Weekend March 15, 2014
WHat happened to gay marriage is going to happen to marijuana. Give me 24 months.
Justin Hartfield of Weedmaps, the Yelp of Marijuana Dispensaries
I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis,” he said last night in prepared speech for a meeting of the Banks of Mexico Association in Mexico City. “With its massive asset purchases, the Fed is distorting financial markets and creating incentives for managers and market players to take increasing risk, some of which may result in tears.”
In January, Fisher said investors were seeing the world through “beer goggles” because of the liquidity caused by the Fed’s stimulus programs. Yesterday, he noted increasing signs of market distortions in the stock and bond markets.
Richard Fisher Dallas FED Chair
Several other financial advisers told me this past week about clients who are chafing to move most or all of their money into stocks. Often those who lost the most in 2008 and 2009 and begged to be taken out of stocks entirely, are the msot eager to pike back in now.
Jason Zweig, Haunted by the Bull that Got Away Page B 1 Weekend WSJ
This of course is classic socionomics of following the herd instinct.
Corporate Insiders are more bearish than they have ben at least since 1990.
Mark Hulbert, Page B7
How the FED has failed America Good thoughts from Charles Hugh Smith ironically only the one percent have really benefited from the FED's actions.
2014 is Starting to Look Like 2008 by CH Smith - someinteresting graphs on how this time reflating the money supply has not reflated jobs or income for most people.
Rambus.com was right all the way down on gold. Then during December he switched to the bull side. Here are the last 51 days. If you are interested in following metals this is the best site I have found.
NYSE Advance Decline
Our most reliable indicator of all simply got too far ahead of itself. As was the case May 2013, a correction is now taking place. Notice how high the index was above the MAs.
Summation INdex Last May and Now
We shows a chart illustrating the decreasing breadth of the market last weekend. Here it is clear again that the summation index is making a lower high while stocks made a higher high. This bears watching in terms of attempting to time the end of the correction.
Bullish Percent NYSE
Here the down sloping line indicates fewer and fewer stocks are participating. Will we retreat to the February low?
Early Warning Indicator Stocks
Apple, Starbucks, Facebook, and now GM are all broadcasting some eventual trouble ahead, it would be helpful if they came with dates.
Bonds
My guess that bonds had completed their re tracement was premature, here money scurries back to bonds on the stock sell off.
US Dollar
THe buck is still falling, the focus is clearly on whether the October low will hold.
Natural Gas
Natural Gas is coming off its high. But it looks to be forming a higher low. There is considerable urging for the Administration to offer gas exports to Eastern and Western Europe. I doubt that will happen.
Shanghai and Copper
Shanghai continues its fall, and copper falls along with it, that is the whole story.
Central Fund
CEF is a pure play on gold and silver prices. It is still amazingly trading at a 4.2% discount to its NAV.
Gold
Gold breaks out from the double bottom. It moves through last resistance.
GDX is still trading at 2008 prices while the stock market is at new highs. You tell me which is the better deal.
GDX
MY guess is that GDX is in a third wave headed to 31 for its next resistance level.
Monthly PAR SAR Buy Signal on Deck
Monthly charts are slow movers. Their signals can range over a period of years. That is the good thing about them. Stay with the major trend and you should make money. Her. GDX moved to the 2008 lows and it still in that neighborhood.
GDX moves up to 35 before generating a buy signal in 2009. It looks to be on the verge of issuing a buy signal with a monthly close over 30. That is why this is potentially winning trade, One is getting in at what should be the start of a big move.
The Bottom Line
A correction of some significance is now underway in world wide stock markets. A move back to the February lows for the US is certainly possible.
Money moved back to safe havens of bonds, REITs,and Utilities.
Energy moved lower on refinery work and Iraq exports and a generally top of the market condition.
Money moves back to gold after last year's drubbing.
Social Mood
Our thesis has been a return to the mood of 1973-74. POlitically that has been spot on. The stock markets however have held up given the FED's $65 B a month suport, and late arriving individual investors.
Maureen Dowd notes relations between Congressional Dems and the Administration are at new lows. THat is precisely what happened to Nixon in 1973-74. Once he lost the Republicans he had no where to go when the Impeachment Threat rolled out. Well not quite, he went back to California.
The WSJ Weekend Report noted that Dems are running on a We will Fix Obamacare idea but Sebellius nd Obama are doing nothing of the sort. Again this is precisely the same intransigence that befell Nixon. I am not hammering on Obama from a political standpoint just pointing out the similarity of then and now. Eventually this turned social mood negative as the US lost is long war in Viet Nam. Now the US loses Afghanistan and Iraq. Our friends at Socionomics point out that one Dictator used poison gas and won, staying in office. Russia returns to its Cold War Self. While the media says the outcome of the vote in Crimea might roll markets, interviews on the ground there say it is a forgone conclusion. After plotting his non violent incursion does anyone think Putin will lose the election? Meanwhile
China jousts with Japan
Iraq moves on its nuclear ambitions
Europe waffles while Putin advances, after looking to the US for a military umbrella for decades now Europe is alone in the Russian Rain
the Middle East continues to melt down
Another front in the The New Civil War is Energy. The Former National Security Advisor and Marine General James Jones calls for approving the Keystone XL Pipeline. This is qute the issue for Mary Landrieu in energy dependent Louisiana. AFL CIO suports Keystone. Unions have poured millions into the Obama campaigns. But Dem contributor billionaire opposes it.
I hope you are seeing what I am trying to demonstrate. Obama cannot please everyone and does not face re election. Will his personal opposition to fossil fuels win over the economic and strategic benefit, at least in appearance, of approving the pipeline?
These are the classic elements of a New Civil War. Various sections of the country and the political spectrum now find themselves at odds with one another.
And on another Civil War Front, Senator Feinstein accuses the CIA of spying on the Senate and Congress. Obama attempts to stay neutral. Good luck on that one!
THis would be an easy call, IF the Republicans were coherent and organized. They are not. So we have the perfect storm of a New Civil War. Internal stife in both parties leads to close outcomes like the Florida election this past week. Note a Libertarian candidate took over 4% of the vote making hte outcome much closer than it would have been.
The stock market is supported by the FED and late arriving investors. I linked to Warren Buffet's comment that he would be surprised to see the stock market fall 50%. I wondered what he was thinking in the Fall of 2007 but apparently no one asked. WE don't need a 2007 2008 Financial Crisis for markets to fall. We just need a continued lack of confidence, in everyone and everything. Welcome to 1973-74.
Thanks for reading The Market Perspective
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