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Chart of The Day

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Posted by Chart of the Day

on Friday, 03 August 2012 08:30

The latest jobs report came out today with the Labor Department reporting that nonfarm payrolls (jobs) increased by 163,000 in July. Today's chart puts the latest data into perspective by comparing nonfarm payrolls following the end of the latest economic recession (i.e. the Great Recession -- solid red line) to that of the prior recession (i.e. 2001 recession -- dashed gold line) to that of the average post-recession from 1954-2000 (dashed blue line). As today's chart illustrates, the current jobs recovery is much weaker than the average jobs recovery that follows the end of a recession. Today's chart also illustrates that the jobs market continues to improve at a fairly steady pace -- a pace very similar to what occurred following the recession of 2001.NA

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"Four little words sum up what has lifted most successful individuals above the crowd: a little bit more. They did all that was expected of them and a little bit more." - A. Lou Vickery

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Timing & trends

Bill Gross: ‘Stocks Are Dead!’

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Posted by Robert Zurrer for Money Talks

on Thursday, 02 August 2012 11:00

Bill Gross runs PIMCO's $252.2 billion Total Return Fund. With such a massive fund investing in income bearing instruments during a collapse in interest rates, its no wonder many call Gross the world's pre-eminent bond fund manager.

As for Gross's calls on the stock market,  the chart below shows that that he was consistently wrong on his macro stock market calls. He was negative throughout the 6000 odd point Dow Rally from the Stock Market bottom in 2002. Negative again for most of another 6000 point Dow Rally from the early 2009 stock market bottom. . 

Specifically Gross says that "The cult of equity is dying",  that stock investors should rethink the age-old investing mantra of buying and holding stocks for the long run. He says consistent, annual returns from stocks are a thing of the past.

Gross makes the case that stocks have averaged a 6.6% annual gain on an inflation-adjusted basis since 1912. That said he thinks that the 6.6% return was a  "historical freak" that is unlikely to occur again because of slowing economic growth around the world. He says that return "belied a commonsensical flaw much like that of a chain letter or yes—a Ponzi scheme.". In short that with growth on the US economy averaging 3.5% over that period of time, "investors were "skimming 3% off the top each and every year." 

Of the $1.8 trillion Pimco has under management in its various funds, only about $6 billion is in active equity assets.

With Gross's track record in calling stock market moves so negative, one has to wonder if its not time to buy. Be sure to click on the chart below and view his track record. 

Click on the Chart or HERE for Larger Image. To read Bill Gross's entire commentary "The cult of equity is dying" go  HERE

chart-of-the-day-bill-gross-long-history-of-stock-commenting-july-2012



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Timing & trends

How To Trade Today’s Oil Markets

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Posted by Keith Schaefer: Oil & Gas Investments Bulletin

on Wednesday, 01 August 2012 11:27

What’s the biggest lesson retail investors need to learn to increase profits in these markets?

It’s knowing how and when to trade volatility.

The professionals say trading volatility really is the only way to make money in a flat to down market, which the energy sector (especially the juniors!) has gone through since February 2011 – a full 16 months ago.

“A flat bear market can give flat performance, but with a lot of volatility,” says Martin Pelletier, managing director at Trivest Wealth Counsel of Calgary. “Fifty per cent to 100% swings either way are quite common.

“Unfortunately investors have reacted incorrectly – buying the tops of secular bull markets and selling the lows of secular bear markets.”

Josef Schachter, president of Schachter Asset Management Inc., says “the oil and gas sector has been good to investors – just sell during euphoria and buy during duress.”

Now of course, that’s easier said than done, and to a large degree that separates out the wealthy investors. But Schachter – who is bearish on oil for the next three to five months – says there are some turning points investors should look for in the Toronto Stock Exchange Energy Index.

TSX Energy Index 5-year chart

8-1-12-oagib-1-tsx 5_year_2

TSX Energy Index 1-year chart

8-1-12-oagib-2-tsx 1_year_2

“Given how devastated the S&P TSX Energy Index is, if it goes below 180 then it’s a great buy. We would then switch from being bears to being bulls again.

“I look at the market internals. We’re in a bounce wave now. It could go up again, but then it could go below 200 down to 180 maybe. I expect the timing on that to be the third or fourth week of October.”

Are other sectors as volatile as energy?

“From a broader perspective, if you overweighted telecom, utilities and financials you would have best risk weighted return,” says Pelletier, but adds “over the last ten years, if you were willing to accept a little more risk to get better returns, then energy is the best space to invest.”

And that means a little more active trading – even in the senior producers’ stocks.

“Just look at large cap Canadian energy stocks like Suncor (SU-TSX; NYSE) and Canadian Natural Resources (CNQ-TSX; NYSE). Both have shown a lot of volatility through the year, but there’s nothing good for those who bought and held the stock over the past five-six years.

Are other sectors as volatile as energy?

“From a broader perspective, if you overweighted telecom, utilities and financials you would have best risk weighted return,” says Pelletier, but adds “over the last ten years, if you were willing to accept a little more risk to get better returns, then energy is the best space to invest.”

And that means a little more active trading – even in the senior producers’ stocks.

“Just look at large cap Canadian energy stocks like Suncor (SU-TSX; NYSE) and Canadian Natural Resources (CNQ-TSX; NYSE). Both have shown a lot of volatility through the year, but there’s nothing good for those who bought and held the stock over the past five-six years.

8-1-12-oagib-3-suncor-1

“It’s been even worse for junior oil and gas have even more volatility given their greater capital demand. They typically spend 2x-4x their cash flow on exploration.

“Therefore buy and holding juniors is not the way to play them at all – you have to trade them to manage risk,” because when the market turns down, they can’t raise money to bridge the gap between exploration spending and cash flow – so the junior stocks get hit really hard.

The junior oil and gas market has definitely turned down – but for how long?

Schachter says, “If they (national governments) face the music (on their debt issues), we could see a multi-year bull market in energy through to 2015-2016 and set all-time highs. But if they just continue to kick the can down the road, then the market malaise could drag out with trading rallies and year end bounces, and you’ll need a trading mentality, as we’ve had a good year then a bad year.”

Pelletier believes there is another two to three years to go before the next secular bull market in the major indexes and energy markets – it’s a traders market until then.

But the juniors will once again have their day, says Pelletier.

“Juniors will outperform when the market returns to normality especially those with good management teams with attractive growth profiles.

“Interestingly, there is an opportunity among those who have sold off from their financings. We think these companies will be able to take advantage of this market environment and consolidate. And there are some other stories well liked among my peers which we think are attractively valued – we think it’s important to own stocks everyone likes that are backed up by strong fundamentals.”

In Part II, both Schachter and Pelletier will share some of their favorite investment ideas going into the last half of 2012.

Keith Schaefer will make a newsletter presentation and present an expert view in two sessions on Friday, Sept. 21, during the Chicago Hard Assets Investment Conference.

About the Author

Keith Schaefer

Keith Schaefer

Keith Schaefer, Editor and Publisher of Oil & Gas Investments Bulletin, writes on oil and natural gas markets – and stocks – in a simple, easy to read manner. He uses research reports and trade magazines, interviews industry experts and executives to identify trends in the oil and gas industry - and writes about them in a public blog. He then finds investments that make money based on that information. Company information is shared only with Oil & Gas Investments subscribers in the Bulletin – they see what he’s buying, when he buys it, and why. 




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Timing & trends

The Precursor To Western Collapse: The Rapidly Approaching Demise of Japan

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Posted by Martin Armstrong - Armstrong Economics

on Tuesday, 31 July 2012 00:00

The key pattern that is always the final warning sign of the collapse of a society becomes most self-evident within two primary factors:

1)      The Rule of Law

2)      The rise in taxation

Ed Note: A few clips below and the conclusion paragraph from this potent analysis.......highly recommend you Go HERE  to read the entire fascinating work.  

'Each is fueled by government waste and inherent corruption. Japan has been the bastion of inherent political corruption".

"The motives of such corrupt individuals, drawn to the public sector by its corruption, power, and the ability to strike deep and fatal wounds at those in the private sector, is often simply to get even with those in the private sector whose success they truly despise.

Today, "the socialism (Western Governments) have adopted as the justification of their usurpation of power is collapsing and crumbing into dust all around us. The excuse is always the “rich” have not paid their “fair” share, as if they should be willing to turn-over all their assets to support public servants that contribute nothing to the wealth of a nation"

As they say those who cannot do teach and those that can – just do. Perhaps that old saying needs to be revised by stating – those who cannot make it in the real world, hide in the bowel of government resentful of the fortunes of others regardless of merit". " 

The Japanese Democratic Party of Japan took office in 2009 pledging not to raise taxes, curtail  bureaucracy and give more power to citizens. "As with every political promise, it is just always bullshit". Last month, Prime Minister Yoshihiko Noda pushed through the ministry’s decade-old plan to double the sales tax. "For you see, behind closed curtains, it is always the rank & file of the bureaucracy that truly dictates the course of government".

This new policy,  to double the five percent tax, " is meant to shore up the future of bureaucrats" – not reverse the declining economy.

"Socialism adopted in ALL westernized economies is the same economic mistake as communism. It simply takes longer to get to the same place – bankruptcy" . The 50-fold export-led expansion in the Japanese economy between 1955 and 1990 was by no means their creation. We see the same in all other countries as well. "Global trade simply expanded largely due to the socialism in the USA that saw World War II usher in the payroll tax in America".

"Like Goldman Sachs has infiltrated governments worldwide, in Japan it is MOF (Ministry of Finance) that is close to the bankers and it is  the MOF that has always controlled government. Kenji Eda published a book in March entitled: “Finance Ministry Mind Control: The frightening methods of finance ministry bureaucrats, who brainwashed Prime Minister Noda to engineer the tax increase.” This indicates the truly realization of what is taking place in Japan and why Japan will collapse into a final 26 year economic low".

Our long-term outlook in Japan for the NIKKEI 225 Cash Stock Index has remained bearish since 1989.95. Our long-term cyclical models show the first window of opportunity for a final major low remains that of 2013 with a possibility of extending into 2014 where we also have a Directional Change for the year. We are looking at a sharp increase in volatility starting in 2013 and running through into 2015. Volatility will rise again starting in 2018 and build into 2020, but it should remain high into 2023. It is possible that if the Nikkei fails to make new lows into 2013-2014, then it could extend the decline into 2017. Ideally, such a bear market reaches its conclusion within the 23 to 26 year window, which extends the bear market into 2015 with the top of the Economic Confidence Model. The target support lies at 6500-6100 followed by 4000-3800. This is further confirmed by our Yearly Bearish Reversals at 6957 and 4038. Therefore, reaching these price objectives within the ideal time frame will greatly enhance the prospect that the final low has at last been established.

....read the whole analysis including charts HERE

 

panic-howtotrade



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Timing & trends

Key Reversals as Market Climbs a Wall of Worry

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Posted by Victor Adair for Money Talks

on Monday, 30 July 2012 11:26

Submitted by Victor Adair on July 30, 2012 - 7:41am

We've had a week of dramatic reversals across all markets.

Stocks: The DJI dropped nearly 500 points from the Friday July 20 highs to this past Tuesday's lows...and then rallied back nearly 600 points to the Friday July 27 close.

Credit Markets: Early this week the yields on "safe haven" bonds fell sharply while the yields on Spanish bonds soared. This pattern reversed dramatically Wednesday through Friday.

Currency markets: Early this week the US Dollar Index surged to new 2 year highs...and then reversed sharply Wednesday through Friday.

We had Key Weekly Reversals higher in Euro, Swiss, CAD, AUD, DJI, S+P, TSE, Gold (in USD terms), US treasury yields from 2 through 30 year maturities, and a Key Weekly Reversal lower in the US Dollar Index.

From an emotional point of view the stock market had been flying high (relative to the credit markets) until it hit a stone wall Friday, July 20, as Spanish bond yields soared and the markets feared that the Euro debt crisis could swiftly spin out of control. The fear intensified Monday and Tuesday...investors scrambled for safety...the USD and the Yen soared, stocks tumbled, safe haven bonds rallied and liquidity drained out of the markets...and then...

Late Tuesday afternoon an article by Hilsenrath in the WSJ speculating about imminent Fed easing brought the DJI back from its lows to close slightly higher on the day. A comment the next day from ECB head Mario Draghi to the effect that the ECB would do "whatever it takes" to save the Euro seemed to light a fire under the markets and the weekly reversals were on with a vengeance. The market mood had become increasingly fearful Friday through early Tuesday and then suddenly changed to becoming increasingly hopeful Wednesday through Friday. To say that the market mood swings have been manic-depressive would be an understatement.

This week ahead there are scheduled central bank meetings of the BOE, the ECB and the Fed...as well as the US employment numbers Friday Aug 3...plenty of fuel for more manic price swings.

What is the market really doing? Despite the manic-depressive mood swings, despite the torrent of capital rushing into perceived safe haven bonds, despite the seemingly intractable European debt crisis, despite the sluggish US and global economy, despite the all time record high number of American citizens on food stamps and disability it seems that THE STOCK MARKET WANTS TO GO HIGHER...the DJI has rallied over 1000 points from the June 4 lows...over 2,700 points from the October 4 lows.

Why? It seems as though we are mainly trading off macro political or central bank inspired headlines...or rumors...its seems as though the markets expect central banks will take further reflationary action...will print more money...which will inspire risk on...and higher asset prices.

The technical view: Technicians make the point that you can never know all you need to know to make the best market decisions...but if you look at the market you can see what it's doing...so free yourself of your opinions about what the market should be doing and look at what it is doing. When I look at the US stock market this week I see that it rallied right through this month's previous highs and closed at its best levels in nearly three months. This market is a classic case of climbing a wall of worry.

There has been a huge amount of cash sitting on the sidelines for the past few years due to economic and political uncertainty and that money could come into this market...taking it much higher...yes, the economic and political uncertainty that has kept that cash on the sidelines still exists...yes, those problems may only be intensifying...and yes, it's entirely possible that the stock market may reverse tomorrow and drop a few thousand points before Christmas...but...since March, 2009, the US stock market has been trending higher and, as skeptical as I am and as skeptical as I have been, I have to say it looks like this market wants to go higher.

With my own money I remain cautious in both my short term trading account and my long term savings accounts...I feel there is a high degree of risk in these markets...so I remain on the sidelines...but I don't want to be short either!

 

Picture 2

Victor Adair

Senior Vice President and Derivatives Portfolio Manager

Contact Victor E-mail @ vadair@union-securities.com

Victor Adair is a Senior Vice President and Derivatives Portfolio Manager at Union Securities Ltd. Victor began trading financial markets over 40 years ago and has held a number of senior positions during his long career as a commodity and stockbroker. He provides daily market commentary on CKNW AM 980 radio Vancouver and is nationally syndicated on Mike Campbell's weekly Moneytalks radio show.

Victor's trading focus is primarily on the currency, precious metal, interest rate and stock index markets and his clients are high net worth individuals and corporations.



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