The market rally has been in a classic bear market rally mode, and whether you are a fundamentalist or chart watcher, the facts speak for themselves. Dear reader, I will place my thoughts for your digression. I use by the way, a hybrid approach of the two main market techniques.
Earnings
continue to decline. Company revenues are reaching new highs or should I say, new lows, quarter after quarter but the government has laid out its proof that the economy is growing. The BEA revised the GDP upward last Friday from 1 percent to 1.4%. The Fed speaks. Basically saying it will continue cheap money to keep things on the right path that they envision, but never admit that errant results are by their doing.
Who is right?
Consider this: A report by CNBC that covers a period back to 1990, has shown that the Bureau of Economic Analysis has continually misrepresented the true GDP numbers by an extremely wide range of 1.3%. By that measure the last quartet of 2015 would be .01 percent. Now, I think that would be an exaggeration of the real number. I think that the original 1% is correct. Nevertheless, we now have proof that the BEA numbers are no more accurate than China's. How about this for an example. On 30th of April in 2008, the BEA stated that the economy was growing by .06%, when in fact, the recession had already started. Years later, they revised it lower to negative 2.7%. This is what they do. It is like I have been saying all along that these people are appointed shills. Their revision's are done quietly and then, it has little effect on the stock market. Mark Twain said it so well, "There are three kinds of lies. Lies, damn lies and statistics."
My Proof
lays in corporate profits which plunged 11.5% in the fourth quarter from a year-ago period. For the entire year, profits are down 3.1% and I predict that the first quarter of 2016, GDP will fall to .05%. In addition, S & P 500 profits declined by 8.3%.
Dear reader, oil has led this market, whether down in January or up in February. Now, if you understand support and resistance levels or study Fibonacci retracement ratios, the dead cat bounce is ending. Oil has rallied 49% and only has one more percentage point upward to reach its Fibonacci 50% retracement. The next move is down to test the lows of $26 oil. The oil glut is not going anywhere. Yes, small oil firms are in line at bankruptcy courts, but even in bankruptcy, they still are pumping oil. This catch-22, leads to their ultimate collapse unless a miracle happens. GM was still making cars in bankruptcy. They received a miracle, a bailout. There is a difference between one major firm as opposed to hundreds of small oil firms with taxpayer support. Consider these facts: oil revenues are down 97% in the fourth quarter of 2015. Rig count in the US is down from last month from 476 to 464. In Canada, it is down from 69 to 55. It will take along time to end the glut because Iran is looking to grab market share and they will. They and others will cover the US decline.
Another Aspect
of the oil bust is the effect it has in the economy as a whole. A closer look at one of the premier oil formations provides the answer. In the Eagle Ford oil formation, oil companies added "man towns." These communities established by oil firms for their workers made building and trailer manufacturing companies go full blast. Now, they don't. This is all across the nation from Williston, North Dakota to the Marcellus shale formation in the East. Boom towns are going bust and they take down housing, small stores and all the trickle down companies that service the oil industry. Quality jobs and real wealth producing entities are in a down swing. It will take the market with it.
Back to Retracement Levels
All three major market indexes still have a little more upside, however many have exceeded their bounce levels. Sometime, after the "April Fool," a switch will flip, and a new test will begin. The S & P 500 has reached my projection of 2054, however the Dow still has more upside and with "window dressing" on the last day of the month, the top should be reached in this bounce. I thought that the $COMPQ would close the gap at 5000, but it will fall to 4000 when the turn comes. The S & P should test the February lows of 2014 and the Dow sink to 15,750, however only time will tell who is right. I'll add this important reminder, if I'm correct and the market drops its second leg, the volume at the lows will indicate the next journey in 2016. If you read my Market Forecast 2016, I am leading the league in batting, shooting percentage and touchdowns. Someday I'll get some recognition, but the blog will always be free. Of course, if I'm wrong, I beg your pardon. If I'm right, what will or who will the Fed blame?
Wednesday, March 30, 2016
Wednesday, March 23, 2016
Can You Say Vacancy?
- Listening to Goldman Sachs, is like listening to your wife's divorce lawyer.
- Sebastian
The institutions and talking heads have plenty to talk about as the year's losses in the Dow and S & P have been recovered. Don't listen to their siren calls, dear reader. Last week, I gave you an insight into the consumer and this week, the locations where the consumer shops.
Two Pillars
of the US economy is under severe duress. Sadly, the beauty and convenience of our strip centers, regional shopping locations and malls are closing. Why, you ask? As I pointed out last week, sales and revenues at these locations have declined quarter after quarter. Whenever a solid earnings quarter filters into the equation, the media shills pound on it like a dog walking past a flea. It is in their interest that you stay in the market until they can get out. It is why they always claim there is light at the end of the tunnel. I rode my bicycle past all the cars stuck in traffic. Do you know what is waiting at that point of light, a traffic crash. You will sit holding some stock that doesn't know what you paid for it until the crash site is cleared and things start moving again.
Refresher
Last week I mentioned many retail companies are closing stores because with declining sales, they are losing money with no upturn in sight. For new readers a quick refresher. The following is just a sample of store closings: Sears, Macy's, Men's Warehouse, Gameboy, WalMart, Dillard's and John Deere.
Now, we need to look at the effects of those store closings to commercial real estate. Looking at the list, you notice the big brand names among the group. Sears, Macy's, Dillard's and WalMart are anchors in shopping locations. They are cash cows for the owners of the real estate. However, when things turn south, they become an albatross to the owners and an evil omen for the small businesses that make up the shopping location.
First and foremost, these retail giants are magnets that attract shoppers to a location. It is why the small businesses follow the herd. In this situation, two smaller companies on the list, Men's Warehouse and Gameboy are examples of this retail axiom. When the lease is due, there is no extension. Instead, the owner of the shopping center has a boarded up wall that graffiti artists attack which results in constant maintenance costs to keep clean. These graffiti artists do brighten up many locations around the country when commissioned or asked to design a mural, but by and large, they are a blight on most terrains and add a cloud of depression to the areas that they place their tag lines.
Back to the commercial landlord and the loss of the anchor...
Stability
The owner not only losses his biggest asset, but now, fears his smaller retail clients will also seek a new place. There is a real fear that shoppers will find another, more appealing location. His vacancy clients will look at the center. They will want better terms as the large vacancy makes the shopping center appear to be a dangerous location. Why else would the anchor leave? In a booming economy, these same retail owners would have no trouble finding a new tenant. News flash: this is not a booming economy and if WalMart or Macy's can't make a go of it, good luck trying to convince or find a new anchor.
Second Pillar
In addition, the oil patch has laid off thousands of high paying jobs that will effect business park locations who have service industries that provide the oil patch. They too, are suffering. The latest casuality number of oil bankruptcies is 67. This is up from the 48 in January. This rising tide of bad loans will affect the financial industry with a flood of non-performing loans. By the way there are 150 more oil firms getting caught in traffic in the tunnel.
In fact, the early tally of commercial real estate loans that need to be rolled-over or reconstructed is approaching $43 billion. This pending trouble is reflected in the government report last week in the confidence level of small businesses. It is down. These people can see that their shopping centers are getting over-loaded with vacancies. As for the chances of the $43 b getting new financing, that too is in trouble because the new rules under the Dodd-Frank Act makes new lending more stringent.
Adding everything up, things aren't quite as positive going forward as the media would have you believe. Not good. By the way, all that easy money that the commercial developers needed and provided by the Fed is another example of their boom and bust policies which is why I say, End the Fed!
- Sebastian
The institutions and talking heads have plenty to talk about as the year's losses in the Dow and S & P have been recovered. Don't listen to their siren calls, dear reader. Last week, I gave you an insight into the consumer and this week, the locations where the consumer shops.
Two Pillars
of the US economy is under severe duress. Sadly, the beauty and convenience of our strip centers, regional shopping locations and malls are closing. Why, you ask? As I pointed out last week, sales and revenues at these locations have declined quarter after quarter. Whenever a solid earnings quarter filters into the equation, the media shills pound on it like a dog walking past a flea. It is in their interest that you stay in the market until they can get out. It is why they always claim there is light at the end of the tunnel. I rode my bicycle past all the cars stuck in traffic. Do you know what is waiting at that point of light, a traffic crash. You will sit holding some stock that doesn't know what you paid for it until the crash site is cleared and things start moving again.
Refresher
Last week I mentioned many retail companies are closing stores because with declining sales, they are losing money with no upturn in sight. For new readers a quick refresher. The following is just a sample of store closings: Sears, Macy's, Men's Warehouse, Gameboy, WalMart, Dillard's and John Deere.
Now, we need to look at the effects of those store closings to commercial real estate. Looking at the list, you notice the big brand names among the group. Sears, Macy's, Dillard's and WalMart are anchors in shopping locations. They are cash cows for the owners of the real estate. However, when things turn south, they become an albatross to the owners and an evil omen for the small businesses that make up the shopping location.
First and foremost, these retail giants are magnets that attract shoppers to a location. It is why the small businesses follow the herd. In this situation, two smaller companies on the list, Men's Warehouse and Gameboy are examples of this retail axiom. When the lease is due, there is no extension. Instead, the owner of the shopping center has a boarded up wall that graffiti artists attack which results in constant maintenance costs to keep clean. These graffiti artists do brighten up many locations around the country when commissioned or asked to design a mural, but by and large, they are a blight on most terrains and add a cloud of depression to the areas that they place their tag lines.
Back to the commercial landlord and the loss of the anchor...
Stability
The owner not only losses his biggest asset, but now, fears his smaller retail clients will also seek a new place. There is a real fear that shoppers will find another, more appealing location. His vacancy clients will look at the center. They will want better terms as the large vacancy makes the shopping center appear to be a dangerous location. Why else would the anchor leave? In a booming economy, these same retail owners would have no trouble finding a new tenant. News flash: this is not a booming economy and if WalMart or Macy's can't make a go of it, good luck trying to convince or find a new anchor.
Second Pillar
In addition, the oil patch has laid off thousands of high paying jobs that will effect business park locations who have service industries that provide the oil patch. They too, are suffering. The latest casuality number of oil bankruptcies is 67. This is up from the 48 in January. This rising tide of bad loans will affect the financial industry with a flood of non-performing loans. By the way there are 150 more oil firms getting caught in traffic in the tunnel.
In fact, the early tally of commercial real estate loans that need to be rolled-over or reconstructed is approaching $43 billion. This pending trouble is reflected in the government report last week in the confidence level of small businesses. It is down. These people can see that their shopping centers are getting over-loaded with vacancies. As for the chances of the $43 b getting new financing, that too is in trouble because the new rules under the Dodd-Frank Act makes new lending more stringent.
Adding everything up, things aren't quite as positive going forward as the media would have you believe. Not good. By the way, all that easy money that the commercial developers needed and provided by the Fed is another example of their boom and bust policies which is why I say, End the Fed!
Wednesday, March 16, 2016
Consumers & Our Economy
"There are three kind of lies: lies, damned lies and statistics."
- Mark Twain
I think this applies to the talking shills in the media when referencing to the consumer. Yes, cars sales are up along with rents and home prices. These high priced items reflect consumer spending, however everyone has a limit. The first sign of that limit was revealed in the Consumer Retail Report by the government. It was down .01% for February and revised way lower for January. Furthermore, when you read the latest report on consumer spending by CardHub, it makes you realize a couple of possibilities. One, spending will slow or defaults will rise. That resolution is based on the total figure of debt. The average debt on household credit, according to the findings of the study is $7,879.00. In addition, at the end of 2015, the total debt outstanding on credit cards stood at $917 billion. Together, this points to a tipping point on an individual's ability to pay off their debt. If they just make minimum payments, they will suffer the effects of compound interest, to which credit card companies will raise on their card rates. It leads to default somewhere down the road. Keep in mind, if your car goes repo, you are stuck between a rock and a hard place.
Old Habits
die hard as it seems that Americans are returning to their bad habits of living beyond their means. In the last quarter of 2015, consumers added $52.4 billion in debt and for eight of the past 10 quarters, consumers have increased their debt. When you pay off your credit cards with minimum payments, you end up with maximum interest charges. Consider the biggest age group at present: the Millenniums. They have the highest school debt in history and they love their social media. They love their gadgets and technology. They use Pay Pal and not cash. They don't understand what it takes to make a buck. They live way beyond their means. As a result, most live with their parents because debt is their albatross. Not good for our future economy. This gets reflected by corporate decisions. Stores are closing which means vacancies rise along with commercial landlords ability to meet debt obligations on their properties not to mention job losses.
Consider this:
Retailers are closing stores because sales are down, along with revenues. The following is just a sample of well known brand names that are feeling the pinch: Sears, Macy's, Men's Warehouse, Gap, Gameboy, WalMart and John Deere.
Bottom line: Even with all the spending and credit being utilized, the effects on the overall economy is shrinking sales and revenues with the consumer reaching the limit of ability to safely meet their expenses and obligations. Not good going forward.
- Mark Twain
I think this applies to the talking shills in the media when referencing to the consumer. Yes, cars sales are up along with rents and home prices. These high priced items reflect consumer spending, however everyone has a limit. The first sign of that limit was revealed in the Consumer Retail Report by the government. It was down .01% for February and revised way lower for January. Furthermore, when you read the latest report on consumer spending by CardHub, it makes you realize a couple of possibilities. One, spending will slow or defaults will rise. That resolution is based on the total figure of debt. The average debt on household credit, according to the findings of the study is $7,879.00. In addition, at the end of 2015, the total debt outstanding on credit cards stood at $917 billion. Together, this points to a tipping point on an individual's ability to pay off their debt. If they just make minimum payments, they will suffer the effects of compound interest, to which credit card companies will raise on their card rates. It leads to default somewhere down the road. Keep in mind, if your car goes repo, you are stuck between a rock and a hard place.
Old Habits
die hard as it seems that Americans are returning to their bad habits of living beyond their means. In the last quarter of 2015, consumers added $52.4 billion in debt and for eight of the past 10 quarters, consumers have increased their debt. When you pay off your credit cards with minimum payments, you end up with maximum interest charges. Consider the biggest age group at present: the Millenniums. They have the highest school debt in history and they love their social media. They love their gadgets and technology. They use Pay Pal and not cash. They don't understand what it takes to make a buck. They live way beyond their means. As a result, most live with their parents because debt is their albatross. Not good for our future economy. This gets reflected by corporate decisions. Stores are closing which means vacancies rise along with commercial landlords ability to meet debt obligations on their properties not to mention job losses.
Consider this:
Retailers are closing stores because sales are down, along with revenues. The following is just a sample of well known brand names that are feeling the pinch: Sears, Macy's, Men's Warehouse, Gap, Gameboy, WalMart and John Deere.
Bottom line: Even with all the spending and credit being utilized, the effects on the overall economy is shrinking sales and revenues with the consumer reaching the limit of ability to safely meet their expenses and obligations. Not good going forward.
Wednesday, March 9, 2016
Best Soldiers, But Worse Led
As an ex-GI, I have inside experience. Our guys are brave and honorable. However, we have leaders who just want this and that, but they have no idea what it takes to achieve this and that. In addition, there are good and poor leaders which is nothing more than a reflection of society with the same attributes. The next budget calls for over $580 B for the military. In addition, many of the other categories in the budget is related to the military. One would think that these Pentagon administers know what they are doing and that they have a vision for the future. One would be wrong. Just gander over the following list and believe me, there are many more examples of their incompetence.
* Army ended their Combat Helicopter System with a loss of $18.1 B.
* Army ended their Rach- 66 Helicopter with another $7.9 B loss.
* Air Force replaced their Environment Sat System with DWSS, but that too was cancelled, losing $5.8B.
* Air Force dropped their Laser research with another $5.2 B loss.
* Marine dropped their Presidential Helicopter and took $3.7 B loss.
* Army dropped their self-propelled howitzer. It was replaced by another system which was also cancelled. The Army wasted another $2.2 B.
* Marine dropped their Fighting Vehicle and lost another $3.3 B.
* Air Force stopped their Multi-Sensor Airship, but took a $1.9 B loss.
* Air Force dropped their Infrared System and took another $1.5 B hit.
* Navy ended their Seal System. It was replaced by the Joint Submersible, but that too was cancelled. Another $.6 B down the drain.
* Army dropped their Helicopter Recon and replaced it with drones. Taxpayers lost another $.5 B.
* Army / Navy dropped their Aerial Sensor study and lost another $.4 B.
* Navy dropped its Cruiser and another $.2 B.
* Air Force dropped its Rescue Helicopter another $.2 B.
* Army ended its Bomber fiasco and another $18.1 B of our money. It is now the Long Range Strike-Bomber and another long-range financial loss for all our citizens.
Together, all these mishaps reflect their leadership or should I say lack of leadership. Our service branches added another $69.4 B to our national debt.
Bad and Really Bad
The above is sad and I would speculate some corruption, but the following borders on treason. Sadly, no charges are files or pending. This will show the truth behind the title to this piece. In 2014, just as ISIS was surfacing, our military made an unforgiving blunder. This mishap provided this terrorist organization the weapons to become a force in the Middle East. The Iraqi army disserted an insolation that the US just resupplied and all of what I can gather became ammo for the enemy. We supplied them the weapons of their success. They confiscated the following:
* 2,300 Humvee's = $16 M
* 40 Abron tanks = $172M
* 52 Howitzers = $2.7 M
* 74,000 machine guns = $29 M
* Not to mention that ISIS was able to control oil operations and actually sell in the market.
* Hack into the department of Personal Management and collect info on government employees. Keep in mind that the budget provided money for cyber-security, but this shows the incompetence of the so-called military leaders. = $ Countless.
These guys have a disease. They go to bed crying, "I want..." and they wake up calling, "Give me..." I know a cure, have them lead a patrol...on point!
* Army ended their Combat Helicopter System with a loss of $18.1 B.
* Army ended their Rach- 66 Helicopter with another $7.9 B loss.
* Air Force replaced their Environment Sat System with DWSS, but that too was cancelled, losing $5.8B.
* Air Force dropped their Laser research with another $5.2 B loss.
* Marine dropped their Presidential Helicopter and took $3.7 B loss.
* Army dropped their self-propelled howitzer. It was replaced by another system which was also cancelled. The Army wasted another $2.2 B.
* Marine dropped their Fighting Vehicle and lost another $3.3 B.
* Air Force stopped their Multi-Sensor Airship, but took a $1.9 B loss.
* Air Force dropped their Infrared System and took another $1.5 B hit.
* Navy ended their Seal System. It was replaced by the Joint Submersible, but that too was cancelled. Another $.6 B down the drain.
* Army dropped their Helicopter Recon and replaced it with drones. Taxpayers lost another $.5 B.
* Army / Navy dropped their Aerial Sensor study and lost another $.4 B.
* Navy dropped its Cruiser and another $.2 B.
* Air Force dropped its Rescue Helicopter another $.2 B.
* Army ended its Bomber fiasco and another $18.1 B of our money. It is now the Long Range Strike-Bomber and another long-range financial loss for all our citizens.
Together, all these mishaps reflect their leadership or should I say lack of leadership. Our service branches added another $69.4 B to our national debt.
Bad and Really Bad
The above is sad and I would speculate some corruption, but the following borders on treason. Sadly, no charges are files or pending. This will show the truth behind the title to this piece. In 2014, just as ISIS was surfacing, our military made an unforgiving blunder. This mishap provided this terrorist organization the weapons to become a force in the Middle East. The Iraqi army disserted an insolation that the US just resupplied and all of what I can gather became ammo for the enemy. We supplied them the weapons of their success. They confiscated the following:
* 2,300 Humvee's = $16 M
* 40 Abron tanks = $172M
* 52 Howitzers = $2.7 M
* 74,000 machine guns = $29 M
* Not to mention that ISIS was able to control oil operations and actually sell in the market.
* Hack into the department of Personal Management and collect info on government employees. Keep in mind that the budget provided money for cyber-security, but this shows the incompetence of the so-called military leaders. = $ Countless.
These guys have a disease. They go to bed crying, "I want..." and they wake up calling, "Give me..." I know a cure, have them lead a patrol...on point!
Wednesday, March 2, 2016
Rush To Borrow...
...as the first recipients of cheap money look to rollover or refinance a new loan that is coming due between now and early 2017. The first look shows that $88 B is needed, however many of those loans fell under junk bond status. The problem is twofold. One, the rates are now higher and secondly, the lending market is tighter. Just ask Sand Ridge Energy or Energy XXI? The two oil companies missed their interest payment and no one is willing to restructure their loans which will be in default in March. Those two over leveraged companies are not alone. Standing in line are 47 other energy and oil producers. The rubber stamp that said, "Yes, approved," just five years ago, now says, "No! Denied!"
Toys 'R Us
is also in the line. Two aspects are revealed in their quest for another $1.B plus loan. One, they had to utilize the junk loan category the first time and this time, they are having difficulties in getting new finances.
CLOs
Banks, who bought Collateralized Loan Obligations(CLOs) are seeking to unload the risky debt, but now, higher rates have put pressure on them because with the timing of the rates increases and market jitters. These banks and lending institutions have $88 B coming due and losses are looming. The majority of the loans are related to oil and energy. The low price for oil are making payment of loans not applicable. Losses are revealed in the value of these loans with some down substantially.
Underwriters may be forced to eat losses or to sell at a steep discount. In this scenario banks are pulling back just as this mass of debt is hitting the market. Bank of America, the largest underwriter of leveraged loans, has tightened the ship. It previously forecast $70 B of applications. Now, it will trim that number to $45 B. One reason for this:
No One In The Store.
There are no buyers for their CLOs. In addition, credit rating agencies have downgraded these loans. These downgrades are up 126% for the fourth quarter of 2015. More companies are being labeled junk as CCC tier loans rose 3.9% in January. Bonds rated B lost 21% last month. This shows contagion is spreading.
Dodd-Frank Rules
dictate that issuers must now be able to cover 5% of the debt that they create. On the other side, borrowers cannot meet the standards needed for new loans. All in all debt seekers will have to pay a higher rate and price for new financing. As it is, they barely met the "old" standard. The only one making money is the coffee guy who has a long line waiting for service, but I suggest this to the jo server, get cash!
Toys 'R Us
is also in the line. Two aspects are revealed in their quest for another $1.B plus loan. One, they had to utilize the junk loan category the first time and this time, they are having difficulties in getting new finances.
CLOs
Banks, who bought Collateralized Loan Obligations(CLOs) are seeking to unload the risky debt, but now, higher rates have put pressure on them because with the timing of the rates increases and market jitters. These banks and lending institutions have $88 B coming due and losses are looming. The majority of the loans are related to oil and energy. The low price for oil are making payment of loans not applicable. Losses are revealed in the value of these loans with some down substantially.
Underwriters may be forced to eat losses or to sell at a steep discount. In this scenario banks are pulling back just as this mass of debt is hitting the market. Bank of America, the largest underwriter of leveraged loans, has tightened the ship. It previously forecast $70 B of applications. Now, it will trim that number to $45 B. One reason for this:
No One In The Store.
There are no buyers for their CLOs. In addition, credit rating agencies have downgraded these loans. These downgrades are up 126% for the fourth quarter of 2015. More companies are being labeled junk as CCC tier loans rose 3.9% in January. Bonds rated B lost 21% last month. This shows contagion is spreading.
Dodd-Frank Rules
dictate that issuers must now be able to cover 5% of the debt that they create. On the other side, borrowers cannot meet the standards needed for new loans. All in all debt seekers will have to pay a higher rate and price for new financing. As it is, they barely met the "old" standard. The only one making money is the coffee guy who has a long line waiting for service, but I suggest this to the jo server, get cash!
Tuesday, February 23, 2016
Economic Reality...
is scary...as opposed to what is considered news and information from the media world and most of the candidates running for president in 2016 by both of the major political parties. I'm sorry, dear reader the facts are not optimistic. Of course, it goes without saying that the Obama administration will never address these aspects, issues or trends. There are too many indicators and all are signaling a recession for the US. It could have already started. The bureaucratic government stats are lagging information. The government can't see the forest due to all the trees. Having said that, a stat from the Bureau of Labor Statistics reported a 2.4% rise in inflation. This is the highest rise in over three years for a monthly reading. I see this inflation in housing, whether renting or buying. I see it in the price of eggs and other dairy products. I see it in the cost of a Big Mac. It is up 6.7% last year. I see it in insurance and clothing. The federal government only sees lower fuel costs. It is the excuse for not giving social security recipients a "Cola" increase this year.
However, my personal economic situations do not collectively effect the nation. This does.
Baltic Dry Shipping
index fell to an all-time low under 300. Global shipping is falling off the earth. If it were only ocean containers that were hitting a rough patch, that would be one thing. However, land rail traffic is also at a standstill. If you were to visit a locomotive hub in Colorado, you would see idle locomotives that appear like a rental car lot at a major airport.
Corporate Profits
margins are all but erased since the third quarter of 2014. Declines in the S & P 500 will reach 4% and this is two straight quarters of profit declines. Some call this a "earnings recession."
Banks
too are feeling the pinch. Rock solid oil loans are hitting dust with commodity prices falling. This in time will trigger the derivative market which could devastate the global economy. The flat lining of yields reflects this worry. There were 112 global bond defaults last year and 2016 at the moment looks worse.
Employment
just fell under 5%, but job cuts also just surged 218%, according to the January reading of the Challenger Report. US factory orders have dropped 14 months in a row. Not only that, but take a look at the following releases by various companies.
* Royal Dutch Shell announced 10,000 jobs to be eliminated.
* Johnson & Johnson is dropping 15% of its workforce.
* Caterpillar is closing 5 plants and another 670 jobs.
* Sprint laid off 8% of their people.
* Go Pro is laying off 7% of its personal.
* Wal-Mart is closing all their new small stores(269). Think of all the lost jobs for workers and less revenues for the company.
There are many other behind the scene actions taking place, especially in the oil industry and all the businesses that service that industry. Add the latest release of oil inventories to the worries: Oil in storage is over 500 million barrels and climbing.
Together, all this adds up to a gloomy picture that the Fed is only making worse as they returned to their playbook. They are now increasing the money supply. It rose over 9%. This is the way the Fed usually pays off old debt by creating new debt with cheaper money and a way to devalue the dollar. It will raise the price of oil, all commodities and everything. It is why I say, End the Fed!
However, my personal economic situations do not collectively effect the nation. This does.
Baltic Dry Shipping
index fell to an all-time low under 300. Global shipping is falling off the earth. If it were only ocean containers that were hitting a rough patch, that would be one thing. However, land rail traffic is also at a standstill. If you were to visit a locomotive hub in Colorado, you would see idle locomotives that appear like a rental car lot at a major airport.
Corporate Profits
margins are all but erased since the third quarter of 2014. Declines in the S & P 500 will reach 4% and this is two straight quarters of profit declines. Some call this a "earnings recession."
Banks
too are feeling the pinch. Rock solid oil loans are hitting dust with commodity prices falling. This in time will trigger the derivative market which could devastate the global economy. The flat lining of yields reflects this worry. There were 112 global bond defaults last year and 2016 at the moment looks worse.
Employment
just fell under 5%, but job cuts also just surged 218%, according to the January reading of the Challenger Report. US factory orders have dropped 14 months in a row. Not only that, but take a look at the following releases by various companies.
* Royal Dutch Shell announced 10,000 jobs to be eliminated.
* Johnson & Johnson is dropping 15% of its workforce.
* Caterpillar is closing 5 plants and another 670 jobs.
* Sprint laid off 8% of their people.
* Go Pro is laying off 7% of its personal.
* Wal-Mart is closing all their new small stores(269). Think of all the lost jobs for workers and less revenues for the company.
There are many other behind the scene actions taking place, especially in the oil industry and all the businesses that service that industry. Add the latest release of oil inventories to the worries: Oil in storage is over 500 million barrels and climbing.
Together, all this adds up to a gloomy picture that the Fed is only making worse as they returned to their playbook. They are now increasing the money supply. It rose over 9%. This is the way the Fed usually pays off old debt by creating new debt with cheaper money and a way to devalue the dollar. It will raise the price of oil, all commodities and everything. It is why I say, End the Fed!
Wednesday, February 17, 2016
Gold: The Historic Choice
Valentine's Day just passed and we find that the flower business continues to shrink. In fact, in Iran it is a felony to practice the West's concept of Valentine's Day. I hope that this was not a sub-agreement in the nuclear treaty. Anyway, I got to thinking about gifts that show a deep respect and possibly love. I could only come up with one, but it is time proven. It is one of the three gifts from the Three Wise Men. It has been used throughout history as a tribute, a store of wealth and that custom still lingers in India and China. I'm talking about the lustrous, precious metal, gold.
- "If you don't own gold, you know neither history nor economics."
- Ray Dalio
2016
it is up 18% while everything else is down. The rally last Thursday caught the fiat people flatfooted as it rocketed higher than the North Korean test rocket. People who deal in gold attribute the surge due to investors and buyers from all global exchanges. The gold dealers were smiling and singing, "Love is in the air..."
Gold reflected this faith in it and flowing in the melody, it gained 25% for Russians against the ruble. Mexican avocadoes were no match to the 23% gain versus the peso. South Africans were rewarded with a 18% gain against the rand.
Gold spread the good feeling to the "old" hard currencies too. It gained 17% against the British pound. It rose 14% versus the Canadian loonie and another11% against the negative interest rate of the Swiss franc.
As for the US dollar, the Fed is turning red with its 13% rise.
RBC Capital Markets
George Gero, added that some investors were seeking to buy US treasuries, but they were crowded out by the Fed. They were seeking safety from negative interest rates. They found the all-time, number one, safe haven.
It Keeps Getting Better
Gold showed its permanent luster best against the yen and euro. It is up 10% in 60 days against the euro and 6% against the yen. That is one sweet move!
Looking Ahead
I see a rise to $1392 for gold and $16.28 for silver. From a technical stand-point, gold is above the 50 and 200 - day moving average which is very bullish. If I'm correct and we get there, then, we will have to look at the number of contracts to see if it can activate a booster rocket. At the moment all systems are go!
In that vein I think that NASA's "LIGO" experiment blew a circuit because as you read this piece, you realize that the two biggest buyers, China and India are hardly mentioned. I consider them a known known like Jewelry buyers. However, with that implied, some gold dealers are reminding the followers of the precious metal that the market will be extremely volatile in the coming months. One reason is the current inflow of buyers and investors can be manipulated by the second reason, the Fed. Keep in mind both Wall Street and the Fed hate gold and they will attack gold at some point. Just as I dotted the sentence, Goldman Sachs declared that investors should "sell" gold as it will fall in price. However, they did not disclose that they probably had a short position and sweat was entering their brow. Citi says, "Buy until May, then, go away." If we keep applying the pressure, they will have to move money to cover their position losses or if they close and attack another day, they risk another surge in gold due to this short covering. I say that they may lose like in 1980. For example, their shills always remind investors that gold does not pay interest, but now, neither do the banks and it could get worse. By the way, dividend paying corporations are also cutting back their rewards. In fact, dividend cuts in 2015 were higher than in 2008 (295 v. 394). On the flip-side physical gold sales keep climbing. In the Shanghai Gold Exchange, 2,596 tonnes were sold. This figure represents 90% of the total global output. If you seek small by buying some gold coins, the US Mint and Australian Mint are over-loaded with orders, but today's price is a lot lower than the future cost. Buy now and profit later. The Fed hates gold and I hate them. They have a one hundred year history. The facts say that since the Fed started the US dollar lost 95% of its value which is why I say, End the Fed!
Under a disclaimer: I have a long-term position in SLW and trade LSG and GFI.
- "If you don't own gold, you know neither history nor economics."
- Ray Dalio
2016
it is up 18% while everything else is down. The rally last Thursday caught the fiat people flatfooted as it rocketed higher than the North Korean test rocket. People who deal in gold attribute the surge due to investors and buyers from all global exchanges. The gold dealers were smiling and singing, "Love is in the air..."
Gold reflected this faith in it and flowing in the melody, it gained 25% for Russians against the ruble. Mexican avocadoes were no match to the 23% gain versus the peso. South Africans were rewarded with a 18% gain against the rand.
Gold spread the good feeling to the "old" hard currencies too. It gained 17% against the British pound. It rose 14% versus the Canadian loonie and another11% against the negative interest rate of the Swiss franc.
As for the US dollar, the Fed is turning red with its 13% rise.
RBC Capital Markets
George Gero, added that some investors were seeking to buy US treasuries, but they were crowded out by the Fed. They were seeking safety from negative interest rates. They found the all-time, number one, safe haven.
It Keeps Getting Better
Gold showed its permanent luster best against the yen and euro. It is up 10% in 60 days against the euro and 6% against the yen. That is one sweet move!
Looking Ahead
I see a rise to $1392 for gold and $16.28 for silver. From a technical stand-point, gold is above the 50 and 200 - day moving average which is very bullish. If I'm correct and we get there, then, we will have to look at the number of contracts to see if it can activate a booster rocket. At the moment all systems are go!
In that vein I think that NASA's "LIGO" experiment blew a circuit because as you read this piece, you realize that the two biggest buyers, China and India are hardly mentioned. I consider them a known known like Jewelry buyers. However, with that implied, some gold dealers are reminding the followers of the precious metal that the market will be extremely volatile in the coming months. One reason is the current inflow of buyers and investors can be manipulated by the second reason, the Fed. Keep in mind both Wall Street and the Fed hate gold and they will attack gold at some point. Just as I dotted the sentence, Goldman Sachs declared that investors should "sell" gold as it will fall in price. However, they did not disclose that they probably had a short position and sweat was entering their brow. Citi says, "Buy until May, then, go away." If we keep applying the pressure, they will have to move money to cover their position losses or if they close and attack another day, they risk another surge in gold due to this short covering. I say that they may lose like in 1980. For example, their shills always remind investors that gold does not pay interest, but now, neither do the banks and it could get worse. By the way, dividend paying corporations are also cutting back their rewards. In fact, dividend cuts in 2015 were higher than in 2008 (295 v. 394). On the flip-side physical gold sales keep climbing. In the Shanghai Gold Exchange, 2,596 tonnes were sold. This figure represents 90% of the total global output. If you seek small by buying some gold coins, the US Mint and Australian Mint are over-loaded with orders, but today's price is a lot lower than the future cost. Buy now and profit later. The Fed hates gold and I hate them. They have a one hundred year history. The facts say that since the Fed started the US dollar lost 95% of its value which is why I say, End the Fed!
Under a disclaimer: I have a long-term position in SLW and trade LSG and GFI.
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