« About miners and jockeys, Fri., Apr. 13, 2007, 2:02 PM | Main | Cara’s Bull Board, Mon., Apr. 16, 2007, 8:58 AM »
April 14, 2007
Week #15 (2007-04-14) in Review (FINAL)
This was another week of widespread bullish trader enthusiasm restrained somewhat by the continued sell-off of parts of the Financial sector. As long as the Financials sink, so too will the rest of the broad market. It's just a matter of time.
As the G-7 finance ministers and central bankers met in Washington on Friday, they probably took note that the Precious Metals were up +2.5 pct on the day, and they probably thought that stinks. On that score they’d be right on the money too because Potash Corp (POT) was up almost +4.0 pct on the day.
That’s the flip side of the coin. Well actually, that is not a good analogy. It’s more so the downside of printing paper money at excessive rates, so they can blame themselves.
At it was, according to reports, “the G-7 finance ministers pledged to make structural reforms in their own economies to reduce the yawning trade gaps and called on China to do more to introduce flexibility into its currency system, which U.S. manufacturers believe is necessary to curb China's huge trade surpluses. All of the talks were being overshadowed by the World Bank President Paul Wolfowitz controversy and his involvement in a huge pay raise awarded to a close female friend.”
So, the US has needed those other G-7 monetary authorities to help the cause by selling gold to keep the price from zooming to four-digit values. And, I am sure that another one of those structural changes is to reduce their cross currency rates against the $USD, which (as they weaken their own currency by printing more Euro’s, Yen and Pounds) would boost gold prices, which in turn they would try to counter with further gold sales.
But give this concept some extra thought: where, after deciding to fight a war with no new taxes, would the US be today if those other countries didn’t print money as fast as the US? Those other currencies would otherwise be, without doubt, much stronger and the $USD weaker still, and global inflation would be imported straight to the good ol’ USA.
In any case, this issue will not go away until the US economy regains its health, and that’s not going to happen as long as the debt bubble continues to grow.
On the matter of Wolfowitz, it’s a disappointment that a person so capable and accomplished as he is (or appears to be) has seen fit to destroy the confidence of his staff at the World Bank. Leaders on the world stage like Wolfowitz have to realize that they are role models for society, and when their direct staff calls the boss’s personal behavior “shocking”, then it’s time for them to go. This is no longer a matter of the Old Boys Network being able to help the man.
In the INITIAL report on Saturday morning, I wrote, “I will be out for meetings with VIP’s from the Caribbean, and so will not likely finish this report until Sunday morning.”
John then wrote to say, “I hope these VIP's include your Bahamian fishing guide, boat captain, scuba guide, and other Bahamian friends. Enjoy your day.”
Actually, it was the President of a university and the ex-Deputy Chair and CEO of a major Caribbean bank. We are planning something special. More later.
Global Market Summary
International Equities: Except for Japan, most international markets were firm this week. India rebounded.
U.S. Equities : Thanks largely to Friday (especially the afternoon), the broad indices in the US gained between +0.6 pct and +0.8 pct W/W. These indexes are still falling will behind the Precious Metal price increases as traders seem to have things figured out.
Dow 30 : The Dow 30 average lifted +0.41 pct to 12612, which is only +52 points, and there were 17 components up and 13 down this week, but without the hype on Friday afternoon (MRK and MCD for two), the week was listless.
U.S. Sector ETFs: There were eight US sector ETF’s up this week, one flat and one (XLF) down. The Financials are usually the sector rotation leaders, and they have been the worst performers so far this year.
First segment: most influenced by global commodities, forex and capex spending
10: Energy (XLE): #2 (+2.1 pct); $USD-denominated oil
15: Basic Materials (XLB): #3 (+1.1 pct); Metal/gold miners & steelmakers up
20: Industrials (XLI): #5 (+0.6 pct); GE was trying, but few followed
Second segment: most influenced by U.S. consumer spending and economic growth
25: Cons. Discretionary (XLY): #7 (+0.2 pct); Friday saved the week
30: Cons. Staples (XLP): #9 (+0.0 pct); Helped by beer & soda pop
35: Healthcare (IYH): #1 (+2.1 pct); #1 two weeks running; what a crock!
Third segment: most influenced by U.S. interest rates and general economic health
40: Financial (XLF): #10 (-0.2 pct); Even Friday couldn’t save the week
45: Tech (SMH chips): #4 (+0.7 pct); Even spinning Intel won’t help
50: Telecom Service (IYZ): #6 (+0.1 pct); Whoopee; T and VZ both lost over 1 pct
55: Utilities (XLU): #8 (+0.1 pct); Falling bond market still hurts
Bonds: “The US Bond market dropped a little as bond traders don’t know where to turn. Was that US PPI up +1.0 pct M/M (over +12 pct Y/Y) or was it flat? If you can believe the core number, inflation is in check. Outside of Washington, how many believe that story? With a longer time horizon, the bond market isn’t as easily duped.
Commodities: Crude oil (both West Texas and Brent) lifted, and so did $CRB. But the week’s gain in $CRB was modest (+0.10 pct), and only helped by Friday’s trades (+0.2 pct). Traders are now awaiting those measures the G-7 finance ministers and central bankers were talking about in their communiqué. Maybe China will speak first!
Oil & Gas: $WTIC futures gained +2.05/bbl (+3.2 pct W/W) to 66.33, and Brent is close to 70. This is above the upper end of the 55-65 band and is a prime driver of stagflation.
Gold: The Precious Metals continue to gain. $GOLD was up +10.50 (+1.6 pct) on the week to 689.90, making it a rally of +32.60 (+5.0 pct) over three weeks. Reflects the falling $USD, inflation concerns and money printing needed to support the stock and bond markets. But, you heard that here last week too. Next step is to see what the G-7 leaders really decided because $GOLD is rising faster than $USD is falling, which means that the world is quickly losing confidence in the $USD and in government-produced inflation data.
Goldminers: The goldminers rallied hard, gaining about +3.0 pct on two of the three main goldminer indexes. Using W/W closing prices, the $XAU has rallied from 137 to 147 (+7.3 pct) in two weeks. Traders are starting to discount the higher gold prices into the goldminer stocks, which means they are starting to believe that $GOLD will soon move to a higher trading range.
Forex: Once again, the $USD dropped, this week by -0.7 pct and the Euro gained +0.8 pct. That’s even more than last week. Using W/W closing prices, the $USD has fallen from 82.30 to 81.17 (-1.74 pct) in three weeks.
Economics:
Economic calendar for next week.
Cara 100 Stockwatch
Here are the Cara 100 gainers on Friday.
Interactive chart of the top 12 Watch List gainers
Here are the top Cara 100 losers for Friday.
Interactive chart of the top 12 Watch List losers (Interactive link)
Here are the stocks of the Cara 100 for Friday that hit 52-week intra-day highs and lows.
Sector ETF Summary
The tables I show are for ten (GICS) Sector Index Funds (ETF’s) only.
As for this week’s prices, of the ten sector ETF’s I follow here, eight were up this week, one flat and one down. The Financials (XLF) were the back markers on the track. Is it time to black flag them or do they get to go round the track a few more weeks (to help the insiders get off the last of their stock) before the Big Bear pays a long-overdue visit?
The following table is sorted by price performance Week over Week (W/W), i.e. 1W%N.
Table 1: Cara ETF List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. XLE XLB XLI XLY XLP IYH XLF SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.
For a list of components to any ETF, simply go to the AMEX.com web site, and click on ETF’s. I do that frequently because the list of ETF’s growing incredibly fast.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
Individual Sector ETF Review
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
This week, XLE gained +2.11 pct W/W to close Friday at 63.05. Interestingly, the near futures contracts ($WTIC) were up +4.5 pct W/W, so perhaps traders are thinking the oil price may come back down or they are concerned that the US stock market is over-bought.
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Big Oil gained again this week, but there were some losses.
ExxonMobil (XOM) was flat, but some of the foreign-friendlies were up. The latter were more in tune with the increase of West Texas Intermediate and Brent Crude this week.
Canada’s Suncor, Imperial Oil and EnCana gained +6.2 pct, +4.3 pct and +3.8 pct respectively W/W. Petro Brazil gained +3.7 pct.
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
The Basic Materials ETF (XLB) gained +1.09 pct W/W to close at 38.88.
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
XLB Daily data:
Table 3: Senior metals and steel equities:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The steels, including Tenaris (+5.1 pct) and Gerdau (+3.6 pct) and the base metals, including CVRD (+3.8 pct), Teck (+3.4 pct) and Rio Tinto (+3.3 pct) were strong. Gold Fields (+4.0 pct), Goldcorp (+3.4 pct) and Kinross (+3.3 pct) were strong among the gold miners.
I think the fact that Barrick and Newmont shares are relative under-performers is that the big fund managers recognize their weaker fundamentals compared to the Kinrosses, for example, and particularly the reserve replacement issue.
I continue to believe that the best relative value is in smaller miners and developers that will commission new mines in the next five years. That’s the thing about gold and silver; they are storehouses of value whose prices rise constantly over the generations as governments print money that too often does not create offsetting wealth. So the timing of extracting the proven in-situ resource is only a matter of a present value calculation. The value is always there.
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
The Industrials and Transport sector ETF (XLI), aka capital goods producers, managed a gain of +0.64 pct to close at 36.06.
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data:
XLI Weekly data:
XLI Daily data:
Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Most of the US Industrial conglomerates are not doing so well. GE, however, did have a good quarterly report and gained +1.0 pct W/W, aided by Friday’s gain of +0.6 pct.
Last week I wrote that Colin Twiggs (www.incrediblecharts.com) was “looking for a move higher here in the Dow Transports (4917) that will challenge resistance at 5000.” With a close of 5035, he now opines that the Bull market trend was technically confirmed.
Fedex and UPS, however, are not showing signs of recovering (see charts below). It has been a tough two months for FDX and five months for UPS.
Compared to UPS, the FDX chart shows little support below these levels. So, if you are one of those believers in Dow Theory Bull/Bear confirmations of the Industrials by the Transports, or at least feel that the Transport stocks are effective leading economic indicators, I’d keep a close watch on FDX here.
As a Dow Theory technical signal, I no longer look at the Dow Transports. I prefer to look directly at global transporters Fedex (FDX) and UPS (UPS), which had another tough week, and seem to be signaling econ problems in the quarter or two ahead.
I happen to think that the Dow Transports moved higher as and when Warren Buffett’s Berkshire (BRK) made a major acquisition in the railroad industry (10.9 pct of Burlington Northern Santa Fe BNI), and traders hopped aboard other trains and transport.
For short-term traders (ie, unlike Buffett), I’d be careful with BNI here. The average price on a volume basis is about 78 in the past ten months, but the price has zoomed in the past month from 77 to 92 (closing Friday at 90.69).
Sector 25 (consumer discretionary: XLY, IYC and VCR)
The Consumer Discretionary sector ETF (XLY) had a gain of +0.08 pct on Friday, which helped save the week as XLY only gained a wooden nickel (+0.13 pct W/W) to close at 38.90.
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data:
XLY Weekly data:
XLY Daily data:
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Toyota Motor (NYSE:TM), down -3.9 pct W/W, and -6.5 pct over 2 weeks and -10.2 pct YTD, is a reflection only of the falling $USD, which makes exports from Japan more expensive. Toyota makes more money when the $USD is strong.
The TM:$USD pairs trade seems to be popular with the hedge funds. Maybe it reverses next week? Maybe the $USD has a brief rally, taking TM up with it. But, I still see downside ahead for the $USD.
Ebay (NDQ:EBAY) gained +3.2 pct and Whirlpool (NYSE:WHR) was up +2.9 pct on the week. (Cara 100) Ebay has an effective business model, particularly during economic slowdowns and recessions where people tend to sell stuff for money. As for household appliances at this point, I don’t get it.
But the rest of my GICS 25 sector watchlist were losers, especially Brunswick Corp(NYSE:BC), which I gather is having trouble getting Sub-prime financing for its sales of boats.
Brunswick Corp is one to watch. Every few years the boat manufacturing industry goes down the tubes as the economy slows and bank credit tightens. Here's a short article on Brunswick that has a different take.
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
The Consumer Staples sector ETF (XLP) was flat W/W to close at $27.09. This ETF would have been a big loser except for Friday’s gain of +1.92 pct. With the flood of capital going into gold stocks on Friday, I guess other traders got nervous and switched to defense.
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data:
XLP Weekly data:
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
The beer makers (ABV and BUD) were up +3.1 pct and +2.0 pct respectively. The chant D-E-F-E-N-S-E… D-E-F-E-N-S-E goes on. Other than for family gatherings, I cannot recall the last time I bought a case of beer. As I see it, most of us are using red W-I-N-E, for strictly medicinal reasons of course.
You can put Wal-Mart (NYSE:WMT) in either the GICS 25 or 30 classification depending on whether you see people with disposable income willing to dispose of it there or whether you see shoppers there who are trying to get to the end of the month not a dollar short and a day late, hence buying their staples. I chose the latter, but I can understand why others link WMT to the consumer discretionary spending sector.
In any case, WMT was the worst performer in the Dow 30 this week, going down -1.78 pct.
And, clearly a defensive stock, MO (that terrible name Altria, which goes hand in hand with their terrible health destroying cigarettes) was down -1.68 pct, for second worst performer on the week.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
The IYH healthcare ETF was the number one ETF performer in my list of ten for the second consecutive week. How often has that happened? Not too much that I can recall. Something’s up (on Wall Street).
IYH gained +2.11 pct W/W (+5.0 pct over two weeks) to close at 70.08.
As I see it, Wall Street prop desks are clearing their inventory before the May Day Sale. Possibly they are setting up for a blockbuster deal – before May Day!
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data:
IYH Weekly data:
IYH Daily data:
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
In a letter to me entitled “The rebirth of Merck”, I see that at least one reader clued in to what has been happening in stock markets that has caused traders to continuously lose money or at the very least to earn less than they ought to.
Bill, I remember reading your blog during the darkest days of the Merck Vioxx debacle, when the stock was being universally shunned by The Street, that MRK had reached your accumulation point (2004/2005)? ...while at the very same time Jim Cramer was stating emphatically that MRK was a strong sell, and could conceivably disappear under an avalanche of lawsuits (my words). Now Cramer seems quite comfortable with MRK, after a 20+ point move off the bottom, and an excellent two year return for people who were reading your blog back then. And,Goldman Sachs saw fit yesterday to upgrade MRK from a sell after this tremendous run, with a public apology attached to their recommendation. Now, is it time to trim my gains when everybody else is seeing blue skies ahead? Or, hold for the momentum crowd? Thanks. David
Yes, David, you have it right. After two or three years, take your gains. Just study prices when they hit the Accumulation Zone and Distribution Zone. And, don’t worry about trying to pick cycle tops and bottoms.
Btw, did you see the volume in MRK in the 4Q04 with the price below 30 as traders (including mostly professional fund managers) were throwing the stock away as it hit the Cara Accumulation Zone?
So Merck rocketed +10.3 pct on the week, closing at $50.21, and Pfizer was up +3.2 pct and Glaxo +3.3 pct.
But wasn’t this all Wall Street hype on Friday?
On Friday, Bristol Myers jumped +2.8 pct, which made a gain of +1.8 pct on the week. And, Amgen was up +2.4 pct on the day, carrying the stock to a gain of +1.2 pct on the week.
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
The Financials ETF (XLF) dropped –0.17 pct W/W to close at 35.70, which is just 6 cents on the week, but Friday there was a gain of +0.42 pct on the day to save the week from being a really bad one.
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data:
XLF Weekly data:
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Goldman Sachs (GS) and Morgan Stanley (MS) were at the bottom of the performer list this week (losing -0.7 pct and -0.4 pct respectively).
I guess they didn’t like the phone calls from Paulson and Bernanke from Friday’s G-7 meeting.
Isn’t it interesting that the sector leaders were the foreign banks, Deutsche Bank (+3.4 pct), HSBC (+2.4 pct) and Credit Suisse (+1.7 pct)!
The cycle peak seems to have been in February for the HB&B units.
But, just like the chart above, the one below shows how foreign banks (in this case RBC) have been outperforming the US banks.
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
This week SMH gained +0.67 pct to close at 34.47. Do I believe the chips are ready to come out of the dip? No.
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data:
SMH Weekly data:
SMH Daily data:
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
India’s Infosys had a terrific week, adding +6.0 pct. The aforementioned Intel gained +4.5 pct. German software giant SAP gained +2.8 pct on the week, but was up +3.1 pct on Friday. Cisco jumped +2.4 pct W/W, but was up +2.7 pct on Friday.
So what happened Friday to boost the share prices of a select few? I don’t see much.
Sector 50 (telecom: IYZ, VOX and IXP)
The U.S. telco sector ETF (IYZ) was also saved by a gain of +0.44 pct on Friday. The whole week was only a gain of +0.19 pct.
Verizon dropped -1.6 pct and AT&T lost -1.1 pct.
A week ago I opined, “If there is to be a break-down in these two stocks, I look to VZ to lead the way (down) on the basis that T has had a stronger RSI and seems to be the trader favorite.
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data:
IYZ Weekly data:
IYZ Daily data:
Sector 55 (utilities: IDU, XLU, and VPU)
The Utilities ETF (XLU) were flat on the week, closing at 40.72 (actually a gain of 2 cents).
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data:
XLU Weekly data:
XLU Daily data:
Bond & Interest Rate Review
US Treasury bonds dropped a little in price this week as the yields lifted +1, +1, +2 and +5 basis points (bp) to 4.91 pct, 4.74 pct, 4.66 pct and 4.74 pct respectively on the 30-year, 10-year, 5-year and 2-year paper.
Note that the spread between the 2-year and 3-month Treasuries has dipped from -30 bp to -10 bp this week from two weeks ago as the T-Bill yield dropped -2 bp from 4.88 pct to 4.86 a week ago to 4.84 this week.
So capital is going quite short-term, signifying concern for capital markets at the moment.
And as the bond market is falling, the inflation hedge TIPS are declining relatively less. This continues to be my rationale that traders are betting on stagflation, not recession and deflation.
The fact that the metals and precious metals prices lifted again this week shows me more of the same.
The TLT dropped -0.72 pct W/W to close at 87.12.
A week ago I wrote, “As you know I have been focusing on (bonds). The question seems to be ‘how low can TLT go?’”
As I wrote last week,
That really is an important question because the lower TLT goes, the higher goes the yield. That higher yield will attract equity traders who seek high fixed income, and it will also cause further problems for the US mortgage and housing industry.So unless the US economy really picks up here and starts to put more money in more pockets and more taxes to government, the Treasury/Fed will have to be printing more money, which will further depress the $USD, bringing more inflation and higher precious metal prices.
And if the $USD continues to drop, the foreign investors of US bonds will say ‘heck with this; I don’t want to be repaid in wooden nickels’. So they’ll sell those bonds before maturity, which will raise yields even more. This is an economic death spiral. Ultimately everything from bonds to stocks to the economy gets sicker until really bad things start to happen – like rising unemployment, higher taxes, higher cost of living, greater need to extract and rely upon past savings, and so on.
I think you can see that the bond market is crucial to the future of America at this point and that its future is inextricably linked to the $USD.
Interest rates and bond yields.
Interactive Daily data charts:
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 4.84 | 4.86 | 4.86 | 4.88 |
| 6 Month | 4.85 | 4.86 | 4.85 | 4.86 |
| 2 Year | 4.74 | 4.70 | 4.69 | 4.54 |
| 3 Year | 4.68 | 4.64 | 4.65 | 4.46 |
| 5 Year | 4.66 | 4.63 | 4.64 | 4.43 |
| 10 Year | 4.74 | 4.71 | 4.73 | 4.51 |
| 30 Year | 4.91 | 4.89 | 4.90 | 4.68 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.57 | 3.57 | 3.60 | 3.51 |
| 2yr AAA | 3.59 | 3.56 | 3.52 | 3.48 |
| 2yr A | 3.56 | 3.65 | 3.53 | 3.57 |
| 5yr AAA | 3.61 | 3.60 | 3.53 | 3.50 |
| 5yr AA | 3.66 | 3.64 | 3.60 | 3.49 |
| 5yr A | 3.72 | 3.71 | 3.65 | 3.57 |
| 10yr AAA | 3.81 | 3.81 | 3.75 | 3.62 |
| 10yr AA | 3.81 | 3.80 | 3.73 | 3.59 |
| 10yr A | 4.10 | 4.03 | 4.01 | 3.93 |
| 20yr AAA | 4.20 | 4.18 | 4.11 | 4.15 |
| 20yr AA | 4.41 | 4.41 | 4.41 | 4.08 |
| 20yr A | 4.26 | 4.26 | 4.15 | 4.01 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 5.13 | 5.10 | 5.06 | 4.89 |
| 2yr A | 5.18 | 5.14 | 5.12 | 4.95 |
| 5yr AAA | 5.16 | 5.13 | 5.13 | 4.87 |
| 5yr AA | 5.24 | 5.21 | 5.19 | 5.01 |
| 5yr A | 5.27 | 5.24 | 5.24 | 5.02 |
| 10yr AAA | 5.46 | 5.44 | 5.50 | 5.10 |
| 10yr AA | 5.47 | 5.45 | 5.51 | 5.37 |
| 10yr A | 5.59 | 5.57 | 5.60 | 5.39 |
| 20yr AAA | 5.94 | 5.93 | 6.04 | 5.76 |
| 20yr AA | 5.89 | 5.87 | 5.90 | 5.68 |
| 20yr A | 6.08 | 6.07 | 6.18 | 5.90 |
Interactive Chart of Interest rates and bond yields.
Fannie (FNM) (-0.7 pct) and Countrywide Financial (CFC) (-0.1 pct W/W) are still losers, basically, I think, for economic reasons at this point. Part of the reason is inflation/higher bond yields and part of it is a slowing economy.
US Bond Funds -- Interactive Monthly Data Charts
SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts
SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
I put a link on the side bar to www.thehousingbubbleblog.com, which seems to offer solid insights as to what really is happening across America with respect to housing and mortgages. Typically these have offered a comfort zone, but that’s not the case at present.
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
I have continuously warned readers they ought to consider the downside of Countrywide Financial in a slowing economy, lousy housing market and rising interest rate environment. CFC is now down -20.1 pct YTD.
Commodities Review
The Commodities Index ($CRB) gained a bit this week +0.33 (+0.10 pct), closing at 317.93. For two weeks now, that is not much of a gain.
The prices of oil, metals and precious metals lifted quite a bit this week. It could be that $CRB moves higher next week, unless the $USD has a bounce.
$CRB (317.93) is now sitting above the (new) 200-day MA line (315.24).
The lower the $USD falls, the higher $CRB will go.
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil:
This week, $WTIC lifted +2.05/bbl (+3.19 pct W/W) to close at 66.33.
Brent Crude (Europe) is now close to 70.
The $WTIC 50-Day Moving Average (from StockCharts) is now 61.17, while the 200-Day MA is 63.64. Hence the current price (66.33) is bullish.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold:
This week, thanks to a bump (+1.50 pct) on Friday, $GOLD gained +10.50/oz (+1.55 pct W/W) to close at 689.90. That’s a bump of +32.60 in three weeks.
The 50-day MA is now at 665.62 and the more important 200-day MA is at 632.11. So $GOLD at 689.90 is very bullish.
All the Precious Metals were on the rise this week.
Not even a booming US Jobs Report the previous Friday or the +1.0 gain M/M in the US PPI, could hold back the rising price of precious metals. That’s because traders know that the Fed cannot raise rates at this point for fear of destroying the US housing and mortgage industries.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
This week, $SILVER gained $0.35 (+2.55 pct) to close at 14.09. That’s a gain of +0.75 in three weeks. Talk about a silver bullet!
The 50-day MA is 13.60 and the 200-day MA at 12.59, so the current price at 14.09 is now technically strongly Bullish.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
$PLAT gained +19.90 (+1.57 pct) W/W to 1285.10. It closed the week on March 10 (my wife’s birthday) at 1208.00 (+6.4 pct). I tell her to stick to silver (she won that silver bar at PDAC-06 you know) because $SILVER has rallied +8.6 pct since her birthday.
The 50-Day MA for $PLAT is now 1229.73 and the 200-Day MA is 1189.52, so $PLAT is solidly Bullish.
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
Re $PALL, you know that a week ago in this space I wrote,
To me, the ($PALL) chart still looks ready to break out on the upside after trading in a tightly controlled band for the past few weeks. The recent short-term cycle high of 359.72 or the long-term cycle high of 362.43 are close enough to be taken out any day now.$PALL lost -0.51 (-0.14 pct) W/W to close at 356.80, which is a small bit. The Thursday trade was a gain of +0.65 pct.
How good is that! This week $PALL closed at $381.90, up 25.10 (+7.03 pct W/W).
The 50-day and 200-day Moving Averages for $PALL are 353.38 and 334.65 respectively, which is now well below the current price, which means palladium is technically quite bullish.
There has been a bullish pattern here since early October (290.88).
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
Base metals continue to be very strong.
$COPPER gained +15.90 (+4.71 pct) W/W to close at 353.60, which is another huge move. $COPPER contracts have moved up +27.0 pct since my wife’s birthday (March 10).
Do you think she’ll take copper for that silver bar?
The 50-day MA for $COPPER is 289.97, and the 200-Day MA is 316.07. So, at 353.60, $COPPER is now very bullish. I think this move like uranium has a lot to do with supply being kept off the market.
Re uranium, here is a link sent by “da_bombshell” that explains how the uranium spot price is calculated.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Base metal stocks (RIO +3.8 pct and RTP +3.3 pct) enjoyed another good week, although not as outstanding as the previous week. Many of the senior goldminers did also. Gold Fields (GFI +4.4 pct this week after being up +5.2 pct the previous week) was a leader.
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:
NEM ABX AU GFI GG HMY AUY KGC BVN
Interactive Daily data
Interactive Weekly data
MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data
CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data
NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data
Here are the key Silver miners and the SLV ETF:
SLV SIL CDE HL PAAS SSRI SLW MGN
Interactive Daily data
Interactive Weekly data
$XAU, GDX and (TSE’s) XGD were all up strongly again this week, going up +3.09 pct, +2.87 pct and +1.25 pct respectively after the previous week’s gains of +4.09 pct, +4.04 pct, and +4.07 pct, respectively. But this week was really about Friday, which was the day the G-7 finance ministers and central bankers met in Washington, and the $USD continued its journey south.
The $XAU index gained +4.41 (+3.09 pct) to close at 147.02. The 50d-MA (138.92) and 200d-MA (138.18) are now both well below the current price (147.02), which means that the PM stocks are now technically very bullish.
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Weekly U.S. Goldminers Index:
Interactive Chart of Daily U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
Here are the U.S. Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Weekly data:
GDX Daily data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Weekly data:
Interactive Chart of XGD Daily data:
Many have written to thank me for pointing them to the junior miners and the exploration plays on the market. Thank you for thanking me. I hope you realize that this part of the market is the most hyped, often least rewarding, and always most dangerous to trade.
I am bringing up some names because (i) I believe they are some of the best high-risk opportunities based on my knowledge and insights, and (ii) I cannot be “bought-and-paid-for” so the info you get is quite different than most of what you read elsewhere – it’s objectively written with the sole desire to help you steer clear of the minefields.
When I was a licensed financial advisor in the 1980’s, I must admit to losing my share too on these penny miners. But, in my case it was because I was getting too close to the situation, and I would hold on too long, always hoping for the next successful drill hole or whatever.
Later, I discovered that objective and independent thinking always works best. So, no matter what I knew about a company, I learned that trading prices was the most effective approach. And, in the case of the penny stocks, I found that volume was also a crucial piece of information.
That’s not to say I would ever ignore good info from experts – as long as there was a distance between my so-called expert and the hype machine that surrounds all companies in the capital raise-up business.
After I put out my article on Friday taking note that I would look into Guyana Gold and Alamos Gold more closely, I received the following piece of info that I wish to share. The source is a good one.
Hi Bill, When you are looking further at T.GUY make sure you also look at the V.ARK back-in agreement with GUY and the V.WSR earn-in agreement on the Peters mine property. The Aranka V.ARK is an extremely promising concession about 20km up river from the Aurora camp. The property is the scene of intense artisanal surface hydaulic mining. Hard to put a number on production, but the porkknockers (Guyanese term for artisanal miners) are probably pulling 20,000 oz/au a year. The Company appears to be getting ready to put a drill on the most promising targets. A lift in the ARK price will spill into GUY. V.WSR is drilling the Peters as we speak. The Peters Mine property is the original asset in the company from 10 years ago. The company became distracted from it with the success of Rory's Knoll et cetera at Aurora camp a few years ago It all same management, geos, drillers and infrastructure. Cheers,
Aranka, as I see it, is potentially the most exciting greenfields exploration today in the Guyanese Shield that stretches through Venezuela too. I have a lot of confidence the Company will make a mineable discovery there.
Also, I want to point readers to the importance of Point & Figure charts for determining technical break-outs. In the past week or so there has been a large number of upside break-outs among the gold miners and developers I have been writing about. Large companies and small. Owner-operators working in various parts of the world. This is significant.
Kinross is my current pick among the large cap goldminers. The stock (KGC/K.TO) hasn’t broken out, but I expect it to soon.
Here is a recent interview of the Kinross CEO by TheStreet.com. If you can't find it, do a search of Kinross.
Also, as you know, back on Jan. 12 (before the open), I gave readers a list of 20 gold and silver stocks to consider.
Proof of concept: Those 20 gold stocks – from the large cap to the ultra small cap – are up +20.0 pct in 90 days whereas the Dow 30 index is up +0.78 pct.
Forex Review
The $USD closed at 82.17, a loss of -0.54 (-0.65 pct) W/W.
The $USD 50-Day MA is now 83.69, and the 200-Day MA is 84.80, so the current price (82.17) is technically quite bearish.
The following data requires your attention: M3 update as of the past week.
M3 is growing at an excessive rate in order to pay for a war and for govt deficits not matched by taxes, although the annualized rate of change has dropped a bit.
The yield curve in the charts at the last link appears to be ending the period of downward sloping, but I question whether that happens to be caused by an economic strengthening or (more likely in my view) a move out of longer term maturities because of fear of (i) stagflation, and (ii) the falling $USD going even more negative.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro (priced in USD) had another big increase on the week, gaining +1.12 (+0.83 pct W/W), closing at 135.36.
A week ago I opined in this space: “After a small pull-back early in the week, I expect another rally in the Euro. Any higher, say above 135, and I expect a significant move higher in precious metals prices.” Ka boom. As the Euro popped late in the week, so too did $GOLD (to $689.90).
The $XEU 50-Day MA is 132.16, and the 200-Day MA is 129.30, so the current price (135.36) is technically very bullish.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The British Pound gained +1.47 (+0.75 pct W/W) to close at 198.58.
I gather the world wants to own a piece of London with developed real estate selling at over $2,000 per square foot. Shades of Tokyo about 17 years ago – before the collapse.
This time, I figure that if, as and when $GOLD reverses its bullish trend, so too will London real estate prices. You see, there are more than 40 billionaires living in London, most of them from the Middle East or Russia where, as the $USD collapses and the British Pound rises, these people are getting richer due to cash flow from oil, metals and precious metal holdings.
The $XBP 50-Day MA is 195.70, and the 200-Day MA is 191.55, so the current price (198.58) is technically quite bullish.
Weekly British Pound Index:
Daily British Pound Index:
The Japanese Yen had yet another pull back against the $USD this week (-0.36 pct), closing at 83.92.
The 50-Day MA is 84.20, and the 200-Day MA is 84.92, so the current price (83.92) is now short-term and long-term bearish. This is a function, I think, of the Japanese Administration and central bank trying to help out domestic exporters.
Weekly Japanese Yen Index:
Daily Japanese Yen Index:
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
The Canadian Dollar gained +1.03 (+1.18 pct W/W) to close at 87.95.
The $CDW 50-Day MA is 85.77, and the 200-Day MA is 87.48, so the current price (87.95) is technically bullish.
International Equities Review
Most of the international markets had a winning week.
The Indian ETF (IFN) recovered and jumped +3.81 pct this week.
The Templeton Russia Fund jumped up +1.94 pct, after being up +3.48 pct the previous week, to close at 74.66.
The China FXI was up +2.88 pct, after being up +2.65 pct the prior week, to close at 110.08. All eyes are on the China market, wondering with PBOC Governor Dr. Joe is going to do next.
The US monetary authorities would like him to crank up the value of the Yuan relative to the $USD, which seemingly would add to inflation in America but apparently the thinking in the White House and Goldman Sachs (excuse me, the Fed and the Treasury Dept) is that a lower $USD will make those “Made In China” products too expensive for (poor) Americans to buy. Then they will, according to this logic, buy American, or go without.
And its not the significant percentage of Americans who are below the poverty line who are scratching their heads over the price of gold and silver, and tax loopholes, so this way the White House can also appease the upper-middle class and Friends & Family (excuse me, the rich) who are over the moon with “No new taxes, and higher precious metals prices”.
That’s quite a campaign slogan: “Buy American. Don’t pay taxes (if only that were true). Follow the Yellow Brick Road to the White House.”
Actually I was navel gazing about the Republican Party nominees for next year’s President’s race, and I gather it comes down to Stronger Economy on the Back of War – take your pick, McCain or Rice – or “A Vote for Guiliani for Crime-free Cities and a Better Quality of Life”. Hmmm, I wonder whom I’d want to vote for to represent the GOP given that Eliot Spitzer isn’t likely to change parties. :-)
Whatever it takes, the world needs to have a strong leader in the White House. Either Spitzer or Guiliani would do that, I think. But, would they have to move to Texas? (LOL)
Colin Twiggs continues to suggest optimism, which goes along with my opinion that the Fed and HB&B are working overtime to hold the international markets high, but I still suggest the best perspective would be that of caution.
In fact, for the US broad markets, Colin is advising in this week’s headline, “Key Resistance Levels Ahead”.
Commander Twiggs hasn’t steered the wrong course yet, and he is saying, to those who listen, “Buckle Up, there is some challenges ahead.”
I’ll take it a step further, and say: “Sell in May and go to Bahamas in June!”
Asia-Pacific indices (Interactive link)
European indices (Interactive link)
Table 13: International equities perspective
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Japan’s EWJ (which is a USD-denominated NYSE-traded ETF) lost -1.16 pct W/W to close at 14.51.
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF: EWU
The EWU (UK market ETF trading in the US in USD) gained +1.68 pct to 24.80.
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data:
Canadian equity market ETF: EWC
EWC (priced in USD) had another big gain (+2.17 pct on the week) to close at 27.34. That’s a gain of +4.5 pct in nine sessions. The TSX Composite hit another new all-time record this week.
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
U.S. Equities Review
All broad indexes in the US stock market gained this week, but not as much as the previous week. And if the gains on Friday had been losses, the US markets would have been down on the week.
The Nasdaq Composite and Russell 2000 small cap indexes gained +0.83 pct and +0.74 pct respectively, while the S&P 500 and the Dow 30 gained +0.63 pct and +0.41 pct on the week.
A week ago there were just six losers in the Dow 30. This week there were 13, and that number could have easily been 17 or 18 without the late day rally on Friday. Bond yields are continuing to rise however, and the Financials are weak (XLF lost -0.2 pct W/W), so maybe that’s a warning sign. At least it is a “caution required” sign
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Table 14: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summaries window at www.billcara2.com and then clicking on the link for Performance.
AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG T UTX VZ WMT XOM
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)
Dow 30 comments:
If you didn’t already, you might wish to review the reports from Value Line, which this week are on four important blue chip companies: General Electric (GE), Hewlett-Packard (HPQ), IBM (IBM) and Intel (INTC).
(GE: Value Line Report Apr. 13: next one is due Jul. 13)
(HPQ: Value Line Report Apr. 13: next one is due Jul. 13)
(IBM: Value Line Report Apr. 13: next one is due Jul. 13)
(INTC: Value Line Report Apr. 13: next one is due Jul. 13)
GE charts
HPQ charts
IBM charts
INTC charts
GE and Intel are Cara 100 companies. They are in long-term cyclic Bear phases. They will be leaders in the next great Bull market. Watch them closely. As long as they stay weak, I don’t think the US stock market is going to set a new record high.
And what doesn’t go up…
Alcoa [GICS 15, Dow 30]
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 19: next one is due Apr. 20)
Altria Group Inc [GICS 30, Dow 30]
(MO: Yahoo Finance file)
(MO: StockChart chart)
(MO: ADVFN Financial Data)
(MO: Value Line Report Feb. 2: next one is due May. 4)
American International Group [GICS 40, Dow 30]
(AIG: Yahoo Finance file)
(AIG: StockChart chart)
(AIG: ADVFN Financial Data)
(AIG: Value Line Report Feb. 23: next one is due May 25)
American Express [GICS 40, Dow 30]
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: ADVFN Financial Data)(AXP: Value Line Report Feb. 23: next one is due May 25)
AT&T [GICS 50, Dow 30]
(T: Yahoo Finance file)
(T: StockChart chart)
(T: ADVFN Financial Data)
(T: Value Line Report Mar. 30: next one is due Jun. 29)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: ADVFN Financial Data)(BA: Value Line Report Mar. 23: next one is due Jun. 22)
Caterpillar [GICS 20, Dow 30]
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: ADVFN Financial Data)(CAT: Value Line Report Jan. 26: next one is due Apr. 27)
Citigroup [GICS 40, Dow 30, Cara 100]
(C: Yahoo Finance file)
(C: StockChart chart)
(C: ADVFN Financial Data)(C: Value Line Report Feb. 23: next one is due May 25)
Coca Cola [GICS 30, Dow 30]
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Feb. 2: next one is due May. 4)
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: ADVFN Financial Data)(DIS: Value Line Report Feb. 16: next one is due May 18)
Dupont [GICS 15, Dow 30]
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: ADVFN Financial Data)(DD: Value Line Report Jan. 19: next one is due Apr. 20)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Mar. 16: next one is due Jun. 15)
General Electric [GICS 20, Dow 30, Cara 100]
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: ADVFN Financial Data)(GE: Value Line Report Apr. 13: next one is due Jul. 13)
General Motors [GICS 25, Dow 30]
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: ADVFN Financial Data)(GM: Value Line Report Mar. 2: next one is due Jun. 1)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: ADVFN Financial Data)(HPQ: Value Line Report Apr. 13: next one is due Jul. 13)
Home Depot [GICS 25, Dow 30]
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: ADVFN Financial Data)(HD: Value Line Report Apr. 6: next one is due Jul. 6)
Honeywell [GICS 20, Dow 30]
(HON: Yahoo Finance file)
(HON: StockChart chart)
(HON: ADVFN Financial Data)(HON: Value Line Report Jan. 26: next one is due Apr. 27)
IBM [GICS 45, Dow 30]
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: ADVFN Financial Data)(IBM: Value Line Report Apr. 13: next one is due Jul. 13)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Apr. 13: next one is due Jul. 13)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Mar. 2: next one is due Jun. 1)
JP Morgan [GICS 40, Dow 30]
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Feb. 23: next one is due May 25)
McDonalds [GICS 30, Dow 30]
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Mar. 9: next one is due Jun. 8)
3M Company [GICS 20, Dow 30, Cara 250 June 25-06]
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Feb. 16: next one is due May 18)
Merck [GICS 35, Dow 30]
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 19: next one is due Apr. 20)
Microsoft [GICS 45, Dow 30]
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Feb. 23: next one is due May 25)
Pfizer [GICS 35, Dow 30]
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 19: next one is due Apr. 20)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Apr. 6: next one is due Jul. 6)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 26: next one is due Apr. 27)
Verizon [GICS 50, Dow 30]
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Mar. 30: next one is due Jun. 29)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb. 9: next one is due May 11)
Wrap up:
Now that Investertech.com is getting its act together following the re-programming needed after they made the decision not to pay the excessive cost increases for intra-day data, I’m going to direct more effort into the BillCara2.com project.
I am very appreciative of the contributions made by many of the readers. Thank you. Some of your insights are every bit as illuminating to the readership as my own.
Finally, remember my mantra: “Sell in May and go to Bahamas (in June). Take a slow boat to Staniel Cay. Enjoy life. Health comes before Wealth.”
Enjoy your week-end, although I suppose by now (Sunday late morning in Toronto) in the Far East it is rapidly coming to a close. Thank Goodness for Mondays.
Posted by Posted by Bill Cara on April 14, 2007 09:30:02 AM | Category: Cara Week in Review
Discourse
G'DAY,
Kaimu, I'm glad you were able to get into GIX on the pullback. It is quite volatile at the moment which gives plenty of opportunities to get in still.
Even with the current price of $2.50, I think there is still room to move further. I know you still prefer ECU but it has a market cap of half a billion. GIX is not as advanced which is reflected in the market cap with only 36 million fully diluted shares. ($90 million @ $2.50/share)
Also Kaimu I remember you mentioning Emgold a while back. I was watching them too. When I was at PDAC I talked to their IR man and I make the following comments.
- I think they have a great property with absolutely huge potential.
- They don't have a permit and being in California this could take a long time.
- He admitted that the permitting was resulting in a high cash burn rate and that they would need to keep going to the market for funding.
- Their share price is very low so they will have to issue lots of shares to keep this company liquid and even more if they explore at the same time.
- They have a very interesting and innovative technology to change old tailings ceramics and bricks. They are hoping that this will help them get their permit but it is unknown technology.
So while I lke the property, I will not be investing a dime until they get the permit. This permitting issue could drag on for years, burning up cash and diluting existing shareholders. I am going to keep an eye on them and invest in the deposit once the permit is approved. I may miss the initial leg up on the granting of the permit, but I think it will be still very cheap for a long term play on the actual property.
Posted by: Aussieontop ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
April 14, 2007 11:56 AM [link]
Bill see fridays note by jeff saut stating per a report by merrill’s rosenberg on payroll numbers that they were overstated by 20% or 450,000 and a huge adjustment may be coming shortly? Noting bearish numbers for both Steel and Rail industries (talk about overpriced stocks but then again I could have made EVEN more on my OS), we have a textbook "sell in may" set-up here. Curious to hear your Q2 forecast for p.ms's
Posted by: Rick45 at
April 14, 2007 12:55 PM [link]
ALOHA !!
Aussieontop ... G'day mate!!! How's the view? Just how cold is it there now? Cold? Or BLOODY cold?
Glad to be in Geologix for sure!! What you say about ECU is true, however for Geologix to get to the same level of production as ECU the share structure will have to dilute significantly unless they soon prove up another Aurelian deposit, then the necessary production dilution would be a lot less. It will no doubt be less anyway you slice it in the long run compared to ECU since GEologix was able to find a great deposit earlier on(meaning management). The sad part for ECU was that they did not find Michel Roy earlier on and so were diluted due to prior bad management at the earlier stages of exploration. Also unless I am missing something Geologix still faces a $53mil-$72mil balloon payment based on the Silver Standard agreement terms, which I suspect they would pay by issuing shares. It would be nice if they had to dilute above $10 a share ... eh? Further dilution is inescapable ...
The other issue with early juniors has been mentioned by Bill in the past in terms of "years to production" ... If production is 6-8 years out by then "inflationary" pressure may make prodcution near impossible. Already costs to operate mines by currently producing companies are driving some into losses combines with mining lower grades. With the "futures market" supression of prices it puts a squeeze on profit and therefore survival, even with PM spot prices at the current levels. If the company is "hedged" due to "non-recourse loans" its even worse. So the only way around that is to mine deposits with the highest grades, which also attracts major producers as well, since that is how a lot of them survived the 20 year stagnation of respective spot prices. I quite frankly am baffled as to why these major companies allow the pricing of their products to be manipulated by Wall Street and Central Banks! It seems they not only "allow" it but condone it through their participation in the World Gold Council and "non-recourse loans". Perhaps they should bribe a few of the foreign countries they operate in to form an OPEC Mining Cartel!!!
My point is ... companies like ECU are currently producing. I also have to point out that ECU recently has brought to their board Dan Kappes, of Kappes, Cassiday Assoc. fame, a highly regarded specialist for mine construction, design and operation. I noted in one of my "private e-mail list" reports a few months ago when Mr. Kappes first came onboard that companies he sat on the board of had their share prices more than doubled within a year of the news release. I noted that he did the same for Gammon Lake.
The 900% share price increase of ECU last year is over I realize and this year it seems to be Geologix turn. Both companies have had their share price driven by deposits rather than "jockey" hype, but profit is profit no matter what drives it! Isn't that some sort of Ferrengi School Of Profit motto? HA !!!
EMGOLD ... I stumbled onto them while researching Western Goldfields USGS reports. I concur and in fact stated when I posted on them that it was too early to buy them. They are also on my watch list! I have noticed them coming out with more news releases lately on Kitco. More visibility ...
In a highly inflationary environment(if you don't buy the US government CPI numbers)buying into exploration companies with existing and past performing mines seems to be a key short cut to production, providing the grades and deposits are not played out. I look at that aspect a lot. A lot! More to come on that ...
Posted by: kaimu at
April 14, 2007 1:55 PM [link]
In late February when the US markets were closed, the Chinese raised interest rates and caused a 5+% drop in the markets. Well they just did it again. The usual reason given for this kind of after market move is to avoid adversely affecting the markets while they are trading. I think the more likely reason is to make sure that complacent US traders do not have a chance to exit the market before the Asian and European traders.
"China's central bank said on Saturday that it was raising interest rates for the third time in less than a year to put a lid on credit and investment and keep the world's fourth-largest economy on an even keel.
The People's Bank of China said that, effective Sunday, its benchmark one-year yuan lending and deposit rates would rise by 0.27 percentage point each. That brings the one-year deposit rate to 2.79 percent and the lending rate to 6.39 percent."
Posted by: lessmore at
April 14, 2007 1:55 PM [link]
>>>On the matter of Wolfowitz, it’s a disappointment that a person so capable and accomplished as he is (or appears to be) has seen fit to destroy the confidence of his staff at the World Bank.
<<<
Bill,
"Turning out" a staffer fits in perfectly on Wolfowitz's C.V. He was a principal in leading the US into the Iraq disaster. I am not sure what you think he is capable or accomplished at. He is a clearly an ace at destroying public confidence in organizations he has headed up.
Posted by: ableape at
April 14, 2007 3:13 PM [link]
Kaimu,
how does one get one's name on your "private email list" to receive your reports. Or do you mean personal acquaintances?
Posted by: Eric at
April 14, 2007 3:26 PM [link]
I will be away from the markets for awhile again as I take care of some urgent family matters. In the meantime, everyone take care and good trading.
Posted by: MarkM at
April 14, 2007 4:13 PM [link]
ableape,
I'm certain that Bill or the readership don't need a history lesson on Paul Wolfowitz. Most see him as a charter member of the Dark Side in America. I took Bill's comment as a reflection on human behaviour - where a talented and accomplished person ( you don't get to sit in a seat of power in the White House inner circle if you haven't accomplished anything or demonstrated the ability to get things done ) has become so corrupted by power that he feels he can ignore the standard of ethics and morality that the office requires. He won't be the last of his kind to take a fall, and while the world will be better off with P.W. permanently sidelined, people of his ilk seem to land on their feet - another testiment to why America is in real trouble.
Posted by: TerryC at
April 14, 2007 4:36 PM [link]
China to raise rates again. Hmm, thought provoking. I can hardly wait to see how the Shanghai market reacts and consequently Europe, etc. Possible trigger for another leg down? There must be some big time traders holding positions over the weekend that are not going to be sleeping that well, and it must really irk these HB&B boys to not have an insider in China leaking good stuff like this to "the boys".. it just isn't the way the game is supposed to be played, right?
Sorry to learn that you have to leave us for a spell, MarkM. Just when the fun might be starting. Sure hope that all family matters resolve for the best, and look forward to your return.
Posted by: Rigdon at
April 14, 2007 5:21 PM [link]
Wolfowitz - very accomplished. First initiate destruction of Iraq, then destroy morale at the World Bank. FT reports today it is unlikely the Bank's Board will force him out.
Maybe they'll give him a two-week suspension like Imus, and then see which way the wind blows!
Posted by: Jock at
April 14, 2007 5:24 PM [link]
If the markets open down on Monday, the dip buyers who have been left out should provide some (early) support. Or it could be a non-event this time around, and we see the markets open up. Either way, it's late in the game, and I'm sure most on this board will be selling into strength and/or starting/adding to short positions.
Posted by: 2nd_ave at
April 14, 2007 5:26 PM [link]
lessmore.. the story on China rate increase is from March 17th. Had me concerned there for a minute.
Posted by: Jim Kingsland at
April 14, 2007 5:40 PM [link]
Good luck Mark.
EJ
Posted by: EJStockman at
April 14, 2007 7:11 PM [link]
"...a U.S.-centric view of capital spending, says Steven R. Appleton, CEO of Micron, is "almost meaningless." "I don't have to hire one more person in the U.S.," says Appleton. "I don't have to invest one more dollar here--and we'll be just fine."
Posted by: JIM at
April 14, 2007 7:55 PM [link]
And March 19 the market opened flat, went up, and closed at the high of the day.
Take care, MarkM.
Posted by: 2nd_ave at
April 14, 2007 9:13 PM [link]
"Kaimu,
how does one get one's name on your "private email list" to receive your reports. Or do you mean personal acquaintances?
Posted by: Eric at April 14, 2007 3:26 PM"
Eric
Order orchids! ;)
Posted by: Seamus at
April 14, 2007 9:56 PM [link]
Bill,
Thank you for another great weekend recap.
Posted by: darvas at
April 14, 2007 11:27 PM [link]
Re: Wolfowitz
Interestingly, the new yorker just did a profile of him and his "work" at the world bank. What's interesting is that a liberal magazine that would have every natural tendency to banish him to hell, instead analyzes the personality and concludes he's a lot more of an incompetent manager than devious right wing hawk/devil. For a smart guy, he's pretty dumb etc.
Posted by: schnauser at
April 15, 2007 1:57 AM [link]
Regarding China's unexplained $73 Billion surplus... talk about forex made easy!
The weak dollar will only get worse. Recently CHina and Japan (Iran's biggest oil purchasers), agreed to buy their oil from Iran in euros. In essence, this reduces the demand for dollars as three major economic powers will suddenly need fewer dollars.
Posted by: rick s at
April 15, 2007 2:18 AM [link]
hustle and cash flow - daily show / "pimp tax" :-)
emerging market watch / pimco
very interesting!
ALOHA !!
GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...
On the 17th of April, this coming Tuesday, Britain's Exchequer Gordon Brown faces the firing squad for his role in selling half of Britain's gold reserves for $300USD per ounce.
Link: http://www.timesonline.co.uk/tol/news/politics/article1654931.ece#comments-form
Canada has already sold off its gold reserves prior to Britain for a song.
One can only wonder where the US gold reserves are? No official audit since the 1950's does not bode well. The silence is deafening!
Who will face the firing squad in Canada or the USA for their gold sales? How did it becomes "legal" for a private bank(US Federal Reserve)to sell US government gold. The US Constitution gives NO monetary authority to any private bank ... none!
Now, what I find very interesting about the UK Sunday Times news article(click on link)is the "HAVE YOUR SAY" section at the bottom, where readers post replies to the article. Please note that a lot of readers that post are from other countries not the UK. Yet if you read their posts they relay to me an astute understanding of money and credit and they also mention similar economic problems in their countries. So, even as we Americans see the "fiat" values of other currencies like the Swiss Franc, UK pound, Aus$, Yen rise it appears those currencies face the same economic excessive credit woes as the US Dollar. What it boils down to is that other governments are as dishonest as the USA, since they print dollar IOUs ad infinitum as well. As long as a fiat monetary system exists there can be no honest government for "We The People" ...
Why is it that these G7 meetings are always held behind closed doors? Private bankers from elite families discussing what to do with the wealth and property of taxpayers and their governments. All people of the World have been sold out by their "so called" elected representatives. Here we have a situation whereby the "democracies" of the World are selling off their gold reserves to the "communists" of the World like China! The Chinese have always understood the value of "real" money, too bad the G7 have forgotten. I feel a lesson is unfolding as they(G7)sleep in their complacency of political power ... a lesson well deserved and long in coming!
BAD LUCK TO THE GORDON BROWNS ...
Posted by: kaimu at
April 15, 2007 5:55 AM [link]
Re: Naked short selling.
I recall that quite recently there was a discussion on this board about naked short selling.
I listen regularly to a radio show by a man named Jim Puplava, and this week he discusses the practise of naked short selling, specifically in junior miners by the hedge funds, or brokerages that underwrite new issues/options/warrants. I thought I'd post the link here for any who may be interested: http://tinyurl.com/38z3jp
its the second segment, about 8 minutes in or so. He says to be weary if you're watching a junior then all of a sudden one day on irregular volume it is seemingly sold off, and goes on to explain it further. Others here may have mentioned this before, but since the miners are discussed frequently, this segment breaks it down nicely (into relatively understandable terms) (for layman like myself).
Have a great day, Thanks Bill, best of health.
Posted by: Eric at
April 15, 2007 10:16 AM [link]
Eric, re Naked Short Selling
I received the following mail from a different reader this weekend that focuses on a fact of trading life that the SEC has not cleaned up because they don't have an Eliot Spitzer jumping on their heads.
Bill:
Have you seen the video:
http://www.businessjive.com/nss/darkside.html
Also the follow up http://thesanitycheck.com/
I would like to see something on your site related to this.
Thanks,
Posted by: Bill Cara at
April 15, 2007 11:43 AM [link]
In reference to the section about the financial stocks. What could cause GS and MS to fall? I understand that a raise in bond yields would cause the loan holders like fanny and freddie to fall, but would bond yields effect GS or MS? Or would it be the rise/fall of the USD that would effect MS/GS?
Thank for the insights,
Quentusrex
Posted by: Quentusrex at
April 15, 2007 12:19 PM [link]
ALOHA !!
When will the US Dollar and the US stock markets reconcile the cost of "nation building" aka: The Iraq War? Currently at $380billion and counting with another $700billion in the budget for the Pentagon FY2008 we are now over $1trillion. The debt numbers for the USA just numb the senses they are so incomprehensibly HUGE !!!
COST OR IRAQ WAR LINK: http://zfacts.com/p/447.html
I urge every reader to go to this link and not only study the graph and be mesmirized by the "real time clock" but most important read the various statements made by politicians and bankers regarding the cost of occupation but also the miscalculations in Iraq oil revenues.
I especially love this quote made by George Bush(Pres) prior to 9/11.
"If we don't stop extending our troops all around the world in nation-building missions, then we're going to have a serious problem." — George W. Bush, Jan. 2001.
The "bill" for all this spending will come DUE and there will be nothing "Goldilocks" about it!!!
Posted by: kaimu at
April 15, 2007 1:22 PM [link]
Quentusrex,
I think that profits are the key drivers of the US HB&B units like GS, MS, LEH and JPM.
There is no question that as the $USD fell from the beginning of January, the share prices of those banks started breaking down. But the biggest cause I think was the rising consternation of traders for the deep involvement of HB&B in the Sub-prime mortgage industry that was coming apart at the seams at that point. The higher that yields/rates rise, the worse off the housing/mortgage industries are going to get.
Some traders today are beginning to question the true value of these big banks should the credit derivative business start to unwind with higher rates/yields that will cause the failure of more of the smaller US financial institutions (which will become bad debts of the big banks).
Posted by: Bill Cara at
April 15, 2007 1:37 PM [link]
Hi Bill,
I have been reading your blog daily for almost a year and a half and several times during that time you wrote about the G7 needing to agree to rebalance world currencies.
It appears that agreements have been struck this weekend. I am hoping to hear your thoughts on the impact to markets, especially gold now that there is a verbal agreement in place.
cb
Posted by: cb at
April 15, 2007 5:05 PM [link]
Dear Bill:
I add with all others the hope of your continued improvement of your health and your many ventures some of which I hope you can make available to your blog readers.
As being new is there another blog or other site that you have that I do not know about or how to access and if so would you post it.
Is it possible to give your opinion on a junior oil and gas exploration stock that is suitable for purchase?
I know it is asking a lot, especially to those viewers who are very familiar with it, if you could give a short run down on how to read your RSI tables concerning the numbers that show selling is appropriate, accumulation and or distribution is taking place and where would be a good time to buy or sell.
I too would like to know how to get your E-mail address and on your "private email list" to receive your reports, or do you mean personal aquaintances?
I know you are extremely busy and would be thankful for anything that you could answer.
Posted by: Rodney at
April 15, 2007 5:45 PM [link]
cb,
I don't believe there was any currency agreement done at the G7 meeting on Friday. I think there needs to be a G20 meeting and a formal signing for that. China needs to be included or there will be no agreement.
In the interim, I believe that Japan will continue to let its Yen slide, and that traders would prefer to go to the Euro and Pound.
I don't see any respite in the falling $USD, or the rising Gold price. Not yet anyway.
There may be ECB sales of gold because the Europeans don't want to see their currency skyrocket against the USD, but those sales will be sharp, sudden and quite temporary. Gold traders will buy the dip and say thank you!
Posted by: Bill Cara at
April 15, 2007 5:47 PM [link]
Rodney,
Thanks for your good wishes.
About the sites, I have only three. This one plus billcara2.com, which I am in the early phase of setting up, and traderwizard.com, which was a site I last contributed to in 2004, but will soon clean up and turn into an educational site and a marketing site for my upcoming book, as well as a series of premium reports such as the Cara Micro-cap 100, both of which I expect will be out in June-July.
In Bahamas I will be licensed to trade in securities and a permanent resident, if all works out, and the name of the company is Cara Trading Advisors (Bahamas) Ltd. I am presently working on something that will involve my own Fund for mining and metals, but nothing has been decided. I also haven't decided what services I will offer under the CTA name and who the clients will likely be.
I'm not rushing anything, really. The book was supposed to have been published on or before April 1, but in February I realized my health wasn't up to it. The manuscript is already close to 400 pages -- "Everything I know in under 500 pages (LOL)". When I finish it, I'll publish the table of contents and a shopping cart on the TraderWizard.com site.
Posted by: Bill Cara at
April 15, 2007 6:03 PM [link]
Amazing job, Bill. Thanks again. I continue to learn (and earn) each week. The caliber of posts has far exceed my meager substantive input, so other than an occasional smart ass remark, I've decided to leave the thinking to those who do this better than I...
EJ
Posted by: EJStockman at
April 15, 2007 7:09 PM [link]
At some point the financials will matter. They are approx. 20% of the SP500.
I don't see inflation anywhere, despite the jawboning from the Fed. I believe they are keeping interest rates too high. That may be the biggest threat to the economy. GDP is already slowing with real estate slowdown and higher energy costs. I think if they were to raise rates, that'd be all she wrote on the economy. And people's houses.
Hi Bill,
Thank you for your response. For some reason I thought you wrote about the G7 but now it makes sense (G20) that when I searched for G7 and currency, I couldn't find any of the blog articles!!!
Thanks again for all the great knowledge you share with us.
cb
Posted by: cb at
April 15, 2007 7:37 PM [link]
Using a US brokerage - should I be aware of anything when buying into some of the OTCBB counterparts for the TSX traded companies? OTC:GUYFF vs TSX:GUY.TO for example? TIA as always.
Bill - I hope that cough clears up. I'm very excited about the rollouts you have planned in the upcoming months.
Posted by: rusticuf at
April 15, 2007 9:23 PM [link]
rusticuf,
by no means am i an expert, but i will share with you an opinion i happen to agree with. If you buy the OTC shares in the U.S., you would be taking the unnecessary risk of having the value of your holdings decrease if the USD continues to fall. I have had no problems buying penny shares through my discount broker (in Canada), either on the OTCBB or the TSX/TSXV. But I have diversified away from my shares (or will do tomorrow if the tides permit) that are traded on the OTCBB if there is an alternatively good choice available.
(I'm sure there is a lot more to it).
To continued success.
Posted by: Eric at
April 15, 2007 9:38 PM [link]
The Bomb, er Bond Market
14 April 2007
Ty Andros
Managed Futures & Alternative Investment Specialist
The Bond market is looking toppy, and is set to break down hard, for domestic reasons as well as international. It will fail as we can predict what the authorities will do. Business and the Economy in general is set for broad inflationary attacks from the Mandarins in Washington DC, and Brussels, and the unintended consequences (not unanticipated, these are big big investment opportunities) of their plans. Let's take a look!
The Bomb, er Bond Market
Just like the previous cycle we illustrated above which was 1966 to 1982 bull market in things, swinging to a 1982 to 2000-2007 market in paper. Now we are moving into the initial phases of the 1966-1982 cycle. Where paper turns to trash. US Bonds and Treasuries actually topped in June 2003, and have formed a broad top on all fixed income indexes since that time. Secular trend lines initially established in 1984 have been broken and after a brief rally to test the break down point the declines are set to begin again.
These long-term breakdowns have already broken down in European Bonds, led by the German Bund, which is a 10-year note, the correlation between the US and German bund is over 90%. Yield curves are steepening and are set to do so more in the future as the Federal Reserve lowers short term interest rates to SAVE the financial system from "ARM" ageddon (see previous Tedbits archives at www.TraderView.com), exasperating the inflationary implications. And the long end tumbles as the foreign bidders are set to be attacked by the protectionists in Washington, and the Federal Reserve as it tries to cushion the American economy from the unfolding weakness by accelerating money and credit creation.
Inflation adjusted Tips bonds while a good idea in a deflationary world of the 80's and 90's will kill the governments balance sheet in the near future, runaway interest expenses will force the Fed to print the money, as fewer and fewer buyers step to the plate as the era of guaranteed confiscation dawns anew. Bonds are entering a phase of "Capital destruction" and the buyers will come from the Central bank printing presses to defend the asset based financial systems operating in all the major capitals of the world.
Nothing has astounded me more than the sheer volume of issuance the fixed income markets in the developed world has embraced over the last five years. There are lots of bubbles out there, but they are dwarfed by the credit and bond bubble. It doesn't matter what is sold, junk, whatever, investors have had an insatiable appetite for these perceived as risk free assets. There is no fear of the risks (of defaults), and these assets are severely mispriced to reflect the real risk inherent in them. Junk bonds used to pay 5 to 9 % over the risk free treasury rate, this is a exercise in math as the compounded returns on a successful purchase quickly takes the risk out, for example using the rule of 72 a bond yielding 12-14 % repays the principle in 5 � to 6 years. Now they are priced 2 to 4 % above the risk free rate and the time frame to more safety is postponed to a much later date. Negating the ability to quickly recover principle as was previously the case. Credit ratings of most of the borrowers has steadily declined during this period. The risks are severely mispriced. Take a look at this chart credit spreads between junk bonds, corporates and government treasuries in the last several years;
This is an illustration of the investment assumptions of safety that has increased during the time of the 'Greenspan era" of Central banking creating the moral hazard of the assumed rescue provided by the "Greenspan put". It is a story of MASSIVE miscalculation. Miscalculations of the reliability of the central banks and finance officials in creating "prudent", "fuduciarily sound" money and credit growth. There are many things you can call the recent World wide acceleration of the supply of money and credit, but "prudent", and "fuduciarily sound" are not any of them. Institutions, pension funds, hedgefunds, central banks and individual investors have flocked to these investment vehicles based on this assumption of "BAILOUT" by the central banks. So the biggest money in the world is in at the top and will be need of imminent rescue. The main stream bond purchasers are set to be cracked as the assumption of bonds as conservative investment vehicles is turned on its head by the recent money and credit creation that has turned the idea of prudent central banking on its head.
Looking at the weekly technical charts of the bomb er Bond market, it is an epidemic of head and shoulders tops, fast approaching triangle breakdowns, trendline failure on the trendlines since 1984, etc.
If you look at the daily, monthly and Quarterly charts they too are all top patterns with head and shoulders all over the place, low volatility is a sign to look for patterns, and the patterns are all there for the astute chartists among us.
Like the proverbial flock of Sheep, fixed income Investors are about to be "FLEECED" as the value of their holdings undergo steep capital losses through the market or from the central banks and government treasuries printing presses as they print the money to buy them to prevent the collapse of the fixed income and credit based economies they underpin. To take down this supply from all the sellers, the fiat-based currencies will be printed far in excess of the insanity that is currently practiced to keep economic expansion rolling. Releasing kazillions of dollars into the economy of the world.
(Authors note; looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining? If so contact me through www.TraderView.com. Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)
Just as mom and pop were killed by Greenspan's lowering of interest rates on savings to 1 percent, they are now set for round two as the longer term and more risky instruments they then embraced to get to any return at all are now set to decline dramatically. A one two punch so to speak. Improverishing the investors who hold them and the "REAL" value of their income return. These Investors will sit at home or in their offices with the belief their money is safe in their government bonds, while at night the value of the currency they are denominated in undergoes "cloning" on an unprecedented scale. They will realize what is transpiring eventually, but by then it will be too late.
An additional reason they must hold bond yields low is the unfolding credit crunch in the subprime, and the "ARM"ageddon unfolding as outlined in a missive by Bill Gross at PIMCO. Using charts outlining credit standards rising and and another outlining Case-shiller home values he postulates that interest rates MUST decline by at least 60 basis points to prevent a additional loss of 20% in home values, and that the federal reserve will do whatever is necessary to head off the additional loss of value, as they don't want to pay the bill for this type of debacle. The systemic problems would be much bigger than the inflationary consequences. It's fed to the rescue, the Bernanke "put" is born. It was actually born last May/July. It is a compelling essay, check out PIMCOS website. Breakdowns in the bond market here are untenable.
Governments can read charts, just as we do, so I can tell you someone at the US federal reserves open market operations in New York are all over this potential Bomb, er bond scare. It will be front and center in this weekends meeting of the G8 central bank and finance ministers. I promise. Watch open market operations for big unidentified buyers which will be your governments at work as you work and sleep. You can see them now, just ask the Mogambo Guru or Greg Weldon.
Look for commercial buyers to get aggressively long in the commitment of traders reports. Primary treasury dealers, big "Money center" banks and wire houses will be big buyers with quiet government guarantees in hand before they begin their buying sprees. For the fed it's just a computerized journal entry to move money right onto their balance sheets. Every G8 Central bank in the world will join these plunge protection team efforts, as the dollar is their reserve currency as well and it sits on their books as US treasury securities for the most part. Just think of the moral breakdowns these central bank and finance officials have undergone over the last 20 years, when they have evolved from semi responsible bankers and stewards of the monetary systems to reckless money and credit creators, would be market manipulators, with total disregard of the people who place their wealth and savings in the currencies they are fuducuiariliy responsible for. A total surrender to political goals rather than long-term economic and monetary responsiblities.
"The inflation solution" is far far superior to government officials than financial system and economic difficulties, as these bankers and ministers look out below into the maws of a credit crisis that will dwarf their "subprime considerations", which in comparison will be a walk in the park. They can't let this trendline back to the early 80's fail very much as the systematic sellers will emerge in force as their computers put on the trades without the benefit of consulting the groups that wrote them (or the central banks and treasury operations around the world). The dollar is breaking down versus the Euro as we go to press, gold is breaking out against every asset class I can identify. The little guy holder of these Bond instruments will be damaged even more as the real inflation rate spirals higher and higher and his yields stay in the 4 to 5 % range, Inflation running at 8% on a bond that yields 5 or 6 is a loss of 2 to 3% a year, compounded annually for the duration of the note!! What a loss, and it is occurring as we speak.
It will be sell, sell, sell as billions of dollars of steepening trades are instituted, outright sales and hedging operations for hundreds of billions of bond holdings will provide further momentum to the emerging moves lower from this massive top. This top is the inevitable result of the Bretton Woods agreements in the early 1970s when we all were taken off the gold and sounder money policies which were practiced previously to that era. The helicopters are firing up as we write this. Talk about a "Finger of Instability" this is it in spades ("fingers of Instability" in the Tedbits archives www.TraderView.com ). They have enough money to put this breakdown off into the future (they just have to print it), look for them to do so, the alternative is "UNTHINKABLE", so look for inflationary money printing and central bank and finance officials to prop up your bonds through market operations during the day and steal the money for it at night right out of your bank as their printing presses and computers hum away!!! The Greenspan "PUT" is alive and well� Kicking the can down the road, creating new and bigger moral hazards for our children, future investors, politicians and central bankers to deal with�
In conclusion, Investing is now all a big game, understand the rules and roadmaps and make a fortune, if you don't you will have a tough time of it. Learn the techniques required to thrive, or be the victims of who do. Wall Street has powerful allies on "Capital" Hill (misspelling intended, LOL). Hank Paulson is Wall Streets "Man on the scene", in DC. They will keep the game of abundant liquidity going till the systems finally break, but I believe this is many years away barring a big political miscalculation out of Washington DC, and Brussels and that is quite possible. When politicians are pandering to the voters figuring out how to buy the most of them. If you are looking to diversify your portfolio with top quality alternative investment managers please give me a call or visit the website and request a consultation.
Posted by: Rick45 at
April 16, 2007 12:13 AM [link]
eric, every day, the OTC stocks close at a US dollar price that closely follows the price of the stock in canadian dollars trading on the canadian exchange. every day, I use the current CAD/USD price to figure out where the OTC stock price should be. if it didn't keep up, then a very straightforward arbitrage opportunity would arise. the problem with the OTC stocks, OMHO, is the lack of liquidity, and the excessive bid/ask spreads. thankfully, E-Trade is in the midst of correcting this by offering direct, cheap, electronic trading of foreign stocks in tokyo, toronto, hong kong, london, and euronext (Paris). I can't friggin' wait...
Posted by: schnauser at
April 16, 2007 1:25 AM [link]
Post a comment
Thanks for signing in, . Now you can comment. (sign out)
(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)
Bill,
Would a stronger Chinese currency not also cause an increase in inflation in the G7 countries? It seems to me a case of biting your nose to spite your face. Is China not the main reason the West has enjoyed low inflation relatively speaking when you factor in the price of oil $60 per barrel?
On another note, I foresee North Korea as the next big manufacturing powerhouse if China can slowly guide them into an economic model like their own, with China reaping most of the benefit. With China lowering its manufacturing costs by outsourcing to North Korea its rising currency would have no effect on the volume of exports. Something to consider...
I am currnetly accumulating Nautilus Minerals NUS on the TSX.V, I find it an absolutely fascinating story and would welcome your input.
Thanks for all your refreshing insight on world markets. Looking forward to your book.
All the best to you Bill, and best wishes for your move and any other plans you may have.
Cheers and long life
Posted by: yaba![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
April 14, 2007 11:22 AM [link]