Archive for June, 2014
Seven Ways to Tell If Your Gold Is Real
But some gold bullion dealers, for their own assurance, will decide to cut your bar if you've agreed to sell it to them. Another downside with fire assays is that you're really only testing the small portion you've sent to the testers. So if there is a …
“At some point things are going to turn, and they’re not going to turn when everybody’s expecting it.” – Jeff Clark
Welcome back to the Stansberry Radio Interview Series.
Every Saturday, the Stansberry Radio Network brings you the most valuable ideas from the most intriguing guests from all of our shows.
This week we’re sharing highlights from Frank Curzio’s interview with superstar trader Jeff Clark. Jeff writes several trading newsletters at S&A, including the S&A Short Report and S&A Pro Trader. Frank says, “I say this a lot… and I truly mean it ’cause I see Jeff all the time and talk to him all the time… Jeff’s one of the best traders I know.”
Below, Jeff talks shorting stocks and investing in China. Jeff is bearish on U.S. stocks, but he says you can’t avoid the momentum in the market right now… “Don’t be stupid and bet against the markets,” he warns, “because it’s probably going higher.”
To learn how a top trader approaches the markets, read on…
Stansberry Radio Network
Originally aired on the Stansberry Radio Network, June 18, 2014
Frank Curzio: We’re talking to Jeff Clark, editor of S&A Pro Trader and S&A Short Report, superstar trader and good-looking guy. Jeff, anything else you want me to add here?
Jeff Clark: Gosh, I’m not even gonna touch that.
Curzio: [Laughter] So happy that you’ve joined us again on the podcast here. I’ve been reading a lot of your stuff lately, like I always do, and I really can say you’re one of the best traders out there. What I’m seeing is stocks near all-time highs, things you mention all the time. It seems like we’re going to stay near these highs as long as the Fed maintains its easy policy. Is it safe to say that the markets are going to continue to do well as long as we have low interest rates?
Clark: Well, I mean, you can’t fight it. The fact of the matter is the bullish momentum has just been too strong. Anybody who’s tried to get aggressive on the short side just gets run over. Now, as you know, I’m bearish as all heck. I think this is such an incredible setup for the short side. But I haven’t really taken many short sides yet other than the occasional intraday trade where, if the market’s up big and looks like I might see an intraday reversal, I’ll take a short trade, scalp it, and try to exit by the end of the day for a quick profit. But I don’t hold too many short positions overnight only because we haven’t gotten any downside momentum. It’s just—it’s amazing. We’ve gone two years without any significant sort of correction. And it’s been, I think, almost three years since we’ve even tested the 50-day moving average line on the S&P. I don’t ever recall seeing a stretch that long.
At some point things are going to turn, but they’re not going to turn when everybody’s expecting it. One of the interesting things is that last week we had a brief pullback in the market. I think we lost 20 S&P points, and everybody was shouting about how this might be it; this is the big correction. And of course when everybody’s looking at things that way it tends not to play out.
So I still think there’s a lot of downside risk in the market. There’s probably a lot more risk than people expect there to be because everybody is looking at the Fed as the ultimate backstop for stock prices. But we’re really not ready to take that move lower yet. Perhaps it’ll happen sometime in the fall where these sorts of corrections typically do unfold. But right now, as long as we continue to make higher highs and higher lows on the indexes, the momentum stays with the bulls.
Curzio: Jeff, so given that scenario, how difficult is it to short stocks?
Clark: Whenever there’s a large percentage of a stock’s float that is sold short — and I think over 30 percent tends to hit my radar — that’s tells you that the professionals are in there shorting. Now professionals get squeezed oftentimes, too, so just because they’re shorting a position doesn’t mean they’re going to be right. But generally speaking, I’ll do a little extra homework on a stock where I see such a large short position to figure out if I can find out why it’s so short.
Let me give you an example. In the case of Tesla it’s easy; they’ve got a convertible bond out there, so what happens is folks buy the convertible bond and they short the stock. You have this arbitrage, so it’s not a genuine short trade. It’s not folks betting on the stock actually falling, they’re profiting off the arbitrage.
But in other cases, especially in a lot of the smaller cap names, when you see a large short position — 30 or 40 or even 50 percent – that means the professionals are in there shorting. They probably have seen something about the stock that makes them question the fundamentals, and it justifies doing a little bit of extra homework with that. Again, you can get squeezed, but more often than not when you have a super-large short position, that squeeze is temporary. You just have to have deep enough pockets to be willing to ride through.
Now having said all that, I usually don’t go out and short the actual stocks. What I like to do is buy put options on them. By buying a put option, I’m limiting my risk. Rather than shorting Tesla for $200.00 a share, I might buy a put option on it that costs me $2.00 or $3.00 a share, and so my risk is significantly lower. And right now, with the volatility index so low – I think the VIX is trading between 12 and 13 right now – put options are fairly cheap.
So it just makes more sense, to me anyway as a trader, to look at put options rather than trying to short the actual stock, and sometimes you’re not going to be able to get a short off on a stock. Sometimes your brokerage firm won’t have shares available to borrow, or sometimes you might get called in. In other words, you put a short out there, but your brokerage firm calls you back a couple weeks later and says it’s time to close the short out; we need the shares back. So put options avoid that entire situation.
Curzio: Yeah, that makes a lot of sense. I want to move on to the global markets here. One market you’ve been recently been talking a lot about is China. What’s your status on China?
Clark: Well, I like China, but China’s been in a horrible bear market the past several years. Rather than going perennially higher like the U.S., China’s been going perennially lower. The momentum is still on the side of the bears there, just like the momentum is on the side of the bulls here.
I think what’s eventually going to happen is, once our stock market peaks, we’ll probably see a valid bottom in the Chinese stock market, so it’s on my radar. I’ve taken a few trades here and there on China, and we’ve gotten a couple of good bounces and a couple of good trades off, but I haven’t taken a significantly large position in China just yet. I’m close to doing it, but we still don’t have the positive momentum over there, just like we don’t have the negative momentum over here. It’s very difficult to take an aggressive stance.
Curzio: Yeah, and you’re being modest. I mean, you’ve done very well trading. And one of the tools that they use there is FXI, right? I mean, that’s the big ETF to play. Are you playing any other ways with China or mostly through FXI?
Clark: Well, the Chinese ETF FXI is heavily weighted to the banking sector over there. And so when the Chinese market does turn, FXI is going to lead the way. And yeah, we had a pretty good trade in FXI recently, and that was based on the expectation that the Chinese market is poised to turn.
We wanted to jump into those stocks that tend to lead the way, and so we were pretty fortunate on that trade. But generally speaking, China itself really hasn’t done much. The Shanghai stock exchange has been bouncing back and forth in about a 50-point trading range for the past several months. That’s good, and when you’re looking for a bottom you want to see that sort of consolidation period in there, but we really need to see a breakout to the upside. I think if the Shanghai stock exchange can break above 2,100, then you’ll see the breakout and then it’ll be time to get a little bit more aggressive with China.
Curzio: Jeff, thank you so much for talking with me today. I know you’re busy, but I really appreciate you joining us again. I always get some great information out of you and great ideas, so hopefully you’ll join us again soon.
Clark: My pleasure, Frank. I love being on your show.
Curzio: All right, thanks buddy. Take care.
Clark: ‘Bye, take care.
Crux note: If you enjoyed today’s excerpt, you can listen to the entire interview with Frank and Jeff right here. In it, Jeff talks more about the sectors he’s watching today, as well as what he thinks you should avoid…
From Michael Snyder at The Economic Collapse Blog:
How in the world does the government expect us to trust the economic numbers that they give us anymore? For a long time, many have suspected that they were being manipulated, and as you will see below we now have stone cold proof that this is indeed the case.
But first, let’s talk about the revised GDP number for the first quarter of 2014 that was just released. Initially, they told us that the U.S. economy only shrank by 0.1 percent in Q1. Then that was revised down to a 1.0 percent contraction, and now we are being informed that the economy actually contracted by a whopping 2.9 percent during the first quarter. So what are we actually supposed to believe?
… Over at shadowstats.com, John Williams publishes alternative economic statistics that he believes are much more realistic than the government numbers. According to his figures, the U.S. economy has actually been continually contracting since 2005. That would mean that we have been in a recession for the last nine years.
Could it be possible that he is right and the bureaucrats in Washington D.C. are wrong?
Before you answer that question, read the rest of this article.
It just might change your thinking a bit.
Another number that many have accused of being highly manipulated is the inflation rate.
But we don’t have to sit around and wonder if that figure is being manipulated. The truth is that even those that work inside the Federal Reserve admit that it is being manipulated.
As Robert Wenzel recently pointed out, Mike Bryan, a vice president and senior economist in the Atlanta Fed’s research department, has been very open about the fact that the way inflation is calculated has been changed almost every month at times…
The Economist retells a conversation with Stephen Roach, who in the 1970s worked for the Federal Reserve under Chairman Arthur Burns. Roach remembers that when oil prices surged around 1973, Burns asked Federal Reserve Board economists to strip those prices out of the CPI “to get a less distorted measure. When food prices then rose sharply, they stripped those out too—followed by used cars, children’s toys, jewellery, housing and so on, until around half of the CPI basket was excluded because it was supposedly ‘distorted’” by forces outside the control of the central bank. The story goes on to say that, at least in part because of these actions, the Fed failed to spot the breadth of the inflationary threat of the 1970s.
I have a similar story. I remember a morning in 1991 at a meeting of the Federal Reserve Bank of Cleveland’s board of directors. I was welcomed to the lectern with, “Now it’s time to see what Mike is going to throw out of the CPI this month.” It was an uncomfortable moment for me that had a lasting influence. It was my motivation for constructing the Cleveland Fed’s median CPI.
I am a reasonably skilled reader of a monthly CPI release. And since I approached each monthly report with a pretty clear idea of what the actual rate of inflation was, it was always pretty easy for me to look across the items in the CPI market basket and identify any offending — or “distorted” — price change. Stripping these items from the price statistic revealed the truth — and confirmed that I was right all along about the actual rate of inflation.
Right now, the Federal Reserve tells us that the inflation rate is sitting at about 2 percent.
But according to John Williams, if the inflation rate was calculated the same way that it was in 1990 it would be nearly 6 percent.
And if the inflation rate was calculated the same way that it was in 1980, it would be nearly 10 percent.
So which number are we supposed to believe?
The one that makes us feel the best? Without a doubt, “2 percent inflation” sounds a whole lot better than “10 percent inflation” does.
But anyone that does any grocery shopping knows that we are definitely not in a low-inflation environment. For much more on this, please see my previous article entitled “Inflation? Only If You Look At Food, Water, Gas, Electricity And Everything Else.”
Of course the unemployment rate is being manipulated as well. Just consider the following excerpt from a recent New York Post article…
In case you are just joining this ongoing drama, the Labor Department pays Census to conduct the monthly Household Survey that produces the national unemployment rate, which despite numerous failings is — inexplicably — still very important to the Federal Reserve and others.
One of the problems with the report is that Census field representatives — the folks who knock on doors to conduct the surveys — and their supervisors have, according to my sources, been short-cutting the interview process.
Rather than collect fresh data each month as they are supposed to do, Census workers have been filling in the blanks with past months’ data. This helps them meet the strict quota of successful interviews set by Labor.
That’s just one of the ways the surveys are falsified.
The Federal Reserve would have us believe that the unemployment rate in the U.S. has fallen from a peak of 10.0 percent during the recession all the way down to 6.3 percent now.
But according to shadowstats.com, the broadest measure of unemployment is well over 20 percent and has kept rising since the end of the last recession.
And according to the Federal Reserve’s own numbers, the percentage of working age Americans with a job has barely increased over the past four years…
The chart above looks like a long-term employment decline to me.
But that is not the story that the government bureaucrats are selling to us.
So where does the truth lie?
What numbers are we actually supposed to believe?
Please feel free to share your thoughts by posting a comment below…
From Mac Slavo at SHTFplan.com:
Have you ever wondered what government employees actually do?
Well, in addition to giving Americans grief over just about anything you can imagine, according to Government Executive, they are apparently so bored that some have resorted to pooping in the hallways of government buildings, purposely clogging toilets, and surfing porn on the taxpayer dime.
Contractors built secret man caves in an EPA warehouse, an employee pretended to work for the CIA to get unlimited vacations and one worker even spent most of his time on the clock looking at pornography.
It appears, however, that a regional office has reached a new low: Management for Region 8 in Denver, Colo., wrote an email earlier this year to all staff in the area pleading with them to stop inappropriate bathroom behavior, including defecating in the hallway.
In the email, obtained by Government Executive, Deputy Regional Administrator Howard Cantor mentioned “several incidents” in the building, including clogging the toilets with paper towels and “an individual placing feces in the hallway” outside the restroom.
Confounded by what to make of this occurrence, EPA management “consulted” with workplace violence “national expert” John Nicoletti, who said that hallway feces is in fact a health and safety risk. He added the behavior was “very dangerous” and the individuals responsible would “probably escalate” their actions.
This is where your tax dollars are going.
If you were in the private sector, as Karl Denninger notes, you’d be fired immediately and prosecuted to the full extent of the law when applicable.
An EPA spokesperson says that the agency is investigating. “Management is taking this situation very seriously and will take whatever actions are necessary to identify and prosecute these individuals,” said Deputy Regional Administrator Howard Cantor.
Here’s an idea, considering we live in a surveillance state and billions are being spent on monitoring Americans…
Why not take some of those cameras that we have at just about every street light in America and utilize them to instead monitor the activities of government employees. Put them in any venue that requires taxpayer money to function, including police stations, regulatory agencies like the EPA, Congressional offices and meeting rooms, and the White House.
And because we certainly don’t need the government spending more money on yet another monitoring agency, make those live feeds accessible to the public.
The American people would be happy to crowd-source the counter-surveillance. Moreover, we’ll happily capture, record, and upload videos of interest to outlets across the internet.
The only way to stop government corruption and indecent behavior is to hold the employees of the taxpayer accountable. Since the government itself is obviously incapable of doing this, why not let the public take over?
With this strategy we can achieve full transparency, as promised by the Obama Administration. It’s the only way to hold to account those who would defecate on Americans and the U.S. Constitution.
Please spread the word and share this post.
From Mike Shedlock of Global Economic Trend Analysis:
California Bill AB-129 Lawful Money passed the California Senate on June 19, and the Assembly on June 23. The bill now awaits signing by Governor Jerry Brown.
Existing law prohibits a corporation, flexible purpose corporation, association, or individual from issuing or putting in circulation, as money, anything but the lawful money of the United States. AB-129 would repeal that provision.
Coindesk reports California’s Bill to Make Bitcoin ‘Lawful Money’ Heads to Governor.
AB-129, authored by Assembly Member Roger Dickinson, would recognize digital currencies – along with a host of other commonly-issued forms of value including points and coupons – as lawful alternatives to the US dollar. The state-backed currency would still have legal superiority, as Californian residents are not required to accept forms of lawful money.
Dickinson recently commented that the law is primarily designed to allow California consumers the ability to continue using a variety of common payment methods, and to remove penalties currently on the books for their usage.
Comments from Bill Author
Let’s tune in to what Roger Dickinson has to say in his Bitcoin Press Release.
Assembly member Roger Dickinson’s (D-Sacramento) bill AB 129 addressing alternative currencies passed the Assembly. Modern methods of payment have expanded beyond cash or credit card. AB 129 repeals an outdated restriction on the use of “anything but the lawful money of the United States.” The literal meaning of the restriction indicates that anyone using alternative currency is in violation of the law. However, people commonly use digital currency, community currency, and reward points without penalty.
“In an era of evolving payment methods, from Amazon Coins to Starbucks Stars, it is impractical to ignore the growing use of cash alternatives,” Dickinson said. “This bill is intended to fine-tune current law to address Californians’ payment habits in the mobile and digital fields.”
Bitcoin, a growing digital currency, has gained recent media attention as businesses have expanded to accept Bitcoins for payment. Long before the introduction of digital currencies, various businesses created point models that allow consumers to use points to pay for goods or services. Many communities have created “community currencies” that are created by members of a community and the merchants who agree to accept the alternative currency. These “community currencies” are created for a variety of reasons, some of which include encouraging consumers to shop at small businesses within the community or increasing neighborhood cohesiveness.
Commodity vs. Currency
Three cheers to Dickinson. At the federal level, we need a more commonsense ruling that bitcoin is a currency, not an ordinary commodity like copper.
By the way, money is a commodity as well as a currency.
In Man, Economy, and State, Murray Rothbard explains “Money is a commodity that serves as a general medium of exchange.”
What About Oil?
Some believe oil should be money. The idea is silly. Oil is not easy to store, not easy to transport, not easily divisible, and most of all, oil is used up.
What About Gold?
In contrast to oil, bitcoin has no commodity use other than to facilitate trade. Similarly, gold has very little industrial use. But unlike bitcoin, gold cannot be manufactured out of nothing.
Gold’s overwhelming role is still as a currency even though it is not in general use as money. After all, central banks still cling to it. They don’t cling to copper, oil, or even silver.
Many think gold cannot be money again “because there isn’t enough of it.” Others believe “the production of gold does not expand fast enough for the economy.”
Both statements are easily proven false.
On page 29 of What Has Government Done With Our Money, Rothbard explains:
An increase in the money supply, then, only dilutes the effectiveness of each gold ounce; on the other hand, a fall in the supply of money raises the power of each gold ounce to do its work.
We come to the startling truth that it doesn’t matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness of the gold-unit.
There is no need to tamper with the market in order to alter the money supply that it determines.
I strongly recommend people read the above link from start to end. It is easy read, easy to understand, and does not contain any mathematical equation gibberish.
In case you missed it, please also see Truly Inane Bloomberg Analysis On Gold.
From Tom McClellan’s Chart in Focus:
The FOMC has continued to “taper” the monthly amounts of its purchases of Treasury bonds and mortgage-backed securities (MBS), but the Federal Reserve is still pumping money into the banking system at a high rate. Purchases in June are to total $45 billion, and it goes down to $35 billion in July 2014.
But $35 billion a month is still a large number. And the injection of this money is still pushing up the stock market.
This week’s chart is one that I showed back in November 2013, calling it “perhaps the only chart that matters for now”. The slope of the Fed’s balance sheet continues upward, and so does that of the stock market.
The FOMC under Dr. Yellen is betting that it can slow the pace of these purchases in just the right way so as to avoid the problems that the Fed created when ending previous programs of “quantitative easing” (QE). When QE1 ended in April 2010, we saw the “Flash Crash” in the very next month. The Fed realized it stopped too soon, and so we got QE2, which was great until it ended on June 30, 2011. The very next month, July 2011, saw another sharp decline, and so the Fed had to restart more QE which is what we are still left with today.
The Fed actually tried to shrink its holdings of Treasury bonds back in 2007 and 2008, a move which contributed to the severity of the financial crisis 2008. So the members of the FOMC understandably don’t want to risk doing THAT again. But even when they just bring the QE purchases to a halt, the stock market crashes and banks are in danger. How they are ever going to unwind their $4 trillion (and climbing) balance sheet is a question I just cannot answer, and I do not think that many in the FOMC have a good answer either.
But for our purposes now as stock market investors, it is sufficient to note that the Fed’s balance sheet is still getting larger, and that is still bullish for the stock market. It may not be as bullish as when it was $85 billion a month, but it is still an upward slope. When the Fed gets down to zero again later this year, we can start to worry.
From Adam J. Crawford, Analyst, Casey Research:
The incandescent light bulb was invented in the very early 1800s, but at that time was a device too crude and impractical for mass adoption. Over the next 80 years, at least 20 inventors contributed to its improvement, until, in 1880, Thomas Edison developed and patented a bulb that would last a miraculous 1,200 hours. Edison’s product was the first to offer the levels of functionality, durability, and affordability necessary for widespread commercial appeal. That’s why he gets credit for inventing the light bulb, even though he was decades late to the party.
Some 130 years after Edison’s patent was approved, the incandescent light bulb has basically the same features… a filament inside a glass bulb with a screw base. And for all those years, it’s been doing yeoman-like work providing clean, quality lighting (compared to the candles and oil lanterns of the 19th century), in millions of homes and offices.
Today, however, the incandescent light bulb is on its way out… and a multibillion-dollar industry will be forever changed.
Done in by Inefficiency
The incandescent bulb, though very effective, is notoriously inefficient. To understand why, one need only understand how it produces light. The filament (or wire) inside a bulb is heated by an electric current until it becomes so hot it glows.
The problem: only about 10% of the energy used by an incandescent bulb is converted into light; the rest is dissipated as usually unwanted heat.
This is a problem, not just for the homes and businesses using these bulbs, but also upstream at the power plants that produce the required energy. In an era when producers are wondering how they’re going to keep up with the surging demand amidst rising fuel costs and concern about the environmental impact of energy production is running high, such inefficiencies are frowned on.
Governments, of course, have the ability to put muscle behind their frowns… and they’re doing just that. In 2013, it became illegal in the United States to manufacture or import 75- and 100-watt incandescent bulbs. 40- and 60-watt bulbs were added to the ban in January of this year. The U.S. isn’t the only government actively limiting the use of incandescent bulbs. The European Union, Canada, Brazil, Australia, and even China are among many that have phase-out programs aimed at forcing users to convert to an alternative technology.
For household applications, that primarily means a switch to those twisty-shaped compact fluorescent lamps (CFLs), or the newest competition in town, light emitting diodes (LEDs).
A CFL’s spiral tube contains argon and mercury vapors, and they are far more efficient than the old Edison bulb. When an electrical current is passed through the vapors, invisible ultraviolet light is produced. The ultraviolet light is transformed into visible light when it strikes a fluorescent coating on the inside of the tube… all at about one-fourth the electrical cost for an equivalent amount of light from an incandescent lamp.
LEDs, in contrast, don’t use commonplace materials. Rather, they’re made from somewhat exotic semiconductor materials, like indium and gallium nitride. When an electrical current is passed through these semiconductors, energy is released in the form of particles called photons—the most basic units of light in physics, i.e., light’s equivalent of individual electrons. In the process, little is lost to heat and the materials take minimal wear, making for another very efficient light source, and one that lasts far longer than its competitors.
Comparing the Alternatives
Right now, LED bulbs are relatively expensive to produce. That’s because a bulb is not just a bulb when it comes to LEDs – it can’t be made brighter by just putting in a thicker filament or tube. Instead, each bulb is a complex web of up to dozens of small diodes, each roughly the size of a pinhead, wired together and to a ballast that regulates the electricity flowing through them.
When compared head to head with incandescent and CFL light bulbs, LEDs come out the clear winner in operating costs. But even with millions of these bulbs now shipping to Home Depot, they still fall down on initial cost:
|Yearly operating cost||$7.23||$1.81||$1.45|
However, when you add up those advantages over that 25,000-hour lifetime, then the advantages start to become clear:
As you can see, to produce roughly the same lumens (a measure of the amount of visible light emitted by a source), both CFLs and LEDs are hands-down more economical than incandescent bulbs.
Of course, in a residential scenario where a bulb is run for maybe three hours a day, it would take about 23 years to realize that big a savings. But put them in place in a commercial or industrial setting like the hundreds of lights running 24 hours a day in the local Walmart, and the savings add up quickly.
Still, why are we so bullish on the prospects for LEDs if they barely edge out their CFL competitors over tens of thousands of hours?
The first difference is environmental. CFLs have the inherent disadvantage of containing mercury, a toxic metal that poses health and environmental risks. Break one of these bulbs and you have a biohazard on your hands. There’s a real cost to recycling these bulbs and containing the mess from those that are just tossed in the trash heap. It’s a cost that will certainly be shifted back to consumers of the bulbs if environmental legislation continues on its same path.
Further still, over its life, an LED bulb is already 25% more economical than a CFL. When compared to an incandescent bulb, either is a huge cost winner. But when it comes down to dollars and cents, the LED wins today. The only reason not go that route is the big upfront cost difference, which when buying tens of thousands of bulbs at a time (as many commercial companies do) can be a hard pill to swallow.
However, the cost of LEDs has been falling fast in recent years and will continue to do so. In 2011, a 60-watt equivalent LED bulb retailed for about $40. In 2012, the price fell below $20. Today, it’s less than $10.
As volumes increase and competition among manufacturers and retailers intensifies, prices will continue to fall. Some industry analysts see a $5 LED on the near horizon. We wouldn’t bet against it.
The price could go even lower if manufacturers can successfully implement a cost-reduction break-through. Specifically, LED devices are built on expensive aluminum oxide substrates. But manufacturers are working on ways to build on substrates made of silicon, which would substantially reduce defects and thus costs.
As prices drop, and if environmental law hits mercury-laced CFLs next, LED’s cost advantage will start to widen significantly.
This all means that the LED’s time has arrived. According to IHS, a global market and economic research firm, unit shipments of LED lighting devices will grow at a compounded annual rate of 40% between now and 2020.
In 2011, the size of the global lighting market was about $96 billion, and LED devices accounted for about 12% of that amount. By 2020, McKinsey & Company projects, the size of the market will be $136 billion, of which 63% will be attributable to LEDs.
With the LED bulb, we have a trend that’s been in the making for several years… and it’s now ready to surge. How should an investor play it? Certainly not with a blindfold and a dartboard, or a whole sector buy like an ETF, because not all participants in this market will prosper.
Some will not be a pure enough play to benefit, or will be cannibalizing their own incandescent and CFL business… like GE and Phillips. Others will find themselves producing a commodity with ever-thinning margins… like Cree. And others still already have much of the anticipated growth priced into their shares.
However, we scanned the field and found a company that is well positioned to benefit from the growth of the LED market while, at the same time, actually improving its margins. We believe this company’s stock is undervalued. That’s why we’re recommending it in the next issue of BIG TECH. For access to this recommendation and many more, simply sign up for a risk-free trial of BIG TECH. If you decide to keep your subscription, it will only cost $99—nothing compared to the profits just this one investment should bring. But, if for any reason you’re unsatisfied, simply cancel to receive a prompt, courteous, and complete refund of the entire subscription price. You have 3 full months to make up your mind.
Federal Reserve Bank of St. Louis President James Bullard predicted the central bank will raise interest rates starting in the first quarter of 2015, sooner than most of his colleagues think, as unemployment falls and inflation quickens.
Asked about his forecast for the timing of the first interest-rate increase since 2006, he said: “I’ve left mine at the end of the first quarter of next year.”
“The Fed (FDTR) is closer to its goal than many people appreciate,” Bullard said today in an interview with Fox Business Network. “We’re really pretty close to normal.”
The Federal Open Market Committee is debating how long to keep the benchmark interest rate near zero after completing a bond-purchase program that’s set to end late this year. The committee repeated on June 18 that it expects the rate to remain near zero for a “considerable time” after the purchases end.
U.S. stocks fell after a report showed consumer spending grew less than forecast and extended declines following Bullard’s comments. The Standard & Poor’s 500 Index slid 0.4 percent to 1,951.10 at 11:41 a.m. in New York. The 10-year Treasury yield fell four basis points, or 0.04 percentage point, to 2.52 percent.
Bullard predicted the jobless rate may fall below 6 percent and inflation rise near 2 percent by the end of this year.
If his forecasts bear out, “you’re basically going to be right at target on both dimensions possibly later this year,” Bullard said. “That’s shocking, and I don’t think markets, and I’m not sure policy makers, have really digested that that’s where we are.”
In quarterly forecasts released June 18, Fed officials said they expected the benchmark rate will be 1.13 percent at the end of 2015 and 2.5 percent a year later, higher than they previously forecast. The forecasts, represented as dots on a chart, don’t give the quarter in which the first increase is expected to occur.
Economists surveyed by Bloomberg from June 6 to June 11 predicted a rate increase in the third quarter of next year, to 0.5 percent from the current range of zero to 0.25 percent.
At a press conference following last week’s meeting, Fed Chair Janet Yellen played down the significance of Fed officials’ interest-rate forecasts.
“Around each of those dots, I think every participant who’s filling out that questionnaire has a considerable band of uncertainty around their own individual forecast,” she said.
From Jeff Clark, editor, S&A Short Report:
The gold-stock rally kicked back into gear last week.
We started the year expecting a rally in gold stocks. And we weren’t disappointed. The Market Vector Gold Miners Fund (GDX) rallied nearly 40% from its bottom in December to its top in March.
That’s the sort of rally that almost always kicks off a new bull market. But it’s also the sort of rally that creates a “buying panic.” And that’s exactly what happened. Investors chased gold stocks higher into overbought conditions in March. Disappointed investors then sold as the sector failed to gain any ground and chopped back and forth for months.
But, as I told you in April, that’s how bull markets work. And there are big gains ahead when the young bull market starts its next move higher.
That’s where we are right now. GDX has recovered everything it lost in May. And the gold-mining sector is approaching its highs of the year…
Take a look at this chart of GDX plotted along with its 50-day moving average (DMA) and nine-day exponential moving average (EMA)…
The biggest rallies in the gold-mining sector occur when GDX is trading above both its nine-day EMA and its 50-DMA. That indicates the sector is in an intermediate-term rally phase. Traders can hold onto positions longer and try to make larger profits.
When GDX is trading below the moving averages, the rally attempts are short-term and shallow. Traders need to be nimble and take profits fast.
The kickoff point for an intermediate-term rally occurs when the nine-day EMA completes a “bullish cross” above the 50-DMA.
You can see how gold stocks launched higher immediately following the bullish cross back in January. GDX soared 30% in two months. We have a similar setup today.
Gold stocks are back in rally mode. But as you can see from the chart, GDX is extended above its nine-day EMA right now. So, it’s not a good time to pile into the sector. There’s too much risk of a short-term pullback.
Traders should look to add exposure to the sector after GDX pulls back toward the support of its nine-day EMA or consolidates long enough to allow the nine-day EMA to catch up to the current price. Any pullbacks in the sector are buying opportunities.
Best regards and good trading,
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