Weekend July 14, 2012
We realize many readers do not agree but we are stil of the view that the following
internal indicators ( A/D volume, Summation Index) will return to their February highs taking stocks, oil, gold higher. There is no way the markets will or can collapse with the Public Safely Harbored in Dollars and Bonds.
Steve Kaplan at True Contrarian (subscription required) has an excellent discussion of the Commitment of Traders reports.
If we do not rally here, it will be the rare time in recorded history that the commercials were wrong.
The Advance Decline Volume turned on a dime or if you will its 50 and 200 day MA. Note the
uptrend in the CCI at bottom. There is plenty of room left to rally to 10,000.
Both the NYSE and NASD Summation Indexes show the same position, again plenty of rally room left.
Ramki pegged 1.22 as the low in the Euro. We hit that level and then rallied; he is still bearish Is he right?
I thought the Dollar had topped June 1 but quarter end squaring kept it up and selling by funds
of our recommendations which are all near lows gave us a double top in Safe Harbor assets of the
Dollar and Bonds. The Dollar is just that much higher above its MAs.
XES Energy Service
Funds will sell low performing stocks so that holders of the funds will not be dissuaded that they were
in 'losers.' Buying low requires buying losers. Eenrgy Service has been irrationally sold even as
the Shale Gas boom continues.Crude oil completed its $30 correction just below $80. The fact that
crude priced in dollars has rallied while the Dollar has held up is another huge divergence that no one
seems to notice.
We are long GDXJ, CEF, SIL, XES, XME, COPX, REMX, PBT, EWI, EWZ, and yes the despised
GM Government Motors trading at 1.05 book value with as much cash per share as the share price
itself. Honestly how often does that happen? No wonder Buffet has a position. We expect the rally to extend the rest of the summer.
Since apparently no one believes much or any of the above this might be a good time to discuss the
Longer Road Ahead - First the Fundamentals
Chart courtesy of
Editor, The McClellan Market Report
We see a potential top in the stock, gold, and oil market by early Fall. Above the Federal revenue is 15%
of GDP while expenditures are 23%. So revenue would have to increase 50%, (half of 15% equals 7.5% which would add to 23%), to equal expenditures at 23%. There is no way taxing the rich will do that, there is no way the gutless Congress
would cut spending by one third to do that. And it gets worse. Let interest rates return to some
normal state of say 6-7%, and interest payments will consume half the budget, and as we said yesterday,
finance the entire Chinese military. So the fundamental bubbles that will collapse world markets include
-Interest on Federal Debt, the US becomes Greece
-Collapse of Cities and States in the USA, three bankrutp in CA in the last two weeks
-The Bush Tax Cuts End, the Obamacare Tax Increases kick in, takinga lot of investable income out of the private sector
-World Wide Real Estate Specuation Collapse from Canada to the Far East brought on by the Dollar Carry
Trade, cheap to zero interest rates as Bernanke creates his own next crisis
-the coming Student Loan Default on $1 Trillion in Debt
-the Airplane Debt Crisis described by Holman Jenkins on page A 13 of today's Weekend WSJ, there are way too many debt or lease deals on way too many aircraft
-the continuing cover ups by banks of large losses and manipulation, now the JPM loss is
$5.8 B not $2 B, as the Barclays CEO resigns over manipulating the LIBOR rate
-How many more Madoff, MF Global, or Peregrine (front page Weekend WSJ) Disasters are looming out there? Efforts to regulate behavior all fail, but cost of business due to regulation soars.
- amd then there is Europe, as the baton of production and leadership passes to Eastern Europe and Asia, the 2,500 year reign of Europe ends, broke and squabbling. Come to think of it, another irony is that the losers of WWII, Germany and Japan, are the industrial giants of today.
Technical Road Ahead
Each 18 year period of stagnation has at least three big downturns, we have two down and one to go for this period. It is shaping up to be quite something, as I expect all of the above events to transpire over the next three years.
Irony of the Week - What Did They Think Would Happen?
Republicans and Democrats are stunned and outraged that the US Olympic Uniforms designed by
Ralph Lauren, remember the Olympics are privately financed, were made in China. After passing more and more legislation which has driven manufacturing out of the country, (recall that the US became what it is (was) from 1636 to 1913, the first Income Tax when the Federal Govt stayed out of the way)
higher minimum wage,
mandatory health care,
raiding the Gibson Guitar Company,
harassing children running lemonade stands,
cursing Haliburton for moving to energy friendly Dubai,
harassing Boeing for bulding a plant in Right to Work Carolina,
encouraging endless open-ended class action lawsuits,
maintaining the highest corporate tax rate on the planet,
clinging to an impossibly complex tax code,
oppsing Shale Gas Exploration ( and thereby achieve a degree of energy independence)
failing to adopt International Financial Reporting Standartds,
passing SARBOX and Doddd Frank,
why are they surprised?
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.