Bernanke on Warren-Vitter & Last Resorts

By Biiwii

Ref. Warren-Vitter and the lender of last resort

[edit] I have had some complaints about writing that I “like” Bernanke and Obama.  That is telling of how divisive today’s financial and political climates are.  I did not write ‘I like the jobs they have done’, after all.  I have not “liked” the job a Fed chief or President have done since I can remember.  It was wording in a post simply implying that I think they are probably nice men.  Sheesh… it would help if some people would actually make the effort to pick up on nuance.  It’s a post answering the assertions of a former Fed chief destined to see the annals of history one day revoke his “Hero” status.

I have always liked Ben Bernanke, in that I think he is a soft-spoken, nice guy who took the hand off from Alan Greenspan in stride, heroically making chicken soup out of the chicken excrement he was left with.  He kept his dignity and calm demeanor during the days when inflationist gold bugs codified the term “Helicopter Ben” and turned it into just another accepted way of saying “Ben Bernanke”.

Mr. Bernanke met the impossible challenges left him by the Greenspan Fed and the Bush White House, and being a scholar of the Great Depression and an intellectual Keynesian, did what he was always meant to do.  He employed tried and true Central Bank policy-making against a natural bust (i.e. reaction to Greenspan’s policy-induced 2003-2007 inflationary boom) of the system.

Continue reading Bernanke on Warren-Vitter & Last Resorts

Bitgold…

By Steve Saville

BitGold: Great product, over-priced stock

A popular view is that gold has no monetary role to play in a modern, technologically-advanced economy. This view is wrong in many ways, including that, thanks to technological advances, gold is now better suited to being money than it has ever been. This is because technology has eliminated the inconveniences that would otherwise limit gold’s usefulness as money, with BitGold being the latest evidence.

In a TSI commentary back in 2010, here’s how I summarised the reason that gold is better suited to being money today than it ever has been in the past: “[The key is that] technology [now] allows gold ownership to simply and instantly be transferred without the need to physically move bullion. Almost all the monetary gold could remain locked in vaults, with ownership to a quantity of gold — anywhere from a tiny fraction of a gram to many kilograms, depending on what is being purchased — being effected electronically.” Previous attempts have been made to create platforms that enable gold to be a convenient medium of exchange, with ownership instantly transferred electronically when a transaction is done, but BitGold is the first attempt that stands a good chance of being successful.

Continue reading Bitgold…

DumpoMed

By Biiwii

In the previous post we tout a good call as we have done from time to time.  There have been plenty of them.  There have also been more bad trades than I’d care to mention, but will anyway.

I avoided taking a good profit in BCLI and instead took a loss.  I tried to bottom feed FARO and it knifed me to a loss.  I got smart with AMAT and took a loss on unexpectedly bad news.  Luckily, none of these were NFTRH+ items; they were personal speculations.  NFTRH+ is for setups, and low risk ones at that.

So this is the fair disclosure website that is not trying to sell you on anything other than that its (and NFTRH’s) owner is a hard working, honest market manager and that this is a genius free zone.

So on to DEPO.  I have traded it very successfully over the last couple of years (hat tip to a subscriber who is very well up on it fundamentally).  This time, I decided not to take profit prior to earnings and got hammered.  It’s a modest position so now I am an investor and looking to add.  The question the weekly chart asks is ‘will it bottom at the dotted channel or major support and the solid channel?’   Good question.  Weekly log scale chart…

depo

NFTRH+; CSCO

By Biiwii

We did an NFTRH+ on Cisco on April 9, with the stock at 27.56 and having just crept out of a downtrend channel, that filled a previous earnings gap.

“Very simply, 25 can be considered important support and 30-31 (where it stopped after the February earnings pump) is critical resistance.  The break above 25 targets 35.  But to get to 35 CSCO would have to cross long-term resistance.  Such a break would target 45.”

I decided to take about a 7% profit on CSCO last week but will watch resistance at 30-31 and if the market is stable at such time, consider the longer-term trade to a higher target.  Here’s the updated daily chart…

csco

Here is the long-term ‘perspective’ chart that was also included in the update.  This situation is not unlike Intel’s last year before it broke through major long-term resistance.

csco.mo

Around the Web

By Biiwii

Financial Analysis & News From Around the Web

 

NFTRH 343 Out Now

By Biiwii

It is more important than usual to be fine tuned on exactly why the gold sector, rising as it is with the general ‘anti-USD’ trade, is different.

We go into detail with analysis that may not flow as easy as the “China love trade”, ‘Gold to 5000 due to hyperinflation’ and ‘Gold to sky rocket as institutional money panics about inflation due to strong employment’ stuff you see out there.  But we are not about easy, we are about right.

Also, #343 covers all the other usual macro market aspects.

nftrh343

Consumer Sentiment Forecasts Employment

By Tom McClellan

Consumer Sentiment Still Forecasts Employment Growth

Unemployment rate and University of Michigan Consumer Sentiment Survey
May 15, 2015

The unemployment rate has not finished falling.  That is the message from the data provided by the University of Michigan’s Survey of Consumers.

In this week’s chart, I am comparing an inverted plot of the US civilian unemployment rate to the UMich sentiment data.  It makes complete sense that how consumers are feeling should have a strong positive correlation to the unemployment rate.  In a recession, when more Americans are out of work, it would be natural for consumers to be bummed out.  So to find a relationship between them is not much of a surprise.

Continue reading Consumer Sentiment Forecasts Employment

Gold: Contrary Indicators

By Biiwii

It was bad enough that a numbered bullet point (!) using tout has been lathering the gold “community” lately with an amazing fundamental consideration he calls “the Chindian love trade” (you know, in China they buy gold for love and as their economy grows gold will go way up in price).  Never mind that he promoted gold for Indian Weddings and China demand all through the bear market or that as recently as last week he predicted that the US ‘jobs’ number would be huge and gold would sky rocket due to panicked institutional demand in the face of rising inflation.

You can’t make this stuff up.  It annoys me, but now this darker thing comes about in the mainstream media, right on cue, just as gold hit the key resistance area surrounding 1220 that NFTRH, for one, has been noting.

headline

Peter Schiff, more bullish than ever, sees gold headed to $5,000 an oz.

Schiff: upside potential in gold equities is ‘phenomenal’

Get this, gold equities have been on an anti-USD bounce along with all kinds of other stuff that will probably not be rising with them when a real bull market gets started.

The same people who were surprised that the USD rose to begin with (we were not; we gauged and tracked it from day 1) are now getting pumped again due to its correction, which was predictable given its strenuously over bought and over loved status.  But an ‘anti-USD’ bounce is all it is in the precious metals until certain parameters are taken out and certain fundamentals join other fundamentals in indicating a real bull market.

I won’t go into details because well, those are for NFTRH.  But I had to make this post because the timing of this article made my jaw drop when I saw it.

Schiff argues that more QE is coming to try to fix the damage done by the previous QE’s and that there really is no limit on gold’s price.  Fine, there are reasons that gold can one day get unchained.  But this MSM highlight is casino patron stuff.

The MSM seem to have an inventory of apt stories for any given environment.  Gold pops for a few days and MarketWatch pulls out the Schiff card.  It’s a 2 of Spades when a King and a Queen are already laying face up.

Gold and Interest Rates

By Biiwii

How many times I have read gold sector gurus working gold-bearish promotions talk about a “strong dollar” and “rising interest rates” as being bearish for gold.  Transfixing certain among the gold “community” with authoritative words about gold’s drivers, they keep ’em transfixed.  Some attained reputations by having been touted by  ‘Mr. Gold’, Jim Sinclair and then turned around and bit the hand that fed them right off when it was time to create a cottage industry of sentiment against poor old Jim and the other gold ‘Generals’ as I used to call them during the previous bull market.

They now offer the cartoonish opposites to Sinclair’s formerly cartoonish bullish stuff.  The dollar is bullish so gold is bearish… interest rates are rising so gold is bearish.  Well, for different reasons neither of those statements – fed to some non-discriminating gold bug herds who lap anything, as dispensed by an authoritative figure, that fits their current view (in this case, ‘we won’t get fooled again’ bearish) – are true.  It’s just paint-by-numbers stuff that is easy to digest and understand.

In the case of interest rates, they are rising.  What do the newfangled gold bears have to say about that?  I saw their anti gold cult ‘cult’ leader write several times that rising interest rates would hurt gold.  I did not see any mention of interest rate differentials, which mean only everything where gold is concerned.

Get this, gold can benefit greatly when rates are rising, as long as the inter-bond signals are inflationary and indicative of an inflation problem.  Gold can benefit when rates are dropping, as long as short-term rates are dropping harder and the implication is a flight to liquidity and risk ‘OFF’.

The reason Thing 2 in the chart below has been stable to (now) firm while Thing 1 launched upward…

tyx.gold

…is because Thing 1 has also been steady and has gently risen vs. Thing 3 (2 year yields)…

30.2

There is no simple analysis of gold and interest rates.  If someone in the mainstream print or TV media or a gold guru going on reputation (and a talent for serving easy to digest tidbits) talks about gold and interest rates in surface, linear terms it is advisable to disregard it.  There are reasons that most people are not going to be on board when the time is right, and this is one of them.  This stuff is fairly, but not overly, complex.

Add in the other elements involved like economic trends, psychology/confidence and okay, it’s complicated.  But its doable if you keep cool and keep a working b/s detector against all of those trying to sell you analytical tidbits.

Trouble in Bond Land

By Bob Hoye

hoye
Click for PDF file

ASS Economics

By Steve Saville

To the Keynesian economist, the world of economics is a sequence of random events — an endless stream of anecdotes. Things don’t happen for any rhyme or reason, they just happen. And when they happen the economist’s first job is to come up with an explanation by looking at the news of the day, because there will always be current events that can be blamed for any positive or negative developments.

It’s futile to look any deeper, for example, to consider how policies such as meddling with interest rates might have influenced investment decisions, because, even though the real-world economy involves millions of individuals making decisions for a myriad of reasons, the individual actors within the economy supposedly form an amorphous mass that shifts about for unfathomable reasons. In fact, in the Keynesian world the economy can be likened to a giant bathtub that periodically fills up and empties out for reasons that can’t possibly be understood, although if an explanation that goes beyond the news of the day is needed the economist can always fall back on “aggregate demand” or its more emotional cousin — “animal spirits”. Specifically, a slowing economy can be said to be the result of falling “aggregate demand”, and when the pace of economic activity is rapid it can be said to be the result of surging “animal spirits”. There’s no need to try to explain the changes in these mysterious entities, because they are inexplicable. They just happen.

Having explained what’s happening to the economy by pointing at seemingly random/unpredictable events or citing unfathomable changes in “aggregate demand”, the economist’s second job is to recommend a course of action. And since the economy can supposedly be likened to a bathtub filled with an amorphous liquid, the level of which periodically rises and falls, it’s up to the economist to suggest ways that add liquid when the level is too low and drain liquid when the level is too high.

Fortunately, adding and draining liquid is very easy to do. For example, to add liquid all that has to be done is for the government to increase its spending and/or for the central bank to create some money out of nothing. It doesn’t matter that the government’s spending is unproductive and that the central bank’s money-pumping falsifies the price signals upon which the market relies; it only matters that more liquid is added to the bathtub.

This approach to economics might seem ad-hoc. It might seem superficial. And it might seem short-sighted. That’s because it is all of these things, which is why Keynesian Economics should be re-branded ASS (Ad-hoc, Superficial and Shortsighted) Economics.