Friday November 9 2012
Stock Futures are unchanged this morning.
Don Thompson got the top job at MCD just four months ago. With the first drop in monthly sales since 2003, observers do not think his tenure is in danger, yet. This is the sort of ridiculous short term thinking that robs US Companies of talent and keeps the focus short instead of longer term. The slow down is hardly Thompson's fault. And it is doubtful any one person could reverse this new longer term downtrend. As the article notes, some 40% of MCD sales are European, or were....
I suspect the Dem super majority in California is good news for Texas. California firms continue their migration out of the state.
While the media obsesses over the stock market pullback, gold and silver hold their own. This is a repeat of the same kind of bottoming action that occurred in 2008 and even earlier this year. Gold bottoms and then moves up while the general stock market takes a pounding.
I have repeatedly warned that as we get closer to the 40th anniversary of the Disastrous 1973-74 Bear Market, Danger increases. One reason for the recent drops in the NASD is the sudden reversal of fortune for Apple.
Tom McClellan
Editor, The McClellan Market Report
www.mcoscillator.com
Tom McClellan makes the point that RCA was the tech darling of the 1920s as Radio ownership soared. But after topping in 1929 it would take until the 1950s for RCA to reach those levels again. The weighting of Apple across multiple NASD indexes has caused the recent pullbacks to be magnified. Here is the flaw in fundamental analysis alone on display for all to see. Apple sold out its less than well received mini iPad white version in three days.Investors have still dumped the stock. Remember all parabolic rises end in a collapse. We have not recommended Apple recently though every talking head on CNBC has.
Crude Oil the Master Market
As we often observe, crude oil is the most emotional market of all. Note that its spike up to 100 in September called the top, three days later it was 92. I have added additional multiples of the MAs. The shortest 25 day MA in purple bottomed at teh last low in July. I am guessing the four shorter MAs will come together this next week, then crude will move higher. XES is lagging.
Fundamental Observations on Energy
Last evening we heard the CFO of Halliburton speak at the Financial Executives Institute here in San Antonio. He made the case that only two nations in the world, Saudi and Kuwait, actually have any excess capacity to produce, that China was buying reserves all over the world, that Schlumberger and HAL were the largest energy service companies and delivered the highest return on asset values. We recently heard a fine presentation on the paperless office by the CFO of HOLT CAT. Halliburton calculates its daily cost of capital at $80 million. The CFO observed that it took some eleven days to go from work comletion to invoice. They are going paperless so the field crew prepares the completion. Thei idea is to generate the invoice faster, and cut the cycle time of cash to cash. The general irrational negative press HAL receives to this day probably prevents this company from reaching higher valuations. If I had to choose between owning Apple or HAL at this oint, I would go for HAL.
Semiconductors
Eyeball these two charts , crude oil previous and semi conductors here. Note the similar patterns. The similar patterns refelct the similar social mood prevailing at the time. Crude bottomed first. Semis followed suit topping days after crude in September. I suspect we need to see the same pattern of the MAs coming together this next week to signal a bottom.
Gold
Gold bottomed just above its 200 day MA, the trend is up shown by the black line, and MACD bottoms in the lower panel, note the higher low in MACDl Gold leads the way up out of the correction.
Internal Indicators
To make a low, markets have to go lower until they stop doing so. This indicator threw under the trend line in June. A similar pattern may be taking shape now. Notice it peaked in mid September, yes that was our exit point. We have been accumulating this past week as the market has fallen into support zones.
Keeping Emotion in Check
Throwing caution to the wind I added some positions Election Day which was an up day. I added small positions relative to my overall cash position. Since then SIL has come off a bit but GDXJ has advanced. The even smaller positions I have of XES COPX have fallen but with ample cash reserves there is the opportunity to add on even lower prices. The better idea would have been to simply place a succession of lower and lower orders. As it is the lower prices in many commodity plays are still falling. The media of course has no interest in recommending that any one buy, as usual gloom and doom prevails.
Socionomics
The Mansion section of today's WSJ is a whopping 14 pages in length. In fact the section now rates its own numbering system, M1-M14, a new height of expectations and assumptions in itself. If the section can go to 14 pages ona a multi hundred point fall in the Dow this week, perhaps we should be tracking how many pages it will number at an expected market top this winter or early spring? The average asking price in Aspen is north of $2 million. Expect wealth to be on display right to the top of the various markets and for some time after.
Euan Wilson at the Socioonomics Institute recently ran down the recent trend in television. The trend as befits an era of stagnation is definitely to the negative. Jack Bauer was hero in 24, in Breaking Bad a former high school chemistry teacher breaks bad inded as he descends into the world of manufacturing methamphetamine.
The era of 1966-1984 underwent a similar transformation. It kicked off with a former television actor playing a brutal gun man in 1964's A Fistful of Dollars. Expansionary periods are marked by inclusion of various groups, coming together is a hallmark of positive mood. Fistful was anything but that as the gunman played one warring family against another, to his own advantage. Made on a modest budget in Spain by Italians, Eastwood was paid $15,000. But tearing pages of dialog from the script he established just the right character for the time, action not talk. Or as Tuco (Eli Wallach, a UT Austin grad by the way) remarks after killing someone in the third film, 'If you're going to shoot, shoot, don't talk.'
The haunting music soundtracks by Ennio Morrichone copmpleted the template for the time.
1965's For a Few Dollars More doubled down on the idea of working opposing sides to one's advantage. Finally Lee van Cleef found his role of a lifetime, in this one as a good guy, well as good as vengeful gunmen can become. Lee was the lone prisoner Gary Cooper lets out of jail as he heads out alone to face the returning criminals in High Noon. He played one of Lee Marvin's sidekicks in 1962's The Man Who Shot Liberty Valance. But he found his role of a lifetime in 1966's The Good The Bad and the Ugly. it's hard to believe a movie featuring the Bridge scene with perhaps a thousand extras could be in a movie
that IMDB says was made for a mere $1.2 M 1966 dollars but that's inflation for you. Eli Wallach was perhaps chosen to reprise the same sort of character he played in 1960s The Magnificent Seven. Playing the outlaw, he gives the Seven Mercenaries their guns back and sends them on their way, he does not want any trouble from American authorities. in The Good, no one gets their gun back.
The setting is the American Civil War as three characters set out to find $200,000 in gold. Life is cheap and everyone is out for themselves. The gore on screen would echo the futility of the war playing out and just then ram-ping up in viet Nam.
During my college years of 1966-1972 membership in Greek fraternties and sororities fell every year. The move was away from inclusion. A campus wide seminar, I the Starting Point was hugely successful in 1968. And so this trilogy set the cinematic stage for what was to follow.
In 1965 and 1966 My Fair Lady and then The Sound of Music won Best Picture. By 1969 it would be Midnight Cowboy. The mood was turning dark. This would finally result in ultra violent contemporary Black films like 1972's Super Fly and 1971's Shaft.
The trilogy of Spaghetti Westerns that kicked off Eastwood's career are on Turner Classic Movies Tonight. We will continue our analysis of Eastwood's success over that era 1966-1982 in future installments. Our take is that Eastwood is much more a bear market figure, note the resurgence of his success since year 200 when this era of stagnation began.
Thanks for reading The Market Perspective.
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