World Of Wallstreet

Best Of The Web: Dangerous Side Effects of Ultra-Easy Money, Gary Dorsch

http://www.sirchartsalot.com/article.php?id=117

Ok, I read hundreds of pages of this kind of stuff every week. The above is the best such "piece" I've seen in a while.

The graphs (best viewed in color) clearly show that the correlation between money printing and the stock (and gold) price rise off the March lows. As far as the inflation / deflation debate goes, here's some real facts that very strongly show that inflation is real and accelerating. 

Here's an example of one of something like five very telling graphs. Isn't it cool the way he gets so many different data sets in one graph and what you can learn by seeing them all in one panel?

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Robry's Weekly Take On USA Industrial Activity

Tired of getting opinions on the economy or government spun economic stats and want something based on true facts? I suggest you start tracking Robry's blog (click here). This guy is quite a methodical/gifted number cruncher who models the natural gas market (based on nightly numbers he gets from who knows where) and posts his results on the Investor Village CWEI board every night (click here for the first of one of his nightly multiple posts). He predicts the natural gas weekly numbers better than any other known source. 

Once a week he posts on his blog what he sees regarding USA factory natural gas consumption (for which he gets nightly numbers). He was the first buy to have actual facts indicating that USA industry had stopped contracting and started expanding. His read has got to be at least 2 weeks (and probably 4 or more weeks) more timely than any other information you can get.

Let me know what you think,

MontyHigh, www.worldofwallstreet.us

FWIW: Hedges Came Off This Morning At 2AM

Lost a bundle on the hedges, but more than made up for it price pops of what was being hedged. 

We are clearly (to me) in some kind of "to the moon" liquidity driven / inflation anticipating / earnings don't matter much market move. Who knows how far it can go, but I bet it can go a long ways as the big banks will all go bankrupt if they can't reinflate the assets underlying the non-performing loans. I'm pretty afraid at what the ultimate outcome of this will be.  

 

I'm back to 100% invested in Jr producing gold miners (well a couple of percent in explorers). Top holdings are GORO.OB, DMM.TO (may lighten as CEO sold some on Friday), OGC.TO, TRY.TO, CGA.TO, APG.TO, SMF.TO and LMA.TO.

 

Obviously this is not for everyone, but the gains to date have been substantial and the 2010 estimated typical price operating cash / flow at $1000/gold is under 3 while the same for comparable well-known miners (such as those held by Northbeach2000) is are around 6. That's my margin of safety, such as it is.

 

Best wishes and do your own due-diligence,

 

MontyHigh, www.worldofwallstreet.us

P.S., I'm finding that I have less of a need to express myself via blogging while my confidence and investing abilities appear to be growing. If you let me know, dear readers, what kind of material you have found to be of value this web site... I will try, out of the high-state of service, to keep that kind of material coming.

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 3%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "New jobless claims drop to 512K, lowest since Jan.... The number of newly laid-off workers filing claims for unemployment benefits last week fell to the lowest level in 10 months, evidence that job cuts are easing as the economy slowly heals."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 480,178 in the week ending Oct. 31, a decrease of 14,216 from the previous week. There were 466,341 initial claims in the comparable week in 2008. "
• My Spreadsheet (click Download 20091015yoy).

Here's my uneducated interpretation - A better than usual data point. Someday soon I expect we'll have a positive year-over-year number. But it still seems to me that initial jobless claims indicate that unemployment is still rising and will continue to rise for some time.

MontyHigh, www.worldofwallstreet.us

P.S., its not worth mentioning because it happens every week, but even though things are getting worse (initial jobless claims indicate that unemployment is still rising), AP insists on assuming that things are getting better.

Jim Sinclair's Dollar Countdown Ends Around November 7, 2009

Jim Sinclair has been talking about a "Countdown To The Implosion Of The Dollar" for quite a while (click here).

Here Jim Sinclair reveals what his "dollar countdown" has been about:

"When Push Comes To Shove

Posted: Oct 27 2009     By: Jim Sinclair     

Dear CIGAs,

October 30th the Fed is planning to curtail QE regarding Treasury auctions.

November 4th is the FOMC meeting most likely to contain discussions of timing for the exit from economic stimulation.

November 7th is the G20 meeting at which BRIC nations will anticipate a cessation of QE and a commitment to establish a currency alternative to the US dollar...

So fasten your seat belts because our long discussed rock and hard place will be reached shortly.

Can the Fed provide the Chinese with their demands of middle July at the USA/Chinese Washington Financial Summit in a deal to buy US Treasuries so as to let the Fed back off their US Treasury instrument auction QE?"

I thought it was interesting to finally find out what he has been talking about with his count down. I have mixed emotions about the guy, but one of the things I like is that he has made specific, testable calls. On the down-side, his "This Is It" and "This Is It And It Is Now" calls have pretty consistently been made at temporary gold price highs (when fear is running at a fever pitch). The way to deal with the gold market is to buy when the fundamentals remain good but when sentiment is bad (like yesterday). Buying breakouts has not seemed to work well (particularly for short plays with tight stops).

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 9.6%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "First-time jobless claims drop less than expected... The number of people claiming jobless benefits for the first time dropped less than expected last week, evidence that the labor market remains weak even as the economy is recovering."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 492,456 in the week ending Oct. 24, an increase of 32,026 from the previous week. There were 449,389 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091015yoy).

Here's my uneducated interpretation - No news here. Initial jobless claims were bad again this week and still 100K over the same point in time for 2002. Mid-october 2002 was the Internet Bubble crash's stock-market low and unemployment didn't start falling until Q2 2003 (see graph below). Seems to me that initial jobless claims indicate that unemployment is still rising and will continue to rise for some time. Based on the economy, the stock market is due for a correction, but I'm expecting it to rise on sentiment/psychological factors thru the end of the year. 

 
MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Commerce Department New Home Sales Down 11.4%, Median Price Down 9%

Here's my quick look at today's Commerce Department New Home Sales:

• Associated Press Headline And Lead: "New home sales fall 3.6 percent... Sales of new U.S. homes dropped unexpectedly last month as the effects of a soon-to-expire tax credit for first-time owners started to wane." 
• Department Of Commerce News Release: click here.
• Key Numbers: New Houses Sold Unadjusted: 31,000, Year Ago: 35,000, Year Over Year %: 11.43. Median Price Unadjusted: $204,800, Year Ago: $225,200, Year Over Year %: -9.06.

Here's my uneducated (also not not spun by guys trying to make you a sucker) interpretation - A bad set of numbers which indicate that perhaps the so-called housing "recovery" is over. I think the housing market is a big illiquid market that trends heavily, so I'll stick with year-over-year numbers for now. I think next month's numbers will be especially telling.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Census Department Durable Goods Manufacturers New Orders Down 19%

Here's the summary for today's Census Department monthly Durable Goods Orders and Shipments report:

• Associated Press Headline And Lead: "Durable goods orders rise 1 percent in September... Orders to U.S. factories for big-ticket manufactured goods rose in September as the biggest jump in demand for machinery in 18 months offset weakness in commercial aircraft and autos."
• Labor Department News Release: click here. 
• Key Numbers: Census Dept Durable Goods Manufacturers New Orders Not Seasonally Adjusted: $176,505,000,000, Year Ago: $213,675,000,000, -17.40%. Census Dept Durable Goods Manufacturers Shipments Not Seasonally Adjusted: $185,889,000,000, Year Ago: $219,940,000,000, -15.48%
• My Spreadsheet (click Download 20091028yoy)

Here's my uneducated interpretation - Unadjusted shipments and orders remain down hard year-over-year, but are getting better year over year slowly. The orders to shipment ratio remains under 100% meaning orders are not coming in fast enough to allow shipments to grow. This is bearish report for the economy, although durable goods are a lagging indicator.

Looking at the graph below, you see that the shipments (year over year) and orders (year over year) are still down hard but improving and are better than the net shipments ratio. I expect that this "improvement" will continue for sometime converging on the net shipments ratio. This will indicate a steady contraction of the economy until they all close in on zero. Based on the current rate of change that will about about January 2011.

AP Spin - no matter how bad the numbers are, AP persists in their spin that some kind of recovery is underway. They refuse to admit the possibility that the economy is still (and could for some time) continue to contract.

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Puplava Gets Bullish With Peru Saxena

I'm probably like you. I've been listening to (and reading) a lot of really bearish stuff for a long time.

I'd say that Puplava's interview with Peru Saxena from this weekend (click here or here) provides a nice contrast which lines up pretty nicely with my previous "Chartworks" post. The interview starts 18 minutes 15 seconds into the mp3. The first two minutes are definitely worth listening to. The part about the yield curve (near the end) which covers when will the "jig be up" for the rally is really, really valuable I think. This is really a good interview, IMHO. Only 11 minutes long. 

MontyHigh, www.worldofwallstreet.us

Weekend Chartworks: Changing My Macro Outlook

Here's what I see in the above S&P chart covering the crash and what follows:

• The absence of volume between 1050 and 1200 operates basically like a gap. There's nobody who can get a sense of relief, psychologically, by selling anywhere in that area. Technically this makes me expect the rally to continue until we get to some resistance (volume of buyers who have been trapped as losers and can feel like they "broke even" by selling.
• At 1222 is the last fibonacci and also the resistance just discussed. I expect serious resistance at that point.
• Generally the chart looks pretty bullish above the 50 and 200 day moving averages.
• The RSI doesn't look overbought at all.
• The volume, while not high, seems steady from June onwards.
• A rising stock market has been good for commodities and precious metals.
• Overall this looks like a pretty bullish chart to me at least for another 10% or so. Party on Garth.

The US dollar is in a nice, steady downward channel that pretty much lines up with the 50-day moving average. Its oversold according to the RSI and could jump up to the top of the channel and the 50-day, but the downward trend looks pretty well established. A falling dollar is good for commodities and precious metals.

The baltic dry goods weekly chart seems to have bottomed. Indicates that global industrial activity has bottomed and is picking up. 

The CCI commodities index has broken out to the upside and is targeting a further rise of another 10% of so. At this point, prices are already up 30% year over year. If/when the target is achieved prices could be up 50% (or more) year-over-year. This, plus the falling dollar, plus the stock market rising on injected liquidity (not earnings) together paints a picture of rising inflation. More about this later.

The copper chart is a really nice looking chart at this point (ok, I've been wrong about copper):

• Breakout above the psychologically significant $3.00 point after consolidating a couple of months. This breakout took place during what is seasonally a weak point in the calendar year.
• It also has a confirmed breakout about the 50-day moving average and is securely above the 200 day moving average.
• The RSI is not overbought.
• By the way, both Zinc and Lead (Pb) are back above $1.00.
• So metal prices are back at the point where miners can make serious profits. 
• I expect I'll buy, in my mother's account, some PCU (nice dividend yielding copper producer).I bought some Fortuna Silver (FVI.TO) this week (a Peruvian silver miner with a lot of zinc and lead byproducts) [hat-tip to Inca Kola News (IKN) news letter which has been recing this stock for quite a while).

The Gold / Silver ratio is trending downward nicely residing securely under the 50 and 200 day moving averages. A falling gold / silver ratio indicates an absence of fear (observe what happened during the end of 2008 when fear was rising). This is occurring while both gold and silver are rising. Together this is another "inflation is coming" indicator.

What can I say about the gold chart that hasn't already been said. Here's some notes from the weekly chart:

• Gold has a confirmed breakout above its all time high with three weekly closes above that high.
• The pattern preceding this breakout is a flat-top triangle formation which targets $1400. I don't know if it will go there or how long it will take, but that is what the chart says.
• The 10-week moving average (and the corresponding 50-day moving average) are at $1000. That leaves a tonne of support at $1000.
• On the daily, tick-by-tick 24-hour a day action I see buying coming in on every dip.
• Reports indicate that the Indians are buying at roughly the $1050 price and we believe the Chinese government is accumulating as much as it can without driving up the price. That leaves immense support for gold.
• Pretty darn bullish.

The HUI to Gold ratio is trending up nicely with the 50 day moving average as support and residing well above the 200-day moving average. This means that large-cap gold stocks are providing leverage (as they "should") and are rising faster than the price of gold. Junior producers / near producers (such as my favorites: Gold Resource Corp, Dynasty Metals And Mining, Troy Resources, Oceana Gold and Apollo Gold) have been enjoying even higher leverage. 

Uranium had an excellent week (and month of October) breaking out above the 200-day moving average, 50-day moving average (earlier this month) and a multimonth trendline. I don't hold any Uranium miners, but perhaps I should.

The crude oil chart looks a little overbought but is trending upwards very nicely (just like the rest of the commodities). I'm not an expert on this but I hear that the short-term fundamentals are not really that good with a decent amount of excess capacity and brimming inventory levels. If my perception is right it fits right into my overall macro outlook.

So, my overall macro outlook is as follows:

• The commodity, inflation trade is "on" with the charts for everything that does well with inflation (commodities, stocks, precious metals...) trending upwards nicely (and the US dollar trending downwards nicely). It looks like it can drive the S&P 500 at least another 10% higher and then we'll see what happens next. The trend is definitely on with no obvious signs in the charts that I see pointing to a reversal.
• I know that there is a strong argument that the USA economic outlook is really dismal, but it appears to me that the rest-of-the-world has bottomed and is recovering (or at least that all that liquidity is flowing into commodities).
• I think that my Jr producer gold holdings (I know, I'm a broken-record) are a great place to be with excellent upside based on pure value (asset and P/E) at anything close to current gold prices and with a very bullish technical and fundamental outlook for the price of gold.
• Although the charts say the inflation trade is "on" and I may start edging back into base metals, I'm more confident with the gold Jrs based on valuation and the technical and fundamentals supporting the price of gold.

Hope you found this helpful. I found it quite helpful for myself. The charts actually paint a much more bullish picture than I had when I started looking at them today.

MontyHigh, www.worldofwallstreet.us