Because the number of shares above their 50 day moving average has fallen back so much that rather sooner than later, stocks become so oversold that the market will bounce
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Friday 27 February 2009
Bounce
Why do I think we’re closer to a bottom than a top?
Because the number of shares above their 50 day moving average has fallen back so much that rather sooner than later, stocks become so oversold that the market will bounce
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Because the number of shares above their 50 day moving average has fallen back so much that rather sooner than later, stocks become so oversold that the market will bounce
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Too early to go long again
I just got a call from my friend Marc, my favorite gold bug. If we already can get in again, because gold is going to 2500 USD/oz. And sooner or later he will be right. But not necessarily now.
I think it’s a good thing to have an eye on the following:
* Gold ran away from other precious metals. Silver, platinum or palladium, you name it.
* Mining shares went up, but in a much lesser extent than the price of the metal. And with the first correction of the price of the metal, the shares of these companies went down too.
So whoever wants to build positions again, I only can tell you, be careful and stick with your discipline, whatever system you’re using to base your decisions on.
We stick with our renko system and prefer to wait.
I think it’s a good thing to have an eye on the following:
* Gold ran away from other precious metals. Silver, platinum or palladium, you name it.
* Mining shares went up, but in a much lesser extent than the price of the metal. And with the first correction of the price of the metal, the shares of these companies went down too.
So whoever wants to build positions again, I only can tell you, be careful and stick with your discipline, whatever system you’re using to base your decisions on.
We stick with our renko system and prefer to wait.
Capital One Financial
Pessimism is still l’ordre du jour.
Shorting too.
It is so crystal clear: stock exchanges open up positive and during the day everything is sold. Only just before the close you can have some modest come-back as computers and algorithms take over. How long will this go on?
I wish I knew, but I don’t.
Last November we had a liquidation tsunami caused by trapped funds. This time it is something else: the new way of ‘investing’ in stocks is by shorting them.
But there is a thought I want to share: if everybody is short, than the rally will wipe out a lot of bears.
As an example we mention Capital One Financial (ticker: COF).
COF went from 7 USD to 14 USD in 2 days. Yes folks, that’s 100%. That’s a short squeeze.
Now, this is too fast, as we all know. And shorters are ready to short it again.
Where would you step in? Professionals try to short near resistance levels. Typically a moving average. In this category the 20- and 50-day moving averages are very popular.
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Shorting too.
It is so crystal clear: stock exchanges open up positive and during the day everything is sold. Only just before the close you can have some modest come-back as computers and algorithms take over. How long will this go on?
I wish I knew, but I don’t.
Last November we had a liquidation tsunami caused by trapped funds. This time it is something else: the new way of ‘investing’ in stocks is by shorting them.
But there is a thought I want to share: if everybody is short, than the rally will wipe out a lot of bears.
As an example we mention Capital One Financial (ticker: COF).
COF went from 7 USD to 14 USD in 2 days. Yes folks, that’s 100%. That’s a short squeeze.
Now, this is too fast, as we all know. And shorters are ready to short it again.
Where would you step in? Professionals try to short near resistance levels. Typically a moving average. In this category the 20- and 50-day moving averages are very popular.
Thursday 26 February 2009
A sweet spot
Can you pass me the sugar please?
Sugar was one soft commodity not participating in the sell-off of mid-2008. Capitulation only came last winter.
But now sugar is making a spectacular come-back.
As Dresdner Bank writes:
Sugar prices are close again to the 4-month high recorded at the start of February, at 13.37 US cents a pound. Numerous market observers have revised their forecasts of an expected deficit on the sugar market this year downwards, some quite significantly. Sugar broker Czarnikow or the consultancy Kingsman expect a market deficit of more than 10 million tons. This week, India, the world’s second largest sugar producer, lowered its forecast for sugar production in this crop year (October to September) by 1.5 million to 16.5 million tons. This would mean a fall in production of about 10 million tons in comparison to last year. As India is also the world’s largest sugar consumer, this has huge implications on the market balance.
Sugar was one soft commodity not participating in the sell-off of mid-2008. Capitulation only came last winter.
But now sugar is making a spectacular come-back.
As Dresdner Bank writes:
Sugar prices are close again to the 4-month high recorded at the start of February, at 13.37 US cents a pound. Numerous market observers have revised their forecasts of an expected deficit on the sugar market this year downwards, some quite significantly. Sugar broker Czarnikow or the consultancy Kingsman expect a market deficit of more than 10 million tons. This week, India, the world’s second largest sugar producer, lowered its forecast for sugar production in this crop year (October to September) by 1.5 million to 16.5 million tons. This would mean a fall in production of about 10 million tons in comparison to last year. As India is also the world’s largest sugar consumer, this has huge implications on the market balance.
Stampede
Everything is drama. Especially now analysts learn how to be bearish. Short recommendations from newsletter writers can be found everywhere and investors cannot wait piling on short positions.
A stampede of the bears.
In good times we learn: buy the dip. In bad times it should be: sell the rally.
But there is no rally coming.
The only thing we hear are the drums whispering: sell-sell-sell.
If we look to the monthly chart of the S&P500 wit a 20 period moving average added, we observe that the S&P500 is more than 50% below it’s 20 month moving average.
We just know there will be a return to the mean, as an invisible rubber band has now stretched this index further to the downside than ever before.
What is especially tricky with this bear market is the fact that there were no entry points for going short.
A stampede of the bears.
In good times we learn: buy the dip. In bad times it should be: sell the rally.
But there is no rally coming.
The only thing we hear are the drums whispering: sell-sell-sell.
If we look to the monthly chart of the S&P500 wit a 20 period moving average added, we observe that the S&P500 is more than 50% below it’s 20 month moving average.
We just know there will be a return to the mean, as an invisible rubber band has now stretched this index further to the downside than ever before.
What is especially tricky with this bear market is the fact that there were no entry points for going short.
A correction... at last
Gold is correcting.
At last.
The renko-chart (60-minutes) works perfectly. CCI and SAR turned negative. Let’s see how far it will fall.
Needless to say that also this dip will be bought.
But it is too early.
Sit back and wait.
At last.
The renko-chart (60-minutes) works perfectly. CCI and SAR turned negative. Let’s see how far it will fall.
Needless to say that also this dip will be bought.
But it is too early.
Sit back and wait.
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Wednesday 25 February 2009
Merrill: let the good times roll....
It is pretty fascinating that Merrill which ranks horribly in both increasing writedowns and change in leverage over the past 5 years has the highest compensation as % of operating profit (when this was positive). Merrill is the only firm that paid out over 100% of its operating profit to its employees over the '03-'08 period (185% to be exact). Even mighty Goldman barely registers on the chart when compared to Merrill on these parameters.
(Thanks to Tyler Durden)
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Them good old boys were drinkin' whiskey and rye...
During the Russian hyperinflation in the early 1990s vodka was the primary item of barter.
Although we first have to wade through a period of disinflation, I am looking forward to some hyperinflation. The only reason is that I cannot wait to start to barter the best whiskey of this planet.
Although we first have to wade through a period of disinflation, I am looking forward to some hyperinflation. The only reason is that I cannot wait to start to barter the best whiskey of this planet.
In the mean time we learned from the Wall street Journal that the Tokyo Stock Exchange immediately suspended trading of CapCom bonds after a 3 trillion Yen order was placed. Unfortunately the entire outstanding issue is only 15 billion Yen.
Seems to a government – any government – placing an x trln USD market bid order these days for bank x which has only y bln USD outstanding anymore.
After AIG it’s now Merrill’s turn to cough up another unforeseen 500 million USD. Hey, TARP will pay anyway. Ok, AIG takes Washington hostage for another 60 bln USD. As there is Detroit, Bank of America and Citigroup.
After the Lehman-trauma nobody wants another debacle.
Tant pis for the future generations.
Don’t worry: we make this world a better place for them.
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Tuesday 24 February 2009
Toronto Venture Exchange
The Toronto Venture Exchange lists over 1000 companies. Mining outlets especially (65%) and energy (15%) and then some. This resource venue is an excellent place to find out how hot or cold the winds are blowing for these tiny juniors.
Well, the shake out was brutal, the last 12 months, I can tell you. The ‘Venture’ lost 80% of its value in 14 months.
How come?
Well, the ‘Venture’ is a place of dreams and hot air. All these companies are paper structures: a balance sheet, some or no cash, a management team waiting for drill results. Assets are a hope not a requirement.
Shares in these companies are like lottery tickets. You buy one, you sell one and sometimes you win.
The place is not crowded these days. The public is gone. Only some diehards are lurking around.
Waiting for spring.
But there are some great companies hidden on the ‘Venture’. With successful managements teams, cash in their bank accounts and waiting for results. The wash-out of recent months gives the astute investor the chance of a life time.
Well, the shake out was brutal, the last 12 months, I can tell you. The ‘Venture’ lost 80% of its value in 14 months.
How come?
Well, the ‘Venture’ is a place of dreams and hot air. All these companies are paper structures: a balance sheet, some or no cash, a management team waiting for drill results. Assets are a hope not a requirement.
Shares in these companies are like lottery tickets. You buy one, you sell one and sometimes you win.
The place is not crowded these days. The public is gone. Only some diehards are lurking around.
Waiting for spring.
But there are some great companies hidden on the ‘Venture’. With successful managements teams, cash in their bank accounts and waiting for results. The wash-out of recent months gives the astute investor the chance of a life time.
We're not done yet...
Feeling miserable too?
About being an investor in stock markets for the moment?
About living there where you never wanted to live?
About reading all this depressing stuff and looking to all that humbug on the tele?
About the gray winter skies and a spring which is not showing up?
About all the gloom and doom?
Yes, dear reader, I feel miserable about all these things.
But in times like this, when all these bright idiots, who led us into this mess in the first place, are running for the hills, the purification is near.
At least that’s what I hope.
That living through this mess, will give way to fresh ideas, fresh minds and take the guys, responsible for this, out of the game.
Well you never will be sure of that last one…
And it’s not over yet.
AIG may post a loss of 6O bln USD.
It started with 85 bln USD, went up to 150 bln USD and how much will the US government throw to it now?
The most sickening thing is that by bailing out AIG, tax money went directly to payoff Goldman Sachs (ticker: GS) and Morgan Stanley (ticker: MS)
It was Luo Ping, director-general of the China Banking Regulatory Commission, who said a couple of weeks ago:
Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option... We hate you guys. Once you start issuing $1 trillion-$2 trillion... we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.
We’re not done yet. Oh no…
Last Sunday there were 120.000 people in the streets of Dublin. How many will there be next time?
Sphere: Related Content
About being an investor in stock markets for the moment?
About living there where you never wanted to live?
About reading all this depressing stuff and looking to all that humbug on the tele?
About the gray winter skies and a spring which is not showing up?
About all the gloom and doom?
Yes, dear reader, I feel miserable about all these things.
But in times like this, when all these bright idiots, who led us into this mess in the first place, are running for the hills, the purification is near.
At least that’s what I hope.
That living through this mess, will give way to fresh ideas, fresh minds and take the guys, responsible for this, out of the game.
Well you never will be sure of that last one…
And it’s not over yet.
AIG may post a loss of 6O bln USD.
It started with 85 bln USD, went up to 150 bln USD and how much will the US government throw to it now?
The most sickening thing is that by bailing out AIG, tax money went directly to payoff Goldman Sachs (ticker: GS) and Morgan Stanley (ticker: MS)
It was Luo Ping, director-general of the China Banking Regulatory Commission, who said a couple of weeks ago:
Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option... We hate you guys. Once you start issuing $1 trillion-$2 trillion... we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.
We’re not done yet. Oh no…
Last Sunday there were 120.000 people in the streets of Dublin. How many will there be next time?
Monday 23 February 2009
Gold
A lot of noise is surrounding the rally of the gold price these days. First of all: a lot of people – the believers – think that the Big One for gold has come… Everything is possible of course, but to ignite a rally for the Big One someone need the money. Where is it going to come from, these days?
While everybody is running for the hills, I would be surprised to see a gold price at –say- 1200 USD/oz anytime soon.
That’s because the buying power is not widespread. No jewelry, no sovereign fund, no India … only investors demand concentrated in the Exchange Traded Funds.
Secondly: a lot of other people – the non-believers- are going to play this from the short side. The set up looks fine: waiting if another round of hope is coming and if not – sell this overbought rally like hell.
I am both. As a believer and a non-believer (we saw too many rallies broken in the butt) we play this thing at the long side for the moment, but with a tight stop. And not risking the whole house.
The renko chart is still upbeat. A good start for a stop-loss would be the 60 minute bars. The SAR stands at 930 USD/oz. That’s already a low stop if you are in this trade. But also indicates how fast everything went up. Too quickly.
While everybody is running for the hills, I would be surprised to see a gold price at –say- 1200 USD/oz anytime soon.
That’s because the buying power is not widespread. No jewelry, no sovereign fund, no India … only investors demand concentrated in the Exchange Traded Funds.
Secondly: a lot of other people – the non-believers- are going to play this from the short side. The set up looks fine: waiting if another round of hope is coming and if not – sell this overbought rally like hell.
I am both. As a believer and a non-believer (we saw too many rallies broken in the butt) we play this thing at the long side for the moment, but with a tight stop. And not risking the whole house.
The renko chart is still upbeat. A good start for a stop-loss would be the 60 minute bars. The SAR stands at 930 USD/oz. That’s already a low stop if you are in this trade. But also indicates how fast everything went up. Too quickly.
Truble
Truble
That’s what Western bankers are thinking about these days if they look to the repayment schedule of Russian companies.
In total the West lent 500 billion dollar to them, but it seems that Russia is not going to support the tycoons anymore but the banking system instead.
Who has money?
EU leaders turn to the IMF on Sunday and call for a doubling of the IMF resources to 500 bln USD so they can respond to the problems in Eastern Europe. Elsewhere the European leaders said that all financing markets and participants have to be regulated and tax havens should be banned from this planet.
Asia agrees on a 120 bln USD currency pool that can be used by countries to defend their currencies if necessary.
Now, I have a question to all this brilliant European political leaders – and subsequently their bankers - : the central and eastern European banking system is dominated by western European banks. These banks sold all mortgages in Swiss francs or yen or other currencies with low rates. There are countless examples that these types of loans always turn sour in a crisis situation. The money that households saved on cheap Swiss interest rates has been more than wiped out by the rise in the Swiss franc.
Why did European banks let it happen when it was only normal and natural to promote the euro as the currency 2B.
No wonder the EU turns to the IMF in a hurry…
Sphere: Related Content
That’s what Western bankers are thinking about these days if they look to the repayment schedule of Russian companies.
In total the West lent 500 billion dollar to them, but it seems that Russia is not going to support the tycoons anymore but the banking system instead.
Who has money?
EU leaders turn to the IMF on Sunday and call for a doubling of the IMF resources to 500 bln USD so they can respond to the problems in Eastern Europe. Elsewhere the European leaders said that all financing markets and participants have to be regulated and tax havens should be banned from this planet.
Asia agrees on a 120 bln USD currency pool that can be used by countries to defend their currencies if necessary.
Now, I have a question to all this brilliant European political leaders – and subsequently their bankers - : the central and eastern European banking system is dominated by western European banks. These banks sold all mortgages in Swiss francs or yen or other currencies with low rates. There are countless examples that these types of loans always turn sour in a crisis situation. The money that households saved on cheap Swiss interest rates has been more than wiped out by the rise in the Swiss franc.
Why did European banks let it happen when it was only normal and natural to promote the euro as the currency 2B.
No wonder the EU turns to the IMF in a hurry…
Friday 20 February 2009
Thoratec Laboratories
Another highflyer appears on our radar ready for some downhill skiing. On our renkocharts we observe that for Thoratec Laboratories (ticker: THOR) the CCI is already signaling a downward trend. If the price goes below 24.64 then the SAR will flip too.
Not a positive set-up for this market darling.
Not a positive set-up for this market darling.
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Gold is shining... again
It's Friday.
Not the first one and not the last one.
Fridays are tricky days for the price of gold.
Especially the last 15 months.
It's also the case today.
Gold jumped more than 5% in less than an hour, just before the opening of NY.
Now, the magic 1000 USD-mark is now very, very close.
We love it...
Not the first one and not the last one.
Fridays are tricky days for the price of gold.
Especially the last 15 months.
It's also the case today.
Gold jumped more than 5% in less than an hour, just before the opening of NY.
Now, the magic 1000 USD-mark is now very, very close.
We love it...
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Axsys
This one I found with trader Mark.
J.P. Morgan downgraded Axsys Technologies (ticker: AXYS) on December 10th. The stock lost 49% from his high since then. The same analyst however upgraded the company twice since then, but the price barely moved.
Axsys makes high-performance surveillance cameras and imaging systems, used for everything from missile tracking to unmanned drones to vision enhancement. They offer life-saving applications, such as those used in the Army’s “We Own the Night” strategy in Afghanistan, and they act as force multipliers, which means more can be done with fewer boots on the ground.
Axsys supplies the Department of Defense, Border Patrol, Raytheon, Northrop Grumman, Lockheed Martin, Boeing and others.
Axsys is trading at just 13 times it expected earnings for 2010. It says it will ship 91% of its 184 mllion USD in backlog orders this year and the market cap is 835 million USD.
Recurrent revenue generated 70% of Axsys’ bookings last quarter. Other headlines: sales were up 34% year over year, EPS up 64%, backlog increased 18% and so on…
Maybe too early to buy, but worth following….
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J.P. Morgan downgraded Axsys Technologies (ticker: AXYS) on December 10th. The stock lost 49% from his high since then. The same analyst however upgraded the company twice since then, but the price barely moved.
Axsys makes high-performance surveillance cameras and imaging systems, used for everything from missile tracking to unmanned drones to vision enhancement. They offer life-saving applications, such as those used in the Army’s “We Own the Night” strategy in Afghanistan, and they act as force multipliers, which means more can be done with fewer boots on the ground.
Axsys supplies the Department of Defense, Border Patrol, Raytheon, Northrop Grumman, Lockheed Martin, Boeing and others.
Axsys is trading at just 13 times it expected earnings for 2010. It says it will ship 91% of its 184 mllion USD in backlog orders this year and the market cap is 835 million USD.
Recurrent revenue generated 70% of Axsys’ bookings last quarter. Other headlines: sales were up 34% year over year, EPS up 64%, backlog increased 18% and so on…
Maybe too early to buy, but worth following….
Gloom and doom
Yes, everything looks gloom and doom indeed.
Not only the headlines – UBS, Rio Tinto, stock indexes, banks- sound very negative but also in less suspected corners we only see dire conditions and predictions.
Bloomberg tells us that in January 74 bln USD was withdrawn by hedge-fund investors. These withdrawals were the second highest on record after the 117 bln USD outflows in December.
Losses and withdrawals cut assets by 37 percent in the second half of 2008 to an estimated 964 billion USD. The entire industry is under pressure in order to survive.
The Eastern Europe story has now hit the headlines of the Wall Street Journal. We’re still not sure if a meltdown is underway. Or is this the meltdown?
Not only the headlines – UBS, Rio Tinto, stock indexes, banks- sound very negative but also in less suspected corners we only see dire conditions and predictions.
Bloomberg tells us that in January 74 bln USD was withdrawn by hedge-fund investors. These withdrawals were the second highest on record after the 117 bln USD outflows in December.
Losses and withdrawals cut assets by 37 percent in the second half of 2008 to an estimated 964 billion USD. The entire industry is under pressure in order to survive.
The Eastern Europe story has now hit the headlines of the Wall Street Journal. We’re still not sure if a meltdown is underway. Or is this the meltdown?
Sphere: Related Content
Thursday 19 February 2009
Fire these guys...
In contrast to Europe where the ECB tries to strangle banks instead of propping them up, money is flowing in the US. The American government has made commitments until now for nearly 8.8 trln USD and spent 2 trln USD.
Yes folks, that’s 2.000.000.000.000 bucks.
Yes folks, that’s 2.000.000.000.000 bucks.
How?
As an investor (commitment: 4.6 trln - spent 1.1 trln - direct investments in financial institutions, purchases of high-grade corporate debt and purchases of mortgage-backed securities).
As a lender (commitment: 2.4 trln - spent 0.657 trln -an extension of the traditional overnight lending in order to prop up liquidity. Terms are longer and more institutions can apply on this funding).
As an insurer (commitment: 1.8 trln - spent 0.267 trln - insuring debt issued by financial institutions and guaranteeing poorly performing assets owned by banks).
Most active is the government in commercial paper (as buyer of last resort – 249 bln spent), installation of public-private fund (not operational yet but will buy nonperforming assets of banks), Troubles Asset Relief Program (TARP – the Treasury now owns stock in hundred of banks an GM, Chrysler, AIG – biggest BOA and Citigroup – 510 bln spent), Federal Home Loan Bank securities (Fannie, Freddie and Ginnie – 217 bln spent), money market funds (14 bln spent), AIG, (43 bln spent) Bear Stearns (the FED bought the portfolio with distressed assets – 29 bln spent), Reserve US Government Fund (a private fund, but the first money market fund that went down – 4 bln spent)
Compared to Europe, this is huge. The ECB leaves it to the locals to save their banks and if necessary they will give money but with a big haircut. Now: in good times there was almost no haircut and in bad times they start to take big margins. Why?
Sphere: Related Content
As an investor (commitment: 4.6 trln - spent 1.1 trln - direct investments in financial institutions, purchases of high-grade corporate debt and purchases of mortgage-backed securities).
As a lender (commitment: 2.4 trln - spent 0.657 trln -an extension of the traditional overnight lending in order to prop up liquidity. Terms are longer and more institutions can apply on this funding).
As an insurer (commitment: 1.8 trln - spent 0.267 trln - insuring debt issued by financial institutions and guaranteeing poorly performing assets owned by banks).
Most active is the government in commercial paper (as buyer of last resort – 249 bln spent), installation of public-private fund (not operational yet but will buy nonperforming assets of banks), Troubles Asset Relief Program (TARP – the Treasury now owns stock in hundred of banks an GM, Chrysler, AIG – biggest BOA and Citigroup – 510 bln spent), Federal Home Loan Bank securities (Fannie, Freddie and Ginnie – 217 bln spent), money market funds (14 bln spent), AIG, (43 bln spent) Bear Stearns (the FED bought the portfolio with distressed assets – 29 bln spent), Reserve US Government Fund (a private fund, but the first money market fund that went down – 4 bln spent)
Compared to Europe, this is huge. The ECB leaves it to the locals to save their banks and if necessary they will give money but with a big haircut. Now: in good times there was almost no haircut and in bad times they start to take big margins. Why?
Gold shines
The World Gold Council is a strange animal. Always difficult to say on whose side they are. But they publish nice reports on the state of this market.
We also read in their 2008 Q4 report:
We also read in their 2008 Q4 report:
On the investment side, the main driver of flows was net retail investment, which rose 396% from 61.4 tonnes in Q4 2007 to 304.2 tonnes in Q4 2008. Over the year as a whole, the growth rate was 87%. Bar and coin shortages were reported across many parts of the globe, although the most dramatic surge was in Europe, where bar and coin demand increased from just 9.0 tonnes in Q4 2007 to 113.7 tonnes in Q4 2008.
All components of net retail investment recorded extremely strong growth. Bar hoarding, which largely covers the non-western markets, increased from 30.2 tonnes in Q4 2007 to 126.6 tonnes in Q4 2008, a rise of 318%. Official coins also enjoyed impressive growth, more than tripling from 22.4 tonnes to 67.9 tonnes. However, the highlight of the quarter was the 92.3 tonne improvement in “other identified retail investment” to 92.6 tonnes from just 0.3
From Tim Iacono we borrow this chart about the inventory of the SPDR Gold Shares ETF (ticker: GLD). Yesterday 23 ton was bought or 229 ton in the first seven weeks of 2009. That’s almost 25% of the total holdings of the fund.
Wednesday 18 February 2009
Not everything is gloom and doom
How bad things may look, I believe we’re moving – o, so slowly – in the right direction.
An example: during his House Financial Services Committee testimony last Tuesday, the Fed Chairman paralleled the Treasury Secretary’s stress test to FDR’s bank holiday. The Chairman explained, “An interesting historical example is the bank holiday of 1933 when Roosevelt shut down the banks for a week, and said we are just going to check the books and open them up only when we think they are solvent. And a lot of the banks opened up pretty quick. So, it's not really clear that how much they really looked through the books, but when they opened them up again, people felt much more comfortable and more confident in the bank. And part of the proposal that Secretary Geithner put out this morning is to have a supervisory review, not only of the quality of assets reserving and the potential future losses, but also to ask a very important question: How well would the banks do in a very -- even more severe scenario?”
And the Homebuilder ETF (ticker: XHB):
The Baltic Dry Index (ticker: BDI) is another piece in the puzzle:
Sphere: Related Content
Every other day we move in the direction of a better understanding our problems and we’re able to address them. Things seem to become worse, but the purification process is running and that is a good thing.
An example: during his House Financial Services Committee testimony last Tuesday, the Fed Chairman paralleled the Treasury Secretary’s stress test to FDR’s bank holiday. The Chairman explained, “An interesting historical example is the bank holiday of 1933 when Roosevelt shut down the banks for a week, and said we are just going to check the books and open them up only when we think they are solvent. And a lot of the banks opened up pretty quick. So, it's not really clear that how much they really looked through the books, but when they opened them up again, people felt much more comfortable and more confident in the bank. And part of the proposal that Secretary Geithner put out this morning is to have a supervisory review, not only of the quality of assets reserving and the potential future losses, but also to ask a very important question: How well would the banks do in a very -- even more severe scenario?”
Nobody would have talked about this 6 months ago.
The problems are defined now but investors are waiting before willing to march on.
We look at a couple of economic indicators where a flattening seems to be underway. Too early to call the bottom. But a change we have to pay attention to.
We show copper:
The problems are defined now but investors are waiting before willing to march on.
We look at a couple of economic indicators where a flattening seems to be underway. Too early to call the bottom. But a change we have to pay attention to.
We show copper:
And the Homebuilder ETF (ticker: XHB):
The Baltic Dry Index (ticker: BDI) is another piece in the puzzle:
Europe in pain
It was another Terrible Tuesday.
Turmoil everywhere drove investors to the dollar, Treasuries and gold.
Buyers disappeared.
Europe is now the epicenter.
That’s what we learn from the Financial Times.
The exposure of Western European Banks to emerging Europe is leading markets to price in a full blown credit event.
Did anybody ring the ECB about this, because those guys seem to be lost in space for the moment.
The markets are blowing spreads of member states versus the Bund out of the water.
Italy, Ireland, Greece and Austria are feeling the pain.
On the Zero Hedge blog we found following chart, showing Western European countries’ exposure to their Eastern European counterparts.
Turmoil everywhere drove investors to the dollar, Treasuries and gold.
Buyers disappeared.
Europe is now the epicenter.
That’s what we learn from the Financial Times.
The exposure of Western European Banks to emerging Europe is leading markets to price in a full blown credit event.
Did anybody ring the ECB about this, because those guys seem to be lost in space for the moment.
The markets are blowing spreads of member states versus the Bund out of the water.
Italy, Ireland, Greece and Austria are feeling the pain.
On the Zero Hedge blog we found following chart, showing Western European countries’ exposure to their Eastern European counterparts.
Sphere: Related Content
How to become a banker
It is fascinating to observe how the Crisis is unmasking phony bankers.
With Mr Madoff barely gone, we have now Sir Allen Stanford stepping forward as the next fraud.
Allen is not knighted at all by the Queen but by the governor-general of Antigua.
The nice one is this: concerns were sparked after Alex Dalmady, a Venezuela-based analyst, compiled figures on SIB’s investment performance from the bank’s published annual and half-yearly reports that show consistent market-beating returns.
Mr Dalmady questioned the bank’s ability to ride out market volatility because SIB was purely in the business of trading stocks and bonds and did not make loans.
These were the returns Stanford International Bank produced for his clients against the DJIA. The upper line is the return on investment and the bottom line is the interest paid to investors. Figures are coming form the SEC report
Once more: it is even more fascinating to notice that no regulator or external auditor had a clue what was going on.
Sphere: Related Content
With Mr Madoff barely gone, we have now Sir Allen Stanford stepping forward as the next fraud.
Allen is not knighted at all by the Queen but by the governor-general of Antigua.
The nice one is this: concerns were sparked after Alex Dalmady, a Venezuela-based analyst, compiled figures on SIB’s investment performance from the bank’s published annual and half-yearly reports that show consistent market-beating returns.
Mr Dalmady questioned the bank’s ability to ride out market volatility because SIB was purely in the business of trading stocks and bonds and did not make loans.
These were the returns Stanford International Bank produced for his clients against the DJIA. The upper line is the return on investment and the bottom line is the interest paid to investors. Figures are coming form the SEC report
Once more: it is even more fascinating to notice that no regulator or external auditor had a clue what was going on.
Tuesday 17 February 2009
Gold, my precious....
Joy and fear. That’s the message we’re receiving from the gold market these days. The price is now creeping up above the September dollar highs and on its way to the all time highs reached in March last year.
Shorts are feeling increasingly uncomfortable. Longs too. But for different reasons. What’s different this time?
The gold price action has nothing to do with the US. In the past you had an inverse correlation between the dollar and the gold price. This time we observe a certain currency neutrality. So the move in gold is not anti-dollar.
These higher prices are not set by gold bugs, because they don’t have the firepower. Oh well they claim they are in the know, but no secret central bank buying or sovereign fund accumulation is taking place, because they have other business on their plate for the moment.
That means that the money coming to the gold and silver markets is coming from elsewhere. What’s left? The capital pools. There is portfolio allocation by larger investors. This move is being driven by new investment demand. The buying is coming from the gold and silver ETF’s. And these are the vehicles typically used by large investors. Because ETF’s are easy to handle and their substance makes it possible for the big boys to play.
Another trend is helpful. Suddenly central banks discovered that gold is a precious asset, again.
Well, they are less and less involved in the typical carry trade as low interest rates and high lease rates make such trades less attractive. The margins are too small for carry trades to be profitable enough to justify other risks enhanced with this trade as currency risk and others.
Where is this leading us?
We think that the fun is not over.
Gold is trending on his own merits for the moment as new players are pouring in and discovering gold as an asset class, whatever their beliefs may be about currencies.
Shorts are feeling increasingly uncomfortable. Longs too. But for different reasons. What’s different this time?
The gold price action has nothing to do with the US. In the past you had an inverse correlation between the dollar and the gold price. This time we observe a certain currency neutrality. So the move in gold is not anti-dollar.
These higher prices are not set by gold bugs, because they don’t have the firepower. Oh well they claim they are in the know, but no secret central bank buying or sovereign fund accumulation is taking place, because they have other business on their plate for the moment.
That means that the money coming to the gold and silver markets is coming from elsewhere. What’s left? The capital pools. There is portfolio allocation by larger investors. This move is being driven by new investment demand. The buying is coming from the gold and silver ETF’s. And these are the vehicles typically used by large investors. Because ETF’s are easy to handle and their substance makes it possible for the big boys to play.
Another trend is helpful. Suddenly central banks discovered that gold is a precious asset, again.
Well, they are less and less involved in the typical carry trade as low interest rates and high lease rates make such trades less attractive. The margins are too small for carry trades to be profitable enough to justify other risks enhanced with this trade as currency risk and others.
Where is this leading us?
We think that the fun is not over.
Gold is trending on his own merits for the moment as new players are pouring in and discovering gold as an asset class, whatever their beliefs may be about currencies.
Another tidal wave is coming
O tempora, o mores.
A drunk/chilling Japanese Minister of Finance has to resign, the Russian oligarchs are vanishing, there is an anti-bonus fever, bankers have to appear in front of politicians (who belies who?), and nobody likes stocks anymore.
Our attention is drawn to Europe where new tidal waves seem to hit banks again. We read this morning that Santander seeks to halt payouts from the Santander Banif Immobiliario FII fund after investors sought to withdraw 80% of the vehicles capital at once. And in the background an Eastern European crisis is brewing for Western European banks.
From Bloomberg:
Banks from Austria, Italy, France, Belgium, Germany and Sweden account for 84 percent of western European bank loans in eastern Europe. The region’s economies are weakening, with the International Monetary Fund already offering aid to Latvia, Hungary, Serbia and Ukraine. Bailouts may be extended to Bulgaria, Romania, Lithuania and Estonia as the global recession derails more banks, according to Capital Economics research…
Result of the turmoil?
The price of gold is soaring.
On a moment that everybody was waiting for a technical correction of the gold price, the events everywhere seem to generate momentum for gold to soar and approaching the magic 1K which attracts as a magnet.
Sphere: Related Content
A drunk/chilling Japanese Minister of Finance has to resign, the Russian oligarchs are vanishing, there is an anti-bonus fever, bankers have to appear in front of politicians (who belies who?), and nobody likes stocks anymore.
Our attention is drawn to Europe where new tidal waves seem to hit banks again. We read this morning that Santander seeks to halt payouts from the Santander Banif Immobiliario FII fund after investors sought to withdraw 80% of the vehicles capital at once. And in the background an Eastern European crisis is brewing for Western European banks.
From Bloomberg:
Banks from Austria, Italy, France, Belgium, Germany and Sweden account for 84 percent of western European bank loans in eastern Europe. The region’s economies are weakening, with the International Monetary Fund already offering aid to Latvia, Hungary, Serbia and Ukraine. Bailouts may be extended to Bulgaria, Romania, Lithuania and Estonia as the global recession derails more banks, according to Capital Economics research…
Result of the turmoil?
The price of gold is soaring.
On a moment that everybody was waiting for a technical correction of the gold price, the events everywhere seem to generate momentum for gold to soar and approaching the magic 1K which attracts as a magnet.
Friday 13 February 2009
Exit Caterpillar
Stopped out.
Ok folks, this was a bad trade where I risked 170 bucks. Losing a 50 on them before being stopped out of the Caterpillar trade. The SAR served as my trailing stop loss and yesterday the SAR switched from under the price to above the price. So, I took my losses.
Lesson learned?
Those renko charts are useful for your trading. As long as you respect the rules.
Ok folks, this was a bad trade where I risked 170 bucks. Losing a 50 on them before being stopped out of the Caterpillar trade. The SAR served as my trailing stop loss and yesterday the SAR switched from under the price to above the price. So, I took my losses.
Lesson learned?
Those renko charts are useful for your trading. As long as you respect the rules.
Sphere: Related Content
Love
I am in love.
Nothing new there as being in love seems to be a curse coming from the gods to punish me.
But I am in love.
With banks.
And that’s why I found this piece in the New York Times about the new Treasury Secretary, Mr Geitner, so fascinating:
In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.
Mr. Geithner... successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
Not too bad for a former FED employee.
At the end Wall Street always wins.
For now the Americans are throwing good money after bad money at the expense of the taxpayer.
Even as banks are walking zombies, they will be saved.
Let’s have a look to the bank index.
This index tell us the real story – read my lips: “Banks will be saved”
Nothing new there as being in love seems to be a curse coming from the gods to punish me.
But I am in love.
With banks.
And that’s why I found this piece in the New York Times about the new Treasury Secretary, Mr Geitner, so fascinating:
In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.
Mr. Geithner... successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
Not too bad for a former FED employee.
At the end Wall Street always wins.
For now the Americans are throwing good money after bad money at the expense of the taxpayer.
Even as banks are walking zombies, they will be saved.
Let’s have a look to the bank index.
This index tell us the real story – read my lips: “Banks will be saved”
Valentine Day
Reckless fools lost first because they deserved to lose and careful, wise men lost later because a world-wide earthquake doesn’t ask for personal references…
This is a quote from Edwin LeFevre, written in 1932.
The world hasn’t change that much in the mean time, we chuckle.
What did we learn today?
France will press today on a meeting in Rome of the G7 finance ministers for tighter controls on hedge funds, urging other big industrialized nations to strengthen regulation of the industry and compel banks that lend them money to hold more capital.
Paris wants the European Union, and eventually all leading economies, to beef up indirect regulation of hedge funds via their prime brokers, the banks which provide them with loans and other services. Governments should force banks with higher capital requirements to reflect the riskiness of their hedge fund clients.
Something different. For the Valentine fans among us:
The Los Angeles Times reports that membership at online dating sites has increased substantially this year; eHarmony, for example, was up 20 percent.
In light of the economy, we wonder how many of these online daters joined up to do some gold-digging. They should be careful. As research by Gunter Hitsch, Ali Hortacsu, and Dan Ariely makes clear, income is often vastly overstated on online dating sites.
This came from the Freakonomics blog.
This is a quote from Edwin LeFevre, written in 1932.
The world hasn’t change that much in the mean time, we chuckle.
What did we learn today?
France will press today on a meeting in Rome of the G7 finance ministers for tighter controls on hedge funds, urging other big industrialized nations to strengthen regulation of the industry and compel banks that lend them money to hold more capital.
Paris wants the European Union, and eventually all leading economies, to beef up indirect regulation of hedge funds via their prime brokers, the banks which provide them with loans and other services. Governments should force banks with higher capital requirements to reflect the riskiness of their hedge fund clients.
Something different. For the Valentine fans among us:
The Los Angeles Times reports that membership at online dating sites has increased substantially this year; eHarmony, for example, was up 20 percent.
In light of the economy, we wonder how many of these online daters joined up to do some gold-digging. They should be careful. As research by Gunter Hitsch, Ali Hortacsu, and Dan Ariely makes clear, income is often vastly overstated on online dating sites.
This came from the Freakonomics blog.
By the way, Saint Valentine is buried in Dublin. Romantic stories are crossing around, but don’t believe them. He simply lost his way at sea and landed on the shores of Ireland.
He could never escape, the poor lad…
Thursday 12 February 2009
Europe falls
A not so secret 17 page paper was discussed by the finance ministers of the EU on Tuesday.
A bail-out of toxic assets held by European Banks could lead to plunge the European Union into a crisis.
There is talk that European banks may be sitting on £16.3 trillion of toxic assets and could suffer massive losses.
There is a business decision to be made as well as a policy decision.
National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.
In line with the risk, and the weak performance of some EU economies compared to others, investors are demanding increasingly higher interest to lend to countries such as Italy instead of Germany. Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.
Look to Belgium.
After the Fortis debacle yesterday, the spread with Bunds on Belgian govvies widened to almost 100 bp.
The result: a weakening euro.
Watch this space: a full fledge currency crisis will be the result if governments don’t act quickly in unisono.
A bail-out of toxic assets held by European Banks could lead to plunge the European Union into a crisis.
There is talk that European banks may be sitting on £16.3 trillion of toxic assets and could suffer massive losses.
There is a business decision to be made as well as a policy decision.
National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.
In line with the risk, and the weak performance of some EU economies compared to others, investors are demanding increasingly higher interest to lend to countries such as Italy instead of Germany. Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.
Look to Belgium.
After the Fortis debacle yesterday, the spread with Bunds on Belgian govvies widened to almost 100 bp.
The result: a weakening euro.
Watch this space: a full fledge currency crisis will be the result if governments don’t act quickly in unisono.
Irish banks - an omen?
Ai, my pension money.
These banks are toast.
This is what happening on the Emerald Isle this morning:
Allied Irish Banks market cap - €828m
Bank of Ireland market cap - €572m
Irish government’s capital injection - €3.5bn for each bank
The Irish government doesn’t want to take control of the banks.
That’s noble. Only thing is that they try to recapitalize with the wrong type of capital.
Alex Potter wrote already in December:
Much as the government and banks consistently describe this as core Tier 1(which it is), it is not equity Tier 1 which is an important difference in the capital structure of the banks. Firstly, it does not share the equity dividend nor confer control (ex-ANGL) therefore meaning Irish taxpayers lose out on potential upside as the Irish economy reflates at some point in the future. This differs from the UK bailout. Secondly, equity would likely be better received by ratings agencies and the funding markets.
Not good at all.
No, sir. Sphere: Related Content
These banks are toast.
This is what happening on the Emerald Isle this morning:
Allied Irish Banks market cap - €828m
Bank of Ireland market cap - €572m
Irish government’s capital injection - €3.5bn for each bank
The Irish government doesn’t want to take control of the banks.
That’s noble. Only thing is that they try to recapitalize with the wrong type of capital.
Alex Potter wrote already in December:
Much as the government and banks consistently describe this as core Tier 1(which it is), it is not equity Tier 1 which is an important difference in the capital structure of the banks. Firstly, it does not share the equity dividend nor confer control (ex-ANGL) therefore meaning Irish taxpayers lose out on potential upside as the Irish economy reflates at some point in the future. This differs from the UK bailout. Secondly, equity would likely be better received by ratings agencies and the funding markets.
Not good at all.
No, sir. Sphere: Related Content
Natural gas
The crisis is hitting. In every corner of the financial universe we observe phenomenons illustrating this.
Since 2000 natural gas prices typically peaked between December en February. A bottom was put in between August and October.
But energy consumption has changed recently and there is no natural gas spike at the horizon. This year the prices will stay flat, we think.
A collapsing price is caused by a lack of demand and demand is not there because industrial production collapsed.
In March 2008 a 30-year high in natural gas production was reached and even now gas reserves are the highest ever seen.
In a recent past we had tar sand production using up excess reserves. But that’s gone for the moment.
So prices could stay low for a long time. It’s better to speculate on something else than natural gas.
Since 2000 natural gas prices typically peaked between December en February. A bottom was put in between August and October.
But energy consumption has changed recently and there is no natural gas spike at the horizon. This year the prices will stay flat, we think.
A collapsing price is caused by a lack of demand and demand is not there because industrial production collapsed.
In March 2008 a 30-year high in natural gas production was reached and even now gas reserves are the highest ever seen.
In a recent past we had tar sand production using up excess reserves. But that’s gone for the moment.
So prices could stay low for a long time. It’s better to speculate on something else than natural gas.
Wednesday 11 February 2009
More precious than gold
We come back on gold. Yesterday we expressed our thoughts that gold could be in for a kind of correction. Well, not yet…
But while we wait, I want to mention another phenomenon.
This has to do with platinum.
The ratio between this precious metal and gold shows that the sell-off was much more outspoken in the former. And compared to gold, it seems much more interesting to look to platinum in case of a rally.
A weekly chart shows how sellers pushed Pt over the cliff.
But while we wait, I want to mention another phenomenon.
This has to do with platinum.
The ratio between this precious metal and gold shows that the sell-off was much more outspoken in the former. And compared to gold, it seems much more interesting to look to platinum in case of a rally.
A weekly chart shows how sellers pushed Pt over the cliff.
A daily chart illustrates the formation of a bottom of this ratio over the last couple of weeks
Que sera, sera
And where do we go from here?
Nobody knows.
How can we summarize the situation?
The banks will be saved.
The shadow banking system will suffer the pain of free markets.
The assets (housing, commercial real estate, CMB, ABS, and many more) will be saved.
How?
This question is not structured, but we will print the money.
Anyhow.
The market believes that this monetary stimulus at the end will increase the odds of inflation. When inflation runs high Treasury Inflation Protected Securities (or TIPS) outperform regular Treasury Bonds. When inflation expectations are low, the opposite is true.
Now, this is what the markets believe:
Nobody knows.
How can we summarize the situation?
The banks will be saved.
The shadow banking system will suffer the pain of free markets.
The assets (housing, commercial real estate, CMB, ABS, and many more) will be saved.
How?
This question is not structured, but we will print the money.
Anyhow.
The market believes that this monetary stimulus at the end will increase the odds of inflation. When inflation runs high Treasury Inflation Protected Securities (or TIPS) outperform regular Treasury Bonds. When inflation expectations are low, the opposite is true.
Now, this is what the markets believe:
Yes: more inflation. As the ratio climbs TIPS are performing better than the 20-year Treasury.
That’s the news from Ireland, friends.
It’s cold here, the mood is icy, people are queuing for hours for the dole and property prices are swinging. Downwards, that is.
Banks are living on the edge.
The Celtic Tiger is no longer.
Caterpillar
The Caterpillar deal revisited.
This is not exactly what we were looking for, but if indexes lose 4%, you only have a small chance to escape with a blue chip.
Yep, so down went the price of CAT.
Look to the renko-chart. The positive trend is abolished. The CCI is retreating.
Now, our stop is the level of the SAR: 30,65 USD. If hit, we‘re out.
Sphere: Related Content
This is not exactly what we were looking for, but if indexes lose 4%, you only have a small chance to escape with a blue chip.
Yep, so down went the price of CAT.
Look to the renko-chart. The positive trend is abolished. The CCI is retreating.
Now, our stop is the level of the SAR: 30,65 USD. If hit, we‘re out.
Tuesday 10 February 2009
Durban Roodepoort Deep
I am worried about the gold price. It rallied two weeks ago but is not able to win more ground. Quite often is this the prelude to a correction. We saw it so many times before.
Maybe a downward move can be avoided if the price make its way through the 930’s soon, but otherwise we can be sure that lower levels will show up first, before the jump towards the magic 1000 USD limit.
A nice opportunity to show a renko chart of an all time favorite.
Maybe a downward move can be avoided if the price make its way through the 930’s soon, but otherwise we can be sure that lower levels will show up first, before the jump towards the magic 1000 USD limit.
A nice opportunity to show a renko chart of an all time favorite.
Durban Roodepoort Deep (ticker: DROOY).
A stock we follow for so many, many years. It’s a South African goldmine, not even a good one. But always fighting back. This stock had a nice rally (in dollars), but the tide seems to turn for the short term being. A sell-signal is given.
All the way to the bank
The game between Congress and the Administration is in full swing, but at the end of the day it seems that the markets will receive what they want: TARP, TALF, Bad Bank, Aggbank, accounting rules modifications and everything else.
One could have think that nationalization was inevitable, but the rally in some of those troubled bank stocks proves the opposite.
One could have think that nationalization was inevitable, but the rally in some of those troubled bank stocks proves the opposite.
Since Thursday we have a huge rally in some of these battered stocks: FITB, BAC, C, PNC, STT, BK, WFC and JPM (not) ...
Well, nobody knows what the real value is for these names, but we see buyers all over the place. Citigroup (ticker: C) saw a low at 2.80 USD. It only has to go to 5.60 USD to double.
Well, nobody knows what the real value is for these names, but we see buyers all over the place. Citigroup (ticker: C) saw a low at 2.80 USD. It only has to go to 5.60 USD to double.
Confessions
I confess.
Yesterday I published a renko chart of Caterpillar (ticker: CAT). These charts have only an informal character. ‘To show how…’
Normally I never invest and I never get involved.
This is no longer the case.
Yesterday I bought 1 call CAT march 2009 35 USD at 1.70 USD.
So there it is, in the open.
It’s not a fortune, but it is everything I have in my TD Ameritrade account.
Now everybody knows.
Please don’t tell my mom.
For the sake of this blog, we’ll follow up the developments and adventures of CAT in the next couple of days.
So far, so good.
The renko trend is not broken, though the close is not very reassuring.
Time to suffer…
Sphere: Related Content
Yesterday I published a renko chart of Caterpillar (ticker: CAT). These charts have only an informal character. ‘To show how…’
Normally I never invest and I never get involved.
This is no longer the case.
Yesterday I bought 1 call CAT march 2009 35 USD at 1.70 USD.
So there it is, in the open.
It’s not a fortune, but it is everything I have in my TD Ameritrade account.
Now everybody knows.
Please don’t tell my mom.
For the sake of this blog, we’ll follow up the developments and adventures of CAT in the next couple of days.
So far, so good.
The renko trend is not broken, though the close is not very reassuring.
Time to suffer…
Monday 9 February 2009
No shame
How ‘clever’ is ‘clever’ in banking?
Answer: very clever.
Now that the public learns about the bankers’ bonuses, do you think these guys learned a lesson?
No way.
They look upon you and think: haha, you think you’re clever?
Few of us know Stock Appreciation Rights (SARs) and Restricted Stock Units. These are equity compensation securities.
Instead of receiving cash bonuses, bank executives received very large bonuses of this kind.
So we learned that the top15 executives at JP Morgan on the 20th January 2009 were granted with 81.405.000 USD SARs and 30.500.000 USD of RSU’s or a total of 111.905.000 USD.
JP Morgan received form the government 55 bln USD for the Bear Stearns deal and another 25 bln USD of TARP money.
In return the government received Preferred Stock and Warrant packages. The actual values of these securities are now 50% lower than the taxpayer/government paid for it.
Sphere: Related Content
Answer: very clever.
Now that the public learns about the bankers’ bonuses, do you think these guys learned a lesson?
No way.
They look upon you and think: haha, you think you’re clever?
Few of us know Stock Appreciation Rights (SARs) and Restricted Stock Units. These are equity compensation securities.
Instead of receiving cash bonuses, bank executives received very large bonuses of this kind.
So we learned that the top15 executives at JP Morgan on the 20th January 2009 were granted with 81.405.000 USD SARs and 30.500.000 USD of RSU’s or a total of 111.905.000 USD.
JP Morgan received form the government 55 bln USD for the Bear Stearns deal and another 25 bln USD of TARP money.
In return the government received Preferred Stock and Warrant packages. The actual values of these securities are now 50% lower than the taxpayer/government paid for it.
Bullish
Tuesday = D-Day. President Obama’s economic stimulus package will be announced on Tuesday. Or not? On Wednesday all of the big-names financiers are set to appear before the House Financial Services Committee in Washington DC. They take train, bus or commercial aircraft, but the jets stay home.
The world has changed indeed.
Or has it?
Lloyd Blankfein, CEO of Goldman Sachs, has called for banks to adopt more stringent accounting practices. In the FT of today, Blankfein outlines seven areas of misdemeanor including valuation of assets and the outsourcing of risk management to rating agencies.
Well, let me tell you something: those rating agencies are private held institutions, with a stock exchange quotation, intended to produce dividends for its shareholders and paid by banks to make it possible for banks to sell their lofty products. In no way they are independent. They need the customer fees to exist. And banks need their ‘ratings’ to sell those lovely complex derivatives.
In the UK the bank bonus row escalates. Yes, Alistair Darling is reading this blog too. Alistair will learn quickly that this popular theme has some dark angles: a lot of bonuses are written down in contract clauses. Not so easy to abolish them.
But is this the news to concentrate on?
The answer is: NO.
I just ran a renko-scan on positive outbreaks and a long list was produced. In fact the longest list ever.
For a universe determined to implode, this is rather disappointing.
So, time to make a statement: I think we gonna see a broad rally the coming days and –hopefully- weeks.
If this is the case a lot of bears are going to burn some vital body parts.
I was alarmed by the Baltic Dry Index and discovered this weekend that a lot of sectors are producing bullish noises.
Maybe I am wrong. But be prepared.
As an exercise we show you the chart of Caterpillar (ticker: CAT). The positive outbreak is clear.
Sphere: Related Content
The world has changed indeed.
Or has it?
Lloyd Blankfein, CEO of Goldman Sachs, has called for banks to adopt more stringent accounting practices. In the FT of today, Blankfein outlines seven areas of misdemeanor including valuation of assets and the outsourcing of risk management to rating agencies.
Well, let me tell you something: those rating agencies are private held institutions, with a stock exchange quotation, intended to produce dividends for its shareholders and paid by banks to make it possible for banks to sell their lofty products. In no way they are independent. They need the customer fees to exist. And banks need their ‘ratings’ to sell those lovely complex derivatives.
In the UK the bank bonus row escalates. Yes, Alistair Darling is reading this blog too. Alistair will learn quickly that this popular theme has some dark angles: a lot of bonuses are written down in contract clauses. Not so easy to abolish them.
But is this the news to concentrate on?
The answer is: NO.
I just ran a renko-scan on positive outbreaks and a long list was produced. In fact the longest list ever.
For a universe determined to implode, this is rather disappointing.
So, time to make a statement: I think we gonna see a broad rally the coming days and –hopefully- weeks.
If this is the case a lot of bears are going to burn some vital body parts.
I was alarmed by the Baltic Dry Index and discovered this weekend that a lot of sectors are producing bullish noises.
Maybe I am wrong. But be prepared.
As an exercise we show you the chart of Caterpillar (ticker: CAT). The positive outbreak is clear.
Friday 6 February 2009
Chicken wings
Something strange is going on. Cocoa has reached his highest level since 1985. How come?
Because the currency, this commodity is denominated, is the pound sterling.
And the sterling is making lows not seen for many, many years versus major currencies. The central banks around the world have had a contest to see which could cut rates to zero the fastest (Japan doesn’t count; it has been a mess for over a decade). The goal in times of global slowdown is to devalue your currency to aid exports and jump-start the economy with cheaper relative prices and more money to spend in the system.
The dollar is not strong. It’s just not as weak as some other currencies of economies that are also in serious trouble. The currency fun and profits are about to begin.
Now where will this lead us?
As a currency goes down, commodities rise. Most of them are expressed in dollars.
We read an article about a problem the Super Bowl Sunday event has provoked: a shortage of chicken wings doubled the prices in some areas.
In the sixties the Anchor Bar of Buffalo, NY, started to use the wasted wing parts. Now there are plenty of breasts and legs, but there is a shortage of wings.
We all know that a chicken is nothing more than packed corn.
Will a weakening dollar and a stronger demand reignite the corn price again?
And what will happen if the oil price will pick up again?
You never know….
Sphere: Related Content
Because the currency, this commodity is denominated, is the pound sterling.
And the sterling is making lows not seen for many, many years versus major currencies. The central banks around the world have had a contest to see which could cut rates to zero the fastest (Japan doesn’t count; it has been a mess for over a decade). The goal in times of global slowdown is to devalue your currency to aid exports and jump-start the economy with cheaper relative prices and more money to spend in the system.
The dollar is not strong. It’s just not as weak as some other currencies of economies that are also in serious trouble. The currency fun and profits are about to begin.
Now where will this lead us?
As a currency goes down, commodities rise. Most of them are expressed in dollars.
We read an article about a problem the Super Bowl Sunday event has provoked: a shortage of chicken wings doubled the prices in some areas.
In the sixties the Anchor Bar of Buffalo, NY, started to use the wasted wing parts. Now there are plenty of breasts and legs, but there is a shortage of wings.
We all know that a chicken is nothing more than packed corn.
Will a weakening dollar and a stronger demand reignite the corn price again?
And what will happen if the oil price will pick up again?
You never know….
A come-back
Yesterday we mentioned the 15% rise in the Baltic Dry Index on Wednesday. On Thursday the index went to 1498 points or the highest level since October. And today we observe that sentiment had fed through global metal prices. London copper rose 5.3% this morning.
Even more: Asian shipping stocks have seen a corresponding lift.
According to the Financial Times demand is stronger from the Chinese; they are buying iron ore from Australia and Brazil. And AP Moeller-Maersk said that due to improving demand the freight rates will be brought up.
What can be the reason behind this move?
Are inventories worked off? We think both things happened: a contraction in trade finance and a one-off inventory correction have pushed Asia’s exports down more sharply in the 4th quarter of 2008 than was warranted by the fall in underlying demand. Now trade financing is picking up and inventories are worked off, the train –grinded to a halt – is now slowly on its way again.
Yesterday we showed Chinese shares, today we offer a renko chart of Dry Ships – o yeah babe…
Even more: Asian shipping stocks have seen a corresponding lift.
According to the Financial Times demand is stronger from the Chinese; they are buying iron ore from Australia and Brazil. And AP Moeller-Maersk said that due to improving demand the freight rates will be brought up.
What can be the reason behind this move?
Are inventories worked off? We think both things happened: a contraction in trade finance and a one-off inventory correction have pushed Asia’s exports down more sharply in the 4th quarter of 2008 than was warranted by the fall in underlying demand. Now trade financing is picking up and inventories are worked off, the train –grinded to a halt – is now slowly on its way again.
Yesterday we showed Chinese shares, today we offer a renko chart of Dry Ships – o yeah babe…
Thursday 5 February 2009
Go out and drive a car
In the States we see that the refinery rally is in full swing.
Tesoro Petroleum, Valero and Sunoco are hitting new highs.
The margin between the crude product and the gasoline is still widening.
This gives an answer to the question: how come that crude oil can lose 60% and my gasoline is only falling with 30%. Well here’s the answer: the refining companies take a chunk for themselves.
And governments are helping here of course, because the higher the price, the more taxes they earn.
And they can use every penny for the moment.
Watch this rally in full swing:
Tesoro Petroleum, Valero and Sunoco are hitting new highs.
The margin between the crude product and the gasoline is still widening.
This gives an answer to the question: how come that crude oil can lose 60% and my gasoline is only falling with 30%. Well here’s the answer: the refining companies take a chunk for themselves.
And governments are helping here of course, because the higher the price, the more taxes they earn.
And they can use every penny for the moment.
Watch this rally in full swing:
But still early in the game:
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Goldman Sachs - Greed Sucks
Goldman Sachs would like to pay back their TARP money NOW. The reason is clear: this new rule about capping executive salaries, Obama introduced, is too stringent for these bankers ego. If you’re used to earn a couple of millions a year and suddenly you see this amount reduced to 5 figures, than this unreasonable and groundless.
It should be the moral obligation of a taxpayer to funnel money to these bankers. Unconditionally.
Right?
Right.
Now, how can we pay back 10 bln USD?
Easy, we lend it with the FED. Money enough and lesser control.
Bankers never change if they have to deliver some efforts where their own wallet is concerned.
Wall Street loves it…
It should be the moral obligation of a taxpayer to funnel money to these bankers. Unconditionally.
Right?
Right.
Now, how can we pay back 10 bln USD?
Easy, we lend it with the FED. Money enough and lesser control.
Bankers never change if they have to deliver some efforts where their own wallet is concerned.
Wall Street loves it…
China on the move?
These are interesting times we live in.
Look at the Baltic Dry Index. This is a benchmark for freight costs for dry bulk commodities such as iron ore, coal and iron and is meticulous collected in the Baltic Exchange in London. On Wednesday this index jumped with almost 15%. Is this a sign of recovery in the raw materials trade?
Shipping brokers are telling that the demand is slowly recovering as Chinese steelmakers buy iron ore again after running down their inventories. The index fell from an all-time high in 2008 of 11.793 points to a December 22-year low of 663 points. It recovered 100% since then.
Two things are important: this is a price-index – nothing to do with volume – and China.
If the Chinese don’t swing, nothing swings.
Even if Obama tells us ‘buy America’, what is there to buy? There is nothing left…. And what is left is too expensive, anyway.
Look at the Baltic Dry Index. This is a benchmark for freight costs for dry bulk commodities such as iron ore, coal and iron and is meticulous collected in the Baltic Exchange in London. On Wednesday this index jumped with almost 15%. Is this a sign of recovery in the raw materials trade?
Shipping brokers are telling that the demand is slowly recovering as Chinese steelmakers buy iron ore again after running down their inventories. The index fell from an all-time high in 2008 of 11.793 points to a December 22-year low of 663 points. It recovered 100% since then.
Two things are important: this is a price-index – nothing to do with volume – and China.
If the Chinese don’t swing, nothing swings.
Even if Obama tells us ‘buy America’, what is there to buy? There is nothing left…. And what is left is too expensive, anyway.
Look to the renko chart of iShares FTSE/Xinhua China 25 (ticker: FXI). It’s moving…
Wednesday 4 February 2009
Cristal clear
In the 1930s the New Deal Act rewrote many of the rules of the economic game as played in the States. The same seems to be the case now.
Over the past weeks we got a peek into Obama’s stimulus plan. Some of projects included, are:
Over the past weeks we got a peek into Obama’s stimulus plan. Some of projects included, are:
* Renovate 10,000 schools
* Build more than 3,000 miles of new or modernized transmission lines and install 40 million “smart meters” in homes
* Weatherize at least two million homes and 75% of office buildings
* Launch 1,300 wastewater projects, 380 drinking water projects and 1,000 rural water and sewer system projects
* Repair and modernize thousands of miles of roadways.
A lot of work to do once the 850 bln USD is shoveled through Congress.
Of course a lot is anticipated and discounted, however the water business seems to benefit in particular from the water projects in this stimulus plan. Whether companies build, repair or install pipes or are involved in projects, it will be interesting to see how these companies are going to cash in on the growing list of projects coming out of Washington.
Names we have for you: WTR, MWA and FLO but also PowerShares PIO and the PHO ETF.
We don’t think there is an urgent buy-opportunity now.
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* Weatherize at least two million homes and 75% of office buildings
* Launch 1,300 wastewater projects, 380 drinking water projects and 1,000 rural water and sewer system projects
* Repair and modernize thousands of miles of roadways.
A lot of work to do once the 850 bln USD is shoveled through Congress.
Of course a lot is anticipated and discounted, however the water business seems to benefit in particular from the water projects in this stimulus plan. Whether companies build, repair or install pipes or are involved in projects, it will be interesting to see how these companies are going to cash in on the growing list of projects coming out of Washington.
Names we have for you: WTR, MWA and FLO but also PowerShares PIO and the PHO ETF.
We don’t think there is an urgent buy-opportunity now.
Ride this bike
Yesterday Harley Davidson (ticker: HOG) jumped with 20%, slaughtering a lot of shorts. Even in a bear market, a shorter is not safe. News that Buffett came in with financing, ignited the short squeeze and drove the share price from 12 USD to 14 USD.
This is the reason we found:
Harley-Davidson Inc. said Tuesday it priced $600 million in new debt to fund motorcycle lending at its troubled financing unit. Berkshire Hathaway Inc., the company owned by billionaire investor Warren Buffet, and Davis Selected Advisers LP, the company's biggest shareholder, both agreed to purchase equal portions of the principal amount of the new debt.
Now Warren Buffet decided earlier to start buying distressed assets. He came in with financing for Goldman Sachs (ticker: GS) en General Electric (ticker: GE).
Both stocks have retreated since with 50%.
Why is Buffet a winner? Because these unsecured notes will carry an annual interest rate of 15%.
Wow, very nice terms indeed.
But not for the common shareholder.
This is the reason we found:
Harley-Davidson Inc. said Tuesday it priced $600 million in new debt to fund motorcycle lending at its troubled financing unit. Berkshire Hathaway Inc., the company owned by billionaire investor Warren Buffet, and Davis Selected Advisers LP, the company's biggest shareholder, both agreed to purchase equal portions of the principal amount of the new debt.
Now Warren Buffet decided earlier to start buying distressed assets. He came in with financing for Goldman Sachs (ticker: GS) en General Electric (ticker: GE).
Both stocks have retreated since with 50%.
Why is Buffet a winner? Because these unsecured notes will carry an annual interest rate of 15%.
Wow, very nice terms indeed.
But not for the common shareholder.
We see this as a potential set-up to short this stock.
Tuesday 3 February 2009
Gas
United States Natural Gas Fund, LP is an exchange traded fund that is designed to track in percentage terms the movements of natural gas prices. UNG issues units that may be purchased and sold on the New York Stock Exchange (NYSE) Arca. The investment objective of USNG is for the changes in percentage terms of the units’ net asset value to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana
Our Renko chart shows that a bullish pattern is developing here. This seems to be contradictory with this article:
As many as seven massive natural gas export terminals are expected to start up overseas this year, expanding worldwide capacity by 20 percent and flooding markets with new supplies of the key power plant and heating fuel. Dozens of new tankers capable of carrying natural gas in a liquefied form are slated to hit the seas.Just as these new supplies come on line, worldwide demand is expected to drop as the global recession deepens …
This is how the chart is looking:
Our Renko chart shows that a bullish pattern is developing here. This seems to be contradictory with this article:
As many as seven massive natural gas export terminals are expected to start up overseas this year, expanding worldwide capacity by 20 percent and flooding markets with new supplies of the key power plant and heating fuel. Dozens of new tankers capable of carrying natural gas in a liquefied form are slated to hit the seas.Just as these new supplies come on line, worldwide demand is expected to drop as the global recession deepens …
This is how the chart is looking:
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Yen
The economic destruction in Japan is quite amazing in terms of size and velocity.
Industrial production fell almost 10 per cent in December compared with November. That’s a big number but it gets worse. The government re-did its forecasts for January to a 9 per cent drop, and February down another 5 per cent. In all, that knocks almost a third off output since September, putting it back, as Macquarie notes, at 1983 levels.
For car makers it is even worse: production may halve from last year.
Some elements play an important role in these figures. Most prominent influence – for us – is the rising yen. As Japan subcontracts a lot of their production abroad, a strong yen is a negative factor.
How come that yen is so strong?
Simply put: the massive unwinding of the carry trade last year caused the yen to strengthen.
And all desperate measures the BoJ has taken (as there are buy backs of corporate bonds or bonds issued by real-estate investment firms) have not helped until now. Next step is the purchase of shares owned by financial institutions so they can boost liquidity to the tune of 11 bln USD.
It’s clear that the local authorities will do everything they can, to bring down their currency. The Japanese are notorious to handle their currency that way and with rates at 0% there is no resistance to balance their exchange rate towards 100. Welcome to the race to the bottom.
The renko chart of the USD/JPY is pointing in that direction.
Industrial production fell almost 10 per cent in December compared with November. That’s a big number but it gets worse. The government re-did its forecasts for January to a 9 per cent drop, and February down another 5 per cent. In all, that knocks almost a third off output since September, putting it back, as Macquarie notes, at 1983 levels.
For car makers it is even worse: production may halve from last year.
Some elements play an important role in these figures. Most prominent influence – for us – is the rising yen. As Japan subcontracts a lot of their production abroad, a strong yen is a negative factor.
How come that yen is so strong?
Simply put: the massive unwinding of the carry trade last year caused the yen to strengthen.
And all desperate measures the BoJ has taken (as there are buy backs of corporate bonds or bonds issued by real-estate investment firms) have not helped until now. Next step is the purchase of shares owned by financial institutions so they can boost liquidity to the tune of 11 bln USD.
It’s clear that the local authorities will do everything they can, to bring down their currency. The Japanese are notorious to handle their currency that way and with rates at 0% there is no resistance to balance their exchange rate towards 100. Welcome to the race to the bottom.
The renko chart of the USD/JPY is pointing in that direction.
Monday 2 February 2009
A medicine for a bad day
A lot of things are going on today. A lot of red. And a lot of investors worried about all this red and looking for the Big One.
However, we think there are some positive stories going on, worth to follow. One is the stabilizing CRB-index indicating commodities may bottoming.
This is one of my favorites: look to things which are hated and despised. And became cheap.
Than it’s a question to wait for an uptrend. Once established taking a position becomes an option.
We have commodities, infrastructure but also biotech, of late. Amgen (ticker: AMGN) is popping up on our renkoscreen. The CCI became positive a while ago and now the SAR is changing camps on a 60-minute chart.
Interesting to see where the price will walk in a negative environment.
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However, we think there are some positive stories going on, worth to follow. One is the stabilizing CRB-index indicating commodities may bottoming.
This is one of my favorites: look to things which are hated and despised. And became cheap.
Than it’s a question to wait for an uptrend. Once established taking a position becomes an option.
We have commodities, infrastructure but also biotech, of late. Amgen (ticker: AMGN) is popping up on our renkoscreen. The CCI became positive a while ago and now the SAR is changing camps on a 60-minute chart.
Interesting to see where the price will walk in a negative environment.
One bank to buy them all...
This one is coming from the Financial Times this morning, while snow is shutting down UK Plc
One bank to buy them all, one bank to find them
One bank to price them all, and in the darkness bind them
Tolkien, we remember…
As this week will be the week of ‘bad bank – good bank’ (how can a bad bank be good?) we have to admit that the idea is not bad at all – this is a huge bail-out of the banking system at the expense of the tax payer. The government will misprice the assets they will buy from the banks and take them off the hook.
The European experiment seems to be far more interesting than the American version. In Europe all governments have to act on their own behalf while the gnomes in Frankfurt will supervise this exercise, titled: swapping cash for trash.
While banks and governments are discussing the state of their broken empires, we try to deal with these markets.
Let me show you how one of our favorite indicators, the sell and buy volume indicator was pointing to lower markets already last week. Thanks to marketvolume.com.
One bank to buy them all, one bank to find them
One bank to price them all, and in the darkness bind them
Tolkien, we remember…
As this week will be the week of ‘bad bank – good bank’ (how can a bad bank be good?) we have to admit that the idea is not bad at all – this is a huge bail-out of the banking system at the expense of the tax payer. The government will misprice the assets they will buy from the banks and take them off the hook.
The European experiment seems to be far more interesting than the American version. In Europe all governments have to act on their own behalf while the gnomes in Frankfurt will supervise this exercise, titled: swapping cash for trash.
While banks and governments are discussing the state of their broken empires, we try to deal with these markets.
Let me show you how one of our favorite indicators, the sell and buy volume indicator was pointing to lower markets already last week. Thanks to marketvolume.com.
Sphere: Related Content
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