US COMMERCIAL REAL ESTATE

The 'green shoots' brigade is totally ignoring the turmoil in the US Commercial Real Estate Market.

More job losses means more vacant spaces at office properties and shopping malls.

Notice how the chart is ''mean reverting'', returning towards values last seen in 2004 when the Real Estate values started to climb!

PRECIOUS METALS MANIPULATION ???

I write many articles on gold and other precious metals, but I don't usually write a whole lot on ''ongoing manipulation & conspiracy theories' in the precious metals markets.

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I recently came across the 'Bank Participation report' published by the CFTC, June 2, 2009,
Bank Participation Report, while reading an article by Theodore Butler.

( Making the Case by Theodore Butler )

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The reason I looked at the report, was that it contains data published by the CFTC.

Focus on the 'LARGE' short positions by a few US Banks in precious metals like Gold, Silver and Palladium. Below is the data from the above mentioned link.

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As Mr Butler discusses in his article,

"Delivering against short contracts is not always a simple case of having enough money. In real commodities, it often comes down to owning the real material, not a cash equivalent."

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While I'm not a big believer in conspiracy theories, those short positions in precious metals are rather surprising, given the turmoil in the global economy today.

Also, how exactly will these banks cover these short positions if precious metal prices rise?

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And that brings us right back to the conspiracy theorists

- as they say

''' the bullion banks are preventing gold and other precious metals from rising at every chance they get!''''

BONUSES : BACK TO '''''NORMAL'''''

Well that didn't take long. Having repaid the TARP, Goldman Sachs is back on the bonus bandwagon.
Goldman Sachs on pace for record bonuses :
Goldman Sachs to pay biggest bonuses in 140-year history; Lloyd ...
goldman sachs new bonuses - Google News
Jesse's Cafe Americain Goldman Sachs Obtains Record Profits, to Pay Largest Bonuses Ever
The guys at RBS are at it as well
Outrage as RBS boss Stephen Hester gets £9.6m pay deal
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For some reason, no one seems ready to acknowledge that
'this mess' is not cleaned up yet!
Equity markets worldwide have been correcting for the first time since their one-way rally beginning March 2009.
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Looks like these banks are going to have another round of writedowns/bailouts/handouts soon; and just trying to get another round of bonuses through the gates, before the economy deteriorates any further!
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I once again advise readers to follow the advice of 'experts' who have called this crisis correctly so far. (you can take a look to my blogroll for that! ).

Ignore the ill - timed advice of experts with terrible track records. Their expert advice could do you more harm than good.

U.S. BLS UNEMPLOYMENT CHARTS

NIKKEI 225 - A NASTY BEAR MARKET !

I came across this Nikkei 225 chart recently. ( The chart is a month old - ending 15th May 2009)

Since its 1989 highs at just under 40,000, the index is now trading at 1984 -85 levels.

A long term chart can really put things in perspective.

The 1970s, right until the 1989 top were a time of mega multi-bagger equity returns.

This was then followed by 20 years of pain.

Imagine the plight of a Japanese investor who put in money in the Nikkei 225 in 1989 when he was 25 years old!!!!
20 years later, the investor is now in his mid forties and the market is nowhere near the highs and the economy is still stuck in the aftershock of a serious bubble-bust!!

The real estate market is also nowhere near the 1989 highs, so if he invested in a home then, he definitely lost money on that deal as well.

Long term investing is a dangerous idea when you buy in at peak valuations.
As the Japanese example shows, the market can stay irrational longer than you can stay solvent, although in this case, the post 1989 crash was a the most rational event that could have occured.

The above chart also goes to show that monetary policy and government intervention CANNOT solve the problems caused by excessive leverage and speculation.

When you come to today's problems of excessive leverage, speculation, and mind boggling quantitative easing by the USA - 'the central bank currency reserve country', the results are not going to be any different!

GOLD : VOLATILE TIMES

Once again I refer you to the analysis of
Przemyslaw Radomski (of Sunshine Profits).
I continue to recommend his site for excellent analysis on precious metals. You can catch his essays on Kitco.com.
Source: Several Factors Suggest That The Bottom in Gold and Silver Is Near

In my last post on Gold, I said that the May- August period is historically a time when gold consolidates.

Equity markets are getting restless; maybe they have run up too far too fast. An equity market sell off could result in a sell off in precious metals.

Long term holders should hang in there, and I think that Mr Radomski's 'buy on dips' approach makes sense.

INDIAN ECONOMY : GETTING BACK ON TRACK

The Indian economy has survived the global turmoil, and is now looking to consolidate its position as one of the few countries with a positive GDP growth rate that is driven by domestic consumption.

The Equity markets went into overdrive after a 'positive' election result, and the FIIs who were panic selling in March 2009, are now re emerging from the rubble with buy recommendations of various stocks!


While I'm not doubting India's positive long term prospects, there is clearly a lot of work to be done. As Jim Rogers recently said Indian politicians are big on promises, but execution quite often disappoints.

This brings me to a newspaper clipping from the Times of India, Mumbai, June 4, 2009. I have no idea of the accuracy of the survey undertaken, but I will say that irrespective of the political party in government, bureaucracy and red tape have always been major stumbling blocks!






India has tremendous potential - a hard working population, strong and growing household savings, and increasing levels of literacy albeit at a slow pace.
Unfortunately, if we do not clean up our act soon enough, we will continue to suffer from 'non inclusive growth', unfulfilled potential and a growing rural - urban divide.

COMING TO THE INDIAN GDP
























Well the numbers look impressive (lets not forget we are battling a global slowdown!)

Here's a closer look -
Sectors like manufacturing and construction are slowing down.
Funding issues have started to stress expansion projects across sectors as companies have turned to conserving cash and paying down debt.

The figures of the recent quarters have been positively impacted by government stimulus packages ( reflected by rising government expenditure) as well as a sixth pay commission pay hike for government employees.

As the government looks to control its deficit in the upcoming budget, some subsidies and recent stimulus incentives may have to be rolled back, given that tax collections are expected to decline.

It's a wait and watch game for now, and the second half of 2009 looks as challenging as ever!

EMPLOYMENT STATISTICS

Here are a few charts from a recent U.S. Bureau of Labor Statistics May2009 press release.
http://www.bls.gov/web/ceshighlights.pdf

Don't just focus on the headline numbers, unemployment is on the rise, and there is more pain ahead.
The manufacturing sector is struggling and the recent bankruptcy filings in the auto sector are going to add to job losses.

Unlike the recession after the dot com crash, the US Consumer is quite stressed out.

US home prices are still dropping, debt levels are at record highs and its the worst job market in years.

AUDITING THE FED !!!

As Maria Bartiromo says on the CNBC show 'Closing Bell' -

'Do you know where your money is? '
Well the FED knows, but is the truth going to be just too painful to hear?

You want the truth - > Maybe you can't handle the truth!

Could it cause a market panic, when the public is faced with the harsh reality that the FED's investments may not be as sound as initially expected?

""" After months of activism and lobbying by Congressman Ron Paul’s supporters, House Resolution 1207, the Federal Reserve Transparency Act, will move out of committee to be debated by the full House of Representatives. """
Source :House to debate Ron Pauls HR 1207

Ron Paul is one of the few people in government who actually realises that the monetary policy currently underway is just unsustainable.

Taking on more debt to solve a problem caused by too much debt in the first place, is just not the best way forward.

The Budget Deficit is totally out of line, and US Treasury Bond yields are rising.

Some of the FED's ' investments ' are already losing money.
Case in point : Fed report shows losses on Bear Stearns, AIG holdings | Reuters

Are there more losses on the Fed's Balance Sheet?

Wait and watch, but I seriously doubt any audit will occur.
Why?
Because the market won't be able to handle the truth!

I'M BACK AGAIN.

Well I'm back after a really long break from the Bullish Bear!!
Been busy with work and also catching up on some reading!! Worked on some good stuff for upcoming posts.


Not a whole lot has changed. Emerging markets have rallied on, and the US Dollar weakened considerably, only to stage a comeback of sorts since late last week.

Currencies have been volatile, trending back and forth to the good and then continuing bad news in global markets.

Rising Treasury Bond yields in the US created quite a stir, as more paper from the US Government is set to hit the market!

So what does the FED do now?
Raise short term rates and trample the 'green shoots' in a bid to support the USD?
OR
Let the USD slide continue and face an ever rising cost of borrowing in the US T Bond Market?


GOLD sold off heavily last Friday.
The elusive $1000 mark is insight, but just out of reach. The USD was quite oversold recently, and staged a comeback just as Gold was about to take on the $1000 level.
Keep in mind, that this isn't the strongest time of the year for gold, so expect some consolidation before the next move.
Commodities also sold off after their recent run up, and precious metals weren't spared either.
I expect gold to trend upwards once we are done with this 'summer consolidation'.















August onwards, we should see the 'sugar high' effects of various government stimulus packages start to wear off, even as governments will have to continue to deficit finance their way out of this mess.
If the USD continues to stay weak at that stage, we could be in for a precious metals rally in the last quarter of 2009.

While it is perhaps too early to call for inflation, it will be interesting to see how governments react to it when it finally comes to the party (yes, money printing isn't the final solution!).
The last time we faced inflationary pressures in 2007-2008, the unemployment situation was far far better than it is today.

It's not over yet.
A 'V' shaped rally in the stock market does not mean that we are out of the woods yet!

Lets not forget that markets are still well below their bull market highs and there are many who were heavily invested in equity markets at the peak.
Some of these guys are still in really bad shape; yes even after this market rebound!

Contrary to popular belief, they were too broke and too scared to buy anything near the market bottom, and are now either selling into the market rally, or beginning to chase the market in a last ditch effort to outperform their peers.

Many Private Equity funds and Hedge Funds, are still stuck in illiquid investments that they are now selling at discounted prices.

Green shoots aside, the 'Transport ' sector is still down in the dumps.

Keep an eye on Trucking Freight rates, Rail Cargo rates, Air (Cargo and Passenger) rates and Sea Freight rates.
Aside from a recent bounce, these rates too, are far below their peak rates.
Weak consumer demand is evident, and as the consumer looks to pay off debt and save for the future instead of spending in the present, consumption figures will continue to be anaemic.

For now, its important to stay focussed on the big picture.
Look to do a portfolio clean up if you need to, and remember to maintain adequate liquidity in your investment portfolio.

The waters are still choppy and 'testing times' are set to continue.
Lastly, ignore the advice of experts who are now turning bullish, and advising you to take more risks at a time when you probably need to cut back on your ' risky ' investments!