Weekend October 20 2013
Bud Conrad suggests the bond bubble has burst. As he says, let the interest rates go back to normal of say 5%, let the debt ceiling run to $20 T and the interest cost is $1 trillion a year.
Replacing Bernanke with Yellen suggests permanent QE.
Tom McClellan
Tom McClellan
Editor, The McClellan Market Report
www.mcoscillator.com
(253) 581-4889
The idea is that the capital gains holding period results in a 13 month cycle from bottom to top in the stock market. This means money funds reach a low at stock market tops. The ext low is 1/2/14.
NYSE A/D
That view is supported by the Advance Decline which ticked up after consolidating the last few months.
Consumer Discretionary
And so Consumer Discretionary hits a new high as well.
XES Oil Service
The top of the oil market in 1981 occurred with the rig count in the US soaring over 5,000 and the price of oil dropping. Here we show the XES energy service stocks in red black. The price of oil is the solid black line. The price of oil dipped as the XEX hit a new high. This may be a temporary thing but it bears watching. The two should move in synch with one another. Otherwise we have too many rigs chasing a lower price of oil.
EEP
I suggested pipelines as a way to play a suspected uptick in this sector. EEP, OKS, and TCP have all taken off again. Yields are still around 7%
Refiners The Crack Spread
An alert reader asks about the refiners. Great question and timely to boot! The refining business does not depend on high or low crude prices. Rather it depends on teh difference between the price of gasoline which can be sold versus the price of the raw material to produce the gasoline. This difference is known as the crack spread a term derived from the catalytic cracking process that produces gasoline from oil. I have attempted to graph this crack spread with a ratio chart of gasoline to crude oil prices. When the chart hits a low, gasoline prices have outperformed oil prices. I plotted the big refiner Valero VLO at top. At the end of 2011, VLO bottomed along with the crack spread. The spread is bottoming againn, and again VLO has pulled back.
VLO
HFC Holly, Tesoro TSO, Valero VLO have all taken off as a resutl. VLO shown above. VLO has a 7.72 P/E and over $5 per sahare earnings.
US Dollar
A drop below 79 will really turn the dollar chart to the downside. This suggests the Administration wants a cheaper dollar to pay on the debt. 'We need to move away from confrontational politics' ( the President) means no one should oppose further raises in the debt ceiling, my way or the highway.
GOOG the New Leader
We have a new leader. Google is running ads for multiple versions of its Chromebook by HP, Samsung, and Accer. At less than $300, this is the product MSFT failed to produce. Coupled with other android systems there is now an alternative to Apple and MSFT. Google is not selling a stripped down version of its Office system as MSFT used to do. And the boast is start up in ten seconds. At school my MSFT systems take forever to boot up. The stock jumped $100. No wonder Ballmer resigned at MSFT.
IBM
Here is more evidence of new leadership. In the same time frame that DELL went private, IBM has bumbled from 212 to 172. Note the air pocket drop to the downside for IBM as GOOG shot up.
Closed End Municipal Bonds
Closed end munis have rallied on whatever deal we have in Washington. The weekly chart suggests we finally have a trade able low.
CRB Index
The weaker dollar has the CRB Index perking up, note the pattern of higher lows. And so oil, the CRB and even gold was up this past week.
Bottom Line
Stocks continue higher, commodities rally on the weaker dollar, Google is the new IBM/MSFT.
Socionomics
While markets have picked up, the themes at the theater are decidedly downbeat.
Robert Redford stars in a one man show with little to no dialog. in All is Lost. Here is the tag line.
After a collision with a shipping container at sea, a resourceful sailor finds himself, despite all efforts to the contrary, staring his mortality in the face.
This suggests a population grappling with whether the future is indeed brighter than where they are today. I have not seen the film but presume Redford survives. Contrast this with the first Rocky movie that appeared shortly after the Dec 1974 low of 577 on the DOW. Rock resonated with audiences as the underdog winning the day. Here potential movie goers are navigating their own lives comparing it with the sailor lost at sea.
Audiences are flocking to see a similar story in Gravity. Contrast the theme of Gravity, lost in space, with the 1983 film The Right Stuff. The Right Stuff finally gave Chuck Yeager, first man to break the
sound barrier, his due. All seven of the Mercury Astronauts had, as Tom Wolfe described it, the right stuff. This was just what audiences wanted to hear as the markets lifted off the 1982 final lows of the 1966-1982 bear market. In the photo at right, notice the astronaut floating helpless in space, a metaphor for the contiinued jobless recovery in the country.
Now contrast the image of Gravity with the image of The Right Stuff. Quite a difference! Even in their space suits the astronauts look bold and confident, the opposite of the Clooney and Bullock adrift in space.
Thanks for reading The Market Perspective
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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. |
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