I'm not a superstitious guy. I'm not afraid to walk under a ladder, worry if a mysterious black cat crosses my path or feel any apprehension on Friday the 13th. There are countless other clues to a "dark" day, but I don't follow them or let them get my goat. With that said, I do think that there is a vibe out in the universe and for some unknown reason, things happen on certain dates. Again, I'm not referring to a full moon scenario, but the human condition to fulfill what people believe will happen to happen. It becomes a self-fulfilling prophecy. March 15th is one of those dates. Maybe because the Bard of Avon is so influential in our culture. I don't know, but two important aspects to our economy will take place on Wednesday.
Would you like a second opinion?
Edson Gould
Ever hear of him? He formulated an economic conclusion that when the Federal Reserve made interest rate hikes, that the third hike would be the beginning of a recession and stocks would crash. This Wednesday should be the third interest rate hike by our central bank. The economy won't stop on that day if the Fed hikes, but the seed will be in the ground to germinate.
Still not convinced? How about this past presidential advisor to Ronald Reagan?
David Stockman
He sees a "bloodbath." He calls this Fed moment, "three steps and tumble." It is the same theory that says after the Fed raises rates three times, the economy tumbles.
Now, do I have your attention? I hope so because there is a second whammy on Wednesday.
Debt Ceiling
The US national debt limit under our Treasury, will expire on Wednesday. I don't foresee any problems with a Republican Congress to help a Republican president. However, the $20T in debt fulfills my prediction. In addition, our ability to repay will generate another possible self-fulfilling prophecy, could the US default?
Consider some related aspects to the date:
Trump wants an expensive, stimulus infrastructure package. He plays politics and allows or compromises with his fellow Republicans with their health care bill. We find out, and it didn't take long, for the Republicans to show their true colors. This has nothing to do with Sean Spicer wearing his American pin flag upside down. This bill sucks! Higher premiums and lower coverage! It is why I dislike or trust the GOP. They never do anything for ordinary citizens. I rather have no health care bill than this one or Obamacare. I was foolish to vote for Obama the first time because the idea of First Payer health plan was great. We didn't get it because the Democrats are corrupt! Now, Trump will learn the hard way that his fellow Republicans won't support tariffs or our workers. They view the world this way. We are management versus workers rather than let us do right and everyone wins. Anyway, you got the Fed hiking interest rates, the US getting deeper in debt, and this time bomb. I predict that the Federal Reserve will seek permission to buy stocks just like central banks in Japan, China and Europe. The fiat system has failed, but they are doing everything to keep it afloat. We are like Caesar, seeing knives coming at him and us from every direction. Sad days ahead.
Wednesday, March 15, 2017
Wednesday, March 8, 2017
You Don't Know $hit from Liaoning
"I'm just a soul whose intentions are good, Oh Lord, please don't let me be misunderstood."
- Eric Burton and the Animals
If I offended anyone, pardon my French. The words of the old expression may have change, but the thought remains the same. In fact, the Chinese city will add a new twist, "You don't have to be profitable to remain in business."
Economic Hub
Dear reader, Liaoning is one of China's economic hubs. The problem seems to be that this region is inefficient and hires by who you know and not, by what you know. It leads the country in defaults and yet, its doors are open for business. You see, this is an another example of the lie of free trade. Every company is state supported in this fiat nation. You lose a million this quarter, a billion this year, no problem. Fiat daddy will cover it. This does not mean that there are no quality state sponsored companies because there are many in China, Asia and Europe. It just points out that there can be no fair trade in this global environment. Gresham's Law states that bad money(fiat) will drive out good money(precious metals). Sebastian's Law states that fiat entities will drive out free capitalist companies. This is why we need protectionism and if you disagree, you don't know $hit from Liaoning.
Liaoning is not alone, I could point out examples in France or Germany even Mexico. When one thinks about it, it is amazing how our free capitalist companies compete in this global environment. Yes, I know that our banks get the same fiat protections and I wish I knew what lawyers know about bankruptcy court because it too, seems to have some corrupt under linings. How can a company default, enter bankruptcy and then, reappear like GM and be back in business? I feel that it is totally wrong to steal from workers and investors and still be an on going concern. Even if the original debt is put off into some future date, it should be repaid if the company is still functioning, but that's just me.
Back to Liaoning
There were 125 bankruptcy filings in the province and Liaoning had one-half of all Chinese defaults last year. This is a classic example of state sponsored entities. None of these firms have to pay extra to find financing. They have the complicit understanding that the government will bail them out if necessary.
Case in point: Dalion Machine Tool Group defaulted. They do not respond to questions about their company. They, like hundreds of other Chinese concerns, just go about their way, whatever way that is.
A part of me wants to bring to light the plight of Notre Dame in a similar vein. For those of you who don't know or like the Irish, the school faces the same problem as our capitalist companies face with state sponsored competition. Notre Dame is a small, private school with a student population under 4,000. They compete with state sponsored schools like Florida or Michigan with over 45,000 students. If Florida needs new equipment, a lunch date with the local congressman gets it done. The same for Michigan, Ohio State and all the other excellent state schools. Not so for the Irish, they will sacrifice in some other part of the budget and yet, they compete on and off the field. The miracle is that every once in awhile, a Joe Montana comes along and we win it all. Thank you, St. Patrick(March 17th), Our Lady and of course, God.
Go Irish!
- Eric Burton and the Animals
If I offended anyone, pardon my French. The words of the old expression may have change, but the thought remains the same. In fact, the Chinese city will add a new twist, "You don't have to be profitable to remain in business."
Economic Hub
Dear reader, Liaoning is one of China's economic hubs. The problem seems to be that this region is inefficient and hires by who you know and not, by what you know. It leads the country in defaults and yet, its doors are open for business. You see, this is an another example of the lie of free trade. Every company is state supported in this fiat nation. You lose a million this quarter, a billion this year, no problem. Fiat daddy will cover it. This does not mean that there are no quality state sponsored companies because there are many in China, Asia and Europe. It just points out that there can be no fair trade in this global environment. Gresham's Law states that bad money(fiat) will drive out good money(precious metals). Sebastian's Law states that fiat entities will drive out free capitalist companies. This is why we need protectionism and if you disagree, you don't know $hit from Liaoning.
Liaoning is not alone, I could point out examples in France or Germany even Mexico. When one thinks about it, it is amazing how our free capitalist companies compete in this global environment. Yes, I know that our banks get the same fiat protections and I wish I knew what lawyers know about bankruptcy court because it too, seems to have some corrupt under linings. How can a company default, enter bankruptcy and then, reappear like GM and be back in business? I feel that it is totally wrong to steal from workers and investors and still be an on going concern. Even if the original debt is put off into some future date, it should be repaid if the company is still functioning, but that's just me.
Back to Liaoning
There were 125 bankruptcy filings in the province and Liaoning had one-half of all Chinese defaults last year. This is a classic example of state sponsored entities. None of these firms have to pay extra to find financing. They have the complicit understanding that the government will bail them out if necessary.
Case in point: Dalion Machine Tool Group defaulted. They do not respond to questions about their company. They, like hundreds of other Chinese concerns, just go about their way, whatever way that is.
A part of me wants to bring to light the plight of Notre Dame in a similar vein. For those of you who don't know or like the Irish, the school faces the same problem as our capitalist companies face with state sponsored competition. Notre Dame is a small, private school with a student population under 4,000. They compete with state sponsored schools like Florida or Michigan with over 45,000 students. If Florida needs new equipment, a lunch date with the local congressman gets it done. The same for Michigan, Ohio State and all the other excellent state schools. Not so for the Irish, they will sacrifice in some other part of the budget and yet, they compete on and off the field. The miracle is that every once in awhile, a Joe Montana comes along and we win it all. Thank you, St. Patrick(March 17th), Our Lady and of course, God.
Go Irish!
Wednesday, March 1, 2017
Texas Tea For Everyone
I told you a few weeks ago that even though the OPEC price cut deal is sill holding together, they forgot about the possibilities of the free market. The US is filling the void. This has not been reflected in the market price of oil as it remains in the low $50s. It won't stay there. The test will be at $47.85 and it will test that retracement. The volume in contracts at that time will tell us all we need to know. Check the facts:
* Rig count has reached the "magic" number of over 1000 in use in North America.
* 2017 oil inventory builds are 3x greater than the 10-year rate.
* US shale oil production is up. The Energy Information Admin(EIA) says it will approach 5m barrels by the end of March. If this happens, US production should hit 10m barrels = #1.
Now, here is two other tidbits that you can enjoy with your Texas tea.
Gasoline
US consumption is at its weakest in 15 years. Buyers use less gas than refiners need less oil. If you put this fact into the global picture, it makes global demand less due to the fact that the US uses 9% of all demand.
Could it be all those uncounted long-term unemployed? Could it be all the new electric cars and trucks? Could it be that vehicles get better gas mileage? Could it be that our military is downsizing? Our military uses more oil than most nations. No matter what, the fact that gas demand is down 5.5% YOY is all you need to know.
LNG
Now, here is the other shoe for prices to drop. It covers both sides of oil and gas.
Last week in Germany, Iran hosted the LNG & Gas Summit. Gazprom(OGZPY) had three representatives. Their company is the largest natural gas company. They were checking out the competition. They didn't like what they saw and learned. Iran is exporting LNG and at lower prices than Gazprom. Gazprom has long-term contracts, but they are tied to present prices. Their clients want new deals with cheaper prices. In addition, Gazprom has new pipelines with China and elsewhere, but roadblocks are surfacing. Not good for Gazprom or Russia, but great for consumers.
The EIA also reported that Iran and Iraq will both increase their oil production by over one million barrels by 2020. This is like a new large producer coming online and it will more than supply any future increase in demand.
Lower prices as supply builds EVERYWHERE.
* Rig count has reached the "magic" number of over 1000 in use in North America.
* 2017 oil inventory builds are 3x greater than the 10-year rate.
* US shale oil production is up. The Energy Information Admin(EIA) says it will approach 5m barrels by the end of March. If this happens, US production should hit 10m barrels = #1.
Now, here is two other tidbits that you can enjoy with your Texas tea.
Gasoline
US consumption is at its weakest in 15 years. Buyers use less gas than refiners need less oil. If you put this fact into the global picture, it makes global demand less due to the fact that the US uses 9% of all demand.
Could it be all those uncounted long-term unemployed? Could it be all the new electric cars and trucks? Could it be that vehicles get better gas mileage? Could it be that our military is downsizing? Our military uses more oil than most nations. No matter what, the fact that gas demand is down 5.5% YOY is all you need to know.
LNG
Now, here is the other shoe for prices to drop. It covers both sides of oil and gas.
Last week in Germany, Iran hosted the LNG & Gas Summit. Gazprom(OGZPY) had three representatives. Their company is the largest natural gas company. They were checking out the competition. They didn't like what they saw and learned. Iran is exporting LNG and at lower prices than Gazprom. Gazprom has long-term contracts, but they are tied to present prices. Their clients want new deals with cheaper prices. In addition, Gazprom has new pipelines with China and elsewhere, but roadblocks are surfacing. Not good for Gazprom or Russia, but great for consumers.
The EIA also reported that Iran and Iraq will both increase their oil production by over one million barrels by 2020. This is like a new large producer coming online and it will more than supply any future increase in demand.
Lower prices as supply builds EVERYWHERE.
Tuesday, February 21, 2017
A Wild and Crazy Idea
Do you ever wonder why the dollar didn't hit new highs after the Fed tightened in December? In fact, now, it looks like it will retrace back to 96? The fundamentals haven't been this strong for the dollar in decades, so why?
Here is a list of countries and what they pay for a 10-Year Note, and how I feel about the return.
* Germany, world export power= .30% Get real!
* Switzerland, old world leader in gold and today? Negative fiat= .18% See above.
* UK, London finance center= 1.21% Like in 10 years, there will be less than 2%, inflation&Brexit!?
* France, election blues approaching= 1.03% See UK and Brexit above.
* Italy, banks ready to implode= 2.17% Won't even be in EU in 10 years.
* Greece, basket case= 7.58% Do you know 100% of nothing yields? Same as this note.
* Japan, 3rd largest economy= .08% If that's so, how come Japanese cars cost more than this yield per year in price increases? You would be better off with a Greece note and that is simply crazy.
* India, rising economic power, uses more oil than China= 6.85% Great, but lose it back on currency exchange and Modi wants to get rid of cash, period!!!
* Australia, nice, safe country= 2.80% Best in Show!
US= 2.41%
You get the world currency in a safe, secure nation. You could also get currency appreciation if Fed comes through with the three proposed rate hikes which would make it the new crown winner for Best in Show!
What about the US debt and other factors?
This is the thorn in the side of the fundamentals. At present, the world holds $5.94T or 43% of all US government debt. In addition to the notes, there are other bills like Medicare and Social Security which is pushing US debt to $20T or 100% of GDP. Big, big issue with no resolution on hand, but then again, this is about a wild and crazy idea. Japan holds the most debt and China holds $1T, however both of these buyers are buying less as the debt market is down from 50% by 7%. Then, there is the danger of Saudi Arabia and the Petro-dollar. Every transaction in oil must be in US dollars. The Saudi's use this as leverage in our foreign policy. Do as we like or we will find another currency in the oil trade. Big problem, especially with the new Trump administration and a possible policy change?
Some people believe something is in the works about the dollar, but it hasn't hit the fan yet. World debt buyers of US debt are worried about Trump's plans for our trade imbalances. They will try to use their holdings as leverage against us. I say...
Bring It On!!!
That's right. Sell all your holdings and our Fed will buy them all with fiat money. Your money is worthless fiat currency and we will give you ours. Now, we will be free from all world threats to our economy and policy. Then, to be totally free and clear, we have Congress null and void the Fed because of all the mistakes and corruption that they are responsible. FREE and CLEAR! NO DEBT! We can return to the gold standard like our Founding Fathers directed us. Yea, Baby!
Dear reader, there you have it.
Here is a list of countries and what they pay for a 10-Year Note, and how I feel about the return.
* Germany, world export power= .30% Get real!
* Switzerland, old world leader in gold and today? Negative fiat= .18% See above.
* UK, London finance center= 1.21% Like in 10 years, there will be less than 2%, inflation&Brexit!?
* France, election blues approaching= 1.03% See UK and Brexit above.
* Italy, banks ready to implode= 2.17% Won't even be in EU in 10 years.
* Greece, basket case= 7.58% Do you know 100% of nothing yields? Same as this note.
* Japan, 3rd largest economy= .08% If that's so, how come Japanese cars cost more than this yield per year in price increases? You would be better off with a Greece note and that is simply crazy.
* India, rising economic power, uses more oil than China= 6.85% Great, but lose it back on currency exchange and Modi wants to get rid of cash, period!!!
* Australia, nice, safe country= 2.80% Best in Show!
US= 2.41%
You get the world currency in a safe, secure nation. You could also get currency appreciation if Fed comes through with the three proposed rate hikes which would make it the new crown winner for Best in Show!
What about the US debt and other factors?
This is the thorn in the side of the fundamentals. At present, the world holds $5.94T or 43% of all US government debt. In addition to the notes, there are other bills like Medicare and Social Security which is pushing US debt to $20T or 100% of GDP. Big, big issue with no resolution on hand, but then again, this is about a wild and crazy idea. Japan holds the most debt and China holds $1T, however both of these buyers are buying less as the debt market is down from 50% by 7%. Then, there is the danger of Saudi Arabia and the Petro-dollar. Every transaction in oil must be in US dollars. The Saudi's use this as leverage in our foreign policy. Do as we like or we will find another currency in the oil trade. Big problem, especially with the new Trump administration and a possible policy change?
Some people believe something is in the works about the dollar, but it hasn't hit the fan yet. World debt buyers of US debt are worried about Trump's plans for our trade imbalances. They will try to use their holdings as leverage against us. I say...
Bring It On!!!
That's right. Sell all your holdings and our Fed will buy them all with fiat money. Your money is worthless fiat currency and we will give you ours. Now, we will be free from all world threats to our economy and policy. Then, to be totally free and clear, we have Congress null and void the Fed because of all the mistakes and corruption that they are responsible. FREE and CLEAR! NO DEBT! We can return to the gold standard like our Founding Fathers directed us. Yea, Baby!
Dear reader, there you have it.
Wednesday, February 15, 2017
The Doctor Is Busy
His phone is ringing off the hook for an appointment. No, this has nothing to do with Obamacare or the ACA. This doctor has his degree in housing, plumbing, electrical wiring and hundreds of other applications. He has been on vacation as demand had been lacking.
$COPPER
came alive around October 25th in 2016, maybe as an early Christmas present. It went from $2.10 a pound to $2.55. This is a huge, huge move. It has formed a classic pole/flag chart pattern. The good doctor filled in the flag section in a $2.45 to $2.65 consolidation range.
New Year
It rang in 2017 with a new pole/flag bullish continuation pattern. The doctor filled the flag from $2.61 to $2.70. Then, with last Friday's close, copper formed yet another continuation bullish pole/flag chart pattern. It sits at $2.77 a pound.
Copper is a global indicator that gets most of its momentum from China and India along with the expectation of Trump's infrastructure package. China is on holiday which should give all of us a chance to make an appointment as in an entry price.
Medicine
BHP Billiton's(BHP) flagship copper mine in Chile went on strike, so all the other players are benefiting. In addition, Freeport-McMoRan(FCX) is having trouble in its flagship copper mine in Indonesia. The government won't issue an export permit and this too, is medicine for Dr. Copper.
TGB
is a nice cheap, copper stock. Taseko Mines has followed the same pole/flag chart pattern. It could test $2.50 and if volume comes behind it, all the way to $3.50. Smart traders picked it up at .30cents. They have already received 5x their money. Good for them and maybe good for the rest of us. I am making an appointment at $1.23 which is the 200-day average for Taseko. If your cell can't reach him, try a landline. Later.
$COPPER
came alive around October 25th in 2016, maybe as an early Christmas present. It went from $2.10 a pound to $2.55. This is a huge, huge move. It has formed a classic pole/flag chart pattern. The good doctor filled in the flag section in a $2.45 to $2.65 consolidation range.
New Year
It rang in 2017 with a new pole/flag bullish continuation pattern. The doctor filled the flag from $2.61 to $2.70. Then, with last Friday's close, copper formed yet another continuation bullish pole/flag chart pattern. It sits at $2.77 a pound.
Copper is a global indicator that gets most of its momentum from China and India along with the expectation of Trump's infrastructure package. China is on holiday which should give all of us a chance to make an appointment as in an entry price.
Medicine
BHP Billiton's(BHP) flagship copper mine in Chile went on strike, so all the other players are benefiting. In addition, Freeport-McMoRan(FCX) is having trouble in its flagship copper mine in Indonesia. The government won't issue an export permit and this too, is medicine for Dr. Copper.
TGB
is a nice cheap, copper stock. Taseko Mines has followed the same pole/flag chart pattern. It could test $2.50 and if volume comes behind it, all the way to $3.50. Smart traders picked it up at .30cents. They have already received 5x their money. Good for them and maybe good for the rest of us. I am making an appointment at $1.23 which is the 200-day average for Taseko. If your cell can't reach him, try a landline. Later.
Tuesday, February 7, 2017
What's Happening With Oil?
Ever since the OPEC meeting and the tie-in to Russia on oil cuts, oil spiked from $47 to $57. The market paused at that price in December 2016 to see if the deal had conviction. At the moment, it looks like all the players are cooperating except there is a new swing producer in town - US. The market is aware and the oil price is testing a decline. Let's take a closer look.
Rig Count
has crossed the magic threshold for North America(US & Canada) of 1000 or more working wells. This means that US can produce up to 10 million barrels per day, especially if shale comes back to previous levels. Dear reader, unlike mines, well sites can resume production in as little as two weeks. A new well site can produce in six months. It can take ten years to get a mine into production. With that said, let us look at the recent past US production along with global figures.
US : reached a 25 year high in 2015. By the way, we led the world in production in 2015.
World: averaged 80 plus million bbl/day in 2015. This level is 40% higher than 2008 when oil hit its all-time high of $147 per barrel.
Today, world demand is 93mbbl/day. Supply exceeds demand by one-half million per day.
Pluses and Minuses
New world discoveries are a real problem with only 2.8b on the books while present demand is 29b.
US oil inventory is approaching 500m.This is up 5% year over year(YOY) and a record amount.
US gasoline is up 1% YOY.
US distillates is up 6.9% YOY.
US demand is down 2% YOY on oil.
US demand is down 5.7% YOY in gasoline.
US demand is up 5% YOY in distillates.
China's oil production is down and demand is up. It is now a big importer of oil.
India needs more oil than China.
The Baltic Shipping Index is down 50% since the Trump win. Even though this is dry goods, less boats, less need for oil.
US demand is down and now, is an exporter.
Iran is upping its production. It could reach 4 million bbl/day, however there is new tension with the US and Trump. Iran says it will answer Trump on the 10th of this month which is the anniversary of the Iran Revolution. It turned out to be a big nothing. No shake up of the market, for now. Could only be temporarily like the oil cut agreement.
Then, there is this future aspect...
Electric Cars.
Production of this cleaner burning fuel surged over 60% in 2014 after rising 44% in 2013. Bloomberg predicted that there will be over 200 million electric cars in the world by 2035. British Petroleum sees 100 million. So, let us average it to 150m. That is still a big number and it means less fossil fuel going forward.
All in all, I see oil testing the $47 level. Iran could put a $50 floor, but long term, I see oil back at $40 a barrel.
Rig Count
has crossed the magic threshold for North America(US & Canada) of 1000 or more working wells. This means that US can produce up to 10 million barrels per day, especially if shale comes back to previous levels. Dear reader, unlike mines, well sites can resume production in as little as two weeks. A new well site can produce in six months. It can take ten years to get a mine into production. With that said, let us look at the recent past US production along with global figures.
US : reached a 25 year high in 2015. By the way, we led the world in production in 2015.
World: averaged 80 plus million bbl/day in 2015. This level is 40% higher than 2008 when oil hit its all-time high of $147 per barrel.
Today, world demand is 93mbbl/day. Supply exceeds demand by one-half million per day.
Pluses and Minuses
New world discoveries are a real problem with only 2.8b on the books while present demand is 29b.
US oil inventory is approaching 500m.This is up 5% year over year(YOY) and a record amount.
US gasoline is up 1% YOY.
US distillates is up 6.9% YOY.
US demand is down 2% YOY on oil.
US demand is down 5.7% YOY in gasoline.
US demand is up 5% YOY in distillates.
China's oil production is down and demand is up. It is now a big importer of oil.
India needs more oil than China.
The Baltic Shipping Index is down 50% since the Trump win. Even though this is dry goods, less boats, less need for oil.
US demand is down and now, is an exporter.
Iran is upping its production. It could reach 4 million bbl/day, however there is new tension with the US and Trump. Iran says it will answer Trump on the 10th of this month which is the anniversary of the Iran Revolution. It turned out to be a big nothing. No shake up of the market, for now. Could only be temporarily like the oil cut agreement.
Then, there is this future aspect...
Electric Cars.
Production of this cleaner burning fuel surged over 60% in 2014 after rising 44% in 2013. Bloomberg predicted that there will be over 200 million electric cars in the world by 2035. British Petroleum sees 100 million. So, let us average it to 150m. That is still a big number and it means less fossil fuel going forward.
All in all, I see oil testing the $47 level. Iran could put a $50 floor, but long term, I see oil back at $40 a barrel.
Wednesday, February 1, 2017
Short Cup
No, the title is not a nickname to describe my girlfriend, but refers to my morning medicine, java, a cup of jo. I could care less in what size my elixir arrives at a local establishment as long as the mug is clean and they offer refills. I do like the aroma of vanilla and the taste of hazelnut, but a good smooth bean is all I really need. Since Starbucks made headlines on Friday, I decided to take a closer look at the coffee king. Under disclosure, I like Starbucks coffee, but their prices are high and no refills keeps me walking to a more price friendly venue.
BOGO = Buy One Get One Free
The chancellor of Germany, Angela Merkel blasted the coffee chain as a poster child for avoiding taxes and even questioned whether Starbucks pays any taxes to any country? She was attacking two political issues with one target.
First, she was changing the political atmosphere in Germany from refugees and offering a reason for Germany's recent recessionary situation. Starbucks hurts German coffee houses and pays no local taxes while local merchants still have this burden. This gives Starbucks an unfair advantage. The anti-American fast food theme always plays well in Europe. Secondly, she was sending a message to Trump concerning international trade. She is testing the waters for this issue in 2017. She is also seeking another term in office in this election year. She plans on hammering on this nail using Starbucks as the villain in her election campaign.
EU and Taxes
The EU is also after Starbucks. They say the company owes back taxes in Europe to the tune of $32 million. Starbucks is fighting the claim as it says, it has a deal with the Netherlands and Luxembourg.
In Hollywood, they say there is no such thing as bad publicity, but poor public press doesn't play well on Wall Street.
Charts, Gap and Refill
As I refill my cup from my GLW coffee pot(they make the best home perked coffee), I checked the charts on Friday's price action. SBUX gapped down by 4% on huge volume. This is never a good sign. I further checked back in time all the way back to 2009. Starbucks may not offer refills, but they filled the pockets of investors to the brim. The stock rose from $3.50 a share to over $64 in 2016 in a straight upward move. Sorry, I missed that.
Now, I see a different opportunity. As stated, the stock went straight up like a rocket ship, but as time passed, the volume of buyers is shrinking. This is also not a good sign. The market at present is very bullish, especially with the recent milestone of 20K. I think the gap gets filled, however it will only need one point to accomplish this window. With a PE/ratio only a fraction under 29(high), with more bad press in the works, problems with coffee beans in Brazil and international trade as a political issue in 2017, Starbucks could retrace back to $40 to which makes it a nice short as in short cup. The key will be the volume refilling the gap. If it stays light that will be a green light to short this cold cup of coffee.
BOGO = Buy One Get One Free
The chancellor of Germany, Angela Merkel blasted the coffee chain as a poster child for avoiding taxes and even questioned whether Starbucks pays any taxes to any country? She was attacking two political issues with one target.
First, she was changing the political atmosphere in Germany from refugees and offering a reason for Germany's recent recessionary situation. Starbucks hurts German coffee houses and pays no local taxes while local merchants still have this burden. This gives Starbucks an unfair advantage. The anti-American fast food theme always plays well in Europe. Secondly, she was sending a message to Trump concerning international trade. She is testing the waters for this issue in 2017. She is also seeking another term in office in this election year. She plans on hammering on this nail using Starbucks as the villain in her election campaign.
EU and Taxes
The EU is also after Starbucks. They say the company owes back taxes in Europe to the tune of $32 million. Starbucks is fighting the claim as it says, it has a deal with the Netherlands and Luxembourg.
In Hollywood, they say there is no such thing as bad publicity, but poor public press doesn't play well on Wall Street.
Charts, Gap and Refill
As I refill my cup from my GLW coffee pot(they make the best home perked coffee), I checked the charts on Friday's price action. SBUX gapped down by 4% on huge volume. This is never a good sign. I further checked back in time all the way back to 2009. Starbucks may not offer refills, but they filled the pockets of investors to the brim. The stock rose from $3.50 a share to over $64 in 2016 in a straight upward move. Sorry, I missed that.
Now, I see a different opportunity. As stated, the stock went straight up like a rocket ship, but as time passed, the volume of buyers is shrinking. This is also not a good sign. The market at present is very bullish, especially with the recent milestone of 20K. I think the gap gets filled, however it will only need one point to accomplish this window. With a PE/ratio only a fraction under 29(high), with more bad press in the works, problems with coffee beans in Brazil and international trade as a political issue in 2017, Starbucks could retrace back to $40 to which makes it a nice short as in short cup. The key will be the volume refilling the gap. If it stays light that will be a green light to short this cold cup of coffee.
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