Archive for the ‘Business’ Tag

Distribution – Stock Market Topping

“A healthy strengthening bull market
is accompanied by a large number of stocks
making moderate upward advances in price.
A weakening bull market
is characterized by a small number of stocks
making large advances in price,
giving the false appearance that all is well.”

The stock market trend is up.
SPX Weekly Divergence

The Bullish Percentage of SPX is down.
SPX Bullish Percentage
New Highs decreasing vs. New Lows increasing.

New Highs - New Lows

Percent of stocks above their 50 Day Moving Average is down.
Stocks  Above their 50  Day MA

Another high with another divergence may occur
but
TheEndIsNear

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Devalueing the dollar

Devalueing the dollar
ie printing to pay the debt
will allow the US
to pay off our debts in cheap dollars,

and also give a competitive advantage
to US global corporations
against countries who dont print as fast as the US

also, reduce relativly,
US workers wages
so we can be more competative in the world market

but

it will also reduce the purchasing power of the dollar
meaning a lower living standard
for you and me
and all the people in the country

US Hosehold Income

US Family Net Worth

Wealth Distribution

Out of control ?

Out of control ?

By printing money
it is hoped to:
–Replenish bank reserves
–Hold interest rates low,
to moderate interest payments on treasury loans,
and to encourage home purchases
–Raise the stock market.

By keeping rates low
and paying interest on bank reserves
the banks have been successfully induced
to withold commercial loans
thereby holding the economy in check
and so, in spite of printing,
holding money velocity low
and so, keeping some pressure on inflation.

Velocity 2013

But,

Jun 27, 2013
the Treasury sold $35 billion in five-year notes
to the lowest demand since September 2009,
with a bid-to-cover ratio of 2.45 times.”

“The April TIC report showed
a shocking drop in foreign ownership of US government debt.”

“the selloff [in the bond market]
has now reached the status of the worst ever bond market selloff
(of 90 days or less)
in percentage terms.

“Since May 2nd 2013,
10-year yields have risen from 1.626% to 2.609%,
a 98.3bp selloff
which means that yields have risen 60.5%
in less than two months”

10 Year Yield

Considering:

–“There are more than $12 trillion paper dollar assets
(stocks, bonds and cash)
held by foreigners outside the U.S.”

if this is the start of ‘recognition’
and foreign holdings of US paper is offloaded
rates will substantially rise

also, as

–“the global derivatives
have increased in size from $100 trillion in 1998,
to $1.2 quadrillion today.”
and the majority of those derivatives are interest rate swaps
and that the banks have sold the fixd rate,
and hold the variable rate

the effect of rate rise, on the banks,
on which the world economy relies,
will be catastrophic,

and the expense to the treasury
will be far greater than tax income will cover.

Except for a miracle
this implies immanent western world
deflation on bank collapse
or hyperinflation on attempts to print
to cover bank or treasury payments
or simultaneously, both.

Gold COT net short and long positions.

Gold Small Specs – Largest Short Position ever ?

COT Small Specs Net Position

Gold Large specs – Largest Short Position ever.

COT Specs Short Position

Gold Commercials – Largest Long Position in last 18 mos.  [Blees 100]

COT Commercial Traders Blees Rating 100

Gold Reversion to the Mean price rise.

GLD representing gold
is currently:

–Greater than 2 Standard Deviations below it’s 200 EMA
–Greater than 20% below it’s 200 SMA.

Gold Reversion to the mean

These are historical extremes
and similar locations to the 2008 stretched bottoms.

Gold appears due for a
reversion to the mean
[at least to its 200 MA]
price rise.

Tho note,
In 2008, after returning to it’s 200 MA
gold plunged again below its prior low.

Why QEs [printing] *must* continue.   Leave a comment

Why QEs *must* continue.

If rates rise
changes in outstanding ‘interest rate swaps‘  means derivitive mkt disaster.
ie iaw w the interest rate rise
JPMs & GSs variabl rate payout would rise
abov the rate they are receiving
from the fixd rate instrument they sold
resulting in *major* losses
affecting the US financial system

also, It is a fact that
in the US and Europe tax revenues do not cover
retirement of debt and govt spending;
so, borrowing to cover bond rollover and new expenses,
by issuing bonds, is required.

But if the necessary borrowing,
under present conditions of:
–large scale borrowing,
–poor economy [poor tax revenues], and
–hi debt to GDP ratios,
would cause hier rates:

“Imagine what the US economy would look like
with the base rate set to Italian levels of six per cent.
Asset values from bonds to stocks to real estate would be decimated.
a deflationary
[cause of inability to pay off the debt at such hi rates
and the fall in asset values]
depression would set in.”

Therefore, to avoid such a rate rise
and deflation
printing *must* continue
so so that govt can buy back its own bonds
at higher prices than other bond buyers would bid
ie hi bond prices = lo int rates.
ie the deficits must be monitized

The handwriting on the wall:

1. “The fed has become a significant buyer of debt,
purchasing some 75 percent of US treasuries last year
because there were no other buyers.”

2. LTRO, the ECB‘s  longer-term refinancing operation
[which has now loaned out above a trillion dollars]
lends banks cash  at about 1%
by loaning against sovereign bonds
that those banks currently hold,
so the banks can, in turn, lend to their domestic governments
by buying newly issued bonds.

The question is not wether QEs [printing] will continue,
the question is,
Is there a way to get off the merry-go-round ?

QE3 Impact

  Leave a comment

Gold
Wednesday, May 16th  Keith  Weiner

On Monday, May 14, something happened
that hasn’t happened since Dec of 2008.
Two successive near-month precious metals futures contracts
were in backwardation at the same time

the May silver contract is giving away a 3% annualized profit
to anyone who would sell physical silver and buy a May future
that delivers in a few weeks (thus recovering the same position).
Even more incredibly,
no one can or will take the profit that is dangling out there!

I think that it is a lack of unencumbered metal.
The markets for precious metals, silver more than gold,
have become quite tight.

Sunday, June 3, 2012  Adam

May was the highest monthly volume in the history of GDX
(with a bullish monthly candle to mark a bottom)
and Friday was the highest daily up volume in the history of the GDX ETF.
clearly, the big boys … have now established their positions.

Commercials are eliminating gold shorts.

Commercials are building a heavy long euro position.

A dollar drop may be in the cards.