That word is “BUY”.
So I am in my car a lot and I usually keep an AM talk radio station on.
On the weekends there are a few “Investment Advisors” that have weekly shows. For years I have listened to their advice more for personal entertainment purposes.
I listened through all of 2007 and 2008 when every weekend they said: “Now is the time to buy this dip in the stock market”. Every weekend without fail it was the same thing.
I hadn’t heard any of their shows for a while but in December 2009 when the Dow was above 10,500 and the S&P was above 1100 I was curious if they had maybe FINALLY turned cautious on the market. I mean the market had rallied about 70% from the levels in March and valuations on stocks were higher than pretty much any point in history aside from the Tech bubble in 2000.
I turned on the radio and I heard this:
http://www.fileden.com/files/2010/1/31/2745273/BUYBUYTheMutualFundShow_12-05-09.mp3
I learned from this that it does not matter WHAT the market does, these “Financial Advisors” will always say the same thing. BUY, BUY, BUY!
It reminds me of an old adage, never ask a barber if you need a haircut.
Sunday, January 31, 2010
Thursday, January 21, 2010
Wednesday, January 6, 2010
2010 will be what 2009 should've been
Thus I'm lightening up on my positions. MCD & JNJ sold for 6 and 10% profits. KO sold for a 12% profit. Averaging down on HSY.
Sunday, November 22, 2009
Why Governments should Like Gold
Consider why governments should like Gold:
1) Gold acts as the perfect sponge for money/liquidity. Money put in gold does not really affect the broader economy like money going into oil or treasuries does; money put into Gold goes absolutely no where except into Gold. This is the primary reason governments do not like Gold in deflationary periods because it acts a dampner on their money printing purposes.
2) You can easily assess the value of another nation's currency by how much gold they have. If I have 400 tons with $1T in circulation and you have 800 tons with $1T in circulation, it's pretty easy to determine that your currency should be worth more than mine. With floating fiat currencies, determing actual, absolute levels of trade on a global basis is difficult at best.
3) You can always trade your gold to another nation for goods or services required. For example, a war or some oil.
4) Whether we want to admit it or not, ultimately a nation's status is based on two things -- what they have already and what they can produce. We can talk all day about intangible things like "free speech" and "rule of law" but at the end of the day, and I admit only over the short run, what a nation has and what it can make are most important in determining its next 5 years. Gold is something that productive, wealthy nations should have. Gold is something that Gold producing nations can extract. The value of their nations [currency] is intrinsicly higher than those who have not. That value ultimately largely determines who would be victorious in any sort of battle -- whether it be trade or military.
My country, The United States of America, at least on paper (if you want to believe some of the consipiracists who say the Gold out of Fort Knox has been moved or sold, be my guest), has the world's largest Gold reserves -- far and away. I also find it interesting that the United States in the past 60 years has not really been a net seller of gold either. What does that really tell you about what the US Government truly belives about Gold?
When push comes to shove, the precious metals are one of the most tangible things a nation has in its economic arsenal for trade in times of last resort. Our government knows that. Do you?
1) Gold acts as the perfect sponge for money/liquidity. Money put in gold does not really affect the broader economy like money going into oil or treasuries does; money put into Gold goes absolutely no where except into Gold. This is the primary reason governments do not like Gold in deflationary periods because it acts a dampner on their money printing purposes.
2) You can easily assess the value of another nation's currency by how much gold they have. If I have 400 tons with $1T in circulation and you have 800 tons with $1T in circulation, it's pretty easy to determine that your currency should be worth more than mine. With floating fiat currencies, determing actual, absolute levels of trade on a global basis is difficult at best.
3) You can always trade your gold to another nation for goods or services required. For example, a war or some oil.
4) Whether we want to admit it or not, ultimately a nation's status is based on two things -- what they have already and what they can produce. We can talk all day about intangible things like "free speech" and "rule of law" but at the end of the day, and I admit only over the short run, what a nation has and what it can make are most important in determining its next 5 years. Gold is something that productive, wealthy nations should have. Gold is something that Gold producing nations can extract. The value of their nations [currency] is intrinsicly higher than those who have not. That value ultimately largely determines who would be victorious in any sort of battle -- whether it be trade or military.
My country, The United States of America, at least on paper (if you want to believe some of the consipiracists who say the Gold out of Fort Knox has been moved or sold, be my guest), has the world's largest Gold reserves -- far and away. I also find it interesting that the United States in the past 60 years has not really been a net seller of gold either. What does that really tell you about what the US Government truly belives about Gold?
When push comes to shove, the precious metals are one of the most tangible things a nation has in its economic arsenal for trade in times of last resort. Our government knows that. Do you?
Wednesday, November 11, 2009
Another classic CNBC quote: “Dollar back to normal pre-crisis levels”
So the dollar broke below another critical support level at 75 and set another 15 month low at 74.7 intraday today… It closed back above support at 75 but that is not the point.
The folks on CNBC actually had some bear on and he was talking about the dollar crisis. After he got off the air all the CNBC cheerleaders, oops I mean commentators said… “I am not sure why people are worried about the dollar just getting back to “pre-crisis” levels.” I heard the same thing on Fast Money a few days back.. When Tim Seymour was asked what he thought about the dollar falling he said it is nothing to worry about because all the dollar is doing is getting back to “normal, pre-crisis” levels at 72.
So that is the manta on CNBC now… When anything bad is said about the dollar falling it is ok because the dollar is just getting back to “normal”. These pump monkeys must think we are all idiots.
I have highlighted some charts to illustrate CNBC’s idea of “Normal levels”. Notice my red circles. First the 10-year US dollar index chart:
http://img687.imageshack.us/img687/7430/10yearsdollar.png
Now the 30-year US dollar index chart: http://img39.imageshack.us/img39/1893/since1981.png
(Note: If you cannot make out this chart it starts at 1981 and the peak in 1985 is at an amazing 164.72)
72 is NOT the NORMAL level for the US dollar. It is the ALL TIME HISTORICAL LOW.
Do these pump monkeys have short memories? Why was oil at $147 in 2008?? It is simply because the dollar broke below 72 and looked like it had no support and people PILED into every ANTI-dollar trade. Sorry peak oil folks, this is what I strongly believe. Why is oil over $80 now even though we have ran out of places to store it in the U.S. and demand is next to nothing? Because the dollar is at 75 and people are piling into the SAME ANTI-DOLLAR trades.
If the dollar were to break 72 again Oil would be back to $140 even without any demand. This is not a healthy situation and it sure as hell is not "NORMAL".
PS: If you are curious about my opinion of the stock market even though the dollar has been turned into confetti my bearish view remains the same. The Russell 2000 peaked WAY back in September and still has never taken out that high. Even as the S&P, Dow and Nasdaq make new highs every day on thin volume and narrow leadership the Russell is actually FALLING away from its CLEAR double top. If IWM (Russell 2000 index) breaks out I will be a believer for the short term yet again. The top 2000 stocks is a much better index for charting breakouts and breakdowns because it is the real measure of “the market”.
See the chart below:
http://img32.imageshack.us/img32/2833/iwm.png
Copied from my blog at
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=292310&t=01001808419327792238
The folks on CNBC actually had some bear on and he was talking about the dollar crisis. After he got off the air all the CNBC cheerleaders, oops I mean commentators said… “I am not sure why people are worried about the dollar just getting back to “pre-crisis” levels.” I heard the same thing on Fast Money a few days back.. When Tim Seymour was asked what he thought about the dollar falling he said it is nothing to worry about because all the dollar is doing is getting back to “normal, pre-crisis” levels at 72.
So that is the manta on CNBC now… When anything bad is said about the dollar falling it is ok because the dollar is just getting back to “normal”. These pump monkeys must think we are all idiots.
I have highlighted some charts to illustrate CNBC’s idea of “Normal levels”. Notice my red circles. First the 10-year US dollar index chart:
http://img687.imageshack.us/img687/7430/10yearsdollar.png
Now the 30-year US dollar index chart: http://img39.imageshack.us/img39/1893/since1981.png
(Note: If you cannot make out this chart it starts at 1981 and the peak in 1985 is at an amazing 164.72)
72 is NOT the NORMAL level for the US dollar. It is the ALL TIME HISTORICAL LOW.
Do these pump monkeys have short memories? Why was oil at $147 in 2008?? It is simply because the dollar broke below 72 and looked like it had no support and people PILED into every ANTI-dollar trade. Sorry peak oil folks, this is what I strongly believe. Why is oil over $80 now even though we have ran out of places to store it in the U.S. and demand is next to nothing? Because the dollar is at 75 and people are piling into the SAME ANTI-DOLLAR trades.
If the dollar were to break 72 again Oil would be back to $140 even without any demand. This is not a healthy situation and it sure as hell is not "NORMAL".
PS: If you are curious about my opinion of the stock market even though the dollar has been turned into confetti my bearish view remains the same. The Russell 2000 peaked WAY back in September and still has never taken out that high. Even as the S&P, Dow and Nasdaq make new highs every day on thin volume and narrow leadership the Russell is actually FALLING away from its CLEAR double top. If IWM (Russell 2000 index) breaks out I will be a believer for the short term yet again. The top 2000 stocks is a much better index for charting breakouts and breakdowns because it is the real measure of “the market”.
See the chart below:
http://img32.imageshack.us/img32/2833/iwm.png
Copied from my blog at
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=292310&t=01001808419327792238
Thursday, October 22, 2009
Only 2 Billion of government treasury purchases remain.
Ironically the start of this bear market rally was kicked off when the Fed started its “Quantitative Easing” program. In layman’s terms this means the government printing money to buy treasuries. It is one of the only times in our monetary history that we have done such a thing and if you have been reading this blog for a long time you know that I call this the “Big Red Button” or the “Nuclear Option”.
I said for a few years that they would only use the “Nuclear Option” if their backs really got against the wall and there was no alternative. I also said that at some point they would do it even though it would be horrible for our economy. Well in March that is exactly where they were and as I expected they hit that button.
In all, the program was somewhat successful in holding rates down for the short run. The 10-year bond was trading at 3.00% when the program was announced. (up from 2.00% at the lows) Even with the massive rally in stocks which would usually cause a large flight from bonds the 10-year today is only trading at 3.40%. This is because the Fed was pouring in billions in purchases every week from today since March.
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEib-wRSpEUe8bXyGLpqf9rQCIUL68hhhSzBO6ZOKNTdHbIEi_uMZJHPNd7GArux1iTsfbTukPQ_atCi86JZA54d56Eu17roT-mOkxCHHt-K-P-F9vmkFl5YTd_gpmzx1k2qkLRbqGNWY2g/s1600-h/FedTreasuryPurchases.jpg
Now I see this story on Calculated Risk which says that with the Fed’s 1 billion in purchases yesterday they are left with only 2 billion of the initial 300 billion.
http://www.calculatedriskblog.com/2009/10/fed-treasury-purchases-just-2-billion.html
Back in May 2009 I wrote a blog here called:
“Dollar or the bond market Benny, your choice…”
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=198854&t=01001808419327792238
This is what I said at that time, this is when rates started to rise and the dollar first really started to fall.
"
The people selling the bonds were selling to force the Fed to buy more. Whenever a market participant makes a bluff like “Paulson’s Bazooka” from last year the MARKET CALLS THE BLUFF. That is why the yields are rising.
The people selling the dollar on the other hand, were selling because they are AFRAID that the Fed will print money to buy more.
So now the Fed has a choice.
1. Buy more bonds now and continue the dollar obliteration but hold down yields a bit..
2. Don’t buy more bonds and watch the dollar strengthen but yields rocket higher.
Because I think they are going to chose #1 I covered most of my shorts in real life… I went heavily short at 888 back on April 30th and today we closed at the same exact level (888). I still think stocks could be headed a GREAT DEAL lower but I thought the more “sure thing” at this point was gold and gold stocks yet again. Plus those ultrashorts BLOW and I don't like using puts. I bought a lot of gold on the break of $930 a few days ago and some of my favorite miners at the same time.
“
That worked out well, unfortunately I did not have the conviction to hold all of those positions till today but I always hold a good amount of gold.
Anyway….
So now we are at an interesting crossroads. Really I should have saved the title “Dollar or the bond market Benny, your choice…” for today’s post. When I wrote that post the Dollar was trading ABOVE 80 on the USDX and the 10-year bond rate was only 3.20%
Today the dollar is down below 75 and even with all the billions in buying from the Fed rates are just a bit higher at 3.40%. On one had the dollar crash has to be getting out of hand even in the Fed’s mind at this point. We have Oil well over $80 even though there is practically no demand for it because of this dollar issue. On the other hand the real estate market has not turned and higher rates at this time would still be disastrous for this economy.
Because of these issue I believe the Fed will wait before this issue a second Quanitative Easing program. They are going to spend their last 2 billion next week and see how the auctions go without them buying. I think the auctions will go poorly but if stocks were to roll over a bit the “flight to safety” could keep the bond market from outright crashing.
Either way if the Fed does not issue a second program yields are going to go higher unless stocks crash (down more than 30%). Even with a stock market crash I don’t see the 10-year ever getting to it’s December 2008 low yield mark of 2.00% where I called the bottom.
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=120472&t=01001808419327792238
The only way that is going to happen is if they hit the “Big Red Button” again. If they were to do that though I believe we truly would be at the endgame for our currency. Seriously if they were to issue another 1 trillion MBS/Treasury purchase program I would be joining the camp of the hyperinflationists. Currently I am still solidly in the camp of the stagflationists (the guys who are winning).
Because I think they know at least as much as I do I believe they will hold off on a second Quantitative Easing program and we will get to see the TRUE treasury market over the next few months.
Let’s hope we don’t have to see what happens if their back gets to the wall again.
I said for a few years that they would only use the “Nuclear Option” if their backs really got against the wall and there was no alternative. I also said that at some point they would do it even though it would be horrible for our economy. Well in March that is exactly where they were and as I expected they hit that button.
In all, the program was somewhat successful in holding rates down for the short run. The 10-year bond was trading at 3.00% when the program was announced. (up from 2.00% at the lows) Even with the massive rally in stocks which would usually cause a large flight from bonds the 10-year today is only trading at 3.40%. This is because the Fed was pouring in billions in purchases every week from today since March.
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEib-wRSpEUe8bXyGLpqf9rQCIUL68hhhSzBO6ZOKNTdHbIEi_uMZJHPNd7GArux1iTsfbTukPQ_atCi86JZA54d56Eu17roT-mOkxCHHt-K-P-F9vmkFl5YTd_gpmzx1k2qkLRbqGNWY2g/s1600-h/FedTreasuryPurchases.jpg
Now I see this story on Calculated Risk which says that with the Fed’s 1 billion in purchases yesterday they are left with only 2 billion of the initial 300 billion.
http://www.calculatedriskblog.com/2009/10/fed-treasury-purchases-just-2-billion.html
Back in May 2009 I wrote a blog here called:
“Dollar or the bond market Benny, your choice…”
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=198854&t=01001808419327792238
This is what I said at that time, this is when rates started to rise and the dollar first really started to fall.
"
The people selling the bonds were selling to force the Fed to buy more. Whenever a market participant makes a bluff like “Paulson’s Bazooka” from last year the MARKET CALLS THE BLUFF. That is why the yields are rising.
The people selling the dollar on the other hand, were selling because they are AFRAID that the Fed will print money to buy more.
So now the Fed has a choice.
1. Buy more bonds now and continue the dollar obliteration but hold down yields a bit..
2. Don’t buy more bonds and watch the dollar strengthen but yields rocket higher.
Because I think they are going to chose #1 I covered most of my shorts in real life… I went heavily short at 888 back on April 30th and today we closed at the same exact level (888). I still think stocks could be headed a GREAT DEAL lower but I thought the more “sure thing” at this point was gold and gold stocks yet again. Plus those ultrashorts BLOW and I don't like using puts. I bought a lot of gold on the break of $930 a few days ago and some of my favorite miners at the same time.
“
That worked out well, unfortunately I did not have the conviction to hold all of those positions till today but I always hold a good amount of gold.
Anyway….
So now we are at an interesting crossroads. Really I should have saved the title “Dollar or the bond market Benny, your choice…” for today’s post. When I wrote that post the Dollar was trading ABOVE 80 on the USDX and the 10-year bond rate was only 3.20%
Today the dollar is down below 75 and even with all the billions in buying from the Fed rates are just a bit higher at 3.40%. On one had the dollar crash has to be getting out of hand even in the Fed’s mind at this point. We have Oil well over $80 even though there is practically no demand for it because of this dollar issue. On the other hand the real estate market has not turned and higher rates at this time would still be disastrous for this economy.
Because of these issue I believe the Fed will wait before this issue a second Quanitative Easing program. They are going to spend their last 2 billion next week and see how the auctions go without them buying. I think the auctions will go poorly but if stocks were to roll over a bit the “flight to safety” could keep the bond market from outright crashing.
Either way if the Fed does not issue a second program yields are going to go higher unless stocks crash (down more than 30%). Even with a stock market crash I don’t see the 10-year ever getting to it’s December 2008 low yield mark of 2.00% where I called the bottom.
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=120472&t=01001808419327792238
The only way that is going to happen is if they hit the “Big Red Button” again. If they were to do that though I believe we truly would be at the endgame for our currency. Seriously if they were to issue another 1 trillion MBS/Treasury purchase program I would be joining the camp of the hyperinflationists. Currently I am still solidly in the camp of the stagflationists (the guys who are winning).
Because I think they know at least as much as I do I believe they will hold off on a second Quantitative Easing program and we will get to see the TRUE treasury market over the next few months.
Let’s hope we don’t have to see what happens if their back gets to the wall again.
Wednesday, October 21, 2009
Outside Day! Bears take over?
Outside Day:
"Outside days can occur frequently on daily charts. The secret of the outside day is the bigger the better and it has more meaning if found at the end of a trend.
The outside day (OD) should completely encompass the previous day. It must have a higher high than the previous day and a lower low than the previous day.
One of the most important things about this pattern is that the bar closes in the opposite direction of the trend. If the trend is down the close on the OD must be near the high or in the upper part of the bar. The opposite is true of the up trend. The OD may still work if this is not the case but my research show that it is more effective if it does close in the opposite direction."
Stole this from definition from:surefire-trading.com
We even went slightly above all the levels everyone was calling for as the top to hit their stops. Classic market action.
Today's outside day has a range from 1101 to 1080, which is a MASSIVE range. Not to mention we were at key resistance in October (traditionally weak time for stocks) and over 20% above the 200 day moving average AND to top it all off we closed near the lows.. I have not even gotten into the fundamentals but from a purely technical standpoint today was the “waterloo” day for the bears.
The only thing that could have made this better is if we closed below support at 1080… (near where all the bears were calling the top. That old resistance is now support.)
We held this support level into the close. Also volume was not as high as it should have been given the way the market traded.
Still, this massive an outside day, taking into account all of the other factors already stated make today’s reversal look VERY SIGNIFCANT INDEED.
"Outside days can occur frequently on daily charts. The secret of the outside day is the bigger the better and it has more meaning if found at the end of a trend.
The outside day (OD) should completely encompass the previous day. It must have a higher high than the previous day and a lower low than the previous day.
One of the most important things about this pattern is that the bar closes in the opposite direction of the trend. If the trend is down the close on the OD must be near the high or in the upper part of the bar. The opposite is true of the up trend. The OD may still work if this is not the case but my research show that it is more effective if it does close in the opposite direction."
Stole this from definition from:surefire-trading.com
We even went slightly above all the levels everyone was calling for as the top to hit their stops. Classic market action.
Today's outside day has a range from 1101 to 1080, which is a MASSIVE range. Not to mention we were at key resistance in October (traditionally weak time for stocks) and over 20% above the 200 day moving average AND to top it all off we closed near the lows.. I have not even gotten into the fundamentals but from a purely technical standpoint today was the “waterloo” day for the bears.
The only thing that could have made this better is if we closed below support at 1080… (near where all the bears were calling the top. That old resistance is now support.)
We held this support level into the close. Also volume was not as high as it should have been given the way the market traded.
Still, this massive an outside day, taking into account all of the other factors already stated make today’s reversal look VERY SIGNIFCANT INDEED.
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