Friday, February 15, 2013

Precious Metals Clobbered As Stocks Climb Higher

I rarely pay attention to the day to day action in the markets because I stay pretty busy working on other things, but days that precious metals get hammered I get the emails rolling in. They usually fall in two sets of camps: excitement and worry. The first email I got this morning (excitement) went something like this.

"Silver hammered again. Back below $30. I'm stepping in here to make a physical purchase, and I will track it down with more buying if it falls again."

Another email (worry) went something like this:

"Gold crushed again this morning. You must be really happy." (sarcastic)

Here is the mainstream media's overview discussing the end of the gold market. From Bloomberg today:

"Gold traders are the most bearish in more than a year on mounting speculation that improving economic growth from the U.S. to China will curb demand for this year’s worst-performing precious metal. Twenty analysts surveyed by Bloomberg this week expect prices to fall next week, while 11 were bullish and three were neutral, making the proportion of bears the highest since Dec. 30, 2011. Hedge funds cut bets on higher prices by 56 percent since October and are approaching their least bullish stance on gold since August, government data show."

As a quick reminder, recent bottoms in the gold market occured the last week of December, 2011 and August of last year (see underline above) during the point of maximum pessimism toward the metals.  I certainly won't tell you what to do, as I am not a financial advisor, but if I were a betting man (I am), I would take a long precious metals and short US stocks pair trade here.

$1600 Gold and 14,000 DOW as of this writing. I think you may be upset later this afternoon or even tomorrow morning (if you're a day trader), but you'll be very happy in 12 months.

See the complete 2013 Outlook for more on sentiment and value.

Monday, February 11, 2013

The Hidden Expense On Your Personal Balance Sheet: Unnecessary Interest

One of the largest expenses over the course of a person's life is the cost to borrow money. A good credit score can take an interest rate down 100's of basis points for a car, home, or credit card.

The following is an incredible look at the three powers that control the credit industry in the United States. A new report released from the government today shows that an astonishing 1 out of every 5 people have a mistake on their credit report. This mistake could be costing them hundreds of dollars every month in unnecessary interest payments.

Part 1:

Part 2:

Sunday, February 10, 2013

Jim Rogers: "I Am Buying Russia, Shorting Apple, & Shorting Bonds"

After betting against Russia for 46 years, Jim Rogers says he is now buying their currency, stocks, and bonds because they are one of the most hated assets on the planet. He has been short Apple and long Japan stocks during the recent plunge and rise (crushing both sides of the trade). Rogers become an icon in the financial world after co-founding the Quantum Fund with George Soros in 1973. The fund would go on to achieve monumental success and is widely known for "breaking" the Bank of England in the early 90's.

Grantham: All Assets Are Overpriced & Investing In The Low Growth World

One of the legends of the financial world provides his thoughts on low interest rates, market psychology, and what he is buying now. The following is a brief glimpse of the letter below:

"Courtesy of the above Fed policy, all global assets are once again becoming overpriced.

When one combines the apparent determination and influence of those who do the bullying with the career risk and short-termism of the bullied and the desire of the general public to believe unbelievable good news, these over pricings can go much further and the Fed can win another round or two. That’s the problem. A clue to timing would be when we begin to hear more passionate new era arguments: profit margins will always be higher; growth will snap back to 3% for the developed world; and new ones I can’t think of … maybe “when the discount rate is this low the Dow should sell at, perhaps, 36,000.” In the meantime, prudent managers should be increasingly careful. Same ole, same ole."

Click bottom right of the letter below for full screen:

David Stockman Discusses Hot Money & Interest Rates Impact On Real Estate

How "The Bernanke Bear Trap" will impact real estate in the years ahead:


A Visual Look At Japan's Bond Crisis

The following presentation, in slide show view with excellent charts from Bienville Capital, provides another visual look at the some of the looming issues in Japan. One of the best charts in the presentation shows that Japan is currently involved in printing money to purchase numerous asset classes, not just the government and mortgage bond arena that the Fed currently plays in (of course most of that new money has then found its way into stocks even if the Fed is not directly buying). The Fed has the ability to enter the stock market and Bernanke even discussed doing so as one of the final strategies in his now famous 2002 "helicopter" speech, which he has followed exactly thus far into our current depression.

A portion of the Bienville Capital presentation looks at the Bank Of Japan targeting negative returns on bonds as a positive as it will "shift" money into risk assets, as seen recently with the current US stock market insanity. Click on the bottom right corner of the slide show to bring it full screen, which will help the viewing.

For my thoughts on both Japan and the US stock market see the complete 2013 Outlook.

Robert Shiller On US Housing

Robert Shiller, co-creator of the Case-Shiller index, and author of the book Irrational Exuberance which discussed the stock market bubble (released on March 2000 - the month stocks peaked) and Irrational Exuberance Second Edition which discussed the housing bubble (released the summer of 2005 - the peak point in home prices), discusses his current outlook on US housing providing some rationality to the current euphoria.