Friday, September 13, 2013

Gold Mines- Past and Present

Hope you find this as fascinating as I do.

Volume Off the High- 9/12 Trading Day Edition

A hand full of names here.

High Volume High- 9/12 Trading Day

A few high volume highs on an overall weak day

Volume Down With Demand, Expect Volatility- Price/Volume Heat Map for 9/12 Trading Day

We will have to see have the next few days progresses. Supply won out the day in yesterday's trading, not only as the value of the S&P 500 decline by about 30 basis points, but as the demand apparently withered, as shown on the price/volume heat map below.

That said, overall volume levels were light. I would suspect that barring any major news events, that market volumes will remain on lighter side until September 18, when the Fed answers the will they, won't they, and by how much questions around the taper question. In any event, low levels of liquidity will also pull up the volatility of prices. We should probably expect wide price swings over the next few days.

Elvis (Voyager) Has Now Left the Building

Amazing to think that no matter what happens to us as species, something of us will exist out there essentially forever.

Or Nature writes

“This is a milestone,” says Ed Stone, a physicist at the California Institute of Technology in Pasadena, who has been the project scientist for the Voyager 1 and 2 spacecraft since 1972, five years before their launch. Voyager 1’s entry into interstellar space “ranks with circumnavigating the globe and the first steps on the Moon,” says Stone, who was not involved in the latest study.

The research is based on measurements of the ionized gas, or plasma, through which the spacecraft travels. The frequency at which the plasma vibrates is a sensitive indicator of its electron density, which is predicted to be about 100 times higher in the cold interstellar medium than it is within the warmer bubble of the heliosphere.

Gurnett and his collaborators calculate that recent increases in electron density found by Voyager 1 match the predicted density of the interstellar medium. The findings, combined with other spacecraft data, indicate that Voyager 1 left the heliosphere on or about 25 August 2012, when the craft was 121 astronomical units (18 billion kilometres) from the Sun.

Besides the incredible science behind the milestone, it is also great to think that William Shatner is one step closer to meeting Veger on its trip to Earth. 

Thursday, September 12, 2013

The Austrian Business Cycle, Marc Faber, and Money Supply

After wacthing the video/reading the article, take a look at my recent posts on money supply. Or you could take at the St Louis Fed site. Money supply (the taper) is slowing.

By Andrew Moran in the Digital Journal
New York - Marc Faber is known as both a bear on the United States economy and a contrarian investor. Echoing the sentiments of other libertarian investors and adherents of Austrian economics, a crash in the market is imminent.
For months now, administration officials and some financial experts have been claiming that the United States economy is recovering from the Great Recession – or economic collapse, however you look at it.

Not every investor or realist, though, agrees with that assessment, including legendary investor and publisher Marc Faber. The editor of the Gloom, Boom & Doom Report spoke with CNBC on Wednesday and noted that a great plunge is imminent in the stock market. Despite a failure of a correction yet to transpire this year, Faber believes that a correction is going to happen and lows seen in November last year will appear.

Overall, he feels that U.S. equities is a better sell than buy. Faber listed three reasons as to why the economy is not as rosy as some might depict it. One of them is that since emerging markets have been outperformed by the U.S. over the past month or so, it cannot last and equities could experience harm from their costliness. “When emerging markets go down and the S&P goes up, the asset allocators say, ‘Do I want to buy the S&P near a high, or do I venture back into emerging economies that are down 50 percent from their highs, like India or Brazil and so forth?’ So you understand that the pool of money can flow back into emerging markets,” explained Faber. Reiterating what he stated last week, the Middle East disaster will contribute to the decline of the stock market.

With President Barack Obama gaining support from high-ranking Republican and Democratic officials in launching a strike against Syria, it is quite likely that war in Syria will take place. This is bad news for the market. “The Middle East is a powder keg, and it will go up in flames because the Western imperialistic powers, they still meddle into the local affairs,” Faber said. “It’s going to be a disaster. And it’s going to strike from Syria and Egypt into Saudi Arabia, into the Emirates eventually, and so forth and so on, and you’re going to have a huge mess.”

The final reason has to do with interest rates. Despite the Federal Reserve keeping interest rates artificially low, various data and charts suggest that they are steadily creeping upwards and could be a significant factor in the stock market as well as public and private debt. Faber said that interest rates are no longer a “tailwind” but rather “a headwind.” In the end, the market is due for a correction, according to Faber.

 Fed Data & Austrian Economics

The Austrian Business Cycle Theory has shown that slowing down the money-printing process is usually followed by a great crash in the stock market. Writing in “America’s Great Depression,” legendary Austrian economist Murray N. Rothbard highlighted that from 1921 until Black Tuesday, the Fed expanded its money supply in order to create a boom in the stock market. However, when it began to taper off, the market suffered.

Data from the Federal Reserve shows this to be true even in later years. Prior to the stock market crash in October of 1987, the M2 Money Stock declined. Before the economic collapse in 2008, the same money supply data showed it fell dramatically after being increased substantially. Since the first quarter of the year, the money supply has yet again been falling. Why does this happen? Well, it’s very simple, except for Keynesians: traders, investors and the stock market become dependent on stimulus by the central bank.

In addition, the Fed’s regulation of the market through artificially low interest rates and excessive money printing contribute to the immense slowdown and crash in the market. “The minute they lose confidence that the central bank can print our way into permanent salvation they will start selling bonds and others will sell the bonds and there will be no bid,” said David Stockman, former budget director under the Reagan administration. “It gets liquidated. This is all debt on debt; nobody owns the bond they borrowed 98 cents to buy.”

For years, Austrian economists have been explaining that a central bank constantly intervening itself into the market creates malinvestment and distortion and can send the wrong signals to businesses, investors and savers. Indeed, there doesn’t seem to be any relent in the future as Larry Summers or Janet Yellen both represent the status quo that Ben Bernanke has practiced for the past seven-plus years. Due to these reasons, should the U.S. “end the Fed?” Indubitably.

High Volume High- 9/11 Trading Day Edition

Would have thought there would have been more high volume highs

Volume Off the High- 9/11 Trading Day Edition

A couple names coming off the highs

Learn A Lesson, Go Broke Early- Rogers

Great advice

"It is good to lose money, to go broke at least once, and preferably twice. But if you are going to do it, do it early in your career. Do it early and it is not the end of the world. . . it teaches you how much you do not know." - in Street Smarts

Biderman- Interest Rates Will Continue to Rise/Bubbles Abound

And Yet Another Demand Driven Day- S&P 500 Price/Volume Heat Map for 9/11

Although we see a weakening demand dynamic, demand continues to outweigh supply. This while equity prices continue to gain, as the S&P 500 gained about 30 basis points on a choppy trading day.

Whatever the reason, demand levels pulled back from higher levels in previous tradings. More so, financials, industrials, and telecoms all saw weaker demand on the price/volume heat map despite price gains in each. Noting another divergence, AAPL shares fell by about 5% in yesterday's trading on a disappointing iPhone announcement. The decline in AAPL shares throttled the tech index, despite relatively more upbeat demand, albeit still not above the 50% threshold. The weakest sectors of the bunch was utilities, as higher interest rates spooked investors looking for yield. 

Wednesday, September 11, 2013

Federal Reserve Crisis Solution Flow Chart

All That Glitters Bottoming Process More Complex

The price of gold and the gold-related equities have continued to pull back since hitting near-term highs in or around August 27. This pullback, in my mind, is a constructive trend. Although I would love that if gold/gold equities continued to rise, the pullback is also healthy in that it helps build more dry powder for even higher prices. I think I would be more worried if prices continued to rise without a corrective pullback. Besides, the pullback in price corresponds with a reduction in volume levels. This suggests that pullback is more related to weak hands exiting the market after the run up into the April downdraft. I would not be surprised to see the gold complex hitting the April downdraft multiple times, considering that the energy in the sell-off. The bottoming process looks like it will be complex.

We continue to see more positive leaning results from the timing models. All the models moved away the 0 demarcation in the latest week, primarily due to the pullback in the price of gold in conjunction with an expected increase in the money stock, the latter on regular seasonal patterns. The following show the three timing models with the latest results.

6-Month, current results -0.23

1-Year, current results -0.99

2-Year, current results -1.63

The timing continue to indicate a more constructive environment for purchasing gold and precious-metal related equities. All the while, the the risk gauge remains on the north side of 0, also indicating a positive environment for precious metal purchases.

Risk Gauge, continued positive results

TARP Was to Save Main Street or Will Impose Martial Law

I found this laughable. We will save you or will impose martial law.

while threatening Congress

and now the economy has been on chemotherapy for years, and remember, chemo is a poison.

Duke Global Business Outlook Survey- Third Quarter 2013

Can't say I have followed this survey at all in the past, and I cannot vouch for its usefulness or validity. From what I saw, it does seem interesting

Global Disparity in Manufacturing Strength- A Tale of Two PMI's

You undoubtedly saw the latest print of the Purchasing Managers Index  (PMI) from the Institute of Supply Management. The latest survey results were strong across the board, as the PMI jumped on strong results from new orders and production. This was while customer inventories (a more leading index) fell and exports tracked higher. You can find the full report with all the details here.

ISM August 2013 report

What you did not hear was that global PMI does not reflect the strength in the US. In fact, global manufacturing excluding the US remains flat at best. The following chart shows the US PMI versus the global PMI, excluding the US.

The disparities between manufacturing activity in the US and globally has historically not lasted long and this gap will close. How is the question. My guess is that US activity will cool, and we may see some resurgence in European activity. However, manufacturing sustainability in the emerging market will likely be a wild card, as their economies come under pressure from large current account deficits and currency volatility.

Volume Off the High- 9/10 Trading Day Edition

A host of names coming off the highs on volume.....

High Volume High- 9/10 Trading Day Edition

An expansion in the number of names making new highs on volume on the second day of improved demand dynamics.