The futures are pointing to a lower open this morning, and while yesterday was a nice day in terms of finding support and bouncing---I think we are going to see some profit taking. In my quest to become I better trader, I am learning to flush my emotions. In the past, I would have wanted to go "all in" after a day like yesterday. I am not saying that this market can't go higher from here---just that I think we have exceeded short term expectations of many and will see some pullback. I do think that days like yesterday give us a clue that the "doomsday scenario" is now on the back burner.
What will next weeks Federal Reserve announcement hold? I don't think there is any question that they will hold rates at these historic lows, the real "meat" of how the markets will move is obviously in their statement. So how will they posture? Even though I have been screaming inflation, I think the Fed is going to discount the possibility of inflation at this point. When you look at what oil has done over the past few days (even if you are an inflationista like me) you have to say that they Fed will still keep deflation their main focus. I have been early on my inflation call and have been wrong. Several months ago I posted a question "Is being early equivalent to being wrong" We had many great responses to the question--but I have decided that being early is being wrong WHEN YOU PUT YOUR MONEY ON IT. I lost money trying to play the weak dollar and I WAS WRONG---I LOST MONEY. I have since made a few nice trades on FCX and other plays that I was looking at because of my inflation thesis.
Right now I am mostly in cash and have been trying to make a little money by "scalping" the SP futures. Today's focus will be earnings as we don't have any scheduled news that we would expect to derail the markets.
Have a question for Marc Faber? We will interview him either today or tomorrow, so get your questions in now. Dr. Faber was advocating that those buying gold do so by purchasing the physical metal for delivery when he was on Bloomberg a couple of months back. I will ask him if he still believes that the entire financial system is such that one would need to hold the "physical metal"
I am sitting by patiently today trying to exercise "caution". We are trying to finalize an interview with Mr. Sam Zell for May. I am anxious to get his outlook on commercial real estate, especially given what we heard from noted trends forecaster Mr. Gerald Celente a couple of months back.
Wednesday, April 22, 2009
Sunday April 12, 2009
Is this simply a Bear market rally? George Soros seems to think so. So the near term trade is short, right? I am not so sure. I think we may be headed a little higher. I expected the futures to to come out lower than they did tonight. Could we be in the "here comes the money from the sidelines zone"? So many are afraid that they are going to miss the "rally of a lifetime". I think we could get some panic money moving into the market--but I don't buy that we aren't ultimately headed lower.
The Wells Fargo news on Friday was so powerful because it was totally unexpected. Shouldn't banks be making money in this environment? Their product is almost free to them as long as they eliminate fear and maintain deposits. There are still many loans that are paying like clockwork. It appears that we have averted a financial system collapse and are now focusing on other things. I still contend that the money multiplier is going to cause us inflation. For those that have been arguing that the recent government action is only rebuilding the banks balance sheets, what happens when they get the banks rolling again? Isn't there normal wealth destruction on some level all the time? If not, why do banks make provisions for loan loss reserves? Do you Deflationistas contend that we have had no significant increase in the money supply?
Think about China and their recent stimulus plan. Will their spending on infrastructure cause commodities prices to rise? Does China have the demand to significantly impact the price of commodities? I would argue yes. Last year we saw inflation caused by rising fuel prices and it hurt our economy. As a matter of fact, the level at which we saw demand destruction surprised economists. Many were arguing that we would not see demand destruction because in an inflationary environment that phenomenon would not occur. Being half right is equivalent to being wrong. Can you have price increases without inflation? Many would argue no, but based on last summer, I would argue yes. Just as some stocks go up or down faster than the level of the entire market, so can commodities prices within the context of the global marketplace. Is a service based economy more susceptible to stagflation? Is an economy of entitlements more susceptible to stagflation? Yes.
Will our economy get less efficient with the redistribution of wealth? If your answer is no---please post it in the comments section. I believe that it will. So what does that mean for our investments? To me it means buy commodity based stocks FCX is still one of my favorites.
I believe that we are very dependent on what we see out of this earnings season. If we see better than expected earnings, we could see this rally move up more. If we see dismal earnings, I think it will provide shock to the downside more so than last earnings season. I think we have silently heightened expectations during this rally. If we confirm that things are worse than dismal---look out below.
Monday, April 6, 2009
Listen to theTIPS---Treasury Inflation Protection Securities
What does the activity in TIPS (Treasury Inflation Protected Securities) tell us? That the smart money is betting on inflation? Given the fact that the TIPS returned the most in March since they have since their inception in 1997---I would interpret that as a pretty strong indication that the smart money is betting inflation. Many are expecting the the CPI to exceed 4% or more this year.
Often times when I make a post about inflation, I get comments or emails that criticize it if commodities fall that day or the following days. The inflation argument is over the next 18 months--not the next 18 hours and I am not pegging it to a particular commodity---even given the fact that a rise in oil prices is the scariest of them all. In a guest blogger post on Market Club last week, someone made a comment that milk was $1.87 per gallon in Denver. Either I am getting screwed paying $3.50 per gallon or this guy was quoting mountain goat milk. We have not seen food prices drop at near the rate that they rose when oil was running last year---and if it starts to run again---prices will head up from these already inflated levels. Why? Because the demand will continue at surprising rates and the market will allow it.
I am expecting the markets to pull back soon. I am not totally convinced that we are in full bull mode as are many. Looking at the chart, I would change my mind over 870 on the S&P, but as for now I think we have ourselves just another rally in a Bear market. One thing to keep an eye on is the changes to the components of the S&P 500--those changes may alter the earnings outlook for the group as those stock being taken out were losing money.
I still like EMS as a short. It had a nice drop on Friday and I think it is headed to $25. Again, I think this is a well run company, I just think they are playing in a market that will be punished in 2009.
One of my favorites FCX may pullback with any market weakness. I hope it does, as this is a great long term play--but it has almost doubled over the short-run and I would like to see it pullback. If copper prices take a breather--this one could provide a buying opportunity.
Don't get fooled---INFLATION IS NEAR
Friday, April 3, 2009
Inflation--Why is it So Misunderstood??
Yesterday I was the guest blogger at INO's Market Club. My post about inflation received far more than the recent average of comments on their site. There was some great debate in the comment section. I decided that I would post direct questions aimed to debunk the "deflation" argument and see what kind of responses we get. We want serious debate, not unrelated criticism so keep it focused.
1) Many have argued that every dime of TARP,TALF, Bailout, Handout will go to rebuild the banks balance sheets. If this is your position, is it also your position that we will not see any new lending for a long period of time? That banks will refuse to lend and hence seek to only generate revenue through fees?
2)Do you believe that wage pressure must be present first for there to be true inflation? (there was a comment to this effect yesterday on market club) If so, how would you explain the rise in oil, milk, and other prices last year during the beginning of the worst economic downturn in recent history?
3)Is it your position that none of the other areas of the massive government spending bill will have enough impact on our economy to increase the money multiplier?
4) Do you really believe that a rising money multiplier will not provide incentive for banks to begin lending again.
5)Do you believe that the current level of personal savings rate will increase over time? That fear will get worse? That individuals posses the power to contract the economy through savings while the government is borrowing and spending?
LET THE DEBATE BEGIN!!!!!!
INFLATION IS ON THE HORIZON----CASE CLOSED.....
Wednesday, April 22, 2009
Sunday April 12, 2009
Wednesday, April 22, 2009
Is this simply a Bear market rally? George Soros seems to think so. So the near term trade is short, right? I am not so sure. I think we may be headed a little higher. I expected the futures to to come out lower than they did tonight. Could we be in the "here comes the money from the sidelines zone"? So many are afraid that they are going to miss the "rally of a lifetime". I think we could get some panic money moving into the market--but I don't buy that we aren't ultimately headed lower.
The Wells Fargo news on Friday was so powerful because it was totally unexpected. Shouldn't banks be making money in this environment? Their product is almost free to them as long as they eliminate fear and maintain deposits. There are still many loans that are paying like clockwork. It appears that we have averted a financial system collapse and are now focusing on other things. I still contend that the money multiplier is going to cause us inflation. For those that have been arguing that the recent government action is only rebuilding the banks balance sheets, what happens when they get the banks rolling again? Isn't there normal wealth destruction on some level all the time? If not, why do banks make provisions for loan loss reserves? Do you Deflationistas contend that we have had no significant increase in the money supply?
Think about China and their recent stimulus plan. Will their spending on infrastructure cause commodities prices to rise? Does China have the demand to significantly impact the price of commodities? I would argue yes. Last year we saw inflation caused by rising fuel prices and it hurt our economy. As a matter of fact, the level at which we saw demand destruction surprised economists. Many were arguing that we would not see demand destruction because in an inflationary environment that phenomenon would not occur. Being half right is equivalent to being wrong. Can you have price increases without inflation? Many would argue no, but based on last summer, I would argue yes. Just as some stocks go up or down faster than the level of the entire market, so can commodities prices within the context of the global marketplace. Is a service based economy more susceptible to stagflation? Is an economy of entitlements more susceptible to stagflation? Yes.
Will our economy get less efficient with the redistribution of wealth? If your answer is no---please post it in the comments section. I believe that it will. So what does that mean for our investments? To me it means buy commodity based stocks FCX is still one of my favorites.
I believe that we are very dependent on what we see out of this earnings season. If we see better than expected earnings, we could see this rally move up more. If we see dismal earnings, I think it will provide shock to the downside more so than last earnings season. I think we have silently heightened expectations during this rally. If we confirm that things are worse than dismal---look out below.
Monday, April 6, 2009
Listen to theTIPS---Treasury Inflation Protection Securities
What does the activity in TIPS (Treasury Inflation Protected Securities) tell us? That the smart money is betting on inflation? Given the fact that the TIPS returned the most in March since they have since their inception in 1997---I would interpret that as a pretty strong indication that the smart money is betting inflation. Many are expecting the the CPI to exceed 4% or more this year.
Often times when I make a post about inflation, I get comments or emails that criticize it if commodities fall that day or the following days. The inflation argument is over the next 18 months--not the next 18 hours and I am not pegging it to a particular commodity---even given the fact that a rise in oil prices is the scariest of them all. In a guest blogger post on Market Club last week, someone made a comment that milk was $1.87 per gallon in Denver. Either I am getting screwed paying $3.50 per gallon or this guy was quoting mountain goat milk. We have not seen food prices drop at near the rate that they rose when oil was running last year---and if it starts to run again---prices will head up from these already inflated levels. Why? Because the demand will continue at surprising rates and the market will allow it.
I am expecting the markets to pull back soon. I am not totally convinced that we are in full bull mode as are many. Looking at the chart, I would change my mind over 870 on the S&P, but as for now I think we have ourselves just another rally in a Bear market. One thing to keep an eye on is the changes to the components of the S&P 500--those changes may alter the earnings outlook for the group as those stock being taken out were losing money.
I still like EMS as a short. It had a nice drop on Friday and I think it is headed to $25. Again, I think this is a well run company, I just think they are playing in a market that will be punished in 2009.
One of my favorites FCX may pullback with any market weakness. I hope it does, as this is a great long term play--but it has almost doubled over the short-run and I would like to see it pullback. If copper prices take a breather--this one could provide a buying opportunity.
Don't get fooled---INFLATION IS NEAR
Often times when I make a post about inflation, I get comments or emails that criticize it if commodities fall that day or the following days. The inflation argument is over the next 18 months--not the next 18 hours and I am not pegging it to a particular commodity---even given the fact that a rise in oil prices is the scariest of them all. In a guest blogger post on Market Club last week, someone made a comment that milk was $1.87 per gallon in Denver. Either I am getting screwed paying $3.50 per gallon or this guy was quoting mountain goat milk. We have not seen food prices drop at near the rate that they rose when oil was running last year---and if it starts to run again---prices will head up from these already inflated levels. Why? Because the demand will continue at surprising rates and the market will allow it.
I am expecting the markets to pull back soon. I am not totally convinced that we are in full bull mode as are many. Looking at the chart, I would change my mind over 870 on the S&P, but as for now I think we have ourselves just another rally in a Bear market. One thing to keep an eye on is the changes to the components of the S&P 500--those changes may alter the earnings outlook for the group as those stock being taken out were losing money.
I still like EMS as a short. It had a nice drop on Friday and I think it is headed to $25. Again, I think this is a well run company, I just think they are playing in a market that will be punished in 2009.
One of my favorites FCX may pullback with any market weakness. I hope it does, as this is a great long term play--but it has almost doubled over the short-run and I would like to see it pullback. If copper prices take a breather--this one could provide a buying opportunity.
Don't get fooled---INFLATION IS NEAR
Friday, April 3, 2009
Inflation--Why is it So Misunderstood??
Yesterday I was the guest blogger at INO's Market Club. My post about inflation received far more than the recent average of comments on their site. There was some great debate in the comment section. I decided that I would post direct questions aimed to debunk the "deflation" argument and see what kind of responses we get. We want serious debate, not unrelated criticism so keep it focused.
1) Many have argued that every dime of TARP,TALF, Bailout, Handout will go to rebuild the banks balance sheets. If this is your position, is it also your position that we will not see any new lending for a long period of time? That banks will refuse to lend and hence seek to only generate revenue through fees?
2)Do you believe that wage pressure must be present first for there to be true inflation? (there was a comment to this effect yesterday on market club) If so, how would you explain the rise in oil, milk, and other prices last year during the beginning of the worst economic downturn in recent history?
3)Is it your position that none of the other areas of the massive government spending bill will have enough impact on our economy to increase the money multiplier?
4) Do you really believe that a rising money multiplier will not provide incentive for banks to begin lending again.
5)Do you believe that the current level of personal savings rate will increase over time? That fear will get worse? That individuals posses the power to contract the economy through savings while the government is borrowing and spending?
LET THE DEBATE BEGIN!!!!!!
INFLATION IS ON THE HORIZON----CASE CLOSED.....
1) Many have argued that every dime of TARP,TALF, Bailout, Handout will go to rebuild the banks balance sheets. If this is your position, is it also your position that we will not see any new lending for a long period of time? That banks will refuse to lend and hence seek to only generate revenue through fees?
2)Do you believe that wage pressure must be present first for there to be true inflation? (there was a comment to this effect yesterday on market club) If so, how would you explain the rise in oil, milk, and other prices last year during the beginning of the worst economic downturn in recent history?
3)Is it your position that none of the other areas of the massive government spending bill will have enough impact on our economy to increase the money multiplier?
4) Do you really believe that a rising money multiplier will not provide incentive for banks to begin lending again.
5)Do you believe that the current level of personal savings rate will increase over time? That fear will get worse? That individuals posses the power to contract the economy through savings while the government is borrowing and spending?
LET THE DEBATE BEGIN!!!!!!
INFLATION IS ON THE HORIZON----CASE CLOSED.....
Tuesday, March 31, 2009
Is Energy The Place To Be?
I think so. I am looking at several charts that tell me energy could have another move up. I think NOV could get a nice bounce. I plan to buy it today with a tight stop below 29.40. Many are saying that you can't buy oil under $50--as that is a huge psychological barrier. I disagree, I think we are headed for inflation and many are going to be shocked at the pace of the ascent of oil prices.
We still have a lot of headline risk in these markets. No doubt the markets do not like to hear about more government control. In my opinion, General Motors is most certainly headed for bankruptcy--and that will ultimately be good in the eyes of the market. The more the agony is prolonged---the more headline risk we incur in this market.
I heard from the deflation camp yesterday as oil and gold prices came under pressure. You deflation believers just keep pumping your money into shorts on the oil prices and it will ultimately lower my entry point and make my longs even more profitable. I was in Dallas this weekend and there were restaurants where I had to wait quite some time for a table. Now I admit that the economy has been slow, but it has far from stopped. My point is that when we do get rolling again, you will see rapid growth in the money multiplier. The multiplier will cause rampant inflation. I like the oil trade even better than gold as a hedge against inflation.
One of my favorites FCX got hammered yesterday after a nice run. I think it provided a great entry point near the 20ma. I will look to buy it today with a tight stop. With the Bears coming back out of the woodwork, I am amazed that I am finding more longs than shorts with my chart scans. I am still surprisingly bullish. Cautiously bullish with tight stops would be a better description. I think we have so much headline risk and you must protect yourself.
We still have a lot of headline risk in these markets. No doubt the markets do not like to hear about more government control. In my opinion, General Motors is most certainly headed for bankruptcy--and that will ultimately be good in the eyes of the market. The more the agony is prolonged---the more headline risk we incur in this market.
I heard from the deflation camp yesterday as oil and gold prices came under pressure. You deflation believers just keep pumping your money into shorts on the oil prices and it will ultimately lower my entry point and make my longs even more profitable. I was in Dallas this weekend and there were restaurants where I had to wait quite some time for a table. Now I admit that the economy has been slow, but it has far from stopped. My point is that when we do get rolling again, you will see rapid growth in the money multiplier. The multiplier will cause rampant inflation. I like the oil trade even better than gold as a hedge against inflation.
One of my favorites FCX got hammered yesterday after a nice run. I think it provided a great entry point near the 20ma. I will look to buy it today with a tight stop. With the Bears coming back out of the woodwork, I am amazed that I am finding more longs than shorts with my chart scans. I am still surprisingly bullish. Cautiously bullish with tight stops would be a better description. I think we have so much headline risk and you must protect yourself.
