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Timing & trends

Marc Faber warns of 20 percent fall in Equities

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Posted by Marc Faber

on Wednesday, 18 April 2012 00:00

"The question is not whether this is a correction, the correction has got underway. We may easily have a correction of 10% to 20% here."

also:

Marc Faber : There is no Deflation in the system today except in the housing market

 
Marc Faber : Well, I mean, you know, I’ve learned that what I know I obviously learned from someone. I didn’t invent it. So I worked at White Weld with Gary Schilling and he’s a friend of mine; I see him occasionally at the conferences and so forth. And I disagree with him about that we have deflation. He lives in New Jersey. I went to New York airport the other and day and then I drove to New York City and the Lincoln Tunnel fee has just increased from $8 to $14. Well, I’m sorry, that is a 50 percent increase. And so there is no deflation in the system today. But if you say there is deflation in the housing market, yeah, there has been deflation in the housing market and if you ask me will there be one day a deflationary collapse, yes, one day there will be a deflationary collapse, but you understand, as an investor it’s nice to say there will be a deflationary collapse, but it could happen from Dow Jones 100,000 or gold price 20,000 or from home prices that are much higher than today and from a dollar that has depreciated much more than is the case today. So the difficulty for the investor is actually to navigate between today and the time of collapse that I think is inevitable. But how do you protect your wealth in the meantime and in the time of collapse? Investors, and I think they have to begin to think about this already today and say, okay, what does it mean if there is a global kind of deflationary collapse. In a deflationary collapse, everything essentially goes down in value, but obviously, like in an inflationary boom, in an inflationary boom you have different assets that go up at different times with different intensity. So let’s say if you look at 2000 to today, you were better off in gold and commodities than in equities. Now, in a deflationary collapse, the key is to say, okay, I’m only going to lose 50 percent when everybody else will lose 90 percent. So relatively speaking, I will be much better off. And that is the strategy that investors should consider: How to position themselves to lose less in the deflationary collapse in the final crisis than the majority of people. Then relatively to other people, their position will improve.- 06 Apr 2012 
Click Here to watch the full interview>>>>>>
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Timing & trends

The Big Lie and a Rant Down the Green Paper Road...Follow the Green Paper Road...

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Posted by Jack Crooks - Black Swan Capital

on Tuesday, 17 April 2012 18:02

Quotable - “The darkest places in hell are reserved for those who maintain their neutrality in times of moral crisis.” - Dante Alighieri

Commentary & Analysis

 

[Warning: I am feeling a bit dark this week. So if you want to join me in depression, feel free to read. Otherwise, skip this one. Thanks. Jack]

I finally figured it all out. Our global policymakers are nothing more than Wizard of Oz aficionados (the movie as the book is way over their collective heads). They just love happy endings. Let’s just get all the little people to follow down the yellow brick road and it will all turn out just fine, our pols want to believe.

Of course our politicos’ fairy tale is validated each day by those they love the most--the big people leading us down this path--financial types (defined as anyone who benefits from the financial world, not the real world). It is what it is. Big people are big for a reason. And the big people want that path paved with yet another layer of green paper. Simple!

What is this talk of recession, say the big people? And they say it with their Super Pacs and $40,000 --$50,000 a plate dinners to help elect the top Republicans and Democrats (read totally vetted shills who pledge behind closed doors to keep the status quo the status quo; nothing more than different colored horses from the same stable it seems to me). After all, the financial economy is doing just fine; great in fact, is the refrain from Mr. Financial Big Whig.

But even Mr. Financial Big Whig has a few laments: 1) The price of houses in Greenwich or London; 2) His driver’s parking problems in Davos last year; and 3) The damn 5-minute wait in line at the lift in St. Maritz. What is this recession crap?

I asked JR yesterday (as we watched the local news of Mitt Romney in Palm Beach for a reported $50k a plate stop-over); who is more sickening, the shills panhandling for $40-50k a pop or the crony-istic dregs who actually pony up that much? Decisions, decisions....

To say it is a bifurcated world culturally and materially is to understate the obvious. It is bifurcating down the path of the financial economy versus the real economy, to a large degree. [And if you read Charles Murray’s new book, you get a very bad feeling in the pit of your stomach as to where this is leading.]I realize it is what it is and always has been. But watching it all play out so transparently with such hubris flowing from the top makes it that much more revolting. For example, a bit off point, but if are disgusted with US politics, you have to be stunned to watch the US State Department chastise other countries about the need to “improve their election system”? What a farce! Sorry. These dark thoughts creep in whenever I consider hedge fund managers and pols in the same sentence.]

Back to point, assuming I have one here. Joseph Goebbles would be proud of our central banking wizards. Goebbles, the Nazi propaganda chief, understood the big lie told again and again will sooner or later be believed as truth. All Pols follow this theory. But even Goebbles would be stunned to see how often the Big Lie is used by central banks as the truth stares everyone in the face; the face of those who know how to find US Banking Reserves as listed by the St. Louis Feds research department:

1. If Fed liquidity worked the US would be in the midst of the biggest post-recession boom in history. Instead, we are in the slowest post-recession recovery since Stalin-loving Roosevelt stacked the Supreme Court. Let’s let the reserves speak once again for themselves:

Screen shot 2012-04-17 at 5.54.02 PM

If real growth is taking hold, we should have seen a fall in all these reserves sitting on bank balance sheets.

2. Déjà vu all over again from the ECB. Gee, it did nothing for the US real economy, so why don’t we try it here in Europe, say the Wizards running the European Central Bank (ECB).

Screen shot 2012-04-17 at 5.55.40 PM

The argument to my rant is obvious: So what would you do Jack, let the banking system go bankrupt? Well, yes I would, thank you for asking. One by one and every stinking banker who led his firm down the prim-rose path of derivatives would be history. Super-regional managers would step up to the plate and take their turn. After all it is the regionals and local banks that really know what banking should be anyway...credit and relationships. It isn’t rocket science. [Just look at how massively the powers-that-be, pols and their handlers in the banking system, have attacked Paul Volcker’s very good ideas of what banking should be. Nothing has changed!]

There's an evenin' haze settlin' over town Starlight by the edge of the creek The buyin' power of the proletariat's gone down Money's gettin' shallow and weak Well, the place I love best is a sweet memory It's a new path that we trod They say low wages are a reality If we want to compete abroad

My cruel weapons have been put on the shelf Come sit down on my knee You are dearer to me than myself As you yourself can see

While I'm listening to the steel rails hum Got both eyes tight shut Just sitting here trying to keep the hunger from Creeping it's way into my gut

Meet me at the bottom, don't lag behind Bring me my boots and shoes You can hang back or fight your best on the frontline Sing a little bit of these workingman's blues

Well, I'm sailin' on back, ready for the long haul Tossed by the winds and the seas I'll drag 'em all down to hell and I'll stand 'em at the wall I'll sell 'em to their enemies I'm tryin' to feed my soul with thought Gonna sleep off the rest of the day Sometimes no one wants what we got Sometimes you can't give it away

Now the place is ringed with countless foes Some of them may be deaf and dumb No man, no woman knows The hour that sorrow will come

In the dark I hear the night birds call I can feel a lover's breath I sleep in the kitchen with my feet in the hall Sleep is like a temporary death

Bob Dylan, Workingman’s Blues

At some point, this game must end. The financial world CANNOT continue to widen its gap with the real world ad infinitum. Sooner or later, I think we will learn the path to hell, not Oz, is indeed paved with green paper.

Jack Cooks Black Swan www.blackswantrading.com Currency Currents Blog

Black Swan Capital’s Currency Currents is strictly an informational publication and does not provide personalized or individualized investment or trading advice. Commodity futures and forex trading involves substantial risk of loss and may not be suitable for you. The money you allocate to futures or forex trading should be money that you can afford to lose. Please carefully read Black Swan’s full disclaimer, which is available at http://www.blackswantrading.com/disclaimer



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Timing & trends

Heading for a Turn? Trade Accordingly

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Posted by Victor Adair

on Monday, 16 April 2012 10:11

For the past couple of months I've been anticipating that the rally in "risk assets" would run out of steam but I have been waiting for confirmation...I think we are seeing that confirmation over the last two weeks or so...trade accordingly.

Over the past couple of years I've frequently asked the question, "What are we trading?" And my answer has been "perceptions of central bank liquidity." I think the rally in stocks since the lows of Oct 4 has been fuelled by liquidity injections from the G4 (US, Euro, UK, Japan) and by anticipation of more liquidity injections to come. These injections have created false optimism in the markets.

The LTRO injections in the Euro zone in Dec and Jan created a "Lull" in the Eurozone bank/sovereign debt crisis....it appears the "Lull" is over as yields rise on the weaker credits, Spain in particular. I think we will see stress build in Europe in reaction to austerity programs, weak economies, elections, and high unemployment. The weaker Euro countries are headed into a vicious cycle of faltering economies and higher interest rates. Social unrest will rise, populist politicians will call for "re-negotiations" and possibly a withdrawal from the Euro.

The S+P 500 and the DJI made a "M" double top around the end of March/early April with (very nearly) perfect weekly key reversals down last week...both have fallen ~3.5% from last week's highs to today's close.

The psychology change this past week was interesting. Stocks fell sharply on Monday in response to the weaker-than-expected UE data released on Easter Friday. On Thursday, stocks rallied sharply on anticipation of fresh Fed liquidity injections (two Fed Governors made dovish speeches) but today those gains were reversed as the Euro crisis moved back to centre stage.

To Read More CLICK HERE

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Timing & trends

Investor Sentiment: A Sell Signal is Upon Us

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Posted by Guy Lerner

on Sunday, 15 April 2012 11:28

By: Guy Lerner 

For weeks now, I have been using phrases in these weekly articles on sentiment like "the best, most accelerated gains are behind us" and "we are closer to the end then the beginning". When we look at the charts, the SP500 has been essentially flat for the past 8 weeks, so every now and then, I guess I can get it right. If you have been a buyer over this time period, you most likely will find your investment underwater. In other words, there are a lot of investors who have bought high with the expectation of selling higher and who have bought the Wall Street nonsense that this is an investing opportunity of a lifetime. NOT! The "dumb money" indicator has dropped below the upper trading band (see figure 1, green arrow), and the best time to sell is usually 1 week after this signal. There are other scenarios that could develop, such as the emergence of the dip buyers leading to excessive speculation, but the most likely scenario and until further notice, I would be a seller at higher prices. The gas appears to be coming out of this market.

As the current market environment has been compared to 2011, it is noteworthy that last year's sell signal occurred on March 11. 7 weeks later the market made a marginal new high in another flurry of speculation. It took the market another quarter before it actually cratered sustaining a 20% loss over 4 weeks. In general, the next best buy signal will occur when investor sentiment turns bearish.

The "Dumb Money" indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. This indicator is now neutral. The data shows that the optimal sign to sell is 1 week after the indicator crosses below the upper trading band. But these are optimal scenarios, and I should caution that optimal and stock market are rarely spoken of in the same sentence. The market is just too unpredictable. Who saw the May, 2010 "flash crash" or the 20% drop over 3 weeks in 2011 coming? If you hang around too long, you could be one of those casualties. Alas, there are no right answers or guarantees. These are just signposts that help us better understand the price action.

To Read More CLICK HERE

Figure 1. "Dumb Money"/ weekly

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Timing & trends

Boom Sayer: Bob Hoye's Perspective On Markets

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Posted by Bob Hoye - Institutional Advisors

on Thursday, 12 April 2012 00:00

"Boom Sayers"

Some of them are still singing, but technically markets seem to have finished the hymns of praise.

Signs Of The Times

This Year:

"Dollar Turns Bearish amid Disappointing Housing Data"

– Forex, March 26

"Heavy hitters such as Goldman Sachs and J.P. Morgan are now actively adding equity exposure."

– Financial Post, March 27

"Betting On U.S. Homes Comeback"

– Financial Post, March 30

"The overall technical backdrop remains bullish so buy-on-dips is still the most profitable strategy."

– Technical letter, March 30

 *   *   *   *   *

Last Year:

"Stocks climbed as the better-than-expected data on confidence and manufacturing bolstered optimism on the economy."

– Bloomberg, April 15, 2011

"Flight From U.S. Dollar"

– Financial Post, April 21, 2011

"Don't Like a Weak Dollar? Might as Well Get Used to It."

– Breitbart, April 26, 2011

Concerns about the dollar were so wide-spread that Geithner stated "We will never embrace a strategy to weaken the dollar".

Our notes from then included someone else's description of the Geithner Bond. "No principle, no yield and no maturity".

The DX dropped to 72.70 as the good times ended on May 3rd and rallied to the 80 level as the panic about sovereign debt ended last fall.

On the recent surge to good times, the DX declined (accompanied by the usual bad press) to only the 78 level. The low as the bubble completed in 2008 was 71.33. The low on the speculative surge to March 2011 was 72.70 and the recent low at 78 sets a rising trend of important lows.

Against these, commodities (CRB) set a sequence of speculative spikes at 474, 371 and at 326 in February. Clearly, commodity speculators are not accommodating the Fed's implicit policy of dollar depreciation.

It is worth noting a plea for help during the troubles of September, only six months ago:

"Investors just want to know, even if it is a Band-Aid, that there is some cure that's going to be announced."

*   *   *   *   *

Perspective


Our list of "Boom Sayer" exclamations has been accompanied by technical readings of momentum and sentiment usually found at important tops. Last week, Market Vane's Bullish Consensus reached the highest reading since 2007. Also, as we have been discussing insider selling has reached significant levels.

We have been looking for a rolling top whereby not all sectors peak at the same time. This seems to be working out with cyclicals such as base metal miners and S&P Energy setting their highs in late February. Of Dow Theory importance, the Transports set their high in early February and the bounce seems like a failed test.

Overseas, the DAX, FTSE, Shanghai and Hong Kong set highs earlier in March and have recorded downtrends.

More recently, technical work such as yesterday's "Bearish Divergences" provides confirmation of a topping stock market from an unusual point of view.

Under such conditions it has been prudent to sell the rallies.

Currencies


The U.S. Dollar is in a technical pattern leading to an outstanding rally.  Historically, one of the features of the post-bubble condition has been a chronically firm senior currency. That's against most currencies and most commodities, for most of the time.

 

Commodities


In momentum and enthusiasm, the CRB has been replicating the action in 1Q2011, but at lower levels on the index and in excitement. This year's high was 326 set in the third week of February.  At 306 today, taking out 305 would extend the downtrend.

This would confirm that last year's high of 371 was, indeed, a cyclical peak.

Credit Markets


The action in longer maturities stopped favourable trends in mid-February.  Over the past two weeks, a turn for the worse has started. The price on the sub-prime mortgage bond has broken down.

This has serious implications, as does the action in sovereign debt. As an example, yields for the Spanish bond has been rising since early March, taking out technical resistance. Taking out 5.75% will be a serious event.  The chart follows.

Since the middle of March, yields and spreads for junk and high-yield have been moderately adverse.

Representing shorter maturities, the Ted-spread stopped narrowing in late February and the chart seems to be "bottoming" since.

And it is worth keeping in mind that after there has been joyous action in spread markets in the first part of the year, the seasonal reversal in May can lead to disaster in the fall.

INSTITUTIONAL ADVISORS

WEDNESDAY, APRIL 11, 2012

BOB HOYE

PUBLISHED BY INSTITUTIONAL ADVISORS

The following is part of Pivotal Events that was

published for our subscribers April 5, 2012.

 

Link to April 5, 2012 ‘Bob and Phil Show’ on TalkDigitalNetwork.com:

http://talkdigitalnetwork.com/2012/04/holiday-job-shocker/

 

 BOB HOYE,   INSTITUTIONAL ADVISORS

E-MAIL  bhoye.institutionaladvisors@telus.net">bhoye.institutionaladvisors@telus.net

WEBSITE:   www.institutionaladvisors.com



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