Produced by McIver Wealth Management Consulting Group
Mark Jasayko, CFA,MBA, Portfolio Manager with McIver Wealth Management of Richardson GMP in Vancouver.
Posted by Mark Jasayko
on Thursday, 03 January 2013 14:39
Produced by McIver Wealth Management Consulting Group
Mark Jasayko, CFA,MBA, Portfolio Manager with McIver Wealth Management of Richardson GMP in Vancouver.
Posted by Victor Adair - VictorAdair.com
on Thursday, 03 January 2013 11:40
My Big Picture view for the past few years has been that the biggest credit boom in history blew out between 2006 (the top of the US housing boom) and 2008 (the top of the global commodities boom.) Since then the Authorities (Governments and Central Banks around the world) have been sponsoring The Great Reflation as they attempt to offset private sector deleveraging with public sector stimulus.
When Market Psychology (MP) believes that the Authorities are prevailing it’s “risk-on” in the asset markets…when MP believes that deleveraging is the more powerful force then it’s “risk-off.” MP frequently gets “over-done” and cause prices to move too far/too fast…which sets up Key Turn Dates when a number of major markets reverse direction at more-or-less the same time.
A good part of my short term trading analysis involves measuring how different markets move relative to one another following a Key Turn Date. The power of MP, especially around Key Turn Dates, often trumps fundamental factors that are specific to any one market. For example, I might say that a change in value for the C$ is caused more by“events” outside of Canada than by “events” inside Canada.
This week in the Chart Section I’ve made some observations on longer term charts of interest rates, stocks, metals, energy and currency markets.
United States House Prices:
Nominal house prices in the USA increased from ~$25,000 in 1970 to ~$250,000 in 2006 on the back of the biggest credit boom in history…prices peaked in 2006…and then collapsed…and that precipitated big changes in a lot of other markets.
The 90 day Eurodollar futures contract: (Trades at a discount to par…rising prices mean lower interest rates.) Short term interest rates stopped rising in 2006 as US home prices stopped rising…short rates began to fall as the US stock market began to fall in late 2007…then fell further in 2008 as the commodity market fell…and as worries about the “old normal” financial system lead to the creation of the “new normal” financial system…which has seen short rates at lifetime lows for the past couple of years as central banks try to reflate the world’s economies…with mixed success considering the amount of stimulus…but stocks, gold, bonds and some commodities have had a great rally on the back of these reflationary efforts.
The 30 year US Treasury bond futures contract: (Rising bond prices = falling bond yields) US Treasury bonds have been in a bull market since the early 1980’s and spiked to lifetime highs in late 2008 as stocks and commodities collapsed. In the last three years bond prices have gone to new highs despite a massive increase in government deficits. The bond market vigilantes of the 1980’s would surely have gone bankrupt shorting this rally.
On a short term time frame bonds are often the opposite side of the “risk on / risk off” trade…but from a longer term perspective bonds have rallied along with stocks, gold and commodities since the March 2009 Key Turn Date.
The S+P 500 stock Index futures contract:
The S+P 500 Index made an All Time High in October 2007 ( barely eclipsing the dot.com boom peak of March 2000) and then began to fall. The decline was exacerbated by credit market worries and the commodity market collapse of 2008. The index lost more than 50% from its 2007 highs to its 2009 lows. Since then the index has trended higher…benefiting from central bank reflationary efforts.
The Toronto Composite Index:
The TSE rallied harder than the S+P during the 2002 to 2007 commodity boom period…continued to rally into the first half of 2008 while the S+P was falling and then, like the S+P, lost over 50% as it tumbled to its 2009 lows. At the end of 2012 the TSE was up ~65% from its 2009 lows while the S+P was up ~ 113%.
Gold futures contracts:
Gold made a 20 year low in 1999 near $250 and then began an advance that gathered pace into March 2008 when it briefly traded above $1000 for the first time. Prices fell back to a low around $680 later that year as stocks and commodities tumbled…and the USD soared BUT…gold started to recover from its lows before the end of 2008 (unlike stocks and commodities) and nearly tripled in value by September 2011.
As my good friend Martin Murenbeeld likes to say, “The single best reason to be bullish gold is the reflationary efforts of the world’s central banks!”
Copper futures contracts:
Dr. Copper rallied from 75 cents in 2003 to a high of $4.16 in 2006…a perfect storm of booming housing markets around the world…Chinese demand and short supply. Prices fell back in 2007 and then made new highs in 2008…only to lose ~70% as commodities collapsed. Copper soared to new All Time Highs in 2011 on the back of the Great Reflation but has lost a dollar from there…perhaps on worries that sluggish global economic growth will dampen demand.
WTI crude oil futures:
WTI crude was trading below $20 in early 2002 as the commodity boom was getting underway. Six years later (Peak Oil) it hit $147 on the July 2008 Key Turn Date…six months later it was trading for less than $35.
Natural Gas futures:
Natgas made All Time Highs in late 2005 (post Katrina) only to lose 2/3 of its value within a year…it came roaring back with other commodities into the 2008 peak…only to lose over 80% of its value in just over a year….but still lower prices lay ahead as booming North American supplies took natgas below $2 in 2012 for the first time in over 10 years.
The lumber futures market made the biggest gains of any of the major commodity futures contracts in 2012…up more than 50% YOY….to its best levels in 7 years.
Canadian Dollar futures contract:
The C$ was trading below 62 cents in 2002 (the Northern Peso) as the commodity boom began. Five years later, in November 2007 it touched a lifetime high of 1.10 (that’s a gain of 77%!) It was trading at par on the July 2008 Key Turn Date (when crude was $147) then fell to 77 cents within 3 months as the commodity market collapsed, credit markets panicked and the US Dollar soared. The highest weekly close (~1.06) for the C$ since 2008 was the May 2, 2011 Key Turn Date.
The Euro Currency Futures contract:
The Euro hit its All Time High around 1.60 to the USD on the Key Turn Date of July 15, 2008 just as the commodity bull market was topping out….or was it the USD bear market bottoming out? The Euro began to rally back with other risk assets following the March 2009 Key Turn Date, but unlike stocks and commodities it has trended sideways to lower during 2010 – 2012 as the banking and sovereign debt worries of Europe weighed on the common currency.
The Japanese Yen futures contract:
The Yen trended higher from 2007 to 2011…blissfully uncorrelated to the ups and downs of other markets. (Note that it rallied as a safe haven through the second half of 2008 as stocks, commodities and most currencies, other than the USD, fell.) For the past few years a number of analysts have been expecting the Yen to fall…but it kept rising…despite rounds of intervention…carried out by the Japanese Authorities without the help of their foreign cousins. Its recent decline has been tied to anticipation that the newest Prime Minister, Mr. Abe, will force it down. So far, so good…and Japanese stocks have rallied sharply…but will the Japanese bond market spoil the fun?
Posted by Peter Grandich - Grandich.com
on Wednesday, 02 January 2013 09:08
"The only question one must ask is when it all comes unglued, how will you and/or your children and grandchildren be prepared to handle it? I’m not talking about storing up guns and ammo, dry food and digging a hole in the ground to live. There are economic, social and spiritual strategies that can be undertaken now."
Posted by Andrew Ruhland of Integrated Wealth Management
on Monday, 31 December 2012 15:27
Welcome to the 2013 Annual Forecast Issue of Views from the Crowsnest. Over the last six weeks we've been hunkered down in quiet contemplation of what 2013 may bring. The world continues to edge closer to the second major downturn in what I believe is The Second Great Depression.
It's better to be out of the markets and wishing you were in, than to be in and wishing you were out of the markets...so we've been rather conservatively positioned for over a week now.
Our conclusion for 2013: buckle up in order to survive and profit during the volatility caused by emerging sovereign debt crises. Played correctly, 2013 could be a very profitable year for investors! The always-important traits of filtering out noise, being nimble and investing without emotional baggage will become more essential than ever.
I believe that 2012 has proven beyond any doubt that mainstream financial media has lost its way. With lots of air-time to fill, most mainstream financial pundits seem most interested in weaving tales of easy money or financial Armageddon. As long as they keep their ratings up, nothing much else seems to matter. The results are consistent and predictable: whip up investor emotions of fear and greed via sensational narratives, e.g. the fiscal cliff, and then beat them to death. Choose your information sources carefully.
With my blunt conclusions of financial punditry and ongoing experience as a Portfolio Strategist with ETF Capital Management fresh in front of me, I've made a conscious decision to shift my professional writing. I'm going to focus far less on narrative development (what MAY happen in the future), and much more on the practical side - dealing with what IS actually happening in the most direct fashion possible. The future arrives soon enough, so perhaps living more in the present will be helpful; it's certainly less stressful!
Don't get me wrong, it's important to stay informed - it's essential to protecting and growing your nest egg. Simply put, I've chosen to leave most of the narrative development in the hands of a select number of trusted sources who already do it very well - those independent thinkers who have consistently predicted major trends. In my professional capacity as both a Wealth Management Advisor and Portfolio Strategist, my job is to focus on prudent real-time integration of the wisdom of about 10 selected sources that excel at predicting the future, confirmed always by price patterns, of course.
Regardless of the individual situation, I recommend that each reader ensures that their investment decision-maker uses a practical, systematic and disciplined process for getting in and out of investment positions, with real risk controls. In my opinion, disciplined systems and humility are THE two key ingredients in the creation of excellent long-term track records, especially when it comes to risk management.
Everything in the financial world needs to be kept in context...and the most important context for each of us is our personal situation. It's literally impossible for me to over-emphasize the importance of understanding two essential things: your personal risk threshold and the rate of return that you need to average both before and during retirement. Knowing these two things will reduce your personal stress and help you become a more patient and disciplined investor; that's why having a comprehensive Wealth Management Plan is an essential starting place.
Given that this is our 2013 Annual Forecast Issue, we have outlined below our sense of what we see coming next year. Our five specific investment themes are described in the next section below, but first I ask that you consider the following broader concepts:
2013 promises to be a very interesting year, chock full of both risk and opportunity. Each of the themes below can bring pain or pleasure to your financial portfolio, depending on how your decision-makers allocate your assets. Here are the five areas we are observing for early trend development and investable situations:
1) Europe's Penultimate Descent: the Europeans are very creative re: devising new ways to delay the implosion of their banking system and rich social programs. With Greece, Spain, Italy, and Portugal constantly teetering on the brink, the EU/ECB/IMF crowd has become very adept at soothing the masses with elegant promises of solving a debt crisis with new and different debt. Brilliant! Germany should be able to back-stop the rest of the EU one last time in 2013, but the price tag for the rest of the EU will be big: much more power transferred to Berlin and Frankfurt. The final implosion of Europe will occur when Germany loses its "safe haven" status, but that might not happen for another couple years.
2) The China Syndrome: the digital fireworks mirage over Beijing during the 2008 Summer Olympics opening ceremonies was just the warm-up act for this command and control regime. Their GDP numbers are more manipulated than Europe and the U.S. (a major achievement unto itself) and even those data are declining. Endless loans to build roads and bridges to empty cities, malls and apartment buildings while expanding their monetary base in direct proportion to European and US-bound exports do have eventual negative consequences, even for mighty China. Yes, the longer term story of the urbanization and industrialization of their massive population is still intact, but as the Shanghai Stock Exchange illustrates objectively, this journey has a few potholes along the way. Oh my, what would Chairman Mao think of this?
3) Turning Japanese: with newly elected Prime Minister Abe and their 10th Finance Minister in six years, the Land of the Rising Sun is poised to embark on potentially unlimited Quantitative Easing to jump start their stagnant economy. Staggering. With headwinds like a crushing debt load, rapidly aging population, social norms of "full employment," incredibly restrictive immigration policy, a virtual absence of useful natural resources, the rising cost of natural gas versus now-unpopular nuclear power, and a smoldering dispute with China over useless but symbolic islands, Japan will likely erupt with its own sovereign debt crisis. Timing is unknown, but I'd venture a guess that it starts within 12-24 months. This Kyle Bass video is excellent.
4) The Hitching Post Emerges: Precious Metals are an excellent example of how zeal for a story can cause intelligent people to lose sight of the objective reality of price patterns. I have been a drum-beating public long term bull on gold, silver, platinum and palladium for nearly 8 years now, and I have seen no evidence yet that causes me to change that longer term view. We are gold bulls, not gold zealots, and have repeatedly warned that the road will be very bumpy; especially until we achieve some kind of escape velocity from the upside resistance that has plagued prices of both the metals themselves and the companies that find and produce them. As every major economic power continues to engage in a competitive currency devaluations, influential people are starting to understand that gold is the only currency (or backing for a paper currency) that has zero counterparty risk. James Dines refers to gold as "the hitching post in the monetary universe" and 2013 has high potential for PM's to begin their true emergence as a solid alternative to fiat paper issued at the whim of highly-politicized central bankers. Paper gold and silver positions should be actively managed as investments, while physical PM's should be treated as monetary insurance.
5) Descent into Chaos: dysfunctional and violent governments take turns making global headlines. Israel, Iran and the U.S. each continue to position their armed forces for a major military conflict, while Syria's dictator continues to slaughter his own citizens. North Korea continues to test its missile systems while China and Japan rattle sabers over mostly-barren islands between their respective mainlands. Narco-violence is surging throughout Latin America and along America's southern border, while a handful of mental-health patients murder innocent schoolchildren and first responders in the U.S. Given the violence smouldering in isolated pockets, it wouldn't take much for smaller conflicts to merge into a major regional war. This is extremely depressing for those directly involved, and underscores how incredibly fortunate we are to live in a relatively peaceful and prosperous country.
Whatever happens in 2013, I encourage everyone to take responsibility for making sure your financial assets are being managed in a manner that is both consistent with your worldview, and according to an objective, systematic and sustainable framework.
Please bear in mind that investing is not a game of "perfect," it is a system of consistently high-quality decision making....one day and one position at a time. As long as downside risk is tightly controlled, one doesn't need to be right much more than 50% of the time in order to generate investment results that will help you achieve and maintain financial independence. Whenever in doubt, watch the price patterns.
Patience and Discipline are accretive to your wealth, health and happiness; Fear and Greed are destructive.
Andrew H. Ruhland, CFP, CPCA
President of Integrated Wealth Management Inc, and Portfolio Strategist with ETF Capital Management
Posted by Don Vialoux - Timing the Market
on Monday, 31 December 2012 04:58
\North American equity indices and most sectors found resistance on December 18th and will struggle until the Fiscal Cliff issue is resolved. Significant gains prior to resolution of the “Grand Plan” are unlikely. Thereafter, upside prospects are significant. However, significant capital is unlikely to be employed in the U.S. economy until Fiscal Cliff issues are resolved. A short term resolution prior to a “Grand Plan” could set the stage to take profits in a wide variety of seasonal trades that are at or near expiry.
The VIX Index responded to greater uncertainty about the Fiscal Cliff. It jumped 4.88 (27.35%) last week. The Index remains above its 20, 50 and 200 day moving average. Its intermediate uptrend was confirmed when the Index decisively broke resistance at 19.65
.....45 more charts & valuable comments HERE
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