Uranium Stocks Pop

By Biiwii

The Uranium ETF is following premier U miner Cameco higher today.  We have been keeping a casual watch on the U’s in NFTRH as one of the ‘outlier’ commodities that can bounce in a corrective USD atmosphere.

The problem I have with this bounce however, is that there was a write up on MarketWatch getting hysterically bullish about Uranium and Japan’s recovery and China’s new nuke build out and whatever other standard pump inputs could be included.  To make it worse, the article quoted the man who in his own mind invented the investment cases for both Lithium and Rare Earth Elements; junior gold stocks too!  He’s been trumpeting these things throughout their bear markets.

So I left it alone.  If the U bounce is real, there will be plenty of time to get on it.

ura

Why Not Short the Market? This…

By Biiwii

There are good arguments for the both the ‘upside acceleration and blow off’ and ‘correction’ scenarios, short-term in the markets.  This creepy looking chart of junk bonds argues for the former, with its creepy looking bullish pattern.  Junk bonds are a speculative barometer.

jnk

Disclosure:  I am short SPY (no leverage; straight short with limited leash), but net long.  Longest position of all… cash.

Gold is Not a Play on “CPI Inflation”

By Steve Saville

I have never been in the camp that exclaims “buy gold because the US is headed for hyperinflation!”. Instead, at every step along the way since the inauguration of the TSI web site in 2000 my view has been that the probability of the US experiencing hyperinflation within the next 2 years — on matters such as this there is no point trying to look ahead more than 2 years — is close to zero. That is still my view. In other words, I think that the US has a roughly 0% probability of experiencing hyperinflation within the next 2 years. Furthermore, at no time over the past 15 years have I suggested being ‘long’ gold due to the prospect of a rapid rise in the CPI. This is partly because at no time during this period, including the present, has a rapid rise in the CPI seemed like a high-probability intermediate-term outcome, but it is mainly because gold has never been and is never likely to be a play on “CPI inflation”.

Gold is a play on the economic weakness caused by bad policy and on declining confidence in the banking establishment (led by the Fed in the US)← [edit: as NFTRH steadfastly continues to remind subscribers. We obviously agree 100% with Saville’s view]. That’s why cyclical gold bull markets are invariably born of banking/financial crisis and/or recession, and why a cyclical gold bull market is more likely to begin amidst rising deflation fear than rising inflation fear.

There are times when the declining economic/monetary confidence that boosts the investment demand for gold is linked to expectations of a rapid increase in “price inflation”, but it certainly doesn’t have to be. For example, the entire run-up in the gold price from its 2001 bottom to its 2011 peak had nothing to do with the CPI. Also, an increase in the rate of “CPI inflation” would only ever be bullish for gold to the extent that it brought about declining confidence in the economy or the banking establishment, as indicated by credit spreads, real interest rates, the BKX/SPX ratio and the yield curve. Since it’s possible for the CPI to accelerate upward without a significant decline in confidence, it’s possible that an upward acceleration in the CPI would not be bullish for gold.

The bottom line is that as far as the gold market is concerned, the CPI is more of a distraction than a driver.

[edit:  Once more we ask readers to tune out promoters going on about China demand, Indian Wedding Season, US wages and consumer price inflation, Greece this and Ukraine that.  Saville just very clearly explained why they have been wrong for the entire bear market]

Biotech Sector Still Leading the Market

By Biiwii

The Biotech sector just keeps on going.  Exhibit A is AMGN, which this space noted had a target of 174 back in March when the price popped above 160.  Here’s the updated chart from that post.  It’s had a subsequent drop and rebound, keeping 174 in view.

amgn

We had an NFTRH+ update on an interesting pattern in GILD (daily and weekly charts were analyzed for subscribers) along with an upside target and stop loss parameters. GILD has been forming this pattern for months now.

Today was also interesting because several smaller, more speculative Bio’s were weak while the big boys were strong.  Here is the updated chart of the Biotech ETF (IBB), near the top of its channel.

ibb

What’s it mean?  Simply that an important market leader is still fully intact.  On that note, here is the BTK secular bull vs. NDX chart once again.  This secular bull is 15 years old.  Read into it what you may.

btk.ndx

Currency Genocide…

By Alhambra Investment Partners

Currency Genocide; Or Let’s Kill it More

There is an irreconcilable tension that lies at the heart of every “extraordinary” monetary policy. It isn’t something that is talked about much, and in fact it is steadfastly avoided as if these were two distinct topics. Bringing them together amounts to “crossing the streams” (to use 1984-style metaphors) and tends to undermine the idea that in the most extreme circumstance most extreme measures are needed to deviate.

You hear it all the time from central bankers and economists, as their contention of the cumulative economic shortfall since August 2007 relates to “inadequate demand.” Their solution then is to “stimulate” demand mostly by killing the impulse toward savings. Indeed, the qualification “repression” fits this intent, as central banks are intentionally suppressing rates of returns on “safe” and “liquid” instruments in order to “nudge” people toward spending currency. This has a long history of intellectual development, tracing back further than even the underconsumptionists who timed their apex to just before the Great Crash in 1929.

Continue reading Currency Genocide…

Around the Web

By Biiwii

Financial Market News & Analysis From Around the Intertubes…

 

Raghuram Rajan Speaks

By Biiwii

Of all the world’s Central Bankers, one stands out as a teller of truth and an adherer to sensible long-term policy.  Yes, my personal hero (insofar as one has heroes in the financial realm), Raghuram Rajan.  Thanks to Joe for the link…

India’s central bank chief accuses G-7 of currency manipulation

I mean sure, we all see and to varying degrees understand the bald faced currency manipulation (and other policy machinations) going on out there.  But it is important when a Central Banker cries out in the wilderness.  Even if said Central Banker is not overseeing the finances of a fully developed nation (yet).  It doesn’t sound like the IMF is listening.  That would be the International Muppet Fund.

Faro; Time Was…

By Biiwii

In Q4 2014 NFTRH (+) presented for its subscribers a long/short trade involving FARO and HURC, respectively.  I never got on the HURC short because it turned down before my optimal shorting point.  But I did get long FARO for a nice and profitable trade.

The gist was that any late year revenue bump – per our analysis of traditional year end sales increases in the Machine Tool and related industries – would be an opportunity to long a great company like Faro for a trade and short an over valued vanilla company like Hurco.

Why short Hurco (and take profits on Faro)?  Because of the effects of the strong Dollar, weak Euro and weak Yen.  That is the play that everyone (incl. Mr. Druckenmiller a couple posts ago) is on these days.  But in Q4 2014 few were.  We were.  It was the pro-USD exports trade, which would hurt the likes of American companies like HURC and FARO.

Now, Faro is suffering currency exchange fallout and getting killed in the market.  Wall Street catches on as Needham downgrades to ‘hold’ and Noble to ‘sell’ on a revenue miss.  Just look at this mess…

faro

For the same reason NFTRH is following closely the correction of quality Japanese machine tool and robotics manufacturer, Fanuc, we will once again do the same with Faro, a company that is not going anywhere over the long-term.  It’s best of breed in its highly innovative niche.

But still, this is what happens when you follow the Wall Streeters that have never set foot on a machine shop floor.  But it should have been considered possible by these financial types because it is for strictly financial reasons Faro is getting blown up.  Check these tidbits out from the press release.  It’s not manufacturing stuff, it’s macro financial stuff…

  • negative foreign exchange impact of approximately $7 million driven primarily by the decline in the Euro and Yen relative to the U.S. dollar;
  • weaker macro-economic conditions in Japan combined with the limited release of manufacturing stimulus funds which, in turn, decreased industrial demand in Japan for capital purchases; and 
  • weaker industrial demand in Brazil due to recent macro-economic events.

In addition to the negative impact on sales, changes in foreign exchange rates are expected to generate net foreign currency losses of approximately $1.3 million related to the Company’s intercompany account balances denominated in different currencies, primarily the Swiss Franc.

Whoa!  That’s a mouth full.  Time was, you were a manufacturing guy, you were productive and you tended to your manufacturing business.  Time was, you were a financial guy and even if you were not fully versed in an industry and the underside of your fingernails was completely clean, you at least were a crack macro analyst.

Time was…

Whack-a-Mole: China Pops its Head Up

By Biiwii

US Stock Index Futures Rise on China…

“If the second largest economy in the world, right, says ‘we’re going to inject as much liquidity as we have since the financial crisis’, that is a big deal.  So I think that is a message that PBOC’s sending that says like risk assets; grow your appetite for risk assets.”

whackamoleThis reminds me of last October when super Fed Hawk James Bullard puked out talk of QE 4 the minute US markets showed something impulsive to the downside.  Turned out (as we noted at the time) that the Semiconductor element of that mini panic was entirely hype and the Dove in drag went away to gather himself, most recently coming back to the mic with his sharp beak and talons and that glaring look in his eyes.

Ha ha ha… now China panics in an effort to soft peddle the rational policy it enacted of allowing shorting of its ‘free’ markets.  We called the ‘China allows shorting’ news non-fundamental hype on Friday and we call the ‘China eases’ news today hype as well.  Though its implications could be felt well beyond a hype burst, if players are indeed compelled to “like risk assets” and to grow their “appetite for risk assets.”

The bottom line is that we are on a long journey toward losing confidence in these policy moles.  Here in the US a cranky and sometimes malcontented website has dubbed the phase Peak Fed ©.

Bulls and bears are getting ground up during the process, which will either resolve up (manic acceleration) or down (cyclical trend change).  But it is a process and by definition a process is “a natural or involuntary series of changes”.  Believe it or not, the process is natural.  In this case it is addressing unnatural things.

Stan Druckenmiller Interview

By Biiwii

Thanks to subscriber Marcus for forwarding this to me.

Very nice interview.  I personally think he soft peddles the timing and intensity of the risk side of the risk vs. reward proposition.  But his themes are sound and very in line with my thinking and NFTRH analysis.  “Why does the economy need holding up now?”  Exactly, Stan… and “I just think they’re very myopic.”  Yup.

Listen to the interview.  I have to run, but 10 minutes in I already know I’ll return to finish listening because sane peoples’ views are always welcome here.

[edit]  I can’t stand that the interview got into politics (I am not a Republican, I am not a Democrat, and though I had thought I might be at one point, I am not a Libertarian), but listening to the rest of the interview, I agree with much more than I disagree with on the financial markets.  Oh and I disagree on minimum wage.  I mean, theoretically an increase should not be needed, but in this inequitable system the reality is that it is needed.

NFTRH 339 Out Now

By Biiwii

We do indicators ‘n stuff.  We stay on the right side of the trends, playing the swings.  We refine the elements in play to coming trend changes.  We succeed over the cycles.  That’s market management.

nftrh339