Nassim Nicholas Taleb is interviewed on Charlie Rose...still a lot of deleveraging to go...hedge funds still have a lot of inventory to sell...banks will become simply like utilities in the future...
Sunday, December 7, 2008
Guidelines for a Market Bottom
A reference seen on guidelines for a market bottom, courtesy of Comstock Partners...
- While no one knows when the economy will bottom, any trough that goes beyond the 2nd quarter means that an eventual market bottom will be pushed off until well into 2009.
- However there is still a real risk that the eventual P/E ratio could drop as low as 8 times smoothed 2009 earnings of about $70, resulting in an S&P 500 index of about 560.
http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&CFID=45439052&CFTOKEN=59387017&category=Market%20Commentary&newsletterid=1425&menugroup=Home
Saturday, December 6, 2008
Recession Picking up Steam
Public Broadcasting Station's The NewsHour discusses the quickening pace of job losses as the recession intensifies, and what to look for going forward...LAKSHMAN ACHUTHAN, Economic Cycle Research Institute (top) and STEVEN PEARLSTEIN, Washington Post (bottom)... about 10 minutes long video...John Mauldin - The Velocity of Money
One of Cliff Küle's most admired advisers, John Mauldin, weighs in on the velocity of money... what it means in the current environment of deflation...: "How much monetization will be enough to halt deflation and overcome the slowdown in the velocity of money and the rise in personal savings? No one knows.".... read also the recent Cliff Küle article on financialsense.com which discusses similar issues - see below for link.John Mauldin: http://www.safehaven.com/article-12018.htmCliff Küle: http://www.financialsense.com/editorials/cliffkule/2008/1205.html
Gold Stocks at Bottom?
Chart courtesy of Casey's Charts shows gold stock prices at the lowest ever relative to gold...sign of a bottom?
Possible Reason for Crashing Oil Prices?
Oil Analyst Zapata George today on Financial Sense has a possible explanation for the massive fall in crude oil prices...and it is:..fuel costs. As bizarre as it may sound...if you are a shipowner the only cost you can control is fuel. Fuel burn is a function of speed - if you double the speed you quadruple the fuel cost. Having experienced a big drop in fuel costs, shipowners cranked up the speed to get the greatest margin...exaggerating the price decline (temporarily)
Click the link below courtesy of Financial Sense and go to minute 34 to hear it
Friday, December 5, 2008
Actual Unemployment Levels Worse
The actual levels of unemployment are much worse than the US Government will relate in their statistics - especially when one counts the unemployed that have exhausted their qualified unemployment benefits and have now given up on finding work. This category goes off the radar in the statistics. Click on the chart courtesy of Mish Shedlock of Global Economic Analysis for more representative numbers...
Is Deflation Bad?
Jörg Guido Hülsmann is senior fellow of the Mises Institute. In this insightful article, Jörg explores the myths of deflation...
China: Urges the US to Solve Crisis and Prepares for the Worst at Home
Chinese officials urged the U.S. to do whatever it takes to solve and restore the financial markets and the economy. At the same time , they said they are preparing for a “worst-case scenario” as the global crisis deepens...http://www.bloomberg.com/apps/news?pid=20601080&sid=aNYTcHIr7Jvc&refer=asia
Thursday, December 4, 2008
Equities At Bottom? Bond Bubble?
Technical Analyst Bill Carrigan on BNN today goes through a quick 5-minute perspective on the charts of the US Dollar, Bonds, and Equities... US Dollar may be running out of steam?... are we at the bottom in equities now? Divergence on energy equities with crude oil commodity prices?Martin Wolf - Stimulus Not Likely to Work
Financial Times' writer Martin Wolf says that the stimulus programs may not work... what needs to happen is for the creditor countries to increase their internal demand for goods and services... http://tinyurl.com/5sgv34 (may need to register with FT first)
David Rosenberg Latest Views - Gold, Bonds
Merrill Lynch Economist David Rosenberg is bullish on bonds, gold, and defensive plays including high-dividend yielding utilities and consumer staples...says the government will likely be a big buyer of bonds of various types, including bond types that will enable credit spreads to come down to lower levels..."The Treasury market managed to return more in just one month than the US equity market has managed to muster over the past decade!" ... in this environment, it is not incompatible to be bullish of both gold and bonds... if you read just one article today, recommend it to be this:http://www.realclearmarkets.com/articles/http___research1.ml.pdf
Wednesday, December 3, 2008
MIT Professor Roberto Rigobon - Lecture
MIT Sloan School of Management Professor Roberto Rigobon discusses in lecture format (about 1 hour long) commodities, inflation, and central bank policy through some recent research studies involving many countries - comes out with some very surprising findings and conclusions...
PIMCO's Bill Gross: Current Views
PIMCO's co-CEO Bill Gross discusses on CNBC today his current views of the government and corporate bond markets, equity markets, credit spreads, and where the economy and financial markets are headed...Yield Curves - Chart of the Day
Click on chart to enlarge - historical yield curves in %-yield terms based on short-term 3-month T-bills to long-term 30-year bonds over the last 10 years, with descriptions of economic events and central bank operations - chart courtesy of eSignal and Global Economic Trend Analysis.
How to Avoid the Horrors of Stag-Deflation
One of our closely followed advisors Nouriel Roubini writes that "central banks are becoming the only lenders in the land" and that central banks "need to commit to maintain policy rates close to zero for a long time and/or start outright purchases of government bonds"...http://tinyurl.com/5q8yq5 (may need to register with Financial Times to see article in its entirety)
Monetizing the Debt
Currency fund manager Axel Merk discusses the ways central banks perform monetary operations. In particular, Axel focuses on the operation of buying government bonds as a way of monetizing away debt, what several recent postings have discussed also. Axel sees it likely that from this buying of bonds that the US dollar will be sacrificed - "if the Fed helps to engineer that markets cannot price inflation into bond prices, there has to be a valve. This valve, in our view, will be the U.S. dollar; we cannot see the dollar hold up..."Tuesday, December 2, 2008
Jean-Francois Tardif: Current Views
One of our followed advisors Jean-Francois Tardif of Sprott Asset Management weighs in today on BNN on the current market conditions and his best current picks on equities and alternative investments. Currently does not like equities in general now. Economy going into a deep recession. Deleveraging still going on... Picks focused on infrastructure and preservation of capital...http://watch.bnn.ca/#clip117838
Frank Holmes: Signs of a Turnaround
CEO of US Global Investors Frank Holmes outlines some of the many signs now popping up that may indicate a turnaround in several asset markets:
http://www.financialsense.com/fsu/editorials/holmes/2008/1202.html
200 Year Dow/Gold Ratio Chart
200 year Dow/Gold ratio chart showing long-term trendlines indicating that Dow/Gold ratio likely to go lower - meaning Dow lower and/or Gold higher...chart courtesy of Steve Saville of The Speculative Investor and http://www.sharelynx.com/.
Charts of the Day
Upper chart showing gold outperforming equities in the last 6 months and lower chart showing bonds outperforming gold in the last 6 months. Notice bullish divergence on the momentum indicators above and below the data for the lower chart (this means the momentum trending upwards when prices trending downwards) - according to technical analysis, this bullish divergence could mean an upcoming change in direction, likely to occur once the downward channel (as indicated the space between the two trendlines) is definitely pierced to the upside (as indicated by the area of the circle)... click on charts to enlarge...
Ben Bernanke: Quantitative Easing
One recent posting discussed quantitative easing (QE) - the name given for the current approach to addressing the deepening financial crisis. QE refers to the set of extreme accomodative monetary policies by central banks. These policies include massive lowering of interest rates, increasing liquidity and lending facilities, and purchasing of longer-dated government bonds (this purchasing is called monetization). Here is US Federal Reserve Chairman Ben Bernanke discussing the purchasing of longer-dated bonds - note that this is a fairly lengthy video clip of a Bernanke speech to the Austin Chamber of Commerce if you have the time... Bernanke starts off with "if you want a friend in Washington, get a dog"...US Government Bailout Summary
Chart courtesy of Bloomberg and US Government sources - click to enlarge.
Monday, December 1, 2008
COMEX Delivery of December Gold
In response to many of our readers who asked about the followup to the December COMEX gold contract mentioned in our Financial Sense article (see link to article below), some insight has been provided today by Ron Kirby of Financial Sense. The above chart courtesy of Ron (click on chart to enlarge) details the delivery notices - 8600 contracts which equates to 860,000 ounces. There were over 1 million ounces delivered ("big" by historical standards according to Ron) in the October 2008 contract and now almost 1 million ounces on delivery notices in the December 2008 contract, and only about 5 million ounces left in the warehouse at present - could it be that within a few months the warehouse could be emptied out? What does it mean to gold price when a resultant squeeze occurs - could prices go through the roof at that time?
- link to Ron Kirby's article:http://www.financialsense.com/Market/kirby/2008/1201.html
- link to Cliff's article:http://www.financialsense.com/editorials/cliffkule/2008/1125.html
6 Lessons From Last Week's Action
President of Millenium Wave Advisors John Mauldin this week writes about 6 lessons from last week's action and news:- Expect the worst recession in the post-WWII era
- Capex (capital expenditure, as in "goods") is in a steep decline
- Consumer spending down sharply; savings rate is soaring
- Obama planning a $700 billion fiscal package
- Housing market is not close to bottoming out
- Fed has switched December meeting to a two-day affair
Competitive Currency Devaluation
The Chinese currency fell today by a record against the US Dollar. Some are saying this is a policy shift as Chinese authorities let the Chinese currency depreciate against the US Dollar in an effort to bolster the decelerating economy. This is what happened in the Great Depression - countries tried to devalue their currency then and now it is happening again. Many countries are now trying to devalue their currencies to bolster their economies and help export because a lower value currency means lower cost products to foreign consumers.US Must Bolster Liquidity for Consumers
Oppenheimer Managing Director Meredith Whitney writes an article in FT that emphasizes the importance of keeping liquidity flowing for US consumers and offers some suggestions on how this can be done: http://www.ft.com/cms/s/0/11344d06-befb-11dd-ae63-0000779fd18c.html?nclick_check=1 (may need to register with FT to view in entirety)
Sprott: The Solution to the Financial Crisis
Fund manager Eric Sprott, one of our closely followed advisers, writes in his latest editorial that the solution to the current financial crisis should be for governments to buy and stockpile commodities right now. This will create inflation to combat the current deflation. And it will work immediately. He believes that infrastructure projects will be very supportive of the economy but that their impact to the general overall economy will take about a year to work. So in the meantime, why not buy and stockpile up commodities now...
Marc Faber: The Warren Buffet Approach To Investing Won't Work for Another 10 Years
Marc Faber on CNBC notes that the buy-and-hold approach, the so-called Warren Buffet Approach, won't work for another 10 years:Marc also discusses about investing in commodities and bonds in this current environment:
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