Tuesday, September 30, 2008
Why is this hilarious then? Because optimism is pumped today on hopes for a renewed bailout scheme. What is this bailout or one that policy makers are likely to cook up, possibly as Nouriel suggests, in concert with global authorities? Why, it is inflation. Gold gets a bad reputation as an Armageddon safe haven but in reality is simply a way to store value in the face of inflation. I have little doubt we are entering a global race to the bottom of the currency barrel in the effort to bail out economies far and wide. Now tell me, is that bearish for gold?
The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates - as it may now - a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.
Edit (5:55) And from the other side of the coin comes Jeffrey Miron with Bankruptcy, not bailout, is the right answer. You know, things like Nouriel Roubini's piece can chill you right to the bone. Tomorrow is October 1. The deflation scare is here and it takes the form of a 'global financial meltdown crisis' and a meltdown may well happen. We are scared. That' s all I am saying. A scare was necessary to clear the investment landscape of wild west casino hot shots. Now, if this thing holds together my 'stance', 'game plan', 'script' or whatever you want to call it is well intact.
I have to admit that I'm not too trilled about the newsletter. I'm quite addicted to my biiwii in the morning and the idea of you saving your best ideas for the newsletter will probably make my monthly expenses go up. But nothing for free forever and I understand that you have to monetize all this free time you are putting into this. It's my own fault, should have donated...
I like the format, plain and simple and I love the title. I've only been subscribed to one newsletter in the past and that was CRB's newsletter. I did like their 2 column format, text on the left and charts on the right. It keeps things organized. Here's a sample: http://www.crbtrader.com/pdf/fms/fms20060505.pdf
As you are freeing yourself from the dollar, you might want to free yourself from Microsoft as well. There are very good alternatives to MS Word out there and both have "Save as PDF" or "Export to PDF" functions that will make your life simpler.
1. Google documents
Just hit the New --> Document drop down and off you go!
2. Open Office
I love your work, keep it up.
Dang Philippe, all this work I have to do chasing down all these good ideas you guys come up with. I may never get this thing launched. Seriously, thank you and I will check this out when I get a moment. Tonight is jamming night though - no work on Tuesday night - just rock. Oh btw, I am not monetizing for the sake of monetizing. As I once mentioned to Otto, the reason you NEVER see me pump the TA onDemand service on the blog is that I found I do not like doing a job (working up someone's chart request that I may have no special interest in) for money with no personal satisfaction. NFTRH will let me be me, and in that context I can be at my best.
- Letter goes out by email weekly by Sunday afternoon US Eastern time at the latest, although I hope to have it out by Saturday evening more often than not.
- Billing is monthly ($26) by PayPal or PayPal credit card. This allows readers to cancel any time without a one year commitment and lets me know the reader is receiving value by remaining aboard.
- The general layout will include a summary of the current situation in the macro financial world and/or a look at the week ahead, technical analysis on markets of interest from an investment or trading point of view and the vital indicators to those markets and a summary of other important 'signposts' to the analysis such as gold to asset ratios, currency and bond market analysis. Also, relevant individual stocks will be featured with technical analysis and a brief fundamental overview as I find interesting situations and once a month an individual stock will be highlighted with the full blown fundamental write up provided by my colleague at Inca Kola News, an accomplished securities analyst with whom I have a professional arrangement. I will also illustrate the composition of my real life portfolios each week - on a percentage basis - by asset class.
- At the suggestion of a reader, I am going to include an 'alert' service that can come out at any time. This will be reserved for important events and timing issues that may demand attention in between issues of NFTRH. You know I am not about hype so bear in mind this will not be a buy/sell service. I respect the reader's intelligence enough to lay out parameters and tools and leave decision making to you.
NFTRH will certainly evolve and grow into itself over time and I am excited to be launching it right at the moment when - as I wrote last week "something old dies and something new - the new normalcy we'll call it - rises in its place". Hard as it may be to believe folks, opportunities lay ahead. But convention must be discarded and an open mind is imperative. I like the objective perspective the rabbit hole gives me.
A couple more details to work out and then we'll get it launched.
Broad Market - DOW
Is it really that bad? We are likely to remain in a bear market for some time as the economy decelerates and policy makers fight the forces of deflation tooth and nail. But with hysteria rampant in the public and the media, and the Dow sitting there at the bottom of a pretty ho-hum looking falling wedge with bullish divergence and everybody knowing its all over... well, don't be surprised by a rally. Also consider that the Dow, when viewed on a long term chart is sitting right in the midst of a support range between 10,000 and 11,000. A caveat to this is that in sporting bullish divergence in the panel indicators, the index is remarkably not deeply over sold. Edit (9:40) A warning for bully; the outperformance of gold v. silver - which continues this morning - will argue for this hope rally to be a brief one if the ratio does not reverse itself. GSR is an 'early warning' contraction indicator.
Monday, September 29, 2008
Join me in writing in Ron Paul in November. I did so in 2004 and I think I'll have a little company this time. Continue making a statement! Okay, now back to markets.
Regarding the latter, note that there will be individual stocks highlighted on occasion and where I have limits in my fundamental analysis I will call upon my friend Otto of Inca Kola News to provide the in depth NOBS (no b/s stock analysis) - through special arrangement - on selected stocks that only a professional equities analyst can produce. As noted at the end of the letter, I also plan to include the composition of my portfolios although I do not plan to list the individual holdings as this is not a 'stock pick' letter beyond a few ideas I highlight separately. The portfolio will be broken down by asset class.
I think I will settle on a monthly billing via PayPal (or credit card through PayPal) so that you may cancel at any time if you find the letter is not for you. What I like about this is that those who stay on board are doing so because of value received, not a one year commitment.
Much more to come as I work out the logistics, but I wanted to rush out this sample pre-market. Please let me know your thoughts. Edit (9:38) The plan is for the letter to be sent out weekly, most likely by Sunday early afternoon, in time to be digested well ahead of the new week's market open.
Edit (10:59) Feedback thus far (keep it coming & thanks)
1) Interesting read although I don't completely understand what you write. Logo blurry. It's an acquired taste ;-). Logo may go.
2) Otto's funda contribution a good idea. I think so too.
3) Square off typesetting. Is it weekly or monthy? I like the name. Consider 'investment alert' that can come at any time as needed for a stock, metal or asset. You didn't mention price. Will check typeset format. It's weekly. I like the name too. I will think about the 'alert' and its purpose/function. Still chewing on the price. I want it to be fair and competitive.
4) "I am enthusiastic about NFTRH. Congratulations! No doubt others will have told you by now that the images in the PDF file did not come through, at least not on my Mac system.... Anyway I am looking forward to the NFTRH. With graphics included. :-)" Arghhh, first negative associated with the pdf software. Others please let me know how the images are coming out. Thanks.
5) "Dear Gary,
6) Regarding pdf issues...
Again, I am just testing out this Nitro pdf which has a neat interface and is less clumsy than Acrobat. I will fiddle with it later and make sure it is right for all. At the least I will make sure that people can get the reader(s) necessary at the click of a button. Thanks again John.
Saturday, September 27, 2008
The fiat paper currencies of the world are all suspect or worse. They are measured (by Forex) against each other but it becomes a game of which degrading debt paper backed by nothing is in favor this month? It is nonsense to think economies that depend on a gluttonous and irrepressible American consumer are not going to take the hard down as well. Asian central banks, representing America's #1 macro vendors, have just blinked. The point is that people who are watching the US Dollar as the lynch pin for their investment stance going forward are likely to miss the big picture. And that's okay because we want to be part of the smart money, not the dumb money that thinks this is as easy as 1-2-3 connect the dots and color in the picture in a childrens' coloring book. It isn't. Ratios are now more important than ever.
Here are some important ratio indicators going forward. We have gold-dow, gold-silver, gold-industrial metals and gold-oil. With the understanding that gold most certainly can decline here, it's bullishness relative to the gold miners' cost inputs is what is important and that is why the gold miners stand a good chance of being the top performers in a contractionary environment. Another cost input that is on the decline is human hope for prosperity and what that means is that labor costs and availability should improve going forward along with the ratios that are more easily quantifiable in the charts below.
This is close to the theme that the coming subscription letter will center around, at least as long as it is what is demanded by the current environment. I want this to be different from what the herd is getting. We will tune out the noise and focus on what is happening beneath the surface of the markets. One day, I hope to be able to follow a theme of resurgence and prosperity for the macro world. One day.
Edit (12:40) Thanks to 321gold for this YouTube link to a BoobVision show where perma bulls like Toby Smith lampoon the sane and very correct Peter Schiff. This goes back to my critique of the MSM featuring all sorts of cartoons like Toby, Hannity and Kudlow. Sadly, the majority actually believes the garbage that spews forth. This newsletter is going to be an antidote for this stupidity.
Friday, September 26, 2008
The little boy who cried wolf - at least in the eyes of the public - stood in front of a telepromter the other night and told us of dire circumstances and implications of not passing the bill being pimped by Paulson and Bernanke in Congress. The scary thing is that I believe him. I have to believe him because of my personal experience. You remember me writing about "this mess" many times over the years on the blog and in published commentary, even in a seemingly fine bull market? The market was fueled by the inflation policy of the last contraction. Therefore it was illegitimate to those who are not Keynesians. It was a mess in the making. Well, enter stage right... one big, scary and utterly predictable mess.
I don't agree with Ron Paul in that if we just unwind right here and now... if Congress actually listens to the majority of Americans who are against the bailout, it will be very hard for a year and then we will get back on track. I think it will be utter devastation for a year (or more) and then there will be a painful, grinding climb back out of hell as the US national psyche is recalibrated from hubris clouded self-congratulatory entitlement to just another failed superpower. Ron Paul is all about purity and honesty and he envisions a return to the purest forms of American Constitutional Democracy.
But most Americans are not Ron Paul. Most Americans are as far from Ron Paul as you can be and that conflict will not be resolved easily. It is why I once mentioned that I, a peaceful and peace loving guy, own a hand gun. What will be the limits on social, errr... unrest? I don't anticipate ever having to use it... but again, I took the Boy Scout motto literally; "be prepared". I live in a small town, am friendly with the police Sargent and have done a lot of thinking over the last several years about community and getting back to local thinking and self sufficiency. I look forward to the cold snap of Autumn because my wood pile awaits and swinging that maul is highly therapeutic. Wood stoves, generator, water purification systems, organic gardening (at which I am thus far a failure on balance, but will continue to try)... it's all intact with the idea that the fiat debt paper system could seize up at any moment. That time very well could be now and the implications will be severe.
Now, in the likely event Congress is just posturing and eventually caves in as they always do, the news doesn't get much better. Yes, we will likely get a market pump and a surge of optimism in all the same corners responsible for this mess being pushed so far out on a leveraged limb in the first place. I would sell that optimism and continue to make preparations because as Dr. Paul says [paraphrased] you can't fight the problem with more of what created the problem in the first place and expect good results. That would actually be a good definition of insanity. But it might buy some time. I think that if the bailout does not pass soon the current system is dead maybe - when figuring all the leveraged debits - ten times over. If they ram home the bailout we will eventually be dead twenty times over after the euphoria wears off and the debits keep on coming. But dead is dead.
The system is ending. It included many good points and led to some good times for the USA. We watched the USSR unravel and thought 'oh, but we are America and that kind of nastiness doesn't happen here'. Well, our forefathers endured all manner of nastiness to establish something great on the world stage. I would argue that for the better part of the 20th century up to today, enabled by the fiat debt paper system and the gradual onset of sloth and hubris, we have collectively been bred to just feed on the prosperity without a clue as to creating actual productivity and prosperity. We have just fed on the seed corn and it is sad. The public is waking up and my concern remains in their disorientation as they awake from their economic fantasies, spoon fed by conventional media.
Am I angry? Yeh, I am pissed off. But I am also happy because over the last four years I did all I could do to try to help prepare anyone I came in contact with who appeared willing to see the truth. Granted, that was an extreme minority but combined with the website and the blog I would like to think I did my part to try to get the word out.
Speaking of bailouts, a couple weeks ago we had in the Northeast a 'remnant' of one of the gulf hurricanes and it produced some epic downpours. Our basement was flooding due to faulty foundation window wells so picture me out there on a Saturday night, wearing only my shorts (well, maybe you don't want to picture that), shin deep in muck bailing out the window wells. I though 'oh dear god, don't tell me I am going to be out here until daylight doing this'. Well, by 2:00 AM it was all over and I got a reasonable night's sleep. Just yesterday I mixed some cement, graded the runoff, caulked the wells, installed covers and solved the problem. Why yesterday? Because we are due to get heavy rain over the next couple of days. I was motivated! That is what is happening with the bailout in Washington; there is motivation and they may get it done. The only problem is, they are using more sand instead of cement.
The issue for individuals is to correctly interpret this situation and make the best of it. It makes no sense to click your heels and wish it away. You must deal with it. We all must. It's all the website's name 'it is what it is' was ever meant to imply.
I am planning to finally start that newsletter after four long years of navigating this mess and providing what I think is something different from the average financial commentary and analysis. Gotta do it because right here and right now is go time. Big guy time... whatever you want to call it this is not a drill. I figure I haven't screwed up on the macro thus far and in fact I am disappointed to be proven quite correct on the big picture.
With the understanding that there simply are no all-knowing gurus out there, least of all me, what I offer is a hard working mentality and a straight view of markets, socio-economics and the financial system. Once I reflect a bit on format and logistics, I will offer this service to you dear reader and would be thrilled if you have the confidence in me to sign up. The blog and website will remain here as free services but I want to work harder, go deeper and spend more time on what is a passion for me. Thus, the premium service. I would appreciate any input on what you think I should include or avoid with regard to format (mail me at gt AT biiwii.com).
I envision some narrative/opinion on the macro picture, interpretation of fundamental cycles and of course technical and fundamental analysis of domestic and global markets and macro indicators I find interesting and/or relevant. I will also look at individual stocks, mostly from a technical analysis standpoint although there would be some fundamental commentary as well. Oh and let's not forget about trading opportunities. Every once in a while a nice setup presents itself for short term gain.
Something is ending and something is beginning. As long as the lights are still on I would like to navigate the new normalcy with you, with a respect for the gravity of the current macro situation while not being consumed by it. It is what is beginning - from an investor's standpoint - that I am interested in.
Edit (10:39) I neglected to mention that I think it would be helpful to show my real life portfolio composition broken down by asset class updated weekly, which would be the frequency of the letter (emailed on Sundays).
Have a good Friday and a great weekend. Life will go on. Let's get this right.
Thursday, September 25, 2008
But really, I started this post with simple intentions; to show that stocks are likely to rally soon. So I will dial back in to being a simple technician and present the evidence in the form of Dow daily and VIX weekly charts. The pig looks ready to rally and could approach its bear market limits.
Wednesday, September 24, 2008
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Tuesday, September 23, 2008
Edit (2:48) Gold stocks hanging tough. It would be healthy for the short term pullback to continue because the shakeout would leave stronger holders for the assault on the heavy duty resistance shown in the weekly chart I just uploaded. But I guess we'll be ready for anything. It's all ya can do. If the gaps don't fill here they'll be breakaway gaps, which are not something to worry about at this time in and of themselves.
Monday, September 22, 2008
Of course you know what happens when the bi-polar momo crowd comes thundering in now don't you? They likely will get their asses corrected but good. While I have taken a bit off the table and done some rotating among miners, I cannot find very much in my portfolios that I want to be without, so while I have a decent cash level to take advantage of the inevitable correction, I will likely take a hit as I stick with the mode I have mostly adopted since summer '07; not trading myself out of positions in what stand to be THE initial market leaders of the new normalcy. Here is HUI's progress off the bottom.
You do what you must do. It is your money and this is not a drill. This is real life and real markets and policy makers could suddenly come to their senses. Nahhh, that couldn't happen could it?
Edit (2:52) Well, I broke it off with Gigi for good. She was going uptown on me. She paid me 40% in a week on these remaining shares and for that she might have expected me to start doing housework or attending PTA meetings... I can't take on that baggage. We're done. But I forgot to mention that Silvia is back in the fold in all accounts as of Friday. Okay, that's really enough of the dating shtick. I am trying to manage a balance here as I go out of my comfort zone (i bottom feeder) and watch wild eyed momo's take my favorite stocks higher. But I remember in 2003 it was often a big mistake to trade out of these things. I wrote last week that when the miners launch it will be a thing to behold. Well, was the man right or was he right? I remain locked and loaded on all must have miners with the right amount (for me) of cash for comfort. Edit (3:47) This is a scary day for broad market participants but two things jump out at me: 1) The major indexes are at this point merely filling gaps after the explosive lift off of the Paulson pump but 2) unlike the gold stocks which did the same thing three days into their explosive rally, the broads are in danger of painting bearish engulfing candles today, which would imply additional short term downside before any would-be rally gets going again.
Sunday, September 21, 2008
Friday, September 19, 2008
Also, you have seen me reference Prechter's Conquer the Crash many times. That is because it has been the single most important read for me in preparation for times like this, and that ain't no pitch.
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WASHINGTON - The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks.
The move, announced on the agency's Web site, may well be unprecedented and a reflection of regulators' concern about the widening scope of the financial crisis as entreaties come from all quarters to stem a swarm of short-selling.
In the announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking emergency action to "prohibit short selling in financial companies" to protect the integrity of the securities market and boost investor confidence.
"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement. "The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets."
The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress.
A recent wave of the market maneuvers — where traders seek to profit by selling unowned shares of companies in the anticipation their prices will drop — has been blamed in part for the demise of venerable investment firm Lehman Brothers and other big companies.
Cox, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke held a closed-door meeting Thursday night with members of Congress.
The SEC said its action calls a time-out to aggressive short-selling in financial stocks and said it would consider measures to address short-selling in other publicly traded companies.
Short-selling, in a normal market, contributes to efficiency while adding liquidity to the markets. But now, the SEC said, it appears that "unbridled" short-selling was contributing to the sudden price declines in the securities of financial institutions.
On Wednesday, New York Sens. Charles Schumer and Hillary Clinton, both Democrats, appealed to the SEC for such a temporary ban, saying the watchdog agency "has the power to take a temporary but important step to help restore a measure of stability to our financial markets."
The California Public Employees' Retirement System, the nation's largest pension fund, said that starting Thursday it is no longer lending out shares of Goldman Sachs Group Inc. and Morgan Stanley, joining a growing number of public pension funds that are attempting to curb short-selling of two investment banks' stocks.
Thursday, September 18, 2008
BTW, to close out the Gigi thing, I am still dating her but not as seriously. I dumped some this morning which, along with cousin Sylvia, I may buy back. A small amount was kept for investment. I also continued plucking away in the nuclear fallout site known as the TSX & TSX-V. Values abound. Edit (5:19) Dear readers who bought gold through BullionVault today: I used Euro commissions this morning (gold up) and USD commissions a couple minutes ago (gold down) to buy in the Zurich vault. Buy high & buy low? Nope, buy value. THANKS! I believe your buys will prove very astute one day down the road.
I was concerned about all this and what did I do? For the most part I bag held shares all the way to my targets because of perceived fundamentals and a discipline not to trade myself out of a real bull market. Bull market you say? Didn't some really big players just pull the chord and bail? You won't see them admitting it publicly, but oh yes they did. Especially the dreaded commodity bulls who got caught up in the deflation story. After all, for them copper was tin was soybeans was gold. I bag held but with a backbone made of core beliefs I was able to tune out the panic and remember that in a deflationary environment rising out of monetary disorder, the gold miners bottom lines will become, well... gold mines.
I did not know when this would become evident to the market, but it seemed like a good time to put reserved cash to work amid forced liquidations and the commodity sheep following their gurus out the door. As I mentioned yesterday, the gold stock price action alone strongly hints the bottom is in. But the gold-oil ratio, gold-industrial metals ratio and the yield curves add fundamental exclamation points to that idea. I wrote the post about being contrarian for a reason. It is hard to do and for me, buying my downside targets @ 260's and 250's was all the more difficult with a man I respect, Bob Hoye - who's Pivotal Events I publish weekly on the analysis page - writing about new lows still to come in late October.
I sold SLW yesterday and trimmed a bit on a junior that went nuts but remain locked and loaded with cash reserved for adding what I think will be the main play as the next leg of the gold and gold stock bull market unfolds; the Canadian junior and exploration sector. It has been carpet nuked and writing that there is value there seems like a gross understatement. I think the play is to buy the verifiable quality juniors in the bargain basement and then sit and wait. There is a lot of garbage in this sector, which I will never touch. But when the time comes that even the garbage is rising five fold, I will plan to sell my miners at oh... perhaps 10X in 2 or 3 years.
Here are some charts of Huey, who appears to be looking for his namesake up there in the sky over America. With the levels of excess and misperception that had come to dominate the global investor base, we needed a purification that could only come in the form of BULL OVER! Okay, bull over... now on with the bull.
Wednesday, September 17, 2008
GG, in the short term looks to have the potential to get up near the SMA 50. Beyond that I am going to take a wait and see approach bearing in mind the HUI 220 (62% fib retrace of entire bull) potential noted previously. So I don't know yet whether this is a trade or a hold.
But when the gold miners launch, they are going to put on show like you have never seen before. The macro pot is being stired but good with the main ingredient being fear; fear of deflation... fear of depression. This is what I have been waiting for. Timing is the issue in my opinion, not the deflation impulse. That was always in the script. These are my opinions and my script. Once again I say yours may be different and we each need to respect our own orientations. Edit (11:34) Oh, I forgot to mention that Gigi and her cousin are a couple real hotties! ;-) Edit (3:26) I broke up with her cousin (after she paid me 22% to leave - actually not a bad one night stand) but I am still dating Gigi. What a friggin' day. I think we may be seeing the rudimentary hammering of a bottom based on the last several days' action taken together. Will have cash ready for the twists and turns coming up. Holding all holders and then some because ya just can't time when you're going to get days like this. Separately, Dow has come down to 10,660, 30 points above the level I projected on the chart a couple posts ago. Good enough for government work. That could be the bottom for the pig. (Edit 3:57) Or not. 10,630 target is here and now in the rear view mirror.
Tuesday, September 16, 2008
The website Biiwii.com came about because I had a 'guru' who hammered home certain truths and because I was brave enough to look at those truths. I still do not know where he came from or why he took to me, other than he used to say "Gary, unlike most people you are not afraid to look squarely at this mess." My only aim in starting the site was to warn people, to help give them the tools to get to safety. Read Prechter's Conquer the Crash... buy bullion... PAY DOWN DEBT... but most of all think about living a more simple life within means. But along the way we had a bull market in stocks - nominal, not real of course. This was one of the effects of Greenspan's inflation cycle. It, along with the go go commodity trade helped keep people tuned out and Biiwii.com morphed as well from alarmist to 'hey, play the casino while periodically giving dour reminders of what this really is'. Mission accomplished I think.
In the 90's we had technology guru George Gilder. In the post credit bubble we have a new guru; the commodity/resource guru. You get Jim Rogers. You get Al Gore the global warming guru. You get Boone Pickens, an oil man all his life: "Oil will never go under $100 a barrel again."
Catch my drift? Something is ending here and something is beginning. But this has all been scripted for years and we are all but mere players in the spectacle. Some will survive, some will be victimized. Some will sit back content that they did all they could do to prepare and try to help others while others will feel like a rug is being pulled out from under them. What we all need to do, given that we are beyond any reasonable point of return in this grand experiment, is to hope that these evil geniuses get control of this thing one more time and then adjust to the 'new normalcy' that follows. Whatever that is. Please do not panic out there.
Edit (2:24) See? The Fed's not panicking, why should we? :-)
Sorry, when I mention Mr. Magoo I sometimes get irritated. The spotlight is squarely on the Treasury and the Fed. As a side note, when Obama is elected president - and if da boyz don't pull off a kick save here he will be, do you think he will have the vision to nominate former GAO head David Walker as Treasury chief? With McCain and the PonziPublicans I think there is ZERO chance. Obama is a communist but the mainstream Republican establishment are nothing but socialists masquerading as free traders. Bush had a reputable SecTreas in Paul O'Neill but canned him the minute he stood up for sound policy. What a mess.
The deflation impulse is well in progress now that we've finally got the public engaged, several years after they should have been. Inflation fueled markets go up and the public sits on its ass and watches American Idol. But boy, let the markets begin to drop and watch that outrage begin to boil. The main point is that the inflation fears highlighted with a big neon sign $150 Oil are rapidly becoming a thing of the past. Bernanke has got the cover to do what he was always meant to do; prevent deflation from happening here. He did not have that cover during the inflation effects phase of Greenspan's greatest bubble, the credit bubble. He will have the cover needed however as Greenspan's macro pump rapidly runs dry. This is all on Greenie but the next great bubble, if we are 'lucky' enough that the Fed, Treasury and global partners in inflation Ponzinomics can actually pull it off... the next bubble will be squarely on today's evil geniuses.
We are resigned to an ongoing series of macro bubbles and the angst being generated right now should translate into the next one down the road. It's either that or last one out turn out the lights.
The Fed does not set rate policy. They pretend they do but the bond market actually tells them what they will be doing. What do you suppose this is telling them? I expect some sort of 'emergency' rate policy today.
Yield curve resumes steepening. Economic contraction once again takes center stage.
PCR & VIX both spiking. This means the markets are ripe for upward reversal upon even a glimpse of the Huey commander up there in the beautiful late summer skies of the former America.
Mr. Dow should like the sound of the rotors after perhaps a scary plunge to new lows.
Then of course there are the first-mover beneficiaries of inflationary policy (as opposed to inflationary effects). I expect the gold miners to outperform everything given anything short of policy failure and deflationary darkness permeating the globe. I have put up enough charts of HUI that you know where I currently stand but here is a daily showing retrace levels of the hard down. If the Fed cuts, we should get a big pop for the short term. As a side note, in keeping with good practices I did some selling at yesterday's open of stuff that I bought in the 250's to get cash levels back to a reasonable level. I may buy some back if there is a continued drop this morning. But I still hold plenty and have that comfortable feeling of having enough cash to take advantage when/where needed.
Sunday, September 14, 2008
Impossible? I knew the mess now highlighted by Bear Sterns, Northern Rock, Fanny, Freddie, GM, IndiMac, Lehman and so many other institutions, hedge funds and time bombs in waiting was on the table years ago. If for no other reason than I used to read Doug Noland's Credit Bubble Bulletin every week. But it is all going down right now; figuratively if not literally as in "it's all goin' down, man". This is serious.
Read the AP report below. Think about the desperation as these guys try to cobble together another major bailout. I think it is telling that the government is balking at [outwardly] impairing the taxpayer (and their children) further after Fannie & Freddie as noted in this line: "The government has drawn a line in the sand over using taxpayer money to help rescue Lehman Brothers, however." At times like this I wonder about what could be the only remaining viable 'solution', yes the same solution that got us where we reside today, IN FLAY SHUN. With commodities in the tank and contraction/recession at hand the Fed has the cover needed to burn it baby, burn it. They are balking at outwardly obvious taxation. But what about initiating plans to employ a more clandestine form of taxation, the kind they always opt for in the end? This weekend, if we listen closely we may be able to actually hear the comforting sound of the Huey rotors warming up.
The pun was not intended but the potential next bubble we experience could be those pummeled down leveraged vehicles (to the price of gold), the gold miners in the Huey (HUI). 'But Gary, in the previous post you freaked me out with the possibility of new lows in the HUI!' Yes, but that is technical - it must be respected. What I am talking about now is fundamental and structural. Risk management never goes out of style, but I can see a set up where money supply gets ramped to beat he band. Policy makers have the cover (deflationary impulse) right here and right now.
Feds, Wall Street race to try to save Lehman
Sunday September 14, 7:39 am ET
By Jeannine Aversa and Joe Bel Bruno, Associated Press Writers
As financial world frets, government and brokerage leaders try to hash out Lehman rescue NEW YORK (AP) -- The field of possible buyers for Lehman Brothers narrowed Saturday, but the parties involved in the discussions over the wounded investment bank's future were at loggerheads over how to finance the rescue.
An investment banking official said Bank of America Corp. and Britain's Barclays Plc have emerged as the front runners for Lehman Brothers after a possible cash injection from its rival Wall Street banks and brokerages.
Top officials from the Federal Reserve and the Treasury Department and executives from several Wall Street banks met at the New York Fed's downtown Manhattan headquarters Saturday for the second day in a row try to hash out a deal to rescue Lehman Brothers.
The financial world was watching. Failure could prompt skittish investors to unload shares of financial companies, a contagion that might affect stock markets at home and abroad when they reopen Monday.
Discussions are expected to continue Sunday, said Andrew Williams, a spokesman for the New York Fed.
The investment banking official, who asked not to be named because the talks were ongoing, said the investment houses were balking at paying to polish up Lehman's balance sheet so Bank of America or Barclays could buy a financially clean firm.
He said the investment banks were angling for the government to provide some money, as it did when it helped JPMorgan Chase & Co. buy Bear Stearns in March, because they would get little to nothing in return for their help.
The government has drawn a line in the sand over using taxpayer money to help rescue Lehman Brothers, however.
The official said the talks were tense and neither side appeared willing to back down.
Besides selling the company whole or piecemeal, Lehman could be liquidated, perhaps with financial firms agreeing to still do business with the company as it wound down.
Or, a financial company or companies could buy Lehman's "good" assets. Its shunned or devalued real-estate assets could be placed in a "bad bank" financed by other banks.
Saturday's participants included Treasury Secretary Henry Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox.
Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, and Merrill Lynch & Co.'s John Thain were among the chief executives at the meeting.
Representatives for Lehman Brothers were not present during the discussions.
They gathered on the heels of an emergency session convened Friday night by Geithner -- the Fed's point person on financial crises.
Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance.
Geithner convened the meeting Friday evening and told bankers gathered at the New York Fed to come up with a solution or risk being the next to go under, investment banking officials with direct knowledge of the talks said. They spoke on condition of anonymity because the talks were ongoing.
A spokesman for Lehman declined to comment about the meeting.
Other potential buyers could include Japan's Nomura Securities, France's BNP Paribas and Deutsche Bank AG. All have declined to comment.
Participants in Saturday's meeting were also trying to tackle a broader agenda that includes problems at American International Group Inc. and Washington Mutual Inc., said the investment bank officials, who were briefed on the talks.
AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. Investors, worried they do not have enough cash on their balance sheets to withstand further hits, unloaded their shares on Friday.
AIG's shares dropped about 31 percent on Friday. WaMu's shares shed about 3.5 percent. Shares of investment bank Merrill Lynch & Co. Inc. also lost 12.3 percent. Lehman's stock closed at $3.65 Friday -- an all-time low and down nearly 95 percent from its 52-week high of $67.73.
Lehman Brothers and AIG are the top priorities, said the investment banking officials. WaMu insisted Friday it has adequate capital to fund its operations even as it announced another multibillion dollar write-down on bad mortgage loans.
WaMu has 76 percent of its deposits insured by the Federal Deposit Insurance Corp., an independent agency created by Congress to insure deposits in banks and thrifts up to at least $100,000. AIG has lost more than $18 billion over the last three quarters due to investments tied to subprime mortgages.
Global fears intensified Saturday that Lehman's collapse would stagger markets and undercut confidence in the U.S. financial system.
Germany's Finance Minister Peer Steinbrueck urged that a resolution be found before Asian markets open, warning ominously, "the news that is coming out of the U.S. is bad."
Lehman Brothers Holdings Inc. put itself on the block earlier this week. Bad bets on real-estate holdings -- which have factored into bank failures and taken out other financial companies -- have thrust the 158-year-old firm in peril. It has been dogged by growing doubts about whether other financial institutions would continue to do business with it.
Richard S. Fuld, Lehman's longtime CEO, pitched a plan to shareholders Wednesday that would spin off Lehman's soured real estate holdings into a separately traded company. He would then raise cash by selling a majority stake in the company's unit that manages money for people and institutions. That division includes asset manager Neuberger Berman.
Government officials want to avoid a Bear Stearns-like bailout; the Fed in March agreed to provide a loan of nearly $29 billion as part of JPMorgan Chase & Co.'s takeover of the firm. Unlike Bear, Lehman can go directly to the Fed to draw emergency loans if it needs a quick source of ready cash. In recent weeks, though, there's been no indication that Lehman has done so.
Bear's sudden meltdown led the Fed to engage in its broadest use of lending powers since the 1930s. Fearful that other firms could be in jeopardy, the Fed temporarily opened its emergency lending program to investment firms, a privilege that for years was granted only to commercial banks, which are subject to tighter regulation.
Those actions -- along with the Bush administration's take over of mortgage giants Fannie Mae and Freddie Mac just last week -- have spurred concerns that taxpayers could be on the hook for billions of dollars and companies will be encouraged to take on extra risks because they believe the government will come to their aid.
Paulson and Bernanke, however, have said they needed to help Bear Stearns and Fannie Mae and Freddie Mac to avert a financial calamity that would devastate the national economy.
Lehman's Fuld is currently a member of the New York Fed's board of directors.
Saturday, September 13, 2008
But for now, here is Huey having just broken the hearts of those who could not take it anymore and those who were forced to liquidate. We take our old theme of the A-B-C correction and expand it to the weekly chart and bearing in mind that the damage done so far will not be easily repaired, we realize that at the least a retest of the lows is very possible probably on some dark day in the Fall, with new lows (C) possible if the markets are panicked enough. Remember the 62% retrace level of the entire bull market? It was shown on a couple previous charts and resides around 220. Just an FYI as we enjoy a revival kicked off by a spectacular thrust off our noted lows of the 250-260 range. Assuming we get that far, watch how the HUI reacts around the 38% fib and 150 week EMA.
Friday, September 12, 2008
Yes, I realize it would be a weekly lower low close but we'd take it, wouldn't we? Edit (4:53) There, that wasn't so hard was it? Seriously, when you consider all the people who were either forced out or scared out at the lows, you realize that you are playing with fire in this sector. Elephants stampeded out because they had to, and smart money stampeded in upon recognizing amazing value. More to say this weekend, but for now I am going to grab guitar, amp and a six pack and friggin' ROCK with da boyz. Man, I needed this and suspect a goodly number of you dear readers did to.
Wednesday, September 10, 2008
Also, I want to take a sec to thank you Sandro, my long time reader from Italy, for your latest donation. You have a way of lifting my spirits during some of the most trying times. What I mean is that people commenting on markets are human. Doing this daily is tough enough. But showing up daily during the most difficult times is even tougher. I am not a player. I am not a robot with a subscriber list that I preach canned analysis to. I am a person with a family and a life who really doesn't need to be here, and the last several weeks have been effin' hard. I know you 'get' what I am about and I know there are others out there who do too. I am not THE solution to all your investing needs. I am what I is and I really appreciate that you see that and show your appreciation way more than is necessary.
The bad: We had a close below the August '07 low likely due to the get me outta here at all costs desperation of the elephants AKA large speculators coming under pressure of forced liquidation of anything in the perceived 'inflation trade'. Now gold advisers that had been bullish will flip the switch on the this sell signal. Looking at MACD, especially on the weekly, the momo out of here is incredible.
The Ugly: Good practice demands that we now entertain the possibility of a bear market as opposed to a terrible shakeout. Because I am personally bound by deeply held fundamental beliefs my interpretation of said bear market is one of a cyclical nature within a major and secular bull. Your beliefs may be very different. I personally am not going to liquidate in a secular bull market - but I am going to navigate it (by trading) if that is indeed what this is. If this is a real deflation - which I don't believe will be allowed to happen (inflation is money supply creation after all and one must believe Dr. B is warming up the rotors) everything is going down but cash. The definition of 'deflation scare' might be something like 'blogger who has long written about a 'deflation scare' actually writes the words "if this is a real deflation...".
While HUI has come to a level at which I wrote I would become very bullish, what I did not like about yesterday was the drive toward the finish on the lows of the day. I realize this is within the context of a tanking stock market and another oil humiliation but the most bullish outcome would have been an utter devestation to either 260 or even 250 and reversal back above 284. Didn't happen and we need to deal with that. HUI can still upchuck down to 250 and reverse today or even rally strongly today to flash a 'false breakdown' but at this point that is wishful thinking. A positive is that with yesterday's volumes, there are a lot less wishers and hopers out there. With the over sold conditions bordering on the ridiculous, a rally of some power is likely soon. But events will tell us whether it is THE rally or just a suck in. After all, deflation is here. Right?
Here are daily and weekly charts of Huey. On the weekly I have gone ahead and conjured up lower levels given the momo of the elephants. Note we have retraced 50% of the entire bull and 62% resides at 220. Awful, I know. But it is what it is and it needs to be dealt with.
Tuesday, September 9, 2008
Otto Rock introduces The Mercenary Geologist and given what is the main bullish secular theme of this blog, I think this is important reading. I rarely mention the '.V's' here and there is a reason for that; they are risky with a capital R. Even those that should not be risky like FVI.v, which I did mention and still hold (while getting pummeled) are tough. While looking at technicals and macro-fundamentals, I depend on people like Otto - those who actually know how to get inside a company and root out the nut - for company specific intelligence. Well, it looks like the Mercenary Geologist can be of great help in that area. In a pdf file Otto links the difference between resources, reserves, proven, provable, etc. are highlighted. This is a must read for junior or exploration gold stock holders.
Elliotwave International presents 2008: The Year Everything Changes. EWI, long ignored while the commodity bubble revved up and then blew off last year published a timely piece called 2007: The Year of the Financial Flameout. This requires a free sign up to Club EWI and if you are like me, you WILL benefit. All through the inflation driven commodity rise I kept Prechter in mind. I kept the memory of 2002 and what a deflationary impulse can feel like in mind. I recommend readers consider everything EWI has to say on the subject.
Finally, here is Bob Hoye's latest Pivotal Events excerpt including comments on the stock market, energy prices, base metals and gold. Hoye is looking for gold stocks to continue to weaken with the disappearance of liquidity, BUT...
Monday, September 8, 2008
PS: SLV stopped out. Added back SLW that was dumped in the 11's. Also bought GG. Cash for capit-o-rama. Edit (1:21) Clarification based on an email I received from a friend... I will not sell value, as I have stated. You should see the value in my ports bleeding red day after day mostly in the form of smaller miners and a couple explorers with great prospects. That is the value I am talking about. As noted I have traded the SLW's and AUY's and just stopped out of SLV. But the HUI-Gold ratio is saying a lot about value now showing up across the entire sector, hence the buys of GG & SLW to replace it. Meanwhile this from my virtual pal Lucas: the funny thing is that I think both of us saw this coming, but one of my favorite factoids is that 'wind speeds in a tornado can only be measured by the damage that's left behind.' Markets are made by Men, and Man is the Irrational Animal.
Today promises to be a hoary display as the financial world celebrates the crushing commitment we have just consigned to our children. So what? Markets are primarily dominated by emotion and herd behavior. In the big picture effort to remain whole and perhaps benefit dearly, we need to remain cold hearted and focused. Not chasing around some clandestine group of boogie men with evil in their hearts.
Meanwhile, so much for the Uncle Buck daily [hanging man]. The weekly USD is getting over bought and more and more this looks like a panic out of the 'inflation trade'. A panic that could eventually provide a serious top in the Dollar as opposed to the first leg up I have been looking for. We'll just have to wait and see. We have already fibbed 38% of the decline from late '05 and Uncle Buck is welcoming the deleveragers back into the fold. A negative divergence like the one noted from '05 might be a hint at some point. Meanwhile, gold & silver are vulnerable to panic and herd behavior.