Weekend May 12, 2012
A Billion Here a Billion There, Pretty Soon You Are Talking Real Money
Everett Dirksen on LBJ's first $100 B Budget
$2 B is only 1% of JPM's Shareholder Equity
Holman Jenkins Jr. Page A 15 Weekend WSJ
You know what we can't do without? Ever go a week without a rationalization?
Jeff Goldlbum in The Big Chill
And so we kick off the Weekend Market Perspective with a big rationalization, oh so what, at least among the Big Boys. The problem here and the danger is that the internal controls, if they exist at all, did not keep JPM from losing some serious money. The fact that it is 'just' 1% of equity just adds to the idea that indeed JPM is too big to fail. A reading of the articles in the WSJ indicates that the 'JPM Board was meeting to monitor the situation.' Ina Drew, Investment Strategist (how's that for irony?) may have to resign. Jamie Dimon, JPM CEO of course simply says 'obviously we should have been paying more attention.'
Should we expect that Jamie will pay more attention when he asks for another bailout? just wondering..
You and I of course cannot afford these lapses of attention. While Barney Frank is not one of my favorites, he noted this loss is five times what JPM claims the regulations cost. Of course it is lost on Barney that the regulations did no good whatsoever this time.
The market continues its fairly languid decline.
NYSE Advance Decline Volume
it seems reasonable to expect this indicator to test the 200 day MA at 3376. But the real story here is the US Dollar.With Europe al a twitter, the dollar is breaking out to the upside.
I continue to find the addition of the 125 day MA most interesting. Note here that the 50 day is bouncing off the 125 day MA. The downtrend from the end of the year has been breeched. The trend is up. But how high, let's do a comparison, okay?
US Dollar and Gold
The chart suggests 1550 on gold if the Dollar re visits its previous high. That is my best suggestion. The Commitment of traders has the commercials long the Euro, and that is out of favor, so we should be nearing an extreme of social mood.
OVer the longer term however, that would be the next couple of years, the Dollar looks to be forming an important uptrend. It is respecting an uptrend line from last May. And it jumped above all three MAs by the end of this past week.
QQQ simply got too high above both MAs. It now looks to re test teh 200 day MA currently at 61.61.
Bonds, CEF, Dollar
Long term bonds in red black are closely correlated to the Dollar in green at bottom. CEF in gold is inversely correlated. TLT has resistance at 122.5, the Dollar at 81.5, and CEF last bottomed at 19.
Given the hysteria over European problems and the net long position in the Euro for commercials, an extreme should take place in all these markets over the next month. So we anticipate
The Bottom Line
a low in stocks, gold, oil, that low sould last for months, probably into late summer for another high
a high in bonds and the Dollar, same idea, a high leading to alows later this summer
We have suggested accumulation using a succession of orders at lower and lower prices for CEF. GDXJ is becoming more appealing at these levels.
The New Civil War and Socionomics
The vicious anti coal and carbon fuel stance of the President is causing serious problems for his campaign. One EPa appointee resigned over his statements comparing his actions at the EPA to random crucifixion of Turks during the Roman era. There are of course plenty more left in the EPA just like him.
Twenty nine states have voted against gay marriage but the President has come out for it anyway to appeal to his gay base. Democrats are re considering holding their convention in North Carolin after the failed gay marriage vote and the incumbent Dem Governor is not running for re election.
These are not come together tactics but split apart tactics. This is typical of where Europe is now, as various parties fight for control of Greece. Expect more of the same for Italy. That same us versus them display of anger is showcased in Wisconsin where public employee unions want the reform minded Governor out of office.
But the big picture is the continuing trend to 'throw the bums out' in elections all over the world. Protests continue over the election of Putin in Russia. Sarkozy loses in France, the government of Holland has to re form, Italy as always is a country that works but a government that does not.
The New Civil War continues.
Thanks for reading The Market Perspective
The Market Perspective bases its information on techniques and sources that have been found to be reliable in the past, and The Market Perspective tries to base opinions on sound judgment and research, however, we do not guarantee that future results will match past performance ands no guarantee can be made that advice will be profitable. The Market Perspective accepts no money for stock recommendations and is purely motivated by its own research in recommending any stocks. Put another way, the responsibility for decisions made from information contained in this letter lies solely with the individuals making those decisions. The editor and persons affiliated with The Market Perspective may at times have positions in securities mentioned. Nothing contained herein represents an offer to buy or sell securities. The Market Perspective encourages investors to be diversified, and to maintain sell stops and risk control over their valuable investment capital. No guarantee can be made to the accuracy of text or charts.