Bill Cara’s Blog for Apr 18, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning, Geoff here.

A combination of good news from Europe, US economy and earnings lifted the market into a short squeeze.

As long as Spanish bond yields remain under 6% or so, traders won’t be too worried about Europe for the immediate future so the US earnings season will take center stage. As I have mentioned before, we shall see if companies have the continued ability to cut costs in order to improve profits.

Yesterday, technology and energy stocks performed very well. That was a good sign for the market, we shall see if they can continue to have relative strength.

For our part, in appropriate accounts, we bought a few technology stocks and material stocks and immediately placed sell-stop orders on the 5 buys. They are working out so far, but I’m still very cautious this market.

This morning I see that 55% of Citigroup’s shareholders voted against outrageous executive pay packages. The vote won’t force a change in pay, but it is the first time this has happened and hopefully sends a message to Wall Street, but I doubt it.

Lets see if we can get some follow through today in the equity market.

Gold is coiling and should it break to new lows, that should be the final climax low and should be bought, imo. We should have confirmation of direction in the next few weeks.

Have a great trading day!


Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,056.80 6:44AM EDT Down 16.98 (0.82%) Components, Chart, More
^BFX BEL-20 2,279.90 4:50AM EDT Down 7.10 (0.31%) Components, Chart, More
^FCHI CAC 40 3,242.61 6:59AM EDT Down 49.90 (1.52%) Chart, More
^GDAXI DAX 6,754.05 6:45AM EDT Down 46.95 (0.69%) Components, Chart, More
^AEX AEX General 309.85 6:44AM EDT Down 3.33 (1.06%) Chart, More
^OSEAX OSE All Share 475.60 6:44AM EDT Down 1.59 (0.33%) Components, Chart, More
^OMXSPI Stockholm General 328.90 6:44AM EDT Down 4.61 (1.38%) Components, Chart, More
^SSMI Swiss Market 6,172.81 6:45AM EDT Down 27.46 (0.44%) Components, Chart, More
^FTSE FTSE 100 5,749.28 6:45AM EDT Down 17.67 (0.31%) Components, Chart, More
FPXAA.PR PX Index 923.00 6:59AM EDT Up 2.20 (0.24%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,474.11 6:45AM EDT Down 4.53 (0.31%) Chart, More
GD.AT Athex Composite Share Price Index 722.63 6:44AM EDT Up 1.65 (0.23%) Chart, More

http://finviz.com/futures.ashx

http://finviz.com/fut_chart.ashx?p=m5&t=ES

http://finviz.com/fut_chart.ashx?p=m5&t=ZB

http://finviz.com/fut_chart.ashx?p=m5&t=DX

http://finviz.com/fut_chart.ashx?p=m5&t=GC

http://finviz.com/fut_chart.ashx?p=m5&t=SI

http://finviz.com/fut_chart.ashx?p=m5&t=CL

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.


Cara on Trends & Cycles


Vad’s Catch of the Day


Kaimu’s Sound Money


CTA Trading Desk Mid-Day Report


CTA Trading Desk Post-Close Report


Jeff Borsato’s Hidden Truth

The Rain in Spain…

What we need right now is another article that attributes early morning euro weakness to “concerns over Spain”, followed by late day euro strength attributed to encouraging talks by EU members over the fate of spain.

Lather, rinse, repeat.

This all makes for great filler, plugging up the airwaves providing traders with the impression that markets move based on media claims. Up one day, down the next…

The problem is markets move up one day alot and down one day a bit. Over time the market rises, and the opposite when gains are out-paced by daily or weekly losses. The short time frames tend to dominate the headlines in the mass media, yet the vast majority of those viewers are not short term day-traders but long and medium term investors.

This type of information imbalance is akin to civilians in New York hearing daily patrol reports on Afghan troop convoys. For the typical citizen, their curiosity of the war in Afghanistan consists of grand strategic questions (How many troops are stationed there? What is the overall goal and time frame?) as opposed to tactical ones (What flight path do support convoys fly in Hemland Province? What is the munition situation like for the 2nd Marine Battalion?)

On a daily basis, the bulk of data spit out on TV, Radio and the net is of little or no material value to the bulk of investors. Why would that imbalance persist?

Because it’s cheap.

Daily news casts and the 24-hour news cycle demand a constant inflow of information, even if it is the same news just reported over and over with a few minor changes. When speaking of broad economic trends, a big down day in markets can be tied to broader macro-economic “concerns”. We virtually never hear of who exactly is expressing these “concerns” but like the media’s love of citing “unnamed sources” and “senior officials”, it seems enough these days to simply claim there are “concerns” about the economy of such and such regions.

When there will ever not be “concerns” about the economy is a mystery, we need better context and stronger analysis of what is actually taking place. Expressing “concerns” is at best a platitude.

Geoff’s daily take on the markets gives the community both context and timing as most of our readers are actual traders that require both long and short term data. This is context. CNN MONEY, CNBC, MSNBC, BNN etc provide so much filler, the good analysis that does occasionally appear gets lost in the shuffle.

On a similar note:

This piece by Peter Grandich reminds me that all is not lost in the world of Mining newsletter writers. Peter Grandich has always struck me as an honest and candid reporter of all things jr. mining. I enjoy the fact that he openly admits the situation is dire in the jr. market, and that his losses render him uncertain if he should even give opinions on the matter. The last point alone makes him stand out from the crowd of newsletter writers endlessly declaring “the bottom is in” for the jr. resource market.

I’ve said it before, and I will have to say it again:

This gold bull market is still intact, despite what some short-term oriented traders claim. We have seen months and quarters pass over the last 8 years with nothing but down-trend lines to watch before gold prepared for it’s next highly doubted advance. The wall of worry remains solidly in-tact and in spite of price weakness this week, I see nothing new to signal the end of this bull-market.

The junior market is a different animal, and requires some analysis beyond promotional claims by the dealers themselves. Why the junior market is lagging is too specific of a question. One might ask “why are gold stocks, and most resource stocks for that matter lagging?”. I don’t know, and neither do the vast majority of rent-seeking analysts and brokers who’s only goal is to sell them to you in hopes of a great story.

Good luck out there gang, stand fast.

Jeff

jeffborsato@caratrading.com


  1. 7:00 AM ET MBA Purchase Applications 10:30 AM ET EIA... [#107579]
    By: davefairtex (5215 comments) Go to top ↑
  2. 4 in Buy alert 3 in Distribution Zone 4 in Sell... [#107580]
    By: davefairtex (5215 comments) Go to top ↑
    • 4 in Buy alert
    • 3 in Distribution Zone
    • 4 in Sell alert

    Accumulation Zone: Monthly 5, Weekly 7, Daily 6
    Distribution Zone: Monthly 17, Weekly 8, Daily 5

  3. ... [#107581]
    By: Bill Cara (4105 comments) Go to top ↑

    http://finance.yahoo.com/blogs/daily-ticker/presid

    “Embarrassing”, says it all.

  4. ALOHA!! My pal John Taylor over at Stanford Economics has... [#107584]
    By: kaimu (3289 comments) Go to top ↑

    ALOHA!!

    My pal John Taylor over at Stanford Economics has a new post on his blog about the supposed BIG impact of the “New Keynesian” stimulus multiplier effect on GDP. WHOPEE-E-E!! Maybe this is why Christine Romer finally resigned as Obama’s HOPE AND CHANGE economic adviser!

    From the charts that list the various central bank multiplier thesis I see virtually ZERO long term benefits from stimulus. Now that’s a real shocker since who’d thunk handing free money out to political cronies was good for the overall economy? Now all we have to show for those TRILLION DOLLAR BABIES is more debt!

    So much for the “New Keynesians”. I watched the movie SPINAL TAP last weekend and they first named their band “The Originals” but then found out another band already had that name so they changed their name to “The New Originals”! How much longer must we global citizenry suffer under the economic blight of the “New Keynesians”? As if the old ones weren’t bad enough …

    TAYLOR LINK: http://johnbtaylorsblog.blogspot.com/
    TAP LINK: http://www.youtube.com/watch?v=z6F0VyKp4Ik

  5. ALOHA!! As I read some of the above posts on the European... [#107585]
    By: kaimu (3289 comments) Go to top ↑

    ALOHA!!

    As I read some of the above posts on the European debt crisis I wonder why virtually nobody even bothers looking where the biggest criminal actions are occurring at the US Treasury. It seems NET DEBT matters as so far this fiscal year “net debt” has nearly completely wiped out net tax revenues.

    NET DEBT = $864.3BIL
    NET TAXES = $899BIL

    On April 16th net debt went up another $39BIL. This leaves the US Treasury and the two party monopoly with a $782BIL cushion in statutory debt limits until November. Out of the $5.916TRIL in deposits to the US Treasury Federal Reserve Account $4.317TRIL was made up of “debt issues”. So total deposits are made up of 75% debt. What family budget in America operates that way? Translated into “GDP speak” 70% of GDP is consumerism and 75% of that 70% is funded with debt! That leaves the US Treasury with about $1.6TRIL of real “earnings” from sources like taxation and military weapons sales. With the current USA/Iran “swift rattling” threatening to destabilize the Middle East even further than the Arab Spring the US Treasury must be applauding the increased weapons sales to our allies and fearful gulf potentates.

    I have to ask with all our major advances in technology and the huge influx of the new Asian Middle Class why must we global citizens continually accept “debt, taxes and war” as the only political pathways of human coexistence? Why must we continually flog ourselves at the voting booth into abject debt slavery for generations? I believe it is way past time to just step up and demand that every ruling regime in ever country on the planet resign pronto. The global track record of utter fiscal failure and political misrepresentation is astonishingly long and dreadful. We need to quit allowing our rulers to spend unlimited treasury on vast wasteful projects that have created generational fiscal and moral destruction. Is there anyone here who believes that the sun rises and sets based on JP Morgan’s continued existence? The poli-banko monopoly must go.

  6. Good morning. 07:00 MBA Mortgage Index (6.9%) 10:30 Crude... [#107587]
    By: Bull Hunter (3552 comments) Go to top ↑

    Good morning.

    07:00 MBA Mortgage Index (6.9%)
    10:30 Crude Inventories

    ——

    CEO – CNOOC upgraded to Hold from Underperform at Jefferies.

    IBM – IBM downgraded to Neutral from Outperform at Macquarie based on valuation and the mixed Q1 report. Price target raised to $215 from $210.

    IBM – PT Lifted from $210 to $230 @ Stifel Nicolaus. Buy

    ——

    “An editor is one who separates the wheat from the chaff and prints the chaff.” ~ Adlai Stevenson

  7. ... [#107589]
    By: tradylady (205 comments) Go to top ↑
  8. David Adamson, CEO of Rubicon, will be making a... [#107590]
    By: papadynamite (446 comments) Go to top ↑

    David Adamson, CEO of Rubicon, will be making a presentation in Zurich, Switzerland at the European Gold Forum 2012. It will be webcast on April 19 at 8:30 EST.
    I trust that there will be a significant Q & A. RBY doesn’t attend the NY Hard Assets Conference and I don’t attend PDAC so I never make personal contact with management. They infrequently release news updates although the last one on March 29 was useful.
    Franco Nevada’s interest along with Agnico-Eagle convinces me that they may have a mini-bonanza at the least. A question arises as to whether or not you should switch position from MUX into RBY. Whom do you believe has better growth prospects? Argentina could be a significant drag on McEwen. Luckily, RBY is primarily in Canada. I still have a Rubicon hat!

  9. Grym, They have been so for some time now, although you... [#107592]
    By: Scott (328 comments) Go to top ↑

    Grym,

    They have been so for some time now, although you know this.

    Watched Bulworth on TV a few days ago. Wish I would have paid more attention the first time I watched it… young and chasing the opposite sex then.

  10. AAPL - estimates, target boosted at Goldman Sachs. Shares... [#107593]
    By: Bull Hunter (3552 comments) Go to top ↑

    AAPL – estimates, target boosted at Goldman Sachs. Shares are now seen reaching $750. Estimates were also increased, given higher expected iPhone and iPad sales, Goldman said. Buy rating.

    MCD – The Dow member gets moved to Buy from Hold at brokerage Edward Jones.

    XOM – Exxon Mobil upgraded to Buy from Hold at Deutsche Bank (pre-open).

  11. HOUSTON (Reuters) - Aubrey McClendon, the CEO of Chesapeake... [#107594]
    By: tradylady (205 comments) Go to top ↑

    HOUSTON (Reuters) – Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells – a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest…”.

    Aubrey says does not pose any conflict of interest.

    http://finance.yahoo.com/news/exclusive-chesapeake

    • Interesting timing on the release of that news article... [#107598]
      By: davefairtex (5215 comments) Go to top ↑

      Interesting timing on the release of that news article about CHK and its CEO. CHK is nearing a triple RSI accumulation zone, with daily RSI around 10, and trading at 9x normal volume today. Implied Vol on the options went from 0.50 to 0.67 – just today. I’d like some analyst downgrades to complete the picture, but perhaps that’s asking for too much.

      The CHK CEO seems to be a bit of a gambler. He bought a whole bunch of CHK stock using leverage prior to the crash, and basically lost it all in a massive margin call in 2008. This loan thing seems like more of the same. Its also probably why CHK has the debt levels that it does.

      CHK has 10B in debt, and with natgas trading below 2, I’m wondering how they’re going to continue making money. Perhaps they’re short gas in the futures market, or they’ve sold gas forward back when it was more expensive.

      I’m thinking about maybe writing some puts. But I’d like to see that downward velocity slow down a little first.

    • Is this enough to drive the stock down another 6.6% today... [#107620]
      By: goldbug58 (370 comments) Go to top ↑

      Is this enough to drive the stock down another 6.6% today, that is the question, or is it something additional. Historical low is 11.32 on 1 Dec 2008, another trough is 14.06 on 2 March 2009. They did reduce their NG hedge from 40% hedged in 2011 to 4% hedged in 2012, see attached.

  12. IBM - estimates, price target were raised at BMO Capital... [#107595]
    By: Bull Hunter (3552 comments) Go to top ↑

    IBM – estimates, price target were raised at BMO Capital. Shares are now seen reaching $200. Estimates were also increased, as the company is realizing higher margins, BMO said. Market Perform rating.

    INTC – estimates were increased at BMO Capital through 2013. Company is realizing a lower tax rate and share count, BMO said. Market Perform rating and $24 price target.

    INTC – PT Lifted from $30 to $34 @ Longbow. Buy

    SBUX – estimates, price target were increased at Credit Suisse through 2013. Company should benefit from lower coffee prices, Credit Suisse said. Outperform rating and new $67 price target.

  13. but wish Dr, Rob had kept the old name, ' US Gold ', as it... [#107596]
    By: baz22 (2875 comments) Go to top ↑

    but wish Dr, Rob had kept the old name, ‘ US Gold ‘, as it seems a more powerful, connected name. But, its his baby, so….

    • I agree completely that for holders of MUX shares, US Gold... [#107606]
      By: M R Ducks (84 comments) Go to top ↑

      I agree completely that for holders of MUX shares, US Gold would have been a more investment attracting name.

      But being of Rob’s generation I also understand the desire to leave behind a lasting legacy with one’s family name attached.

      I have not the slightest doubt he will do what he sets out to do with McEwen Mining, regardless of the name. He is a most soft-spoken and remarkable fellow, filled with the “can do” spirit. Opportunity to go along with him for the ride will not last forever.

      Here’s an interview from earlier in the year worth reviewing.
      http://tinyurl.com/8a5c2s3

      • M R Ducks, If the share price of UXG was an ongoing loser... [#107608]
        By: Bill Cara (4105 comments) Go to top ↑

        M R Ducks,

        If the share price of UXG was an ongoing loser and MUX was a big winner, I think the name would not be an issue. In Hong Kong, traders trade companies by number, in fact. All people ought to be concerned about is price, not the name.

        As for his reasons, legacy is probably the biggest. But, Rob calls himself (on his business card), Chief Owner, not CEO. He, like all the shareholders, suffers and alternatively enjoys the rewards of higher stock prices. I like that deal. It’s almost unheard of in capital markets.

        • Totally agree, Bill... was just reflecting in, regard to my... [#107612]
          By: baz22 (2875 comments) Go to top ↑

          Totally agree, Bill… was just reflecting in, regard to my concern a couple of days ago, about average small investors not knowing any gold companies by name. My accountant loves the market, but when we talked yesterday, he could not name one gold company, not even NEM or ABX, only the ETF, GLD. I do not know if financial networks intentionally do not mention various smaller gold companies, but I do know their general regard for gold ( re: Joe K )… We need more general public exposure for the gold world, if for anything else, leverage against the onslaught fom the hedge community. Thanks for all…

          • "All people ought to be concerned about is price, not the... [#107650]
            By: Ventilation Blues (164 comments) Go to top ↑

            “All people ought to be concerned about is price, not the name.”
            Thank you for putting that point out there again. Another -7% last night. Its reminding me of UXG price movement here again (ie down) , how low can it go?.

  14. http://finance.yahoo.com/blogs/daily-ticker/gold-h... It... [#107597]
    By: Bill Cara (4105 comments) Go to top ↑

    http://finance.yahoo.com/blogs/daily-ticker/gold-h

    It pays to consider all views when assessing a position. In the case of Gold, this author takes the extreme view that the price is headed to $700/oz based on, as I understand it: (i) goldminers leading the bullion price down, (ii) economic slowdown, leading to deflation, leading to lower prices for commodities, and (iii) mass over-speculation.

    My response:

    (i) Gold bullion and coin demand has remained strong by wealthy persons who hold no debt, hence not subjected to the pressures of monetary authorities, and at the same time these investors are concerned that govts are spending well beyond their ability to service their own debt, which leads to the necessity of maintaining artificially low interest rates that have become negative when (even low) inflation is factored in. At the same time, most investors have debt and are often forced to sell assets to pay down the debt, which in most cases means selling the most volatile stocks, like commodity price sensitive stocks. The most recent price divergence of XLE and GDX vs $WTIC and $GOLD started Feb 27, which incidentally was exactly two weeks prior to news reports that the govt leaders in US, UK and France had collaborated on ways and means to “discourage commodity speculation”. I asserted at the time that the bully pulpit was in fact more free market intervention by the monetary authorities for political reasons. I anticipated that the stock prices would fall ahead of the commodity prices for that reason. In fact, independent traders have had it to the teeth with political interference in recent years. So, to conclude, this author is writing from the viewpoint that capital markets have been free to function normally and they have not.

    (ii) Deflation or inflation is a matter of degree. This author simply tries to draw a simple link between “deflation” and lower Gold prices, which is like saying that a kindergarten student has something of value to say to a classroom full of street-wise PhD’s. It is widely known that during the extreme deflation of the 1930s (Great Depression), Gold was the best performing asset class. Perhaps, as a technical analyst, this author is saying that presently Gold is headed for $700/oz and thereafter will become the next out-performing asset class? If he truly believes the price will hit $700, then he is ignoring the resultant impact that would have on mining operations, which would be forced to shut down, unable to make a profit, reducing supply in the extreme, which would push the price of gold higher. Moreover, if he were looking at the situation as an economist, he would likely understand that economic slowdown in the extreme would lead to more quantitative easing, leading to more govt debt without an equal or greater growth in private sector economic wealth, would in fact cause currency devaluations against hard assets like Oil and Gold.

    (iii) The over-speculation argument ignores the fact that investors and traders have fundamental reasons for their decisions, other than purely technical reasons, and that increasing numbers of the public are becoming convinced that government net spending (i.e., deficits and growing debt) and central bank actions (i.e., growing their liabilities much faster than their assets in order to cope with govt net spending) are out of control. So, this author is ignoring the education argument, and simply calling the actions of informed persons to be over-speculation.

    I could go on and on here — probably write a good book that would compete effectively with this author’s view that the Gold price is going to collapse — but that’s not my point here. I would like to think that extreme views should be offered to us and that the rest of us would not immediately dismiss them but try to counter them with reasonable argument and discussion, which is what free-thinking people do.

    • "extreme views should be offered to us and that the rest of... [#107600]
      By: Jimymac (40 comments) Go to top ↑

      “extreme views should be offered to us and that the rest of us would not immediately dismiss them but try to counter them with reasonable argument and discussion, which is what free-thinking people do.”

      I’m at the pool the other day and I notice a gentleman reading Ron Paul’s book on the Fed, we start a conversation, the sum if which is I don’t often read those I agree with, more so I read viewpoints from those with other views.
      Thanks Bill.

      • Jimymac, I know many people in this community disagree... [#107601]
        By: Bill Cara (4105 comments) Go to top ↑

        Jimymac,

        I know many people in this community disagree with some of my views as well, but to me that’s a good thing if I have motivated them to respond to a discourse that others respond to.

    • ... [#107613]
      By: Les (7233 comments) Go to top ↑
    • Good defense of gold Bill. The author of the $700 price... [#107628]
      By: MoKat (531 comments) Go to top ↑

      Good defense of gold Bill.

      The author of the $700 price prediction, Yoni Jacobs (?), believes deflation causes commodities to fall in price and that gold is a commodity.

      He fails to realize that gold IS a currency “to those wealthy individuals with no debt”. . The excess creation of money by the US, Japan and the ECB sustain gold’s role as an alternative currency, as one that is not backed by debt. Since the supply of gold is very limited and a small increase in global demand would see rapid price appreciation which will then impart the reality of the loss of the dollar’s purchasing power to those less wealthy and they will seek gold, like their wealthy counter parts, pushing the price of gold even higher.

      Silver should experience even higher demand, as it is obtainable by those who are not members of the debtless wealthy group, yet aware of the declining purchasing power of what saving they do hold.

      FD: Long Gold and Siver

      • "He fails to realize that gold IS a currency "to those... [#107632]
        By: Vadym Graifer (4341 comments) Go to top ↑

        “He fails to realize that gold IS a currency “to those wealthy individuals with no debt”. . The excess creation of money by the US, Japan and the ECB sustain gold’s role as an alternative currency, as one that is not backed by debt. Since the supply of gold is very limited…”

        I don’t pretend to even begin reading the gold prices and charts, that market is too weird to me. I just want to point out two things:

        1. Exactly similar arguments were made in favor of oil moving to 200, 300 and 500 while it was hitting 150, and those who forecast drop to 60-80 were laughed at. It fell almost t0 30 if I remember correct.
        2. These arguments are being made forever, in any gold market phase, bullish or bearish. By now, one’d have to live in a cave not to hear them. Yet TV is full of commercials begging people to buy gold, citing these same arguments.

        Not arguing for or against, just want to offer some points to consider.

        • ALOHA!! For me even at $700USD I have a 150% gain! Apart... [#107633]
          By: kaimu (3289 comments) Go to top ↑

          ALOHA!!

          For me even at $700USD I have a 150% gain! Apart from that egocentric viewpoint I have to point out how long people have been talking of the gold crash! In fact ever since I first got into the “gold bull” back in 2001 I have heard all the same arguments, except back then the “crash” was going to $100! The gold crash talk has been going on almost as long as the bond crash! On the other hand the “real estate” crash by the US FED and Congress view sprung up from nowhere. We were all surprised! Even CNBC had to cancel the REAL ESTATE BOOM bus! I have never seen so many friends and relatives lose huge sums of wealth since 2007 in a single market. It pales in comparison to the TECH CRASH losses.

          Yet as we sit and wait for $700 gold you can plainly go see that the politicians and the US FED are doing everything in their power to circumvent any hint of a debt collapse. Debt is a liability on anyone’s Balance Sheet, so holding liabilities only creates more risk, especially now that we see that global counterparties are surfacing like WHACK-A-MOLE! I would prefer to disconnect my wealth from such counterparties of unending liabilities. Where are there investments with NO counterparties?

          Never fear though as I will have the ELLIOT WAVE INTL analysis on gold behavior in past recessions in my next SOUND MONEY. Robert Prector has been forever predicting a gold crash also.

          Also I have a podcast interview conducted by Chris Martensen with Charles Eisenstein.

          Then I give you the “new austerity” for America coming on Jan 1, 2013!

          • "I have to point out how long people have been talking of... [#107639]
            By: Vadym Graifer (4341 comments) Go to top ↑

            “I have to point out how long people have been talking of the gold crash! In fact ever since I first got into the “gold bull” back in 2001 I have heard all the same arguments, except back then the “crash” was going to $100! The gold crash talk has been going on almost as long as the bond crash! On the other hand the “real estate” crash by the US FED and Congress view sprung up from nowhere.”

            You are making my point here. All cited examples of price acting against the widely publicized expectations is what I am pointing out. People were calling for a gold crash against the backdrop of gold prices climbing – price-information divergence. Real estate was talked up and up while prices started crumbling, and highest levels of economic wisdom (gag) called that an insignificant temporary setback – price-information divergence. The same happened at the peak of oil boom in 2008 and tech boom in 2000.

            Whether we have price-information divergence right now, with prices retreating against the backdrop of widely publicized arguments for upward move, I guess it will depend on what one reads or watches. Widely watched channels certainly demonstrate this tendency.

        • My sense is, if there is no more money printing, and we... [#107635]
          By: davefairtex (5215 comments) Go to top ↑

          My sense is, if there is no more money printing, and we engage in a traditional debt deflation/default scenario, risks are high that gold will drop. Conversely, if Geoff is right and money printing will happen “until the problem is solved”, then gold should continue to move up. Its a pretty simple equation.

          Central bank purchases of gold do add an element of uncertainty, as does gold buying by people trying to avoid devaluation from eurozone exits (greece, spain, portugal, etc). These may be enough to counteract debt deflation; they may not.

          Those who argue that “gold did well last time we had debt deflation” have never satisfactorily answered my main counter-claim: at that time we were on the gold standard, which meant the US treasury acted to place a floor on the price of gold. Of COURSE gold did well. Kalamata Olives would have done well too, had Treasury signed up to buy an infinite amount of them at a given price, when every other commodity was dropping like a stone due to a massive contraction in money supply from debt deflation.

          Under the gold standard, there was NO PRICE RISK to buying gold. The price never changed, thanks to the Treasury. Thus, gold acted as the ultimate safe haven thanks entirely to the US Treasury.

          We are in a different environment now. Gold has price risk. It can go up, or down. Thus, it will not act the same as it did last time around. It is not the ultimate safe haven, because we’re no longer on the gold standard. Exeter put gold at the bottom of the pyramid because gold was a zero-risk investment. No interest, no counterparty risk, and no price risk. The ultimate in no risk. Today, it still pays no interest, and has no counterparty risk, but it definitely has price risk. The zero risk investment today is the FRN – it is the ultimate extinguisher of dollar-denominated debt, and it has absolutely no price risk. Look at the pyramid; where does the FRN fit, when you take gold off the bottom?

          http://en.wikipedia.org/wiki/File:Exter.png

          Having skewered the sacred golden cow, I will now run and hide. :)

          • The zero risk investment today is the FRN - it is the... [#107637]
            By: pulse (324 comments) Go to top ↑

            The zero risk investment today is the FRN – it is the ultimate extinguisher of dollar-denominated debt, and it has absolutely no price risk. Look at the pyramid; where does the FRN fit, when you take gold off the bottom?

            LOL!!! I had to wipe my monitor.

            You have arrived at the hypnotists’ planned destination. Why, the FRN is good as gold! Step right up, I wish to to introduce you to our new breed of genetically modified alchemists.

            WOW! We even get to throw in a Graven Idol to a discussion of honest weights and measures. Sheila Bair should kiss you! – http://market-ticker.org/akcs-www?post=204870

            Thanks for the laugh, davefairtex.

          • pulse - You seemed unable to come up with a response with... [#107638]
            By: davefairtex (5215 comments) Go to top ↑

            pulse -

            You seemed unable to come up with a response with substance – all you could do was engage in argument-by-ridicule. That’s possibly because you didn’t understand some of the things I was saying. I’ll try again; this time, I’ll keep it simple:

            The FRN is the ultimate extinguisher of DOLLAR DENOMINATED DEBT. What does this mean? It means that if you have a DOLLAR, and a DOLLAR of DEBT, you can, with zero risk, EXTINGUISH SAID DEBT with that FRN. If they print $50 trillion, or the US defaults, it doesn’t matter – you can still pay off your $1 of debt using that $1 FRN. No counterparty risk, no price risk.

            You CANNOT do this with gold. The price of gold may fluctuate; it may go up, or it may go down. If you buy a dollar of gold, and the price goes down, you would be unable to extinguish your debt with the less-than-a-dollar of gold you now own. THEREFORE, there is RISK in gold that does NOT exist with the FRN. If you buy gold, you are SPECULATING. You are taking on risk. You may be right on your speculation, but then again, you may not.

            Does that make sense?

            I’m not advocating a position here, I’m just making an observation about RISK, and pointing out the differences between 1930 and now.

          • ALOHA!! Dave-A very limited pyramid you have there. I... [#107642]
            By: kaimu (3289 comments) Go to top ↑

            ALOHA!!

            Dave-A very limited pyramid you have there. I prefer this …

            LINK: http://img694.imageshack.us/img694/4470/assetsandc

            So long as there exists a “promise to pay” nothing is extinguished!

          • Kaimu - Your pyramid addresses a different topic. I like... [#107645]
            By: davefairtex (5215 comments) Go to top ↑

            Kaimu -

            Your pyramid addresses a different topic. I like it because it talks more about life and for that purpose it is definitely more complete, and the physical bits bring some things into clearer focus. It tries to go from unreal to real and thats a good reminder of what really matters in life. Without the 5 things at the bottom, you’re dead in 3 days. Less, if its cold out.

            However my original point was really focused on the Exeter pyramid, which at its core talked about debt. John Exeter billed gold as the ultimate extinguisher of debt, and he was right, back then. That pyramid isn’t right anymore, and that was my point.

            Try this thought experiment. Take out a US Dollar loan and obtain ANYTHING in that pyramid – even the physical bits at the bottom. What is the one item in the list that is 100% guaranteed to repay that loan, under any circumstance, as long as you still retain the thing in question?

            Stocks? Bonds? Paper gold? Actual gold? Shelter? Food? Water?

            No. Its the FRN. And that’s why I believe its now at the bottom of the Exeter pyramid.

            Again, gold used to be there, by virtue of the US Treasury’s actions. Today, its the FRN, by virtue of that little bit of text: “this note is legal tender for all debts, public and private”.

            Again, my focus isn’t on survival, its about debt, and repayment during times of debt deflation. If you have no debt, you can ignore the pyramid, you’ll be fine. If you DO have debt, well – all it takes is a few counterparty defaults, some “stuff” deflation, and you’re stuck owing the same debt, while your assets are zeroed out by default, or worth far less than what you originally paid for them. And then you’ll wish you paid more attention to Dave and his pyramid postings…

            Make sense?

          • Gold at $700 would be a drop below the most extreme... [#107646]
            By: ChrisM (279 comments) Go to top ↑

            Gold at $700 would be a drop below the most extreme Fibonacci retracement (dotted horizontal lines on the attached overly busy chart – sorry), and violation of the shallowest uptrend from 2001, so surprised to hear that from a technician. My current expectation is for the lower channel line, currently around $1487, to hold.

          • ... [#107651]
            By: Dr. Strangelove (2004 comments) Go to top ↑
          • ALOHA!! Dave-Yes, congratulations, from your "legal... [#107652]
            By: kaimu (3289 comments) Go to top ↑

            ALOHA!!

            Dave-Yes, congratulations, from your “legal tender” only perspective you just convinced me we are off the gold standard and operating under the Federal Reserve Act! In terms of legal payments for debts you are right. Saddam found out what happens when you compete with a FRN and domestically Bernanrd Von NotHuas is in jail for thinking silver coins are the new legal tender. From that context I am not sure why the Exeter pyramid is so important. But the point is a FRN is still debt based and just legalized “promises”! If you go back even further to 1914 you can see those same FRNs printed using each district bank, for instance there was a BANK OF NEW YORK FRN and one for CHICAGO,etc for a total of twelve different FRN bank promises. Now they’re not so precise as to where those promises were sourced as it is just one generic FRN and those FRNs no longer have anything of value backing them, just force of law. Certainly the US FED has not put up any of its real assets to back an FRN. I do not automatically accept bank promises as forever risk free, not even for debt payment. Just reading the thousands of Executive Orders FDR produced during his reign is frightening. Confiscations and bank holidays! Not my cup of tea …

            I also have to say that FRNs also lose value and their prices fluctuate just like gold. So far I have picked up an awful lot of assets with leverage by selling FRNs! Of course if Obama was serious about getting rid of speculators then he should Executive Order the abolishment of the Federal Reserve. FDR called a “bank holiday” via Executive Order why not Obama? The US FED is a bank with a monopoly. It should be an anti-trust issue.

            We speak in degrees of debt! There are also degrees of default as we have discovered with the Greek CDS. Actually I prefer to own assets. I prefer to trade them now for an asset while my FRNs still have value and liquid trading markets still exist. I also think many vastly underestimate the power of the US Congress and its Treasury in the event of a potential debt default. I am not so sure FRNs will even be available to everyone at that point. In 2008 we had good old fashioned bank runs in the USA. Depositors could not withdraw their funds. You also recall that Hedge Funds etc restricted trades and withdrawals and there were massive margin calls. Has everyone forgotten that? Then also what form will those FRNs turn to? Of course there again we are back to degrees of default(aka: monetary crisis).

            I just do not trust the monetary system or those who manage money and free markets from chairs at coordinated central banks. In truth the beginnings of the FOMC in the 1930s were illegal and later legalized. We all saw how fast investment banks turned into BHC in 2008. We also saw how fast $700BIL moved! Logistically none of us mortals can out maneuver central bank mouse clicks. Debt is still a liability in my book. In my life I have prospered on turning that belief into actions. Then again we all do what is best based on our own needs. DEBT IS AS DEBT DOES!

          • Kaimu - The Exeter pyramid has little meaning for you... [#107656]
            By: davefairtex (5215 comments) Go to top ↑

            Kaimu -

            The Exeter pyramid has little meaning for you because you are debt-free. Given that, of course you want to buy assets. A debt-free individual doesn’t need to be concerned with absolute prices – its only prices relative to things you need to live that are important. (i.e. as long as you can trade gold bars for food at some ratio, you’re good; the particular prices of gold and food don’t matter, as long as they rise or fall at relatively the same ratio).

            Most of the world doesn’t exist like this, however. Most people (in the US at least) have assets purchased through debt. In a deflation, distinctions between levels of that pyramid will suddenly make a lot more sense. Lose money in a bank default, or notice that the prices of your stocks have gone down relative to your fixed debt burden, and you’ll think “boy, I wish I’d had cash instead of relying either on that bank promise, or that share of Apple’s profits.”

            When you suggest that you aren’t sure FRNs will even be available to everyone in some scenarios, you are making my point perfectly. What value will a very scarce physical item with the legal authority to PAY DEBT have? In that instance, the value will skyrocket, because SO MANY PEOPLE have that monthly debt service requirement. They’ll offer you all their less necessary collectibles (at bargain prices) in order to get the thing that will allow them to service their debt, so they don’t lose the house, the car, or the farm. It will be a supply & demand thing.

            Will such a deflation occur? Given all the bad debt out there still on the books, there are two scenarios. I leave it up to you to assess the likelihood of either coming to pass.
            1) central banks become politically unable to continue printing money
            2) against all odds, we get “sound money”

          • Will such a deflation occur? Given all the bad debt out... [#107658]
            By: Les (7233 comments) Go to top ↑

            Will such a deflation occur? Given all the bad debt out there still on the books, there are two scenarios. I leave it up to you to assess the likelihood of either coming to pass.
            1) central banks become politically unable to continue printing money
            2) against all odds, we get “sound money”

            As Vad posted the other day:

            Not your average Joe-six-pack, but CB reserve managers. Read what they find attractive, safe or risky:

            Euro vs US Dollar (EU) Some central bank reserve managers have questioned the haven status of the Euro, amid the EU debt crisis – FT
            - More than 75% of the managers said the EU debt crisis has significantly impacted their management strategies
            - Over 33% said that the EU debt crisis has put the euro’s reserve currency status at risk.
            - Approx 30% of those polled said they had cut their exposure to the Euro.
            - One reserve manager from a central bank in the Americas cut exposure to the EU by two-thirds over the last year.
            - More than 75% of those polled said they would consider investing in the Canadian and Australian dollar denominated assets over the next 5 years.
            - Also, more than 40% said they would consider yuan and Nordic currency related investments.
            - More than 70% said gold was a more attractive investment.
            - The article cites a survey of more than 50 reserve managers that oversee portfolios worth a total of $6T.

            http://caracommunity.com/content/bill-caras-blog-a

            Looks to me like big money is questioning the fiat currencies that were a given only a few years ago. And here we are but in the first wave of this continued monetary crisis.

            Note the similarities between how the gold standard functioned:

            http://www.plata.com.mx/Mplata/articulos/articlesF

            and how the greek people are organising themselves economically:

            http://tinyurl.com/bvneu3a

            They are one and the same. Just a shiny piece of metal was used for settlement at the time, whereas a script of paper is used in the greek village. You wanna bet that these jokers in power will let economic and monetary power return to the people using scripts of paper?

            I’m willing to bet that it’ll be same old, same old. The gold standard or some equivalent will be resurrected once confidence has collapsed. Plan B gets pulled from the drawer, passes congressional and international agreement within months, and they’ll sell it as the best thing invented since sliced bread.

            That’ll keep the monetary show on the road for another what… 40 odd years? That appears to be the average duration of monetary systems. Global debt is a systemic issue, so I suspect there is a good chance that debts will be frozen while a new credit accord is concluded. Greeks rioting on the streets is one thing. All of Europe committing violence against their respective governments is another.

          • ... [#107665]
            By: Grym (5469 comments) Go to top ↑
          • "Illinois is in real trouble...fellow Americans, this... [#107724]
            By: goldbug58 (370 comments) Go to top ↑

            “Illinois is in real trouble…fellow Americans, this condition is headed your way…”.

            Grym, this is nothing new; as I grew up in NYC in the 70s, I can tell you firsthand about the destruction of neighborhoods, businesses, and communities…it probably started in the 1960s with (Mayor) Lindsay and his over-generous welfare benefits.

            Result: poverty, crime, drugs, unemployment, flight of the middle-class [to Long Island or elsewhere], businesses fled due to over-taxation; property owners with frozen “rent-controlled” units losing money; some of whom turned to arson to collect insurance and get the h*ll out any way they could…

            A self-sustaining engine of destruction, feeding on itself, mothers with no husbands somehow managing to add children so they could “earn” an extra $45 a week through the welfare system. And how did you think all those kids turned out, growing up in slums and ghettos? Were they a benefit to society?

            When governments cannot properly manage their finances and their tax bases; when they give things away for free, services start to disappear, there is no ownership, the workers flee for their lives, no one cares, and the resulting situation borders on anarchy.

            How could it have felt to be threatened by violence, have your kids beat up in school, on public transportation, in the streets…watch your community destroyed to the point where it became uninhabitable…and know that your higher taxes were paying for it, and would continue to pay for more of it…

            Since I know you have time on your hands, Google ‘Bushwick’ and ‘Brooklyn’ and ’1977′ and take a look at images of destruction, similar things occurred in the South Bronx and other neighborhoods. The upper classes in Manhattan did not care about what happened in Brooklyn, Queens, or the Bronx. These were all working-class areas long ago…is this the future of the U.S.A.?

            Because I see this same deterioration of infrastructure in a lot of American cities now, and the list is getting pretty long.

          • davefairtex; Thanks for simplifying that for me. I'll... [#107643]
            By: pulse (324 comments) Go to top ↑

            davefairtex;

            Thanks for simplifying that for me.

            I’ll have to withdraw, because I truly don’t know how to respond appropriately to you.

            BBL,
            pulse

      • Mokat; Agree with most of what you wrote, especially the... [#107636]
        By: pulse (324 comments) Go to top ↑

        Mokat;

        Agree with most of what you wrote, especially the recogniton of the source’s experience. One common statement I will take issue with, though.

        Unlike all commodities, there is absolutely NOT a shortage of gold, or as you say ‘supply of gold.’ In fact, there is an enormous supply gut always overhanging – all that has been mined is quite quickly available for redemption at a price which a potential seller is willing to settle for. Here is where the taxation of ‘gains’ corners the statists of the world. The wealthy are very unlikely to initiate a capital gain (unless they access the black market) and will hold, unless dire circumstances confront them.

        In this deficit world of exponential destruction, the statists (and us) have no escape; they will print until they have destroyed all savings and dilluted the remnants of value to microscopic levels. Rickards commented that the estates of multi-generational wealth operate with a proven theory (one third real estate/one third art & collectables/one third gold) to survive the upheavals consistent with the collapse of monetary confidence.

        I am also of the belief that gold has approached a level of fair value here, but the lunatics running the asylum cannot face the consequences of their actions, so we are just beginning in the GLOBAL devaluation in a highly controlled environment of managing perspectives to conceal the realities of vast incompetence.

        (http://jessescrossroadscafe.blogspot.ca/2012/04/eu…)

        When the miners begin to offer dividends of substance, they will become the Belles of this dance. However, the leaders of the major gold miners are very unlikely to pass the bounty (buying Gold indexes or ETFs are a VERY bad idea due to this and other factors, IMO), as they are largely comprised of the very same personality types who have systematically siphoned the lifeblood of capitalism away from the real producers – see Bonuses, Stock Options, and extremely long dated Warrants. Not to mention control of inventory, selection of refinery and bullion banks for their product, forward selling concealed in off-balance sheet OTC derivatives, royalty deals, selection of contractors, mining rights and finally legislative/corporate adultery to create great volatility.

        This is the house to play in, but many of the rooms are occupied by whores.

        ATB,
        pulse

        • Supply of gold I'm saying the supply of physical gold... [#107641]
          By: MoKat (531 comments) Go to top ↑

          Supply of gold

          I’m saying the supply of physical gold could be easily overwhelmed by demand. Maybe there’s no shortage of paper gold. And who knows how much gold there exists without an audit of the purported biggest holder…

          If 10% of the global population ( those who have investable savings) became fearful of the loss of value of their currency holdings, they most likely would purchase gold or silver to protect those savings. Currently less than 2% have gold in their portfolios. If this 10% suddenly wants to own a few of ounces of gold, the price would skyrocket as supply would disappear. Demand would overwhelm production and, IMO, existing holders would be reluctant to sell.

          Until the issuers of global currencies cease the debasement of their respective currency, upward pressure on the gold price should continue. The purchase of gold and silver is also backed by cultural norms that exist in over half of the worlds population which supports growing demand. Any spike in demand could quickly close the differential between production and demand.

          As Kaimu mentions… until sound money returns, demand for precious metals should continue to grow. If some global panic ensues at some future date, we could see $50-100 moves in daily trading. Volitility could be shocking if
          this type of event were to occur. For gold miners, they could hold product off the market as it could be more profitable holding their production than selling it.

    • gold $700? sign me up as i will be a buyer... [#107629]
      By: NYUGrad (4750 comments) Go to top ↑

      gold $700? sign me up as i will be a buyer there.

  15. Roche is serious aout pulling its offer of $ 51, by this... [#107599]
    By: baz22 (2875 comments) Go to top ↑

    Roche is serious aout pulling its offer of $ 51, by this Friday. Shareholders getting ticked. Board may have a group-hug, and re-think. $ 39′s on the 3 year look inviting. Man, this is so like some other LOB’s in years past. Worth a gamble.

    • Genome sequence is gaining traction quickly. Before his... [#107604]
      By: baz22 (2875 comments) Go to top ↑

      Genome sequence is gaining traction quickly. Before his death, Steve Jobs paid $ 100,000 for a complete genome sequence. Today, the cost is $ 4,000. ( remind ya’ll of another companies’ lower cost/product expansion ? ) More hospitals are contracting out this service ( Mayo clinic and GNOM, for one ). For real, this is the new frontier in personalized medicine. Private companies, like ’23 and Me ‘, are developing huge data-bases. Exciting times we live in, for sure.

  16. research@gold.org Please register to get the mailing of... [#107602]
    By: Bill Cara (4105 comments) Go to top ↑

    research@gold.org

    Please register to get the mailing of these free research reports.

  17. ... [#107603]
    By: Bill Cara (4105 comments) Go to top ↑

    http://finance.yahoo.com/news/exclusive-chesapeake

    Amazing story that points out the importance of an independent board and the separation of powers between chairman and CEO.

  18. Amerigo Resources Ltd, Canadian copper and molybdenum... [#107605]
    By: gregdickie (26 comments) Go to top ↑

    Amerigo Resources Ltd, Canadian copper and molybdenum producer, reported a 24 percent rise in first-quarter copper production, the highest in the Company’s history and Molybdenum production of 216,292 pounds was on budget, but warned that higher power costs resulting from drought in Chile would hurt its financial results.
    - Dr. Klaus Zeitler, Amerigo’s President and CEO, stated “we continue to believe 2012 production will meet or exceed the Company’s targets of 50 million pounds of copper and close to one million pounds of molybdenum”.

    12:21 EST(+5.80%)

    http://www.4-traders.com/AMERIGO-RESOURCES-1409051

  19. when Bertha C. at bublevision, with the Dow at - 80 said... [#107607]
    By: baz22 (2875 comments) Go to top ↑

    when Bertha C. at bublevision, with the Dow at – 80 said the ” market in a slight dip “, and yesterday, when at + 90, was ” in a rally “… I love those guys..!!

  20. when Bertha C. at bublevision, with the Dow at - 80 said... [#107609]
    By: baz22 (2875 comments) Go to top ↑

    when Bertha C. at bublevision, with the Dow at – 80 said the ” market in a slight dip “, and yesterday, when at + 90, was ” in a rally “… I love those guys..!!

  21. perfectly and in deep yet easy to understand details... [#107610]
    By: Vadym Graifer (4341 comments) Go to top ↑

    perfectly and in deep yet easy to understand details described in a blog post, with more patience than I could ever gather:

    http://goo.gl/owkKH

    Only for those who are actually interested in how it works and why it exists. Also, as a side effect, it explains why HFT does NOT influence the direction of the market.

  22. AAPL $607 Another blowout quarter coming RMX.TO $2.93... [#107611]
    By: westcoaster (1130 comments) Go to top ↑

    AAPL $607 Another blowout quarter coming
    RMX.TO $2.93 (Politically secure, well delineated deposit, enough cash to build the mine themselves, many majors nearby, and it’s about time LOL….!)

  23. ILO UNEMPLOYMENT RATE (3M) UK for Feb Actual: 8.3% Cons.:... [#107614]
    By: Les (7233 comments) Go to top ↑

    ILO UNEMPLOYMENT RATE (3M) UK for Feb
    Actual: 8.3% Cons.: 8.4% Previous: 8.4%

    AVERAGE EARNINGS INCLUDING BONUS (3MO/YR) UK for Feb
    Actual: 1.1% Cons.: 1.3% Previous: 1.3% Revised from 1.4%

    CLAIMANT COUNT CHANGE UK for March
    Actual: 3.6K Cons.: 7.0K Previous: 4.5K Revised from 7.2K

    http://www.ons.gov.uk/ons/rel/lms/labour-market-st

    CONSTRUCTION OUTPUT S.A (MOM) EMU for Feb
    Actual: -7.1% Cons.: Previous: -0.5% Revised from -0.8%

    CONSTRUCTION OUTPUT W.D.A (YOY) EMU for Feb
    Actual: -12.9% Cons.: Previous: -1.4%

    (Those construction numbers could be one off. Feb was really, really cold in Europe)

    ZEW SURVEY – EXPECTATIONS Switzerland for April
    Actual: 2.1 Cons.: -8.0 Previous: 0.0

    BANK OF CANADA MONETARY POLICY REPORT
    http://www.bankofcanada.ca/wp-content/uploads/2012

    http://www.fx360.com/calendar/

  24. Mark Carney of Canada hinted of higher interest rates... [#107615]
    By: 14them34me (295 comments) Go to top ↑

    Mark Carney of Canada hinted of higher interest rates sooner than later. Frothy housing prices in Vancouver and Toronto could be part of the reason. However, in my mind, interest rates are not going to dampen Vancouver’s, may be even Toronto’s housing prices. The reason is that the purchases in those cities are mainly the results of a “herd mentality”. Wealthy Asian buyers are one of the main cause. I’ve heard stories of buying multi million dollar houses on the internet, site unseen….CASH ! No mortgage ! So and so wants to buy a certain multi million dollar house because the CEO or the founder of such and such company lives on the same street. It could be “networking”, but it’s also borderlining ridiculous. Just think, there are probably more multi millionaires (8 or 9 digits) in China than the total population of Canada (which is less than 0.03% of China’s population).

    IMHO, (tongue in cheek) the only thing that will slow the tide of high real estate prices would have to be an earthquake in the magnitude greater than a 6 or 7. I do not wish for that to happen, but experts’ been predicting that in Vancouver for years. That will be like a gun shot to stop a herd of stampeding cattle.

    Trivial tidbit …

    • I and Westcoaster vigorously object against this method of... [#107617]
      By: Vadym Graifer (4341 comments) Go to top ↑

      I and Westcoaster vigorously object against this method of regulating housing prices (grin)

    • 14them34me: What does it mean when people say "housing... [#107619]
      By: Jeff B (715 comments) Go to top ↑

      14them34me:

      What does it mean when people say “housing prices are frothy”?

      What does it mean when a house sells for 400k in 2005, 450 in 2006, 500 k in 2008 and 1 million in 2012? Was it frothy in 2006? 2008? is doubling of home prices over the course of say 8 years “frothy”?

      When investment returns double every 8 years we say it’s a healthy or strong return, we consider a double every 5 years “frothy”.

      We speak of housing prices as if there is an agreed upon metric. In fact the vast majority of what he hear about “the housing market” is absolute nonsense, baseless speculation and sweeping generalizations.

      How often have we been told a correction is due?
      How often are these say sources wrong?

      Will Central banks and Political pundits every say anything other than “we are optimistic but remain cautious”?

      Stories about people buying without seeing the homes are just that. There are stories of people buying stocks based on what they overheard at the gym, or loosing their family fortune on bad bets. None of this means that housing as an asset class is in signs of trouble. The problem is that housing markets are in fact a loosely correlated collection of different markets based on geography and structure.

      Citing weakness in Kelowna BC’s condo market was a pretext for issuing a warning to Toronto’s condo market by a large bank not too long ago. Anyone who has been to Kelowna and Toronto would have trouble understanding how the two even remotely compare.

      Construction and development has continued in Toronto in spite of a decade of calls for a crash. Part of the problem is that Speculative busts like those in California and florida bear little or no resemblance to Toronto’s market. The market in T.O. is based on Canada’s largest city, with a surrounding population of 7 million. New homes are bought and lived in. condo’s are rising in price as the city is revitalizing its downtown at a time when US cities are seeing people fleeing for the burbs.

      People will continue to say housing prices are “frothy” or “crazy”, next year if they advance people will say the same, the year after that if they advance we will hear the same remarks. At some point there will be a correction, but not because of anyone’s educated guess about prices being “too high”.

      If you maintain that prices are too high, eventually you will be right. Until then, you might miss out on what millions of others haven’t: owning property that has risen in value. This does not happen by listening to platitudes by politicians or financial pundits who are never held accountable to their failed predictions.

      Everyone is in the wings with their bearish real-estate predictions praying for a break so they can jump forward to proclaim they called it. this may or may not happen. There might be bumps along the way, each short term data point will be trumpeted to proclaim the break is happening. If they are wrong they loose nothing because real estate predictions are cheap and of no value to people trying to purchase a home.

      • agreed. my point is housing prices are a function of supply... [#107622]
        By: 14them34me (295 comments) Go to top ↑

        agreed. my point is housing prices are a function of supply and demand. At the moment, there seem to be a “tsunami” of demand from foreign buying. If the purchases are free of mortgage, raising interest rates will not stamp the tide of buying.

        • ... [#107624]
          By: Vadym Graifer (4341 comments) Go to top ↑
          • This doesnt surprise me. People tend to perceive things as... [#107625]
            By: Jeff B (715 comments) Go to top ↑

            This doesnt surprise me.

            People tend to perceive things as “a rush of foreign buyers” when at the end of the day the vast majority of people buying homes are to buy them.

            Speculators will always exist, and “supply/demand” is much more complex.

            Even if more buyers from overseas enter the market, what does that mean? Is this inherently bad or good? Does the influx of English purchases of Spanish realestate bode ill or well for both nations? What about Canadians in Florida?

            For some time the bulk of purchases in Florida and the sun belt were by wealthier retires and investors from the North east USA. Canadians began to take a greater share over the decades. Is there a material difference if a Bostonian or Torontonian buys a home in Miami?

            I lived in Vancouver about 12 years ago, during that time people spoke of nothing but a housing bubble ready to crash, $200,000 condo’s were considered insane and tiny. The influx of Hong Kong buyers were blamed for their proliferation. Here we sit more than a decade later and its the same argument accept $200,000 is now $500,000. lather rinse repeat.

            we will have the same conversation 10 years from now. its a wonder cities even grow or last more than a decade with the common theme among so many news outlets and analysts being perma-bears to avoid looking like fools again if the market does correct.

            Most market commentary has shifted from providing thoughtful insight to cover one’s ass to always sound right no matter the outcome.

            Cue “we are optimistic but remain cautious” mantra… covering all my bases!! barf!!

          • Our just released numbers (March 2012 and Q1) on new home... [#107644]
            By: stvh (13 comments) Go to top ↑

            Our just released numbers (March 2012 and Q1) on new home sales (not starts or permits) in the Greater Toronto Area if you’re interested.

            http://informedadvantage.wordpress.com/

            Stv

        • This is mostly conjecture It seems to me that I heard... [#107626]
          By: westcoaster (1130 comments) Go to top ↑

          This is mostly conjecture
          It seems to me that I heard recently that buying in Vancouver is as much by Americans as Chinese (and Iranians, Indians, Koreans, Afghani’s, Iraquis, Japanese ad infinitum). But there is the call of NA to every Chinese family who badly want their children to have a western education. This has been going on for centuries: Soon Ching Ling, the godmother of the Chinese Communist Party and her sisters (one married Chiang Kai Shek) all went to school in Eastern US colleges.
          These are secular trends and they keep a bid in Toronto and Vancouver markets. And so, Canadian real estate holds up, while other markets try to find other reasons to re-flate.

          • Three points about Vancouver housing prices: (1) Housing... [#107634]
            By: Dr. Strangelove (2004 comments) Go to top ↑

            Three points about Vancouver housing prices:

            (1) Housing demand requires household growth (foreign or not). Got jobs? No jobby job tends to put a damper on household growth as the herd migrates to greener pastures.
            (2) Western housing debt is way way way too high and must be worked off slowly (20 years as Armstrong suggests using straight up cycle data) or foregiven and do this before interest rates climb off the floor or values are not sustainable. Ultra easy gov’t supported mortgage issuance has hit the wall. Rising interest rates = falling real estate values. Do the math.
            (3) Housing industry has become a debt propaganda machine for our generation with one laser sharp goal: To indenture the middle class. So far, it’s working. Don’t believe the NAR hype.

            As Lily Tomlin used to say, “As cynical as I am, I find it hard to keep up.”

          • Statistically, once a person becomes "landed immigrant"... [#107640]
            By: 14them34me (295 comments) Go to top ↑

            Statistically, once a person becomes “landed immigrant”, his/her money is considered Canadian money. But, in my mind, it is “foreign money” as the money was made or earned outside the country.

            I seriously doubt if there will be any stats on that as that would be considered “politically incorrect” or “racial profiling”.
            btw, “frothy” is not my term. I’m just paraphrasing what other “experts” said.

            I do see the point, however, of raising rates to stamp the rising tides of home equity loans, or using the equity of the house as an ATM machine.

      • Jeff B - I'm sure a bubble could never happen in Toronto... [#107621]
        By: davefairtex (5215 comments) Go to top ↑

        Jeff B -

        I’m sure a bubble could never happen in Toronto. I’m sure housing prices there will only go up.

        However, if the average income in the area can’t afford the average house in that area without going into “non-standard” loans or an imprudent ratio of debt to income, the risk of a price decline increases as the home prices diverge from the base of income that supports the payments. Likewise, if rates are unusually low, and you can’t get a fixed rate loan, your risk also goes up.

        If you’re buying a home in order to make money, its really important to know where you are in the cycle. If you are going to live in it for 20 years and you just want a place that you can customize, its less important, assuming you have a job, and the home is affordable without stretching.

        Last point. Foreigners may be pouring into the market now, but I wouldn’t call them a fundamental (or “eternal”) source of buying pressure. Whatever is causing the herd to buy now, may suddenly stop, and then you are thrown back on fundamentals again and like Wile E Coyote, you may find yourself off the cliff without a visible means of support.

        Its not about certainty, its about assessing risk.

        Just my two cents.

      • What does it mean when people say "housing prices are... [#107630]
        By: Les (7233 comments) Go to top ↑

        What does it mean when people say “housing prices are frothy”?

        Easy. Housing prices to incomes. Way out of whack in many parts of the world. I can only be thankful that as an absolute beginner we were lucky in our entry to the market and housing prices in Switzerland have done naught but gone up since. A reasonable buffer against anticipated collapse of said market. “Greater fool theory” was coined for a reason, no?

  25. With MUX sitting at $3.46/share and company meeting their... [#107616]
    By: kkanagal (8 comments) Go to top ↑

    With MUX sitting at $3.46/share and company meeting their expectations… I think this would be a good time to buy more!

    http://www.marketwatch.com/story/mcewen-mining-ann

  26. ILMN owns a stake in privatey held Oxford Nanopore... this... [#107623]
    By: baz22 (2875 comments) Go to top ↑

    ILMN owns a stake in privatey held Oxford Nanopore… this company unveiled a game changing DNA sequencer recently. A hand held UBS thumb-drive DNA sequencer that reads DNA directly from blood with no prep work. A $ 900 dollar instrument that reads DNA in 10,000 letter stretches vs. the couple-of-hundred current. ( from Forbes )

  27. UBS raises SVM from neutral to buy. Then they lower the... [#107627]
    By: papadynamite (446 comments) Go to top ↑

    UBS raises SVM from neutral to buy. Then they lower the target price from $8.50 to $8.00 Go figure!!!!!

    • That's nothing... a few years ago I witnessed a boutique... [#107631]
      By: Vadym Graifer (4341 comments) Go to top ↑

      That’s nothing… a few years ago I witnessed a boutique brokerage upgrading a company from Neutral to Strong Buy and lowering target price from $25 to $20 – all the while stock was trading at $40. Now, that’s a “go figure”!

      PS. Popular joke among traders for a few days after that was an advice to that brokerage to shell out and install internet connection, to take advantage of 15 min delayed free quotes, instead of getting quotations over snail mail from the exchange.

  28. PMI Gold Corporation (TSXV: PMV.V - News) (ASX: PVM.AX ... [#107647]
    By: ChrisM (279 comments) Go to top ↑

    PMI Gold Corporation (TSXV: PMV.V – News) (ASX: PVM.AX – News) is pleased to advise that it has generated several significant new oxide gold targets from its maiden Aircore drilling program at the Kaniago Prospect, located within a 15km area of influence immediately west of its flagship Obotan Gold Project in south-west Ghana (Figures 1 and 3) where a Feasibility Study is underway on a new gold mining operation.
    The results have highlighted the potential to delineate satellite sources of oxide mineralisation, within an economic haulage distance of the proposed processing facility at Nkran (Figure 1), to supplement mill feed from the four main Obotan deposits, Nkran, Asuadai, Adubiaso and Abore.
    Drill testing of the Kaniago Prospect represents one of many priority exploration targets for PMI as part of a major exploration push currently underway across its extensive ground holdings in the Asankrangwa Gold Belt. Drilling activity continues to gather momentum as part of this regional exploration program, in parallel with the Obotan Feasibility Study which is due for completion in mid-2012.

    http://finance.yahoo.com/news/discovery-kaniago-st

    • Does anyone have insight into why PMI Gold has been... [#107677]
      By: gyglass (26 comments) Go to top ↑

      Does anyone have insight into why PMI Gold has been particularly weak the past month? I realize all juniors have been trashed, but with such great prospects and previous strong uptrend, I am confused by the prolonged, daily losses of PMI suffered almost every day for 3 weeks or so. Today is a good example–almost all gold stocks up this morning and PMI down 3.18% again today. Today’s loss is on the heals of another positive announcement just last night. Previously PMI remained strong, now and for a few weeks, it seems really out of favor. Steady downhill trip from over 1.30 to .92 today. I don’t get it considering previous strength not long ago.

  29. Here's how one Greek town is dealing with the shortage of... [#107648]
    By: MoKat (531 comments) Go to top ↑

    Here’s how one Greek town is dealing with the shortage of currency

    http://tinyurl.com/bvneu3a

    • That reminds me something from 1990s in Ukraine... when... [#107649]
      By: Vadym Graifer (4341 comments) Go to top ↑

      That reminds me something from 1990s in Ukraine… when galloping hyperinflation destroyed the currency and a lot of state-owned enterprises were practically paralyzed, many of them started paying salary in their own product.

      Workers didn’t have much choice so they accepted it and barter became way of life for many. Bearable if your workplace produces something everyone needs all the time… but liquidity of some products wasn’t enough for that, so people started taking their production to flea markets that appeared like mushrooms here and there. Again, bearable in bigger cities but what about a smallish town where most of population worked on the same factory? They did the only sensible thing left to them – organized a flea market along the highway where there was a chance to sell to out-of-towners. In a short while certain points along the highway became known as points to buy certain products.

      Now, a visual for you: a mile along the highway, both sides are teeming with toilets standing next to each other, many hundreds of them. As day progressed, sellers got tired, sun beating on them… so driving that road around noon you’d see hundreds of people sitting on the toilets with open umbrellas, eyes following every car with hope. Ugh.

      • Vad - 'Round my parts, its been done like this... [#107653]
        By: Dr. Strangelove (2004 comments) Go to top ↑

        Vad -

        ‘Round my parts, its been done like this …

        http://www.youtube.com/watch?v=2riRAGzNzvQ

        Best.

      • Vad, oh the memories. In 1992, my son had just graduated... [#107655]
        By: Ilya (572 comments) Go to top ↑

        Vad, oh the memories.
        In 1992, my son had just graduated high school and for his present I took him in a 14 day river cruise on the Dneiper from Kiev to the Black Sea then to the Crimea and back. Ukraine was using an interim currency then, the carbovnet. When we began the trip the exchange rate was 120 to the dollar. Two weeks later it was 200. Very sad for the people but a great object lesson for my son which was my purpose.

        In 94 I opened an account with Menetap Bank in Moscow in order to speculate on the Russian Bourse. I was there in 96 when Boris ‘the drunk’ was elected Czar. I supported General Lebed for reasons you might not understand but when Yeltsin was elected, the speculation began in earnest. By 98, it was obvious that the the economy was a house of cards. The exchange rate was about 6.4 rubles to our uncle buck. I admonished every friend I knew to exchange rubles for dollars and to withdraw those dollars from their bank. Only a few understood what was about to happen. Even Soros was taken for a cool billion U.S. at the end of that bubble. The political/monied classes thought him a feckless Rube for interfering in their internal affairs…

        In 99, with the ruble at 33 to the dollar I began buying flats for cash. A decent 3 room flat in a sturdy Stalin building on Tverskaya Ulitsa could be had for $50,000. Add $20,000 for ‘Western remont’ and today they sell for $500,000 at least.

        Russia and to a much lesser extent Ukraine went through a 2 to 3 year depression and both came out whole and vibrant. The markets were allowed to clear at whatever price.

        My point is that the longer prices are not allowed to clear, the more severe will be the hurtfulness imposed on our working men and pensioners alike.

        The Holy Fathers at the University of Salamanca in the 12th century determined that a ‘fair price’ of any good or service was the last price of an un-coerced transaction. The fair price for gold today is $1600 and change. For feeder cattle, it’s about $1.55 a pound. Where those prices will be in 5 years, I leave to the alchemists and readers of frog’s bones. I will say that if El Senior ZIRP-O has his way with us, gold will be higher in price and frogs more scarce.

  30. Gold waiting for the Spanish auction overnight to make a... [#107654]
    By: stu1x2 (27 comments) Go to top ↑

    Gold waiting for the Spanish auction overnight to make a move? Will the gdx/hui break down from the flag that’s been forming? I suspect we get some resolution in the morning.

    • stu1x2, Certainly the successful Spanish bond auction... [#107661]
      By: Bill Cara (4105 comments) Go to top ↑

      stu1x2,

      Certainly the successful Spanish bond auction ought to help strengthen the Euro.

      http://finance.yahoo.com/news/spain-issues-2-5-bil

      You know, in a long-term stable capital market (and banking system), the rates on the 10-year Spanish bond are normal. The US will sooner or later be looking at paying similar rates on their 10- and 30-year paper.

  31. Value of gold- In 1913 when the Federal Reserve was... [#107657]
    By: danf556356 (26 comments) Go to top ↑

    Value of gold-

    In 1913 when the Federal Reserve was established, the price if gold was $20, the dollar was a dollar and there was no income tax. Today the dollar is worth abour $.02, a 98 % decrease. In my way of thinking, gold should be $1000 per oz. But today we have a 35% tax on the sale of gold, so the price of gold would be $1538 which is about where it is to net $1000.

    Doesn’t look like fair value is very far away.

    Dan

    • Roughly calculated, if M3 now = 15 trillion, and there are... [#107660]
      By: goldbug58 (370 comments) Go to top ↑

      Roughly calculated, if M3 now = 15 trillion, and there are 155,000 metric tons of gold in the world (1 MT = 2200 pounds), the dollar price of gold should then be approaching $2750 U.S. dollars per ounce.

      I’ve never been charged a 35% tax when I bought physical gold (or silver), is this something new, or have you experienced this when you’ve sold recently? This is a Federal tax?

      • The 35% is the federal income tax on the sale of non-US... [#107676]
        By: danf556356 (26 comments) Go to top ↑

        The 35% is the federal income tax on the sale of non-US gold coins. The buyer submits a 1099 to the IRS.. I am not sure what happens on bullion.

        Dan