The Market Perspective

The Market Backs Up

Wednesday August 22 2012

I e mailed those on the e mail list, well  hard to e mail you if you were not on the list, but failed to put on the blog that I sold all 40 some odd TLT puts yesterday about 1:45 PM CST. The stock market had rallied from 1270 to 1420 without much correction and TLT had fallen to my third wave target of 121. Sure enough this morning the 

122s are down 55 cents and the 

125s are down 85 cents, which is 85 bucks each in real money The distribution was lopsided but assuming it had been even the decision to sell was worth

20 x $55 = $1100

20 x $85 = $1700 

which is $2800

Or this morning I would have a paper loss of $2800 from the close yesterday. All of this is to make the point that an option is not a long term investment in a blue chip stock. Not bad but if I had really been thinking I would hav bought a few TLT calls just as a short term hedge against an overall market decline. 

Gold is holding up and most of our holdings are down less than 1%. But this is to be expected after such an extended rally.  Frankly I am surprised stocks are only down a bit. Apparently everyone is waiting for some whiff of QE 3. No matter our view is unchanged that higher commodity prices lie immediately ahead. 

When I make a substantial post or there is a change in ownership like yesterday, I send an e mail out. If you would like to be added to that list e mail me at

[email protected]

 

 

Think Gas Prices are Bad Now?

Tuesday August 21, 2012

Check out the article onpage C4 of today's WSJ. Then review the graph from Year 2008 in our post 

Stair Stepping to New Heights.  In that graph we noted that peaks were recorded first in the Dow Industrial, then then the SPX and finally in Commodity prices. Looks like we are no track for a repeat.

Unleaded Gasoline

Gasoline pulled back from the 125 day MA, amazing how those MAs work isn't it? And it retreated to the 200 day MA. But as the article cited above suggests, we look to be on track for higher prices. 3.4 would be thirty cents higher but at the pump taxes and such make the retail price higher. 

This is actually another puzzle piece that we are on the right track. Higher energy prices always accompany higher stock prices, this is evidence of a positive social mood about the economy. 

This weekend I mentioned the possibility of an Israeli attack on Iran. That of course would spike prices higher but the charts cannot provide a clue as to whether that will happen. 

Re Thinking College

Tuesday August 21, 2012

This is my column which ran this past Sunday in two Texas newspapers. All the current 'solutions' to college costs are merely re-arranging the Titanic's deck chairs. The time and expense of college.  must be cut to cut the debt. 

 

The concept of what college is or should be is undergoing re-examination. It’s time for a re-think of just what we want a college degree to be, and what we as a society want to spend in support of that notion.

Texas will cut is Higher Education Budget  7.6% for 2012-2013, still spending $21.1 billion dollars.  In 2012, the latest year I can find on the THECB website, there were 1,505,449 students enrolled in community colleges and universities in Texas. As employers still report they cannot find adequate technical or university graduates for many positions, we might well ask, exactly what outcome are we getting for $21.1 Billion? By the way that is simply what the State of Texas sends to Higher Ed. The overall Higher Ed budget for all school includes tuition, fees, grants, you name it, pushes the total expenditure well over $100 Billion.  Private schools push the number even higher.

Let me provide a totally non-scientific anecdotal example in answer to my question. One of my students recently began an essay with the rather famous quote, ‘It was the best of times, it was the worst of times.’ I quickly interjected,  in two of my junior level classes, who wrote that, what was the subject, and the title of the publication? Only one person had the right answer. The guesses, such as  Shakespeare, were even worse.  This is the opening quote from A Tale of Two Cities written by Charles Dickens concerning the French Revolution.

Everyone in those classes presumably completed English Literature in both high school and at least two semesters, if not four, in college prior to my class. Yet 98% could not score on the simplest of Jeopardy questions.  I am going somewhere with this….

One fellow in my senior high school English class declared that he enjoyed Julius Caesar much better than MacBeth, because he had finished with Caesar in the eleventh grade. In a related sense, I am, yes, suggesting that there is little point in  requiring students to ‘learn material’ (which they don’t) that is not directly relevant to their desired outcome. And frankly it is a complete waste of time for the teacher and those that are interested, in this case, in British Literature.

High schools are now experimenting with various programs enabling students to simultaneously complete junior-senior high school requirements as well as freshman-sophomore requirements. At the end of high school they are junior class ready. Most students have complained that the first two years of University studies pretty well re-hash high school anyway.

 Another problem is the extremely high drop out rate. Even at the best of our state universities, the completion rate for six years is about 65%. The numbers drop from there, to usually below 45%.

And the community colleges still struggle to gain broader acceptance of the Associates Degree. Worse, only a small fraction of students attain that outcome.

My sense is that with colleges on every corner, both state, private, and on-line, there is growing skepticism of the final product. As a result, there are more and more certifications in virtually every field. Examples  in my field of accounting include  the traditional Certified Public Accountant as well as Certified Internal Auditor. More and more employers are now demanding a certification either prior to or soon after as a condition of continuing employment.

I propose creation of  a series of Chartered Community Colleges.  Admission standards would include timed  exams in that field of study. A majority of instructors would be full time and drawn from the fields in which a student would be certified. The college would only grant degrees that would result in one obtaining a specific certification.   Like classes in the military, student could fail.  The Vision would be a college system specifically geared to an employable certification. The Mission would be the creation of an affordable college tied to the work place. The Outcome Measure would be the success rate of the graduates on said certified exams.

Handily such a model already exists in the community college system-nursing. Let’s add plumbing, accounting, pharmacy tech, and a host of others to the list.   Colleges have given up offering an education but instead claim higher lifetime earnings, regardless of the degree one receives. This is simply not true. The  field of study matters. And they will all matter at the Chartered Community College.

Dennis Elam Phd CPA  completed his Doctorate at the UT Community College Leadership Program and has taught in  four different universities.  He blogs at www.professorelam.typepad.com

 

Speculative Fever

Tuesday August 21, 2012

A GT 40 used by McQueen in the Lemans movie has sold for $11 Milliion.  Speculative fever is alive and well. Over the last two days we mentioned that retro nostalgia is a sign of fifth waves. Indeed, Ford Motor company commissioned a new series of GT 40s while Bill Ford was CEO.  Ford was in trouble and this was a way of attempting to regain the former glory of the top of the 1966 market when Ford beat Ferrari four times running at Lemans. 

It of course did not good whatsoever financially for Ford but nostalgic mood does not equate to profit. 

Speaking of nostalgia, note the Gulf Oil emblem. Gulf never really made any headway with its sponsorship and was gobbled up by Chevron in the takeover mania of the Milken era.

Tuesday Pre market Openning

Stocks are quietly up as are gold and oil. The FED Jackson Hole meeting is next week. Speculation about FED easing continues. The Euro quietly moves up.

Jim Paulsen  recites some of the same things we have noted, the move out of T Bonds, the move up in stocks, tech and materials in particular,  and a quiet VIX. 

The Empire Strikes Back on Student Loans

Tuesday August 21, 2012

Now the FEDS are with holding SS payments on recipients that have not paid their student loans. In some cases these are grand parents that borrowed to help grand kids. 

I have repeatedly warned that the Student Loan Crisis would be one of the factors in the next market meltdown. This has a parallel in the previous era of stagnation from 1966-1984. Then many young men fled to Canada rather than 'pay their fair share'  by being drafted into the Viet nam War. This conflict was resolved when Jimmy Carter gave them all amnesty allowing them to return home without penalty. 

This is emblematic of the fight for survival that is coming. My concept of the New Civil War has pitted the North against the South. Now the Federal government becomes a third player. No end of fronts in this war. 

Here is another instance of a student asking Romney and Ryan about student loans. Ryan notes that tuition is increasing at double the inflation rate.  See our post on Re thinking College for some genuinely fresh ideas on what to do about the problem. 

A Socionomic Stroll Through the Monday WSJ

Monday August 20, 20127:41 AM CST

Page C1 Investors have shown their disdain by withdrawing their money from stock mutual funds, as the headline stats on page A1 this Market Rally Gets No Respect. So where is the money going, still to municipal bonds and money market funds. The article of course goes on to speculate about what the FED will do, but investors will be dragged back into the stock market as it completes 9.7% six week rally. 

Everybody hates GM Department

A few weeks ago the media had negative articles on the difficulty of changing the GM culture and the money losing OPEL unit in Germany. Today  a front page A1 article reports on the success GM has had with china's SAIC Motor corp. On page B1 negotiations near close on shortening the hours at OPEL, cutting costs. GM rallied 8% in two days last week. GM earned $7.6 B last year, $1.5 B with SAIC. 

Another Social Media Darling Sinks

The market continues to exhibit Year 2000 like disappointment with the latest stock market fad. Groupon Investors Give Up, Page A1. Like the dot.coms mimicking paper catalog sales, Groupon was nothing more than a local discount coupon, nothing new under the sun as they say. 

The Gathering Storm of Discontent and War Clouds

The only thing that can save our daughter, my wife, and all of us is a revolution, so that's what we'll have. 

Husband of Pussy Riot Defendand

The WSJ ran an editorial noting the US lack of response. On the preceding  page A9  is a photo of chess champion Gary Gasparov being carried away, literally, by police from the trial. Note his comment

Such a brazen step (after being beaten up by the police Gasparov was criminally investigated for biting a police officer) should raise alarms by the leaders of the  Free World are clearly capable of sleeping through any wake-up call. Worse the US called the sentence disproportionate as though free speech deserves jail time, which tells us a lot about how this Administration views dissent. 

And on page A 7 don't miss Russian activists sued Madonna for $10.5M for her support of gay rights at a concert in St. Petersburg. 

And in this country Gibson Guitar gets by with a mere $350,000 fine in the furor over our own Putin type excess in raiding this distinguished manufacturer. 

This weekend I featured a stroll through the popular titles at a bookstore. We noted that American Sniper and Sniper Elite glorified wars that were no doubt training grounds for the real mayhem yet to come in the next bear market. Better Off Without Them  advocates splitting up the USA, something that did happen  in Yugoslavia. Throw Them all Out echoes the frustration of the husband quoted above. Sociocnomics holds that mood lags social action. There is plenty of negative mood out there to fuel the next world wide bear market. 

WW II in Asia began with a Japanese Chinese confrontation. The South China Sea's Gathering on page A11 notes that the Chinese are sending garrisons of soldiers to extend their claim over the entire South China Sea. The US of course has done nothing which is the point of James Webb's article. 

At this point I was going to transition to make the socionomic point that fifth waves are often accompanied by nostalgic look backs at previous eras. This is even more true than I might have thought. I planned to mention the 1966 release, The San Pebbles about a US gunboat in China in 1926. And lo and behold, a retrospective The Making of the Sand Pebbles was released in 2007. I learned two things from that movie. Never send one ship in harm's way (remember The Pueblo) and never take a date to a movie in in which Steve McQueen gets killed, what a downer. 

And moving to my original idea of retro, Hollywood has obliged with movies based on TV series, like Mission Impossible. In addition 1930s origin comics have morphed into blockbusters featuring Batman and the 1961 creation of Spiderman. Now what else for aging Baby Boomers but Grandad as the action hero. 

Expendables 2 did $29.8 M displacing Bourne Legacy. The cast includes just about every 1980s action star from 65 year old Arnold to 72 year young Chuck Norris. The real outlet though for such fare is overseas, the first Expendables took in a whopping $274 M. Arnold's affairs in the US are no barrier to his fans overseas. The glorification of war is a top of the market social focus. Indeed we are playing out the same sort of Viet Nam era scenario. Finally disgusted with the inability to tell the good guys from the bad, a cynical saying emerged, Kill Them All, Let God Sort it Out, concerning Viet Nam. Now the same sort of thing is occurring in Afghanistan as supposedly friendly Afghans attack the foreign forces there presumably to bring peace to the country. Once gain, the history of social mood repeats. 

Apparently this series takes its name from the 1945 John Wayne film, They Were Expendable. As we say, social mood repeats but rarely remembers. 

Mondays have been the weakest day of the week for stocks for several weeks now. Today seems no exception. I did notice that Spanish and italian bonds yields have fallen to six week lows. The quiet Euro rally continues. 

 

 

 

Relevance of the Death Cross

Weekend August 18, 2012

WE received a good question from a particularly alert reader concerning the crossover of the 50 and 200 month moving averages. When the 50 crosses to the downside of the 200, in classic tech talk this is known as the death cross, ie from which there is no return. The idea is that since the monthly MAs are so slow moving, this signals a lot of downside action. Here is the chart the article sites. 

French Stock Market CAC

Only the 50 and 200 are shown here to replicate the same chart. Now to address his question. 

-Recall that everyone on the planet  has these same charts and indicators, even those SWIFT traders in Bulgaria. And recall the most quantitative programs to trade stocks (like that pesky glitch laden one recently installed at Knight Capital) use these two MAs.

-Having said that, the French market like most headed down in 2008 and then never got above the 200 month AND then the 50 MA again. Truly it does look like its curtain time for France. 

-Also recall that most major market indexes are price or volume weighted, it tells us very little about an equal weighted index or what the market internals are doing, like the bullish percentage or summation index. 

-Recall however that markets consist of fractals, smaller fragments of time that move at a different tempo. This is what makes interpretation difficult. Let's 'telescope the CAC from different time perspectives. 

Weekly French Stock Market

This view is not terribly encouraging either. I added to more MAs. On the plus side

-we have the same series of higher lows since last October

-a confluence of MAs lies overhead. On the one hand that is  huge resistance, the market did rise above them in early  2011.  The mood is generally negative, no doubt many are adding shorts here anticipating that the market will fail, one reader noted that one of the Usual Hedge Fund Suspects was on CNBC Friday going short the US market. 

Now let's examine the daily chart.

CAC Daily

This is a different picture altogether. Our 50 day MA is about to  turn up above the 200, that is the blue line over the red line. And note that price has poked above the pink downtrend line form July 2011. 

Admittedly I have never set foot in Quebec or France, don't speak the language, and have only had escargot one time. But my bet would be that the CAC surprises everyone with a ten percent move back to 4000. The Euro is also trying to break above its MAs, and my guess is that it will. Note the nice move up after CAC last touched the 125 day MA green line. that was literally the quantitative  programs kicking in and the French Hedge Funds following their computers on the buy side. 

But the question was about the US market, so 

New York Stock Exchange Daily

The 50 day MA has turned up, the trend is still up. And we have the summation index in the lower panel looking well at least positive. 

Weekly NYA

I would rely more on the NYSI at bottom, if it returns to its 2012 high, the NYSE will also make a new high. 

Monthly NYSE

So far so good. the price index is pulling the 50 month MA up, it survived a successful summer test. And the 50 month has not crossed the 200 month. Between money leaving TLT, and the probability that Bernanke will unleash another stimulus of some sort, looks like higher prices ahead, note the positive look to the NYSI in the lower panel.  Just to be fair here is the SPX monthly.

SPX

The 50 has not quite crossed to the downside of the 200, the price will now act to pull the MAs up. That should lead to the higher prices we have discussed here the last few weeks. 

 

SPX 1418

Weekend August 18, 2012

 

 

To the Reader

For some reason I keep spacing the paragraphs apart but after saving my work typepad runs them together. This looks bad and is difficult tor ead, not my fault, sorry bout that. I have tired several times but always get the run together look. 

Overview

GDXJ and XME for example have both flashed buy signals on the weekly parabolic indicator. There is little else to say about specific recommendations other than to ask new readers to review the last few weeks of posts. My holdings include

CEF - mvoing out to more aggressive positions like XME

COPX - COPPER MINERS

EWI - ITALY

EWZ - BRAZIL

FCG - NAT GAS PRODUCERS

GDXJ - JR GOLD MINERS

GM - GENERAL MOTORS, SEE POSTS THIS PAST WEEK, SOMETHING IS UP

GSB - SAN ANTONIO BASED SECURITY SOFTWARE

KOL - COAL PRODUCERS

PBT - PERMIAN BASIN ROYALTY TRUST

RAX - RACKSAPCE SAN ANTONIO BASED SERVER 

REMX - RARE EARTH METALS

SIL - SILVER MINERS

TLT - 122, 125 PUTS

XES - ENERGY SERVICE

XME - METALS AND MINING

Overall we look for commodities to top last as they did in 2000 and 2008. Various indexes should begin topping after Labor Day. 

Internals

Notice how the weekly High Low pulled back this week, tested the MAs, and the pink uptrend line, and now is heading higher. I believe we will regain 2250 which supports my idea of SPX 1500 or thereabouts. 

NASD Summation Index

The NASD is lagging the NYSE but turnign up through the ribbons of MAs. Note this indicator is only half way to the top, plenty of room left for upside. 

VIX

An alert reader asks about the low level registered by the VIX, one of the lowest in years. A great question, here is my take. 

 

My take is that the market is settling into the complacency that will lead to SPX 1500. the VIX traded at the 15-20 level from Dec 2010 to July 2011, eight months. It just touched 15 last March, this is only August. Notice that VIX stayed under 15 for most of 2005 and 2006.

 Complacency is a state of mind that comes from believing that markets have attained new permanent high. This was the case for oil prices in West Texas at $36 in 198. The oil price began dropping each year after that, yet I recall being at  Permian Basin Petroleum Club meeting in early 1986 when one producer laughed at my concern. Oh I have been hearing that for years he said. by July when the price dropped from the low 20s to $12, no one was laughing.  However I was doing well in the bond market.

 

Consider NASD 5,000 in March 2000 after the NASD rose 2000 points in six months after taking 18 years to rise 2700 from its start in 1982!. Complacency is not a one time high event for the day. for years gold bugs pointed to the $800 level gold achieved in 1981 but it lasted a bare two weeks. That is an event, not complacency.  People need to feel they have achieved something, a mental nirvana,  read every day in the WSJ that we just hit a four month high, today's headline, hear the blather on CNBC about rotating from defensive to cyclical or whatever mumbo jumbo is on today. The fact that TLT is just now approaching longer term moving averages, there are two articles on dividend stocks in the Weekend Journal, Bill Gross just declared stocks dead, all this suggests that most of the public has still not embraced the iddeas we have been promoting here. 

Good chart watching but this has to go on long enough to lure all out of TLT, that hourglass thing, and into stocks. RUT may just be  turning  up decisively, nearly all market highs involve the RUT or NASD making new highs. 

Ratio chart Russell 200 against the SPX

Euro

If the Euro is ever going to vault the 50 day MA the time is now. 

Socionomics

At the 2012 Socionomic Summit, a card was distributed listing both the tenets and applications of socionomics. One application is that some actions lag mood more than others. In short, all markets or movements do not top or bottom simultaneously.  TLT has crashed some 8%, the Dollar nearly refuses to decline, GDXJ begins a slow ascent. 

Striking CAT workers threw in the towel after 3.5 months. The economy is weaker than the Administration knows and the workers wised up before more plants were built in right to work states.
CAT recently buit an engine plant in nearby Sequin, TX.

The New Civil War Rages on. I strolled through a bookstore yesterday and here are a few titles that reflect the popular mood. Speaking of my New Civil War Concept, Better Off without Them actually outlines a plan for the South to seceded, it is written by a Yankee who dismisses what passes for Southern culture. When I began this blog a few years back I e mailed one Canadian reader about the secession culture in Texas, it was later mentioned by the Governor and now it is in print, that's social mood for you.

 

Sixty Miles of Border details the fight of the senseless and never ending War on Drugs. Now the government will spend millions on drones, moving the expensive technology from Afghan to the Texas Mexico border, insane.

Sniper Elite, tag line Explosive Action in Afghanistan, Iraq, and Northern Ireland is really just detailing how lots of potentially violent people went to graduate school on this topic in these places. Chris Kyle's American Sniper is also out. Interestingly his company Craft International is funded by Kyle Bass whose success is outlined in the introduction to Michael lewis Boomerang that I am now reading. 

Nothing could be more timely than 

Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of us to Prison [Paperback]

Jon Corzine is not going to be prosecuted, no doubt Jeff Skilling is going mad in jail reading this, and incredibly Corzine is planning a Hedge Fund. This attitude of throw the bums out is of  course is on display all over the world, just ask Sarkozy. I believe I mentioned that the incumbent well liked State Senator of 20 years here in San Antonio got beat 2 to 1 by a newbie who moved into the district days before the filing deadline. The Senator was defeated by changing social mood rather than his opponent. 

Can't get enough of one of the darkest movie series ever, Hunting the Dark Knight details the last three Batman pictures. 

Rock the Casbah, Rage and Rebellion Across the Islamic World details 'The Arab Spring.'

Weekend WSJ

On page A8 three female members of the Pussy Riot  were sentenced to two years in prison, observers see the heavy hand of Putin in this. Pretty audacious even for an ex KGB agent. Col. Ralph Peters calls Putin literally the most dangerous man in the world. Russia and China back the bloodbath in Syria. Who would not ignore our Secretary of State calling for, well whatever she is calling for, when the USA has to borrow money from the Chinese. 

On page A 13 the IRS and big tax preparer companies are joining to put your friendly across the dining room table tax preparer out of business with compulsory registration and CPE requirements. 

But all is not lost. ?vogue would not be printing 916 pages without lots of positive vibes 

Our point is that there is enough positive social mood at the moment, see next paragraph, for all these potentially negative events to be ignored. As the mood turns more negative after a stock market top, all the above  will rise in importance. As we say  the events are here it is the job of the socionomist to point them out. 

 about the economy. This will be enough positive mood to push the SPX higher, yes I am still focused on a potential 1500. The Ferrari F 12 at left is the most powerful model ever built at $330 K per copy. Such excess takes place prior to market tops. Note the bright positive colors in both photos, but then 40% of Ferrari production is in Italian Red. 

 

 

Our take on the article, Six Investment Moves to Make Now on page B7. the article recommends buying all  these. TMP does not. OUr comments after the dash

Dividend Paying Stocks  - These stocks are topping now, the article is way behind the curve. 

Cyclical Stocks - They mention energy and tech, I like energy metals gold silver

Municipal Bonds - New high prices make these a sale. With three cities in CA recently taking Chapter 9, there is a potential floodgate waiting. We have mentioned this numerous times, the cities will default in kind either to dwellers, bond holders, or employees or probably to all three before this is done by 2015.These chapter 9s are not getting much attention now, just wait a year. 

Mortgage Backed Securities - Just four years ago no one could figure out how backed what, why on earth get into that risk basket again?

Emerging Market Bonds --We are long EWI and EWZ and Fidelity's Emergin Market Fund, but the bonds will no doubt be heavily marked down in two years, that will be the time to buy. We expect to exit our positions in a few months. 

High Yield Bonds - No way, Jose, these typically top along with stocks,  a junk bond is a stock hoping you will believe Mike Milken was right after all

Below that is an article on Where to Find the Next Crop of Dividend Paying Stocks. This is typical Wall Street linear regression thinking, the trend never ends. The trend is ending, those stocks are turning down, as we showed a few days back, commodities topped last in 2008 and 2000. These stocks already have or will soon top, period. Stay tuned for an article in the WSJ titled, Time to Buy Miners now, after the group has advanced 40% or so. 

We have consistently highlighted the next Big Bust - the College Loan Meltdown, first cousin to the sub prime bust of 2008. My weekly newspaper column outlines a new plan for college, I will put it up tomorrow when it will appear in the papers that run it.  When the Kids Return Home notes that three of ten parents say one adult child has returned home. The article suggests counselling, budgeting, and networking but, as I noted earlier, some social actions  lag mood more than others. Today there is this article about college graduate children right back in the bedroom where they started. Earlier this week the same paper featured an article on Marketing Pros, Big Brand on Campus. Rather than coming up with affordable alternatives and cutting bloated staffs, the fixed cost of college  goes up to convince the other seven of ten parnets that an expensive college degree is still a great deal. Eventually mood will catch up with reality. When it does, there will be a trillion reasons for a meltdown. 

While this has nothing to do with investing, on page D7 Burrata, a cream filled ball of mozzrella, with roasted nectarines and pistachio heb oil, would surely require one to hit the Jack in the Box Drive in Window on the way back home....

So What Could Go Wrong

Quite a bit if Israel Attacks Iran.  Trouble in Iran ended Carter's Presidency.  Then it was the failure of an attemepted hostage resuce not to mention the hostage situation in the first place. Now, such an attack would spike the price of oil. I have no idea where the Administration would be on such an issue and suspect they don't either. 

Bottom Line

We look for TLT to continue its melt down, the Aussie and Loonie have rallied nicely, the Euro will do a bit better, commodity stocks are just beginning a strong run back to at least the highs of earlier this year, and gold should make yet another multi-year high by Christmas. Stay long our recommendations and suggest TMP to a friend. 

Thanks for reading The Market Perspective

[email protected]

 

 

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.

 

 

Big Picture on TLT

Friday August 17 2012

Bill Gross is making excuses for his bad calls on Business Insider, but here is the big picture. A target of 100 on TLT would be a 61.8% re-tracement. And this would take it back near the longer term MAs, note it has gotten way too far ahead of those, as Bob Farrell would say, time to return to the mean.  We cannot know how fast this will happen but thing sped up this week. I hold 40 TLT puts with 122 and 125 strike prices expiring Sept 22 2012.

 

Friday, Options Expiration, The Take on GM, Reading Assignments, Fidelity

Friday August 17, 2012

The GM CEO seems to be following Alan Mullaly's lead at Ford organizing around a global structure.

Despite the drum beat of bad news in the media, Spain and Italy rally.

A tenet of socionomics is that the extreme emotion takes place at the end of a move, both down and up. So CITI's suggestion that gold could hit $6300, at least for a short time, may not be unreasonable.

Matt Taibbi has written extensively on Wall Street misdeeds. His profile of the DOJ is pretty much what I encountered when presenting a case to the DOJ reagarding fraude when I served as a Federal Bankruptcy Trustee. Our work was met with a big yawn. Note, Jon Corzine walks.

We rely on internal indicators for measuring extremes rather than arbitrarily picking prices but whatever you think of the price this is a decent look at recent monetary history.  I suspect this will all be done by the time we get to the end of this 18 year window of stagnation (2000-2018).

Michael Lewis on how Ireland went from bust to boom and back again, a familiar story.

Fidelity Funds

Many investors are constrained in their choices. Most 401Ks and 403Bs like my college retirement account restrict one to a family of funds. And their is no intra day entry or exit, all transactions are on the close or last trade of the day.  In addition, such funds will charge a penalty if one does not stay as long as the fund would like.  So this is a different perhaps more deliberate picture of investor preferences, let's take a look. 

Fidelity Global Commodities - Weekly with Fib Ribbons EMA

Interestingly this fund was created right near the March 2009 lows in the market.

My account is split among three funds with the majority in Global Commodities and Gold and a smaller amount in Emerging Markets. What do you see?

• Prices are right where they were a year ago in August but moving up not down. 
• FFGCX made a higher low in June on a more oversold CCI. 
• The overall downtrend has not been broken-YET. It is  descending from teh April 2011 high price is right up against it now.
• Recall that we recently showed on August 14 2012 that during the last two market tops in 2000 and 2008, commodities topped after stocks. Therefore a reasonable guess is that FFGCX is headed back to 18. 

Fideltiy Gold

This is a fund of gold miners, they are terribly out of favor trading at late 2009 levels!  We have showed ratio charts with further demonstrate this irrrational valuation. Spotting irratiobnal valuations and taking advantage of them is the key to market timing to capture big moves. Above this one year correction should be done, the bull market resumes taking gold to another year end high, which it has consistently done since year 2000.. 

We hope you enjoy reading The Market Perspective.