Well, the Fed has decided to let the current interest rate stay but continue to talk up the US$. As soon as the news was released, precious metals have a smacked down as the they were shorted, pushing the price of gold by almost US$10 and silver by more than 20 cents. The precious metals recovered by the end of the day and managed to sustain its gain for the day. The mining stocks and related ETFs (precious metals and mining) held firm with some small gains.
Despite being the heavy short selling every time gold or silver moved up in price, it can be seen that it is case of higher lows each time they were shorted heavily. Not too long ago the main resistance were US$1,200 for gold and US$16 for silver. Look where they are now today.
It is frustrating if you are on the side of the precious metals. However it is advisable that you hedge your position by buying the miners and related ETFs.
My favourite pick is still ABX for gold and PAAS for silver. As for ETFs it is GDX for gold and SLV for silver. For some heavy leverage, I also bought AGQ (though it remains a risky bet by all standards)
Despite the recent gains, they are still an attractive buy as they remain severely discounted from their historic high.
Why do I make a reference to the historic price target? This is because things are much worse now than they were in 2008:
1. Despite the NIRP. ZIRP, and QE, the world is seeing extremely low growth. Central banks have pumped in trillion of dollars yet have almost nothing to show for it. The PMI is collapsing, GDP is falling, sales to inventories at its highest levels, consumer and business sentiment is falling, unemployment is farce. Almost 50 million of Americans are on food stamps and almost 100 million of employable age are not working. All these points to a coming crisis much worse than 2008 because since then the world have pumped in trillions of dollars into the economy. In the US, the Fed have pumped in almost 4 trillion dollars (5x the amount in 2008).
Incredulously, central banks are using the stock market as a gauge for a sound economy. And that is the reason why the the Plunge Protection Team continue to boost the US market, The ECB and BOJ continue to buy back corporate bonds (and ETFs in the case of the BOJ), and PBOC, suggesting that NPLs are turned into equity. THEY ARE DESTROYING THE FREE MARKET ECONOMY.
It is almost laughable when Bloomberg reported that the BOJ is the TOP TEN holder of 90% of stocks on the Nikkei.
This market intervention by the central banks are also destroying good corporate governance.
2. Global debt continues to grow. China alone has increased its debt form 282% of GDP in 2014 to 350% this year. Japan's total debt is 517% of its GDP. The US is almost 330% its GDP. How are these debt ever going to be repaid? The world IS facing a debt crisis of epic proportions. The amount of debt required to generate US$1 of GDP is escalating exponentially.
How much was China's debt when it was growing at 10% a year? How much now with 6.5% growth? China and Japan will be the ticking time bombs that will set off a global debt crisis. It's just a case who will be the first to do so.
3. EU is in crisis. The migrant and banking crises will challenge the EU and Euro. This summer we will revisit the same debt crisis in Greece as the ECB and IMF began their tit for tat on what's good for Greece. Italy too is facing a banking crisis. It recently secured a 5B Euro loan to stem its 360B Euro of NPLs. ARE YOU KIDDING ME?!
The emergence of far right parties in the EU will challenge the very foundation of the EU in the coming months. And yeah, throw in a potential BREXIT and we have a series of summer events which could change the face of the EU.
4. Then we have all the countries which are on the brink of severe recession or depression due to the collapse of commodities. Canada, Brazil (the Olympics could be at risk here), South Africa, Nigeria, Ecuador and Venezuela. Even the Middle East is facing tremendous challenge in their budget deficit.
So with so much potential crises at every turn, it will be a series of collapse and this time the world have no major economy superpower to bail it out.
If history is of any guide, we will see a Great Depression similar if not much worse than the one in 1929 - 1939.
Wednesday, April 27, 2016
Saturday, April 23, 2016
THE S&P IS OVERVALUED vs EARNINGS
S&P500 continue to defy gravity despite a host of negative news (The DOHA debacle and earnings recession in the S&P500 just to name two) and poor economic data coming out from the US.
This has led many to believe that the Plunge Protection Team (PPT) is supporting the market. Otherwise how can one explain this?
Source: Zero Hedge
This is not surprising given that all data points to a potential recession - if one is not already happening. But the Fed has to give the impression that all is good with the economy. How else but to talk up the economy and support it by pushing the S&P500 higher? Aren't the stock market reflective of the economy health? Well NO! Earnings in the S&P500 has been going down for four consecutive months! That is not an indication of a good economy. But the Fed and their cheerleading supporters continue to give misleading picture as to the health of the economy.
In reality, the Fed has really no more arsenal, short of another massive QE. So what more could they do?
That is why I believe there will be no more interest rates hike this year and a possible QE in the next few months.Should the Fed raise interest rates, then it is economic suicide pure and simple. Non-financial companies have borrowed massively to fund their dividends and buybacks, and what have they got to show for it? Nothing! EPS beats are all manufactured by lowering the forecast and massive buybacks. How can that be a signal for positive growth?
The S&P500 is now trading at an astounding 24x times earnings! As earnings continue to disappoint the PE ratio will widen and put the risk of collapse even more severe.
The only stocks that I am invested in now are the mining stocks and related precious metals ETFs which I think have room for further upside. They are the best hedge against the eventual collapse of the economy and a major debt crisis.
This has led many to believe that the Plunge Protection Team (PPT) is supporting the market. Otherwise how can one explain this?
Source: Zero Hedge
This is not surprising given that all data points to a potential recession - if one is not already happening. But the Fed has to give the impression that all is good with the economy. How else but to talk up the economy and support it by pushing the S&P500 higher? Aren't the stock market reflective of the economy health? Well NO! Earnings in the S&P500 has been going down for four consecutive months! That is not an indication of a good economy. But the Fed and their cheerleading supporters continue to give misleading picture as to the health of the economy.
In reality, the Fed has really no more arsenal, short of another massive QE. So what more could they do?
That is why I believe there will be no more interest rates hike this year and a possible QE in the next few months.Should the Fed raise interest rates, then it is economic suicide pure and simple. Non-financial companies have borrowed massively to fund their dividends and buybacks, and what have they got to show for it? Nothing! EPS beats are all manufactured by lowering the forecast and massive buybacks. How can that be a signal for positive growth?
The S&P500 is now trading at an astounding 24x times earnings! As earnings continue to disappoint the PE ratio will widen and put the risk of collapse even more severe.
The only stocks that I am invested in now are the mining stocks and related precious metals ETFs which I think have room for further upside. They are the best hedge against the eventual collapse of the economy and a major debt crisis.
OIL AFTER DOHA
Well DOHA came and showed it has always been a smoke and mirrors game. After the debacle, oil suffered a decline but towards the closing of the week roared back to trade at US$43.75 per barrel much higher than it was prior to the DOHA meeting.
This has dumbfounded speculators, traders and investors as all news point to a supply glut with Russia, Saudi Arabia and Iran promising to produce more after the DOHA talks ended in failure to reach any consensus.
Perhaps this could be explained by the following, where metals and oil commodities were subject to speculation by none other than the Chinese traders and speculators who jumped into the commodity market boom in China as the recent PMI data suggested that China's economy is roaring back to life as the government pours money into infrastructure.
Source: Zero Hedge
However, like any speculation it has gone ahead of the demand, and with the glut in the supply of oil and steel products, could end pretty costly for the Chinese traders and speculators. Remember how it ended badly for the Shanghai Stock Exchange in the summer of 2015?
I do believe that oil will face tremendous resistant at US$45 per barrel as the supply glut is still an issue.
I will also avoid buying into the oil companies as the I see more misery in earnings. Both Halliburton and Schlumberger reported earnings that were disappointing to say the least, and on top of that, saw massive jobs cut, with the former cutting 8,000 jobs, and the latter, a third of its work force.
The above is just my opinion. You are encouraged to do your own research.
This has dumbfounded speculators, traders and investors as all news point to a supply glut with Russia, Saudi Arabia and Iran promising to produce more after the DOHA talks ended in failure to reach any consensus.
Perhaps this could be explained by the following, where metals and oil commodities were subject to speculation by none other than the Chinese traders and speculators who jumped into the commodity market boom in China as the recent PMI data suggested that China's economy is roaring back to life as the government pours money into infrastructure.
Source: Zero Hedge
However, like any speculation it has gone ahead of the demand, and with the glut in the supply of oil and steel products, could end pretty costly for the Chinese traders and speculators. Remember how it ended badly for the Shanghai Stock Exchange in the summer of 2015?
I do believe that oil will face tremendous resistant at US$45 per barrel as the supply glut is still an issue.
I will also avoid buying into the oil companies as the I see more misery in earnings. Both Halliburton and Schlumberger reported earnings that were disappointing to say the least, and on top of that, saw massive jobs cut, with the former cutting 8,000 jobs, and the latter, a third of its work force.
The above is just my opinion. You are encouraged to do your own research.
Saturday, April 16, 2016
DOHA TALK IN JEOPARDY OF REACHING AN AGREEMENT?
No sooner than the Deputy Crown Prince of Saudi Arabia insisted that Saudi Arabia would only freeze its production provided all that attended the talk also freeze theirs, including Iran,the latter today dropped another bombshell when it (Iran) announced that it will not attend the Doha meeting.
The so called "Production Freeeze" meeting is now turning into a farce.
I think we could expect a heavy sell of in crude once the market opens on Monday unless Russia plays the role of a mediator to bring the two countries to reconcile, which seems unlikely at this eleventh hour.
The S&P is expected to take a hit too as the oilies will bear the brunt of any sell off.
This is just my opinion. You are encouraged to do your own research.
The so called "Production Freeeze" meeting is now turning into a farce.
I think we could expect a heavy sell of in crude once the market opens on Monday unless Russia plays the role of a mediator to bring the two countries to reconcile, which seems unlikely at this eleventh hour.
The S&P is expected to take a hit too as the oilies will bear the brunt of any sell off.
This is just my opinion. You are encouraged to do your own research.
Thursday, April 14, 2016
WILL IT OPEN A CAN OF WORMS?
Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks
The headline perhaps say it all. As reported by Zero Hedge, in what many as dismissed as a no-win situation, the confirmation by Deutsche Bank could open a can of worms.
Precious metals bugs have all along been suspecting of this manipulation, so it is indeed a hard worn victory for those who took legal action against such a manipulation.
And what has the CFTC been doing, dismissing the case in 2013 after investigating against precious metals manipulation since 2008?
Oh! It was run by another ex-Goldman banker - enough said!
WHY THE NEXT FEW DAYS WILL BE CRUCIAL
Earnings season aside, we will have two crucial events in the next few days.
The number one event will be the outcome of the OPEC "Production Freeze" meeting in Doha on 17 April. So far what we have is a constant recycling of the news and rumours to prop up the oil price. Investors who bought oil stocks and oil futures will soon know if their faith in them will return a handsome profit.
Not to pour cold water on the parade, but chances are slim that a disunited OPEC could do much. Nevermind the fact that Russia just increased it production to its highest in March. So if a production freeze does happen, so what? All were already producing at their record highs!
Iran has said that it won't join in the freeze but will continue to ramp its production. So while other have frozen their output, there still more oil coming into the market!
Possibly, irregardless of the result of the meeting, I believe it will be buy the rumour sell the news event. And it could cost those who placed their hopes on OPEC and Russia dearly.
The second event could be a game changer for gold.
According to various online news, China will launch a Yuan fix on gold on 19 April. Many have touted it as a changer and will eventually shift the gold trade from the COMEX and LBMA to the SGE. Why? Becuase unlike the over-leveraged COMEX and LBMA where paper gold is traded, the SGE will deal only in physical gold. So price discovery that is based on physical supply and demand will be allowed to happen, not the rinse and repeat commercial short and long trades in the COMEX and LBMA.
It is also a sign that China, being the world's largest gold producer and having the world's largest physical gold trade is surely exerting itself in the market.
Will it happen on time as reported on 19 April. Do be warned that this event has been postponed twice. I of course hope it will happen because the current gold trade in the COMEX and LBMA is a farce!
The above is entirely my opinion of course.
The number one event will be the outcome of the OPEC "Production Freeze" meeting in Doha on 17 April. So far what we have is a constant recycling of the news and rumours to prop up the oil price. Investors who bought oil stocks and oil futures will soon know if their faith in them will return a handsome profit.
Not to pour cold water on the parade, but chances are slim that a disunited OPEC could do much. Nevermind the fact that Russia just increased it production to its highest in March. So if a production freeze does happen, so what? All were already producing at their record highs!
Iran has said that it won't join in the freeze but will continue to ramp its production. So while other have frozen their output, there still more oil coming into the market!
Possibly, irregardless of the result of the meeting, I believe it will be buy the rumour sell the news event. And it could cost those who placed their hopes on OPEC and Russia dearly.
The second event could be a game changer for gold.
According to various online news, China will launch a Yuan fix on gold on 19 April. Many have touted it as a changer and will eventually shift the gold trade from the COMEX and LBMA to the SGE. Why? Becuase unlike the over-leveraged COMEX and LBMA where paper gold is traded, the SGE will deal only in physical gold. So price discovery that is based on physical supply and demand will be allowed to happen, not the rinse and repeat commercial short and long trades in the COMEX and LBMA.
It is also a sign that China, being the world's largest gold producer and having the world's largest physical gold trade is surely exerting itself in the market.
Will it happen on time as reported on 19 April. Do be warned that this event has been postponed twice. I of course hope it will happen because the current gold trade in the COMEX and LBMA is a farce!
The above is entirely my opinion of course.
Monday, April 11, 2016
LEG UP 250% SINCE MY BUY RECOMMENDATION
Since my BUY recommendation of LEG on September 22, 2014, LEG closed at 0.35 pence, 0.25 pence above my BUY price at 0.10 pence. That's a 250% profit.
I have exited LEG to buy another stock, the Ultra Silver AGQ which is leveraged 3x - 4x the price movement of silver. Silver is near breaking the important US$16 per oz.
However AGQ is extremely high risk as you could see heavy losses if silver trends down again. However the rewards could be tremendous if silver returns to its previous highs.
The gloomy economic picture out there looks likely to support continuous price increase in precious metals, but I encouraged you to do your own research.
Where AGQ is concerned, be warned of the risky nature of such an investment.
I have exited LEG to buy another stock, the Ultra Silver AGQ which is leveraged 3x - 4x the price movement of silver. Silver is near breaking the important US$16 per oz.
However AGQ is extremely high risk as you could see heavy losses if silver trends down again. However the rewards could be tremendous if silver returns to its previous highs.
The gloomy economic picture out there looks likely to support continuous price increase in precious metals, but I encouraged you to do your own research.
Where AGQ is concerned, be warned of the risky nature of such an investment.
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