Weekend Dec 3, 2016
Steve Mnuchin's Coup at Indy Bank
This is a profile of our next Treasury Secretary. Could you or I have obtained a deal like this? Crony capitalism for the ruling elites on display. See my accompanying post on the revolving door that is Washington DC. This is nothing new as Alexander Haig went form Chief of Staff of the Army to NATO Commander to UTX CEO to Secretary of State, yes the dots are all connected.
Tom McClellan suggests bonds are over sold short term.
Buy Low Sell High
Two sectors are now a good deal lower than prices a few weeks back.Those two are gold and silver and various fixed income markets. Let's take a look.
Closed End Municipal Bonds
https://www.blackrock.com/investing/products/product-list-fund#!type=cef&tab=overview&view=list&fst=44336
That link takes one to the Blackrock Closed end municipal page. As you can see the funds are selling at discounts, tow are selling near an 8% discount to net asset value. Here is one of them.
Looks like this fund may go to 9.75-10 before finding an intermediate bottom. Understand that we are now in a period of rising not falling rates, and that follows 34 years of falling rates.
But there should be opportunities to buy expecting a rebound. This weekly chart is not there yet.
Utilities
XLU
The sell off in the ETFs I looked at is lower than the percentage drop in the Dow Utility Index. And at a 3.3% yield this is not interesting.
REITs
Cohen and Steers
The yield here is 3.3% but again it is over sold.
AMLP bounced to the upside on the increase in oil price. EEP is still struggling, will the 9% dividend last?
Gold and Silver Shares
XAU
Perhaps the best opportunity is easing into the gold and silver mining shares over December. This weekly chart looks to be completing a Wave Two Down after the big Wave One beginning in January 2016. If so a larger third wave will unfold into 2017.
Iron Ore CLF
Cliff Resources is just re starting a bull market after a huge water fall decline the last few years.
The Stock Market
NDX The NASD 100
The high tech index is the one index that has not gone to a new high. In fact it fell this week. This is the one to watch.
Bottom Line
A low in commodity prices was seen early in 2016. Many of those markets have advanced and are now in pullbacks like gold and silver.
Oil is likely topping for now on promises of OPEC and non OPEC cuts. Natural gas may well move from the current 3.50 to 4.50 in the next few weeks.
Interest rates are rising. We have seen the end of the 34 year bull market in bond prices. This is already confirmed in falling REIT, Utility, and Junk Bond Prices.
Here are a couple of Blackrock's High Yield Funds already trading at a 10% discount to Net Asset Value
The Dollar has not topped out yet, look for lows in gold and silver when it does.
Social Mood
The WSJ review's Tony Bennet's new book reflecting on people and events that shaped who he is. We also learn that Tony is an impressionist artist.
Click for a look at his images. Who knew? Tony Bennett Official Site
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Well for sure Trump is not one of the Bush Family. He clearly revels in as he puts it, The Art of the Deal. He cannot micro manage the entire business community as he did with the Carrier Deal. But I doubt he will accommodate the Chinese who want to dictate who he can and cannot speak with by phone. This is the first salvo over the Spratley Islands controversy from the incoming President.
We were writing about protests in http://professorelam.typepad.com/markets/2009/05/the-new-civil-war.html
Then it was the teacher unions versus the TEA Party. We noted this would not end well. It ended badly for the Democrat Party which lost both Houses, the White House, governorships, and over 900 state assembly positions. There is no change in the Democrat strategy. Yet some ten incumbent Democrat Senators face re election in states Trump carried in 2018. It will be an interesting 2017 in terms of how social mood determines social action.
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