Month: April 2013

Interesting Price Breakouts Apr. 21, 2013: 10,000 feet view of big moves Pt. 1

Right now, there is a sea change in price trends, and what was once in favor has fallen into disrepute in the raw material space, as most dramatically displayed by the decline in base and precious metals. Conversely, what has been left for dead and in decline, natural gas, the Nikkei and the USD AGAINST the Japanese Yen, has come alive with double digit rapidity. Prices for utilities shares have supplanted hot IBD-style growth issues as among the most buoyant, yield scarcity leads to share purchase rabidity. You would think in a market awash with quantitative easing, with arid islands of first-world austerity experiencing less than “beautiful” defaults of an unsavory nature, that gold and Apple bugs could take comfort in either “unprintable” money and/or an unstoppable cult appeal with massive earnings. Yet we are reminded there are no guarantees or safe havens anywhere to be found.

We’ve all seen these charts before, and this omnibus presentation is meant to anchor your memories to a snapshot just before we embark upon the hackneyed “Sell in May” about to unfold.

NO Country for Safe Haven:

Precious metal prices of late have lost their shine for the moment.

GC_042113

SI_042113

PL_042113

The Diagnosis from Dr. Copper is dire:

HG_042113

Perhaps all the warehouses in China cannot rescue us. Either way, prices command, and traders must obey.

Grain prices have been ground up:

Wheat is all wet:

ZW_042113

With a multi-decade record planting ahead, Corn prices have come “a cropper”:

ZC_042113

Soy is also sad:

ZS_042113

Some “softs” have gotten softer, and softer:

Sugar prices meets Mr.Market on “atkins diet”:

SB_042113

Some MIGHTY TRENDS continue, notwithstanding “mean reversion”, batwing formations and other voodoo analysis:

A Yen to short like never before: Let us recall that the Yen has been “overvalued” for some time.

6J_042113

Japanese money and traders run for cover and the still “cheap” Nikkei continues higher:

NK_042013

Energetic rise to Natural Gas:

More than hot air? We’ll see.
NG_042113

Crude price looks increasingly rude:
CL_042113

And now for “home”:

I “SPY” a test of the 50 day and potential sell-off, consolidation. (Eyes on MARGIN DEBT is what’s really on my mind)

ES_042113

Dow has been a yield seeker refuge, for now:

YM_042013

The name is Bond, 30 year Bond…

ZB_042113

The 10 Year looks terrific in the near-term:
ZN_042113

Canadian dollar, and a looming housing/credit bust makes for “loonie” action ahead:

CD_042113

Advertisements

David Harding, a trend follower featured in a BBC documentary on “Big Data”

A fascinating BBC documentary I saw mentioned on Michael Covel’s twitter feed, on “Big Data”, featuring trend follower David Harding.

[youtube:http://www.youtube.com/watch?v=EsVy28pDsYo&feature=youtu.be%5D

Notes to myself on record high Corporate Profits from John Hussman’s “Taking Distortion At Face Value” article

From John Mauldin’s recent post, presenting Dr. John Hussman’s musings on corporate profits and the market:

Despite the enormous weight of both accounting identity, historical data, and simple arithmetic, we continue to encounter persistent hostility to the idea that profit margins are the mirror image of extraordinary and unsustainable deficits in the government and household sector. The actual relationship was first detailed by the economist Michal Kalecki in the mid-1900’s. James Montier of GMO gives a nice derivation. The full relationship is:

Profits = Investment – Household Savings – Government Savings – Foreign Savings + Dividends

As I noted over a year ago, dividends exhibit very little volatility over time, and do not exert a material amount of volatility in the above relationship over the course of the economic cycle. It also happens that particularly in U.S. data, the difference between Investment and Foreign Savings (i.e. the inverse of the current account deficit) also fluctuates relatively little, because current account “improvement” is typically associated with deterioration in gross domestic investment, as shown … since the 1940’s.

As a result, the Kalecki equation reduces, for all practical purposes, to a statement that corporate profits move opposite to the sum of household and government saving. [Again, see Two Myths and A Legend.] More than a half-century of data that demonstrates the tightness of this relationship.

The upshot is very simple, the U.S. stock market presently reflects two unstable features. One is that extraordinary monetary policy – specifically quantitative easing – has created an ocean of zero-interest money that someone has to hold at each point in time, and that provokes a speculative reach for yield. The other is that extraordinary fiscal policy, coupled with household savings near record lows, have joined to elevate profit margins more than 70% above their historical norm, as the deficit of one sector has to emerge as the surplus of another. The result is that investors quite erroneously accept the distorted “earnings yield” of stocks (and the associated “forward price/earnings multiple” of the S&P 500) at face value, without any adjustment for elevated profit margins or the historical tendency for such elevations to be eliminated over the course of the business cycle.

Put simply, stocks are not cheap, but are instead strenuously overvalued. The speculative reach for yield, encouraged by the Federal Reserve, has created another bubble – which is not recognized as a bubble only because distorted profit margins create the illusion that stocks are reasonably valued. We presently estimate a prospective 10-year nominal total return for the S&P 500 of less than 3.5% annually. The likelihood of even this return being achieved smoothly, without severe intervening volatility and steep market losses, is roughly zero. This does not imply or ensure immediate market losses, but it doesn’t need to. On any horizon of less than about 6-7 years, we expect that any intervening returns achieved by the S&P 500 will be wiped out, and then some. Speculate if you believe that your exit strategy will dominate that of millions of other speculators, despite market conditions that are already overvalued, overbought, overbullish.

Lawrence Lessig: We The People and the Republic We MUST RECLAIM

Lawrence Lessig: We the People and the Republic We MUST Reclaim

[youtube:http://www.youtube.com/watch?v=mw2z9lV3W1g%5D