong as it appears. I believe it has a high possibility to face a hard landing. In my opinion, it might be a good thing for China. If we look back at the history of US, it also faced a few cases of hard landings. it is not the end of the world. I currently advise all of businessmen to keep the capital free, there will be a lot of cheap assets to pickup once the hard landing happens.
As far as the US, the cost of living must go higher and the standard of living must go down. Unfortunately, it is inevitable. That is my takes.
Re: feels every forum I checked is placing gold target at ...
Well I don't know about 1440. Gold still seems to be respecting 1566 as support. While there was one brief poke through it (to 1562) at 10:50 causing a big volume spike, for the rest of the day 1566 seemed to act as a floor. After the buck started going more or less sideways, it seemed gold buyers re-emerged. Why 1566? I have no idea.
CEF has also bounced back from a 0% premium to NAV seen at the low Wednesday to a more normal 2.6% premium.
Gold at these prices has me day trading gold in the futures markets for the first time in months. It doesn't look like there will be some immediate short-covering rebound, but - when I see that others seem to be buying at a certain level, it does give me confidence to jump in.
One thought. Gold gets pounded (sold) in London and New York. It rises (gets bought) in asia. It looks clear to me that gold is flowing from the west to the east.
EDIT: and now for the first time, I'm starting to see gold continue to rise while the euro is falling.
Re: The Shanghai Fly checks in
I reside in Hong Kong and would like to offer my humble opinion on the big picture of what I see is happening in China at the moment. Apologies if any of the points seem to already have been covered, I'm sharing what I currently see and how I think it fits together.
The rapid rise in property prices have led the common people to complain about not being able to afford a house (average income of say RMB 3500/month vs a RMB 500k - 1mil property). The government is trying to prevent social unrest, and especially with the new leadership committee coming in (in 2012), has set about "cooling" the property market to make housing more affordable. This has been done via: a high reserve ratio for banks, clamping down on the "investment trusts" in China synthetically loaning out money through structured products, curbing shadow banking, setting limits on buying property based on residency etc. Some provinces have even gone as far as setting a hard price target (per square foot, i think) on properties.
This ties in with why we're seeing a lot of property related companies and banks (which are ultimately still highly property related!) raising money in Hong Kong via convertible bonds (trying to borrow at a lower yield by enticing investors with the convertibility option) and also dim sum bonds. My feeling is that this is their last source of funding, and if this is also restricted in some way going forward; either via government policies or plainly loss of interest by investors, this could transition into the beginning of the end. Year end heading towards Chinese New Year 2012 (end Jan 2012, this time round) will be interesting to watch as there's typically a large demand of cash to pay workers etc.
Since the government has been putting all their effort in curbing the property sector, they haven't came out with too many new policies for the stock market. Since property prices are relatively less liquid, much harder to mark-to-market and less transparent (I still have yet to find a China property index which looks reasonable..), all the bearish sentiment has been reflected in the stock market, and the government hasn't been trying to support it, as they too understand that the stock market has to come down in order for property prices to come down.
My view is that if managed properly, this ends with a controlled slowdown in property prices, which fall 20-35%, the common folk are happy, the new leadership comes in, and they start relaxing monetary policy again which fuels all markets into a controlled, non-parabolic ascent (which makes them look like heros) and everybody lives happily ever after (at least for the next 5 years). However, there is a large danger that a couple of mis-steps might turn into a steep drop in property prices (think -50%). The form that this will take shape in is anyone's guess: anything ranging from implementing a new policy whilst underestimating its implications, rapidly rising NPLs in the state banks (due to property prices!), the RMB... (the Chinese economy is so intricately connected on all fronts that it would take another post to cover this.. I'll take this post as testing the waters to see whether people think I make sense or am just making incoherent ramblings)
How I would trade this would be to be to short the Chinese stock index via ETFs, look to see how year-end/2012Q1 shapes up to be in terms of property companies earnings etc, and be ready to cover and go long when the new leadership takes over and starts easing on all fronts.
And here it starts
(EU) Hungary and Czech Republic opposes EU treaty tax plan - BBC
- Both Hungary and Czech Republic raised concerns over EU plans working towards fiscal union, saying they should apply only to eurozone states.
- Hungary PM Orban stated he did not want to join any deal that moved towards tax harmonisation; Czech Republic PM Necas said a common tax policy would not be good for the country.
Let's see if I can identify this "chart pattern":
- next, they are going to try and negotiate some kind of the lowest common denominator that all can agree on;
- that'll fail or prove too toothless, so low the lowest denominator will be;
- then they will try to crate bilateral agreements, making exception for this country, deal with that country and appeasing left and right;
- that will create incredibly complicated and extremely unstable patchwork of agreements, cases and exceptions which may stand a chance to be signed but won't stand a chance to work for any meaningful time;
- objections by countries that don't get special deals will lead to new and new duct tape patches here and there; ultimately the discipline will disintegrate and the whole thing will fall apart.
All above is a good case scenario ("good" as in maintaining the EU concept floating).
Re: The Shanghai Fly checks in
Thanks for the update from Hong Kong. I'm not far away - in Bangkok. I have a few questions for you.
What are the interest rates on loans to buy property there, assuming its your primary residence?
Also, what is the ratio of rent/own? Is it vastly more expensive to own the same property than to rent it?
I heard HK was expensive, but have no personal experience.
In Bangkok, owning is more expensive than renting - in my area. A condo you can rent for 15k costs you about 20k in payments (including the condo maintenance fee) per month @ 7% (floating) interest rate. If you believe gov't numbers, the inflation rate is 4%, although food seems to go up much more rapidly than that. You need to put 20% down.
Everyone in the area speculates on the new condo complex being built - they all put down 10% deposits, with the expectation they'll flip the newly built condo for more to "somebody" for more once the building is complete.
Thanks for the reports
Thanks Bill, for the Merkfunds China report. And thanks Shanghai Fly and YYY for the interesting reports.
The other day Lakshman Achuthan, of the Economic Cycle Research Institute was on Bloomberg repeating his call two months ago that we are certainly going into a recession. I agree that the ECRI has a good track record, but they have not always been correct. Interestingly, in the days after his appearance the miners tanked. His last appearance in the media announcing the recession call I remember was Sept. 30, the day before the Cara Conference, and coincidently also a couple of days before the miners tanked on the first couple of trading days of October, which I call Scary Monday and Scary Tuesday. Please do not assume I am talking conspiracy here, I am not a fan of mistaking coincidence for causality. My only point is that I recall that interest rates are one of the factors going into the ECRI leading indicator and with the high level of intervention, their technical indicators are suspect. Short term rates are near zero by fiat with Bernanke's commitment for more than a year, regardless of growth in economic activity. I believe the normal uptick in leading indicators is prevented. I have noticed on charts that the ECRI indicator and the Ten Year Bond yield have a high level of correlation since summer, with the same peaks and pivots. (sorry no chart links, I don't think I could find them. I have adapted a read it once and move on without filing approach to the news)
Deflation!!! Arggh...
I visited my aunt Kroger this 'mourning' to buy up some foodstuffs for the larder. I expected that prices would be down given all the angst that gold is falling and the Dollar index is on the rise...
Not so. (I wasn't really supprised.) My 'ticket' was about 6% higher than a few months or a year ago for similar items. To wit;
Frozen vegis 12 oz ......... last trip, 88c. Today, 10 for a buck. Up 13%
Kroger pretzels.........last trip, $1.25. Today, $1.48. Up 18%
Bacon, 12 oz center cut...last year, $2.99. Today, $3.99. Up 33%
Onions, 3 lb yellow...last year, $1.99. Today, $2.99. Up 50%
Frozen duck... Last year, $1.99/lb. Today, $2.49. Up 25%
Frozen freakin goose... Last year, $2.69. Today (free range, duh) $3.99!!
Boneless chicken breasts...Last year, $1.89/lb. Today, $2.49/lb but wait.. Last year it was only 'enhanced' with 10% (chicken broth)....water. This year 'only' 15%. Read the label.
Prices for chocholate, coffee, peanut butter and cane sugar have also zoomed as has a lowly can of kidney beans...
Cash Water Supply (they still take checks) in Cash, Texas informed me that my water rate will increase by 4% on Jan.,1. I suppose hedonically I can start filtering and boiling my own pond water...
Stag, as in stagnant growth and stagnant incomes coupled with flation as in the prices of everything you need, continue to ratchet UP = Stagflation.
Where is it written that your government is allowed to lie?
Of course the gold 'bubble' has been pricked since it is down 20% from its recent peak. ( If we used avoir vs. troy we could shave a few percent off this decline. )The car bubble must have REALLY been pricked since Ford in down 50% from Its recent peak. If you moved the decimal point two places to the left, gold has declined from $18.50 to $15.50. What's the big deal? You don't like sales? Target advertises 50% off and people line up at their door!
They can water chicken parts, shave coins, put a fat thumb on the scales of weights and trade and know that they will always debase the purchasing power of a fiat currency by printing.
The yield curve has been socialized such that savers are penalized. The money supply has been nationalized such that debt is rewarded. My parents taught me to do the opposite of that but my government differs. I differ with my government and call them out as most vile and corrupt.
The 'parties', all two of them provoke controversy to 'force' you to choose between twiddle dee and twiddle dum and thus have won. Where is a man or orginazation that would gamble several hundred millions to fund a campaign to call for a constitutional convention?
Unelect your state governers First. They are the roadblocks to a constitutional convention as each sees himself as a potential presidential contender.
But I only dream! I guess I'm beginning to believe that 'chicken little' was right after all!
Re: Deflation!!! Arggh...
" I differ with my government and call them out as most vile and corrupt."
AMEN brother!
As forecast...
(PO) Portuguese citizens are being increasingly angered by the austerity measures being imposed on the country
- The vice-president of Portugal's Socialist Party Pedro Nuno Santos warned that the country could use not paying its debts as a way to protest the measures which Germany and France have imposed on the country.
Re: feels every forum I checked is placing gold target at ...
I'm going to play devil's advocate and take a 30'000ft, two pronged approach to the market here and suggest that we've got plenty of downside to precious metals and equities. In this post, a quick squiz at the precious metals charts.
Armstrong had this to say yesterday:
Those who are unfamiliar with our model will find that especially as we go into year-end, markets have a strange attraction toward our year end numbers. In the case of gold, the strange attractor is $1405.50. Our model also suggests that support in 2012 will be found at 122800, with long-term support at 8575.00. I have been warning that it is time for a pause. So many hate when I say that, their heads turn a full 360⁰ and out comes the green spew that greenbacks are fiat currency and how gold just can never go down. Gold fell 1975-1976 and 1980-1999 when the currency was still fiat. It means nothing.
Since the Yearly Bearish Reversal lies at $1058.00, only a year-end closing beneath this area would signal a prolonged decline into 2013. Our Yearly Bullish Reversal stands above the market at $1704.20. Therefore, only a closing ABOVE that would suggest a continued uptrend short-term.
The weekly closing below $1605 will confirm what is coming down the pike. There just has to be a cleaning out of tired longs who have been sitting there counting their profits like chickens based upon unfertilized eggs. All the indicators have been warning that a correction is coming. The fundamental mantra about fiat currency is getting old. The market is poised for retest of the 1225-1325 area going into 2012 which is the key support.
http://www.inflateordie.com/files/Whats%20Up%20Wit...
I'm now thoughtful that this $1405 support may be broken before EoY or shortly in 2102. How easy was it for gold to shave off $150 in a week. See attached GLD monthly chart. MACD begins a negative crossover.
This pullback is vital in producing a massive cup and handle in silver that James Turk has noted. See attached chart, which I've annotated for a potential handle consolidation in the $20 to $15, if the C&H pattern is to remain ideal. You can see a little bit the consolidation required in the silver weekly futures chart I've gone and annotated.
My thoughts on the potential sell off and consolidation in gold and silver are tied to a big picture Dow Theory sell off that MAY arise in 2012. That's the next post.
I can assure you, count me among the happiest of traders if this sell off ensues. I never thought I'd get another crack at a 2008 redux, but Tim Wood, whom I'll introduce next, is warning of the next leg down to come in this bear market.
Re: My trading room opens now
ALOHA!!
NYUGrad-Yep, congrats on you "master plan"!
"My deleveraging of all my debt and debt heavy assets is behind me."
That statement to me is infinite wisdom.
I met you at the first CTA Conference 2009. My strategy, if I were starting out in life in my 20s would be the following, in order:
1-Own, with no debt, shelter that has some food production/water value.
2-Own bread and butter dividend blue chips like CVX/XOM etc.
3-Trade risk
Most people I know in America have that list the complete opposite and they are in their 50s and 60s thinking they will retire in ten years.
Life for me is so much less stress when you do that list 1-2-3 not 3-2-1! Or more like 3-0-0!!
"psychological leap of not having paychecks coming in, as well as start-up capital or cushion."
Very true, but you have mitigated that factor somewhat by putting debt behind you. That is why I had step #2 in my strategy, dividend income, which would cover the missing paycheck aspect or if you are in "sales" think of it as base salary, while you trade!
Start-up capital is something that is going viral on the internet. Look at websites like KICKSTARTER ...
LINK: http://www.kickstarter.com/
The new terminology is "crowdfunding" ...
LINK: http://en.wikipedia.org/wiki/Crowd_funding
I am not saying you can finance your trading room there or maybe you can if you can present a clever way to turn it into something beneficial for society other than yourself. I searched the site and no "trading rooms" came up! HA!! Hey, you could be the first!!! Look at Printrbot and Diaspora and see how much they raised. Diaspora was a bunch of techies out of NYU as well. If you follow the Diaspora story you see some of the downside though.
Good luck and congratulations on your efforts!
More from China
Bill,
I agree with your proposition that the Chinese economy is slowing down and not "crashing". However, it may need to find new sources of economic growth to regain its footing for the new bull phase.
/Shanghai Fly
Bill,
I have been reading your blog these days. One point I'd like to discuss with you here. You have mentioned that China's economy is not crashing, it's only slowing. But how slow can it go? The forecast growth rate is about 8.9% next year which is the nominal growth. With the high inflation it is currently experiencing, the real growth rate is only about 3%. Also, last year when I traveled to China, I did witness that there are a lot of empty suites in apartment buildings. Most of the empty "ghost towns" I found are in the suburb of Beijing. With one apartment building, I found there were only 7 homes with the light on at night--- will all these cause the serious downturn of the housing market in China as we witnessed in USA in 2007/8?
/Anon associate of Bill Cara who is from China
30'000ft view of a potential market smack down in 2012.
Bill said recently "In my youth, we defined the future in terms of generations, say 20 to 30 years. Regrettably, the information all of us now receive has to be streamed into what’s relevant for the next few hours, then days, then, let’s call it “the future”, which could mean anything longer than a few days, certainly not years..."
When I saw Tim Wood's name yesterday I thought of Bill's remarks and Tim's long-term, big picture thinking. He's a Dow Theory technical analyst. For some time I've been aware of his call for the next leg down in this bear market - he always talks of a "DNA marker" identifying every Dow top since the good old days as his cue to short. Obviously he's talking his book and invites you to join his club, but I can piece together potential outcomes by reviewing his thoughts.
I've wanted to find an historical example of his thinking in what a bear market is, and how phase 1 of bear market differs from phase 2, which he asserts is even more damaging than the first leg down. I found one such example, 1966 - 1974.
http://www.financialsense.com/contributors/tim-woo...
First chart of the ranks is the quarterly chart of $DJIA from 66 to 74. Note how each leg gets deeper into bear territory - that must have been excruciating for buy and hold at the time, or those fighting the trend. See attached. 1974 marks the bottom for this Dow theorist and the beginning of a new bull market extending to 2007.
2nd chart is the $DJIA 2000 to present. I'm going out on a limb in suggesting that 2000 marks the beginning of a bear market, not 2007. I'm thinking that because it was monetary and economic policy that was abused in order to sustain the bursting of one asset bubble into another asset bubble, thus keeping the music going a little longer. JMO.
There's a couple of things we can note with the present $DJIA chart. It's a broadening wedge, much like 66-74. Brandt has noted the potential for a H&S reversal pattern, with target around 4000. That's a "You're not in Kansas anymore" scenario, but it is one scenario. Note stochastics, it's close to negative crossover. Note MACD from 2000 to present, a weakening down trend which MIGHT turn negative. Note the candlesticks. A high has been put in and while support has been found at the 40MA, the 2000 high resistance may end up being respected - we need to narrow in on the time frame for more clues.
Cue monthly $DJIA chart. October lows find support at the 40MA again (love the 40MA as S/R marker), the 8MA is serving as resistance. While stochastics is suggesting uptrend, I've pulled up TRIX to smooth out the noise of the market's chicanery. TRIX is crossing over negative, the first crossover since the great reflation trade of 2009.
The weekly $DJIA chart. The range is very, very clear. Break it to the downside and I'd be thinking of covering my assets.
Cue Puplava, who notes some significant technical development, including the Dow's failure to clear the support zone of the June correction. See the following daily chart:
http://www.financialsense.com/sites/default/files/...
The link to the Puplava article:
http://www.financialsense.com/contributorsr/ryan-p...
Start at the daily and work your way out. Each time frame is like a domino that stands ready to fall the next time frame up. And no Central Bank is prepared to stand up with liquidity at this time, which is the only factor I could see lifting this bailout addicted market.
As Puplava points out in closing, China is on the cusp of expansion versus contraction – one or the other.
All markets are moving together. We need another month or two to determine which direction. The downside has the potential to be pretty steep from here. JMO.
Re: The Shanghai Fly checks in
hi Davefairtex,
For the ratio of rent/own, it varies so much that the best I can do is to give you an idea of how absurdly high property prices here can be:
- During the 2008 crash, leading up to the March 2009 bottom, the government/banks were doing everything they could to revive the economy, and you could get a sub 1% mortgage rate (hibor + less than 1%) , and pay a deposit of 5% (meaning you get 20x leveraged!) - this perfectly illustrates how Hong Kong is "caught" between importing a low interest rate due to its USD/HKD peg and the USD rates being so low vs at the same time being the hub and gateway for the Chinese economy with inflation of approx 7%.
- Currently, prices have appreciated roughly 70-90% since 2009. The government needs to cool the market so mortgage rates are around 2+% (hibor + 1.5-2%), and for property prices below HKD 10 mil, you have to pay a deposit of FORTY PERCENT (**that is NOT a typo..**), and FIFTY percent for above HKD 10 mil.
In the Central, mid-levels area, "reasonable" prices are HKD 12k - 15k per square foot (I know it's a wide range, but I have tons of acquaintances who bought properties at "just" HKD 8-9k psf just a few years ago). Hong Kong has this strange way of quoting a "gross" area for apartments (as they factor in a portion of the stairwell, any sports facilities, and who knows what else into their calculations). Therefore you have an "efficiency ratio" whereby [real net area inside the flat] = efficiency ratio * gross area. Efficiency ratio is typically 70-80% for older buildings and can go as low as 60% for newer ones.
Coming back to my point, for 1000 sq feet gross area, it'll cost you at least HKD 12 mil if you're lucky. Using a 2% rate over a 20 year mortgage means you're paying about HKD 60k per month vs the rent of approx HKD 35k. This is on the cheap side. There are some buildings where people can afford to rent for around the same rate, but buying is just sky high at HKD 20k psf, where you'd be looking at a HKD 100k monthly repayment.
Flipping was common and tons of people did it, when the rates were low and the prepayment was small. However, as you can see, the government is really curbing property prices; not everyone has HKD 4 mil (on a HKD 10 mil property) to put down as prepayment, especially with the market looking so weak without signs of a bottom.
Some old school economic research on quantitive easing
done by The Federal Reserve Board of San Francisco, looking at the Bank of Japan's Quantitative Easing program in 2001.
http://www.frbsf.org/publications/economics/letter...
Note the limited effectiveness of QE as regarding the balance sheet statements of Japanese Banks and their willingness to lend and total money supply.
It is why I am posing the possibility that the powers that be will rip the banks a new one, forcing the extremely painful write offs that need to be done BEFORE providing more liquidity through QE3.
The Japanese proved that liquidity itself is not enough. Gotta get the write downs happening. How much pain is required for that to happen?
I'm watching the index action to ascertain what might be planned in these respects.
Re: feels every forum I checked is placing gold target at ...
ALOHA!!
BUBBLOLOGY
From a nominal 30,000 view of the "all mighty" prior "gold bubble" of 1980 you could also extrapolate that the new "bubble" that started in 2001 and is now ten years old will have to rise to have the POG at $2,167USD in order to match what happened in 1980.
In 1976 from a low of $100USD the POG hit $850 in 1980, approximately four years. That would be an 8.5 factor, whereas in 2001 the POG low was $255USD. Do the math ...
What about this "bubble" though?
LINK: http://tinyurl.com/7a8vnlc
That chart above shows you the absurdity of the entire BUBBLOLOGY premises, past and present. As you can see there is really only one "bubble" that transcends all other bubbles!
From James Bond 007 GoldFinger(1964):
Colonel Smithers looked sad. "The other and by far the major defect is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is dug out of one corner of the earth is at once buried again in another corner."
What is odd about that whole "talisman of fear" and hoarding was that when Goldfinger was made in 1964 and Americans flocked to movie theaters to see Sean Connery, US citizens could not legally invest in gold. The British could ... You could buy old coins in the USA, but not bullion bars or futures contracts. We were still under the rule of FDR and his Emergency Banking Act that led to his Executive Orders to confiscate gold. That led to the Gold Reserve Act of 1934 where US citizens could own gold abroad only until 1961, then even foreign ownership was banned. In order for a private US citizen to buy large quantities of gold within the USA you had to apply for a permit from the US Treasury. In 1974 US citizens could officially buy shiny gold bars and we joined the rest of the World in the gold markets again after some 40 years in exile from "free markets"! The Land of the Free and the Brave ... really?
"In addition, according to Thomas W. Wolfe, Director of the Office of Domestic Gold and Silver Operations, the Treasury Department has "'determined that the purchase of a gold futures contract is the same as a purchase of gold itself.... It would certainly be an illegal activity for the 99.9% of us who have no Government authorization to deal in gold.'" TIME, Sept.18, 1972
What was the penalty for trading in futures or owning the shiny yellow metal, the talisman of fear?
SEC. 10. Whoever willfully violates any provision of this Executive order or of any license, order, rule, or regulation issued or prescribed hereunder, shall, upon conviction, be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than 10 years, or both; and any officer, director, or agent of any corporation who knowingly participates in such violation may be punished by a like fine, imprisonment, or both. Amended later to include a penalty of twice the gold value confiscated."
But you could own all the US government debt you want! No limits there.
"In the absence of governments capable of maintaining stable money, private individuals seek to assure it for themselves, hoarding a purchasing power [gold] more stable than that of any other merchandise . . . stable money is one of the last arms that remains at the disposal of the individual to direct his own affairs, whether it be an enterprise or a simple household." - Charles Rist, The Price Of Gold, 1951
Hoarding purchasing power ... In other words preserving the value of ones youthful labor so that one may access that same value in the distant future, say when one reaches retirement age and no longer has the ability to work. What in God's name is so unreasonable about desiring such a "radical" monetary system? Nothing, except that such a desire for SOUND MONEY conflicts directly with the global government agenda of one world power through monetary debasement and the obligatory monetary emergency that eventually leads to the one world currency.
Stop the thinking in terms of the 99% vs the 1%. It should be the 99.9% against the "Empire of the Irredeemable Floating Currency"!
Human action ...
Re: Some old school economic research on quantitive easing
Les,
Just wanted to let you know I appreciate your longer term info and personal views.
Thanks,
Grym
Re: Some old school economic research on quantitive easing
No worries Grym, but it doesn't mean I'm dead set bearish. A break of this range bound trading here will provide further clues to direction - Bill just gave his thoughts on the next 3 months. 1200 on the SPY serves as good a stop as any other.
Let's see if the green light is given shortly to buy with both hands, or the candy bowl is snatched away from us.
Tim Wood speaks of trap being set up "that will impact both the bull and the bear". I haven't worked out what he means by that. He has spoken of other bear markets where bears are squeezed in temporary pullbacks that continue higher and then bulls are trapped by the next leg down - perhaps he's referring to this sort of behaviour.
That would make sense to me in regards to what Bill is suggesting for the coming trimester. Thus I am watching $DJIA levels here and am mindful of how far a deflationary leg could take us down in the near future.