Thursday, July 23, 2009
Wednesday, July 22, 2009
Tuesday, July 21, 2009
Here is the original link. Mr Boris Sobolev does a good fundamental analysis here.
Jul 20, 2009 What Will it Take for Gold to Overcome $1000? Boris ...
Here is the chart from Boris Sobolev's article that I have worked on (the bold trendlines are mine). Sometimes it really helps to analyse a long term chart.
Gold has clearly had a phenomenal run!
While some analysts have called for a bullish inverse head and shoulders formation (2008-today), others have called for a cup and handle formation.
My own view it that the medium term movement in gold prices is most likely going to resemble the consolidation that gold saw in the July 2006- July 2007 period. (take another look at the chart)
This could mean that we could make a clean break above the $1000 mark sometime by mid 2010, if not earlier.
That 'mega' breakout, would resemble the breakout that gold saw after the July 2006- July 2007 consolidation. After that, $1000 will become a new floor rather than a ceiling, just like the $700 level became the new floor after the Sept 2007 breakout!
On the downside, gold would see considerable support in the $800-850 range. As I have said many times before, June until September is a period of seasonal weakness in gold
I continue to be a bullion permabull!! Patience is the keyword!!
Equity markets meanwhile continue to rally, totally ignoring deteriorating employment data.
Corporate profits ex banks, have benefited from cost cutting and layoffs rather than any genuine consumption demand. I say 'ex banks', because anyone who takes the reported profits of large cap US financials at face value, better ask for a detailed statement of securities that are marked to market.
As and when equity markets lose momentum and realisation of the ground reality on 'Main Street' sets in some time in early 2010, we could be in for another down leg in equity markets.
Monday, July 20, 2009
1927-1933 Chart of Pompous Prognosticators
I came across this recently. It was written Colin J. Seymour in June 2001.
I haven't read anything else by this guy( will check up on his articles later), but this article is a must read for anyone who follows/ listens to modern day financial media and 'optimistic' politicians and bankers.
In stressful times, people are always searching for answers and hoping against hope that things get back to 'normal' as soon as possible.
While I prefer to be an optimist, its disappointing to see many being so unrealistic about the current state of the global economy.
Now more than ever, is the time to totally ignore that 'financial noise'.
Educate yourself on the 'real' state of the global economy.
Be a realistic optimist!
Saturday, July 18, 2009
Optimists may be hoping for a jobless recovery, but its hard to see any genuine recovery occur anytime soon, given the downward pressure on wages and the continuing job losses.
Just imagine explaining Goldman Sachs' record bonuses to the people in Michigan!!!
Here was my post on April 18, 2009
Below are the June 2009 figures:
The chart below shows a crossover of the 50day MA below the 200day MA.
That is clearly a BEARISH SIGNAL!
Could we retest recent lows on the USDX if the rally in US equities continues?
On the other hand, it will be interesting to see how the USD would react to sell off in equities; if such an event were to occur in the last quarter of this year.
The USD manages to retain it position as the currency of Central Banks for lack of a better alternative. The US government continues to pile on more debt and the FED keeps interest rates artificially depressed for now.
Fundamentally, the current monetary policy is clearly not sustainable, and its only a matter of time before the system starts to fall apart.
Imagine interest payments on US Govenment debt when interest rates start to rise! The market could start dictating interest rates to the FED sooner than you might expect!
Sadly, the guys at the helm, will listen to no one, and continue to borrow their way out of indebtedness!
Lastly, Guy Lerner quotes the views of David Rosenberg (Chief economist and strategist for Gluskin Sheff and Associates) on the USD, and his general market outlook.
David Rosenberg is one 'expert' whose commentary I would pay close attention to!
Friday, July 17, 2009
""""""A failure to address excess capacity in the global economy may cause a “deflationary spiral” that would prolong the financial crisis and result in more company bailouts, World Bank Chief Economist Justin Lin said.
“Once excess capacity appears, the economy gets trapped in a vicious cycle,” he said during a lecture at South Africa’s University of Pretoria.
Investments made by companies between 2002 and 2007 have now turned into surplus capacity following the worst financial crisis since the Great Depression. If excess capacity isn’t eliminated, more jobs may be lost and corporate bankruptcies surge as spending and investments slide, compounding the crisis, Lin said.
Factories in the U.S. operated at 69.1 percent of capacity in March this year, the lowest since the figures were first collected in 1967, Lin said. In Germany, capacity utilization measured 72 percent, 65 percent in Japan and as low as 50 percent in some developing nations, he added. """""Battling EXCESS CAPACITY :
Embattled industries include - The Airline Industry, the Automobile Industry, Computer Hardware Industry, Consumer durable goods and the Retail Industry.
The end consumer is cutting back on 'discretionary spending' and postponing purchases and looking to pay down debt. The consumer is also looking for bargains and is quite often spoilt for choice, before he eventually makes his purchase.
As a result, these industries are faced with slow sales and an inventory pile-up, and are being forced to lay off workers as they try to fix their bottomlines.
This is clearly a 'vicious cycle' that was supported by an era of 'easy money', that enabled weak and marginal firms to survive alongside efficient ones.
Unfortunately, I do not think that we will see any recovery until this excess capacity is 'flushed out' of the system. Many firms will have to shut down and we will definitely see more job losses.
Despite record debt levels, World Governments are instead bailing out and supporting failing and inefficient firms that took more risks than they could handle.
By restricting market forces, these bailouts will probably drag down the profitability of their efficient and profitable competitors.
Case in point : The Bailout of GM & Chrysler, could destroy the chances of Ford ever making it out of this crisis. (Yes I know Ford isn't profitable, but the GM Bailout is definitely hurting its chances)
This will result in the eventual recovery getting even more delayed.
I’m not just talking of ‘once in a generation shocks’ in the financial markets, but also of the uncertainties and turmoil on ‘Main Street’.
As jobs are being lost and earnings are declining, people worldwide are struggling to keep up with servicing their loans. It’s never easy to cut back on one’s spending and adjust your standard of living downwards; a task that’s made all the more difficult after the ‘speculative boom’ of recent years. It’s bound to be a tough re-adjustment!
While there’s disbelief and pain on Main Street, the guys at Goldman Sachs are back in business; earning massive profits this quarter from ‘trading activities’
There’s one thing I’m certain about; it’s that you can’t get your trading calls right 100% of the time. I just hope the guys at Goldman Sachs are not taking ‘wild risks’ to earn these profits. We all know where that got us last time. Trading in commodities is always tricky, yes even for the guys at GS.
I wonder if the Fed and the US Treasury will bring back the ‘tough mark to market rules’, now that the banks are turning profitable again.
Does GS still need to be a regular bank or will it now conveniently choose to become an i-bank again?
Coming to some India specific news -
India’s credit rating ‘could’ be lowered by S&P, because the budget deficit is now nearing 6.8% of GDP. Reckless spending?
Government spending has also been stressed out by subsidies for the Oil and Fertilizer sector.
The recent stimulus packages – that included excise duty cuts and export promotion handouts, have reduced government revenues. This comes at a time when individual and corporate income taxes aren’t in the best of shape either.
While I think that S&P are over reacting ( I mean there are many countries in far worse fiscal shape), the government here really has no choice.
Given the inadequate social security system and large number of people living below the poverty line, the government must do everything it can to prevent layoffs in the manufacturing sector.
It helps that Indian economy is not an export oriented one, and can depend on domestic consumption demand that has held up fairly well so far.
US Government spending:
Meanwhile the US government continues on its spending spree, bailing out insurance companies and car companies. Is CIT next? Let’s not forget the ‘other’ liabilities of the US government – Healthcare and Pension Liabilities!
Wait!!! No signs of an S&P downgrade here??
The US could also be planning another round of stimulus packages, something that may occur sooner than expected if other states follow California and issue ‘I.O.U.s’
Investing in this volatile and listless market:
Many investors are now puzzled as to what exactly their next move should be.
Step in and buy something or is it too late?
Before following anyone’s recommendations, I would advise readers to first analyze their own risk profiles and ability to withstand market volatility.
Don’t forget that this is a market that moves sharply on analyst buy/sell calls rather than fundamentals, and intraday fluctuations can torment expert traders.
It’s important to realign stock portfolios, and to use this rebound to weed out stocks with weak fundamentals.
Also don’t forget to book profits in stocks that may have seen spectacular rallies.
Lastly, hold on to your precious metals positions, and don’t be panicked by the ‘summer volatility’
Tuesday, July 14, 2009
Friday, July 10, 2009
A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
Source: Relative Strength Index (RSI)
Here is a study by trader Dan Norcini at jsmineset.
The ongoing consolidation in Gold is testing the patience of long term gold bulls. At this stage its important to remember that the months of June- September are stressful for bullion bulls.
Silver too has been weak, and is currently trading just under $ 13.
Its time to be patient, and just hang on in there!!
Source: Trader Dan Comments On Today’s Gold Market