Archive for October, 2015
From Brian Hunt and Ben Morris, DailyWealth Trader:
Over the past month, stocks have enjoyed an incredible rally.
The benchmark S&P 500 Index is up 11.1% since September 28… which is a year’s worth of gains in just a month. The shares of big-name companies like Facebook, Starbucks, MasterCard, and Home Depot are trading near all-time highs. And portfolios that were deeply in the red last month are now showing gains.
Where does all this fit into our “big-picture” take on stocks… and what should you do about it? We answer those questions today.
We last updated you on our “big-picture” view of the market two weeks ago, on October 16. Despite a strong start to the recent rally, we showed you that the downtrend in stocks was still in place.
We’re checking back in today, though, because the picture has changed…
The title of our October 16 issue was, “These Three Signs Will Tell Us When the Bull Market Is Back.” And as the name suggests, we showed you three ways to tell when the bull market had likely resumed.
Here’s what we said…
Before we’ll trust the uptrend, three things need to happen:
- The S&P 500 needs to break above its 200-day moving average,
- The 200-day moving average itself needs to turn higher, and
- The S&P 500 needs to close above the 2,131 level.
The 2,131 level (or 2,130.82, to be exact) is the all-time high for the S&P 500. It’s an important psychological level. And if the S&P 500 breaks above 2,131, investors and traders will know that stocks have overcome concerns about the global economy, corporate profits, and interest rates. The 200-day moving average is a widely used gauge of the long-term trend. It’s calculated by taking the average of an asset’s closing prices from the past 200 days. As each day passes, the most recent day’s closing price is included in the average… And the oldest day’s price (now day 201) gets dropped.
Last week, the S&P 500 leapt over the first two hurdles. It broke above its 200-day moving average… And the 200-day moving average itself turned higher (although you can’t quite see a tick higher on the chart). In other words, the downtrend just shifted back to an uptrend.
This is a great sign. But we’ve seen lots of false signals in the past. Our research showed that the directional change in the 200-day moving average is much more meaningful when it holds its new direction for at least a month. Yesterday was day seven.
Also, the S&P 500 still needs to climb another 1.9% to reach the 2,131 level.
On a scale of one to 10, we would have likely rated our confidence in the market at a three or four two weeks ago. Today, it’s somewhere around a six. We’re happy to see stocks advance. And we’re a bit more bullish. But the market hasn’t yet provided full price confirmation that leads us to say, “We are bulls.”
So what should you do with this information?
If the 200-day moving average continues higher, and if the S&P 500 breaks above 2,131, we’ll be bulls. And we suggest increasing your stock exposure to the market even more.
We’re getting close… But we’re still cautious. We need to see the market signals turn from yellow to green.
Brian Hunt and Ben Morris
Former IBM CEO and Chairman Lou Gerstner discusses the state of education in the U.S. He speaks on “Bloomberg ‹GO›.”
From Justin Spittler, Analyst, Casey Research:
One of America’s largest companies is taking a controversial stance on employee benefits…
In a move that is sure to draw criticism from the mainstream press, Jonathan Johnson, chairman of online retail giant Overstock.com (OSTK), publicly stated that the company has stockpiled gold and food in preparation of a U.S. financial crisis.
Johnson recently told an audience at the United Precious Metals Association:
We are not big fans of Wall Street and we don’t trust them. We foresaw the financial crisis, we fought against the financial crisis that happened in 2008; we don’t trust the banks still and we foresee that with QE3, and QE4 and QE n that at some point there is going to be another significant financial crisis.
Quantitative easing (QE) is when a central bank creates money from nothing and injects it into the financial system. It’s basically another word for money printing.
Johnson went on to explain the company’s preparations.
So what do we do as a business so that we would be prepared when that happens? One thing that we do that is fairly unique: we have about $10 million in gold, mostly the small button-sized coins, that we keep outside of the banking system. We expect that when there is a financial crisis there will be a banking holiday. I don’t know if it will be two days, or two weeks, or two months. We have $10 million in gold and silver in denominations small enough that we can use for payroll. We want to be able to keep our employees paid, safe, and our site up and running during a financial crisis.
We also happen to have three months of food supply for every employee that we can live on.
Taking preventive steps to keep family and friends safe in a financial crisis is common sense to many people. But to the limousine liberals in mainstream press who toe the line for big banks and the government, this type of preparation is only for “weirdos” and “conspiracy theorists.”
Longtime Casey Research readers are familiar with our stance on financial crisis preparation.
Just like it makes sense to wear a seatbelt…just like it makes sense to buy home insurance…it makes a lot of sense to stay prepared and own insurance against a major financial catastrophe.
Right now, this kind of preparation has never been more important. In other words, we think Overstock’s moves represent sound thinking.
In an unprecedented monetary experiment, global central banks have kept interest rates at near-zero levels and printed trillions of new currency units since the 2008 financial crisis. All this “easy money” has warped the global economy and led to trillions of dollars in malinvestment.
We can’t say when this will end, but we can say with certainty that it will end badly. For the sake of your family and friends, we hope you’re taking some simple steps to prepare.
Owning gold is the single most important step you can take to protect your money from the next financial crisis…
While governments and central bankers can destroy the value of paper currencies, they can’t hurt the value of gold. Gold has held its value through every financial crisis in history. That’s why humans have been using gold as a store of value for thousands of years.
We also recommend keeping plenty of cash on hand. Unlike gold, cash will likely lose at least some value during a crisis. But when a crisis hits, you may need cash to pay for everyday goods and services.
Keep enough cash on hand to last you and your family three to six months. Remember, it can be difficult to get cash during a crisis, as we saw in Greece this summer…
During the Greek financial crisis, the Greek government declared a “bank holiday.” The government closed all the banks in the country to prevent everyone from pulling their money out and crashing the banking system.
Even after the banks reopened, the Greek government set strict daily limits on how much money people could withdraw from ATMs. For weeks, Greek people could only withdraw €60 ($67) of their own money per day from ATMs.
We also recommend opening a foreign bank account…
Putting money in a foreign bank account is a smart way to move some of your money outside your home country. If your home country has a bank freeze, you’ll still be able to access your cash that’s held in a foreign bank account.
If you’re not sure how to get started, we recommend reading Going Global 2015. This hardcover book explains in detail everything you need to know in order to open a foreign bank account. It includes details on the one country that has never had a bank failure, where it’s easy for Americans to open a bank account. Going Global 2015 will even tell you about a bank in this country where you can open an account starting with just $400 (on page 120).
And that’s just one chapter. As Casey Research’s “financial survival guide,” Going Global 2015 will walk you through all the best ways to protect your money.
Thousands of people have paid $99 for this book. Right now, we’re giving it away for just a $4.95 processing fee. Click here to claim your copy.
Crux note: If you’ve been following along with our ‘War on Cash’ story, this new chapter is truly terrifying… In the second half of Bill’s essay below, he discusses what’s going on in Sweden today. Not only have the Swedes gone to negative interest rates… but many banks won’t deal in cash at all anymore. A recent report states citizens are now going as far to hide cash in their microwaves. You see, by going ‘cashless’ AND having negative interest rates, the banks have you in a position of complete control. You MUST pay them interest to hold your money – which you are forced to keep in their accounts. Read along below for Bill’s take on this alarming situation – which he’s been following closely for the past year…
From Bill Bonner, Chairman, Bonner & Partners:
NORMANDY, France – “Now, I think I’ve seen everything” is an expression that – like “this is the end of history” and “I’ll never leave you” – usually turns out to be premature.
But it is what we found ourselves saying yesterday.
Not out loud. We just moved our lips in mute amazement.
On Tuesday, the Italian government sold a 2-year note yielding MINUS 0.023%.
We don’t know what is more preposterous: that the Italians were able to borrow money at a negative nominal interest rate or that the press reported this transaction with a straight face.
The Fed’s Big Pivot
It should have provoked howls of laughter, withering scorn, and unvarnished derision.
But here at the Diary, we will not point the finger and chuckle. We will not invoke our usual tone of sarcasm. We will not damn the whole thing to Hell with loud and blustery cussing.
Instead, we’ll take the high road; we just want to know what it means.
But before we get to that, let us pick up the news. Here’s the latest, from Bloomberg:
Federal Reserve officials pivoted toward a December interest-rate increase, betting that further job gains will lead to higher inflation over time and allow them to close an unprecedented era of near-zero borrowing costs.
The Federal Open Market Committee dropped a reference to global risks and referred to its “next meeting” on Dec. 15-16 as it discussed liftoff timing in a statement released Wednesday in Washington, preparing investors for the first rate rise since 2006.
“Pivot” has become the latest fad verb. It seems to mean “move” or “go toward.” You can use it in practically any setting.
Investors pivoted toward higher prices yesterday, with a 198-point increase in the Dow. You might tell your husband that you’re pivoting toward buying a new Tesla. And we pivoted back to France last night… after a few days in Ireland.
It is a gray day in Normandy this morning. But the leaves have pivoted to such glorious shades of orange that the effect is a profound and melancholy splendor.
But let us pivot back to our subject for today…
An Odd World
A negative nominal interest rate – meaning a negative rate before you account for inflation – implies an odd world…
… maybe even a world that cannot really exist.
To lend at less than zero suggests you believe the present value of money is less than its future value – in other words, deflation. And you must assume that the risk of default or inflation is near zero.
This allows the Italians to go out and build roads or pay pensions with money that cost them less than nothing.
How long this will last, we don’t know. But as long as rates remain below zero (and they could go lower!) money is not just free… it’s a cost not to borrow!
Imagine you are buying a house. (Now, you can see the mischief afoot!) If lenders are willing to grant a loan at a negative nominal interest rate that’s secured by nothing more than the full faith and credit of the Italian government, then lenders should surely be willing to extend credit to you against the value of your house.
That would leave you with a curious mortgage – one that pays you interest. At the Italian rate, a $1-million house would come with an extra income of about $19.16 a month.
This raises profound metaphysical issues. If a mortgage carries negative interest, it implies that the house (an equal capital value) also has negative value.
After all, you have to pay someone to live in it. And if houses are worth less than nothing, we have to wonder what a car is worth… or a diamond ring… or a luxury cruise?
Does that mean that money has no value? Or even negative value?
After all, you can no longer give it to someone in exchange for a positive interest payment. Now you must pay him to store it for you, as though it were furniture that won’t fit in your house. You don’t like it anymore. But you don’t have the heart to throw it away.
And if money has no value, what happens when you hire, say, a gardener to pull out weeds? Should you pay him? Or should he pay you? How many hours should he have to work for you before you consent to take his money?
The whole thing is so contrary to nature we gasp when we think of it. We are flummoxed.
But you are a smart person, dear reader: Maybe you can figure it out for us.
The Strange Case of Sweden
This is all prelude to taking up the strange case of Sweden…
All we know about Sweden is what we learned by watching the movie The Girl with the Dragon Tattoo.
And all we learned from that was that Swedes tend to be murderers, sadists, lesbians, and pock-marked wimps.
Maybe that accounts for the torturous financial system the Swedes are creating.
Reports Business Insider:
Sweden is shaping up to be the first country to plunge its citizens into a fascinating – and terrifying – economic experiment: negative interest rates in a cashless society.
The Swedish central bank, the Sveriges Riksbank, on Wednesday held its benchmark interest rate at -0.35%, the level it has been at since July.
Though retail banks have yet to pass that negative rate on to Swedish consumers, they face increased pressure to do so as long as the rates remain where they are. That’s a problem, because Sweden is the closest country on the planet to becoming an all-electronic cashless society.
Remember, Sweden is the place where, if you use too much cash, banks call the police because they think you might be a terrorist or a criminal. Swedish banks have started removing cash ATMs from rural areas, annoying old people and farmers. Credit Suisse says the rule of thumb in Scandinavia is: “If you have to pay in cash, something is wrong.”
A resistance is forming, and some people are protesting the impending extinction of cash. Björn Eriksson, former head of Sweden’s national police and now head of Säkerhetsbranschen, a lobbying group for the security industry, told The Local, “I’ve heard of people keeping cash in their microwaves because banks won’t accept it.”
Alert readers will recognize this negative interest story as one we have been following. We believe it won’t be long before we have negative rates in the U.S., too.
The feds will pivot to even stricter controls on cash to gain more control over the economy and practically unlimited power to tax and spend – without congressional approval.
Sweden is ahead of the U.S. feds on this one. We can only hope it goes far ahead, fast, and blows itself up before the U.S. pivots down that path, too.
Crux note: Bill believes that millions of Americans are picnicking on the slopes of Vesuvius right now. But it’s not a stock market crash… or trouble in the bond market… that he sees coming. It’s a threat so big that it could cut us off from basic things that we depend on every day: ATMs, credit cards, and more. To access Bill’s special presentation on the coming threat… and how you can prepare… read on here.
Ben Franklin would be so proud.
A Louisiana man has reportedly cashed in more than half a million pennies he saved over the past 40 years.
Ortha Anders, a resident of Ruston, Louisiana, started collecting in the 1970s, according to a report from TV station KNOE.
Anders eventually filled 15 five-gallon water bottles with the coins, which weighed 2,830 pounds, or nearly one-and-a-half tons.
Anders didn’t actually want to deposit the coins in the bank, but said his insurance would no longer cover them. In addition he needs the money to pay a medical bill, according to the report.
Anders told the station that whenever he saw a penny “it was a reminder to me to be thankful.”
The sum total of his 40 years of penny saving came to $5,136.14, or roughly 35 pennies per day.
In recent years rising commodity prices have pushed the cost of producing a penny well above its face value. The coins are mostly made of zinc, with a small amount of copper.
President Obama called for consideration of “alternative options for the penny and nickel” in his budget proposal for 2015, amid reports the government lost $105 million minting the coins in 2013….
Image from Ruston Daily Leader on Facebook (http://rustonleader.com/node/64499)
October 30, 2015 (www.investorideas.com mining stocks newswire) The most valuable resource in a mining company is often the people. Good management can attract the right investors and add value regardless of the market.
Gold Falls 3rd Day, Bullion Offers 'Cheap Insurance' as S&P Jumps 9% for Oct …
For traders and investors, "The short-term outlook for gold is somewhat negative," reckons a note from US brokerage INTL FCStone, "as the [precious metals] complex faces headwinds of a rising Dollar, a more 'antagonistic' Fed, a surging US equity …
2015 gold American Eagle bullion sales already beyond 2014 total
The U.S. Mint reports 29,500 ounces worth of the gold bullion coins have been sold as of Oct. 28, likely heading toward to a month-end total down significantly from July, August and September, when 170,000, 101,500 and 125,500 ounces were sold, …
US Mint Silver Bullion Sales Headed for New RecordNewsmax
US Mint American Eagle gold coin sales tumble in OctoberReuters
Firms Vying to Help Texas Build Gold Depository
Major international players in the precious metals industry — and some local upstarts — are hoping to get a piece of Texas' plan to launch an official state gold bullion depository, and the wide range of pitches they're making suggests even basic …
From Bill Bonner, Chairman, Bonner & Partners:
WATERFORD, Ireland – You go for a nice picnic on the slopes of Vesuvius… You spread out your tablecloth. You open your picnic hamper. You prepare for a relaxing afternoon in the warm October sun.
And then someone comes running down the mountain, warning that the volcano is going to blow up. You pack up your sausages and put a cork in the wine bottle… and rush to the car and drive away. Better to be safe than sorry.
And then? Nothing happens.
Most of the time, you can safely ignore the nervous nellies and prophetic Cassandras. (According to legend, Apollo gave Cassandra the gift of prophecy. When she refused him, he spat into her mouth so she would never be believed.)
But sometimes the worrywarts are right…
A Financial Reckoning
For the last 16 years, we’ve been writing a daily e-letter – first the Daily Reckoning and now the Diary.
We saw the collapse of the dot-com bubble coming and warned readers. Most didn’t want to hear it; they were making good money in the stock market. It was a “new era.” And they didn’t want it to end.
But the Nasdaq collapsed in 2000… and didn’t recover until 15 years later.
We believed at the time that the U.S. economy would follow Japan into a long, slow slump. With Addison Wiggin, we wrote a book about it, Financial Reckoning Day: Surviving the Soft Depression of the 21st Century.
“Don’t fight the Fed,” is one of the old-timers’ rules on Wall Street. We understand the principle. You don’t fight the Fed because the Fed has more ammunition than you have.
But when we were writing Financial Reckoning Day, we never imagined that the Fed could create an entire fantasy economy based on completely unnatural signals and grotesque manipulations.
That is the economy of the 21st century. It is an economy in which the old rules of supply and demand… value and price… up and down… have to be viewed through the distorted light of central bank intervention.
When the price of new money – as set by the Fed to its best customers – is almost zero, who knows what other things are worth?
A Crooked Casino
We expected investors to be as appalled as we were.
We thought they would look through the Fed’s distortions… turn up their noses… and close their brokerage accounts.
After all, who would want to pay a high price for an asset whose value depends entirely on central bank manipulation?
Instead of closing their accounts, people piled into the market like gamblers into a crooked casino. They all know the games are fixed. And they all expected to be winners.
In response to the bursting of the dot-com bubble and the mini-recession that followed in 2001, Alan Greenspan cut short-term rates and inflated another bubble – this time in housing and mortgage finance.
The financial industry amplified the Greenspan “put” and made hundreds of billions of dollars on the flimflam trade. And the housing bubble grew so large that all of Wall Street became over-stretched, undercapitalized, and out-of-control.
It was then that we warned readers again. Specifically, we suggested: Sell your expensive house in California; buy a cheap house in Arkansas.
The advice was a little fanciful, but the point was clear. As George W. Bush might have put it: “This sucker’s going to blow up!”
Central Banks’ Dumbest Fraud
As it happened, the Vesuvius of mortgage debt exploded in 2008.
Roughly half of America’s stock market wealth disappeared in about six months. Millions of homeowners sank “underwater.” And just about every major bank on Wall Street would have – and should have – been flattened had it not been for the feds’ bailouts.
Again, using another GWB turn of phrase, we “misunderestimated” the power of chicanery, treachery, and fraud.
Now, it was incoming Fed chief Ben Bernanke on the case – cutting rates to near zero and claiming that the world as we knew it would vanish unless Congress gave the cronies $700 billion.
He was right, of course. The screwy world that the feds had created – funded by ultra-cheap credit – was getting what it deserved, good and hard. Humpty Dumpty had fallen off the wall.
We believed that all the king’s horses and all the king’s men would not be able to get Humpty back together again.
We were wrong. The king’s men came out with ZIRP (zero-interest-rate policy) and QE. The Humpty Dumpty stock market floated higher than ever. And the announcement last week from Mario Draghi at the European Central Bank that more euro QE was in the cards pushed him up an inch more.
Investors are aware that the market is manipulated… and it doesn’t seem to worry them. They don’t fight the Fed; they sit down at the table with it.
They play the game. And so far, they have done well.
And now… here’s the headline from the Wall Street Journal: “Fed Strives for Clear Signal on Interest Rates”
This is the latest – and in some ways the dumbest – of central bank frauds. Now, the Fed is under the leadership of Janet Yellen. And she believes in “forward guidance.”
She believes she can decide in advance what interest-rate policy the Fed should follow in the future and let investors know in advance what that policy will be. That way, they can plan intelligently.
She will signal that, soon, the central bank will begin the long return to “normalcy.” Don’t believe it. The entire system depends on abnormalcy.
It depends on more mischief from the central banks: ZIRP; QE; and as already practiced in Switzerland, Sweden, and Denmark, NIRP (negative-interest-rate policy).
Once again, we hear the grumbling of the volcano… and the smoke rising.
Crux note: Bill believes that millions of Americans are picnicking on the slopes of Vesuvius right now. But it’s not a stock market crash… or trouble in the bond market… that he sees coming. It’s a threat so big that it could cut us off from basic things that we depend on every day: ATMs, credit cards, and more.
To access Bill’s special presentation on the coming threat… and how you can prepare… Read on here.
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