Saturday, May 31, 2014

Weekly Futures Recap With Mike Seery - Crude Oil, SP 500, Gold and Coffee

We've ask our trading partner Michael Seery to give our readers a weekly recap of the futures market. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets......

Crude oil futures in the July contract finished the week down about $1.50 closing around 102.70 a barrel after hitting 1 year highs earlier in the week. The crude oil market is trading above its 20 & 100 day moving average continuing its bullish trend in recent months as economies around the world are improving as well as the U.S stock market hitting new all time highs on a daily basis helping support crude oil prices. We have entered the strong demand season for unleaded gasoline as there will be a lot of drivers on the road increasing demand which could propel prices back up to last August highs of around 112 a barrel. If you are looking to take advantage of this recent dip in crude oil prices I would remain a buyer as long as prices stay above the 10 day low of 101 a barrel which is about $1.75 away or $900 risk per contract.

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The S&P 500 hit all time highs once again along with the transports this week as the Vix or fear index is at a 7 year low as the S&P 500 traded up another 20 points this week at 1917 as Apple Computer was also up $20 this week currently trading at 635 a share which is propelling the rest of the equity markets higher as the trend seems to be getting stronger and stronger and I’m still recommending a long position in this market .The S&P 500 is trading far above its 20 and 100 day moving average telling you that the trend is higher and with the 10 year note trading at 2.45% which is also propelling stock prices higher as companies are able to borrow large amounts of money at practically nothing while increasing dividends while also buying back their shares decreasing their float therefore increasing earnings per share. I love this market to the upside for one reason because the market has very little volatility and continues to grind higher with solid chart structure to continue to play this to the upside.
TREND: HIGHER
CHART STRUCTURE: SOLID

Gold futures in the August contract finished down for the 5th straight trading session finishing lower by 45 dollars this week at 1,245 an ounce continuing its bearish trend trading below its 20 and 100 day moving average as I remain bearish gold prices as I think there’s a high probability of a retest of 1,200 and if that level is broken look at a re test near the contract low of 1,180 as prices look very bearish in my opinion. You have to ask yourself at this time would you rather own gold or stocks as investors are choosing to sell their gold and are buying stocks and it seems like on a daily basis. The problem with gold right now is everybody’s buying the S&P 500 which hit another all time high today as there is a very little interest in purchasing gold at the current time especially with bond yields continuing to move lower as the money is going into bonds and stocks and out of gold. Gold futures are still higher by about $60 in the year 2014 but traded as high as 1,390 earlier in the year and has given back much of this year’s gains that it had and I do think the trend continues to the downside and if you took my original recommendation place your stop above the 10 day high minimizing risk in case the trend does change. Gold is famous for having large washout days meaning it will sell off $50 in one day and volatility will spike as I said in yesterday’s blog & I sense one of those days is coming as the trend seems to be getting stronger.
TREND: LOWER
CHART STRUCTURE: SOLID

Coffee futures in New York are sharply lower this Friday afternoon trading down 445 points at 177.50 a pound trading down for the week continuing its short term down trend as prices spiked to a low of 170.80 on Tuesday as I have been recommending a long position in this market between 165 – 170 so currently I’m still sitting on the sidelines waiting for the opportunity to arrive. A large coffee exporter named Ipanema Coffee is suggesting that yields could drop by as much as 40% as there are small beans in the cherries which could spike up prices if they are correct on their assessment as the numbers will be coming in the next couple of weeks as in the beginning of the season we were expecting 53 million bags then down to 43 million bags due to the severe drought and anything lower than 43 million bags would be bullish this market and I do expect volatility to rise here in the next couple of weeks. Prices have been going sideways to lower in the last couple of weeks because of the fact that we have very little fresh fundamental news on crop size but that will change quickly so continue to look to be a buyer at 165 – 170 level as you will never pick a bottom in coffee but I do not think prices are headed back down 140 as this whole rally started at 125 as there was significant damage done as I talked to many producers down in Brazil and this was no joke as this was one of the worst droughts in history. Coffee prices are trading below their 20 day moving average in the right near their 100 day moving average which has not happened in more than 4 months telling you that the trend is mixed at the current time as I’m laying in the weeds waiting for an entry.
TREND: LOWER
CHART STRUCTURE: IMPROVING

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Thursday, May 29, 2014

The Colder War and the End of the Petrodollar

By Marin Katusa, Chief Energy Investment Strategist

The mainstream media are falling over themselves talking about Russia’s just-signed “Holy Grail” gas deal with China, which is expected to be worth more than $400 billion. But here’s what I think the real news is… and nobody’s talking about it—until now, that is. China’s President Xi Jinping has publicly stated that it’s time for a new model of security, not just for China, but for all of Asia. This new model of security, otherwise known as “the new UN,” will include Russia and Iran, but not the United States or the EU-28.

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This monumental gas deal with China does so much more for Russia than the Western media are reporting. First off, it opens up Russian oil and gas supplies to all of Asia. It’s no coincidence that Russian President Putin announced the gas deal with China at a time when the tensions with the West over Ukraine were growing. Putin has U.S. President Obama exactly where he wants him, and it’s only going to get worse for Europe and America. But before I explain why that is, let’s put this deal in terms we can understand. The specific details have not been announced, but my sources tell me that the contract will bring in over U.S. $10 billion a year of revenue to start with.

The 30 year deal states that every year, the Russians will deliver 1.3 trillion cubic feet (TCF) of gas to China. The total capital expenditure to build the pipeline and all other infrastructure for the project will be more than $22 billion—this will be one of the largest projects in the world. You can bet the Russians won’t take payment in US dollars for their gas. This is the beginning of the end for the petrodollar.

The Chinese and Russians are working together against the Americans, and there are many countries that would be happy to join them in dethroning the U.S. dollar as the world’s reserve currency. This historic gas deal between Russia and China is very bad news for the petrodollar. Through this one deal, the Russians will provide about 25% of China’s current natural gas demand. In a word, this is huge. It’s also not a coincidence that Putin sealed the deal with China before the Australian, US, and Canadian liquefied natural gas (LNG) terminals are completed. If you read our recent Casey Energy Report issue on LNG, you know to be wary of the hype about LNG’s “bright future.” Take note: this deal is a serious negative for the global LNG projects.

I also stated in our April 2012 newsletter:

Putin has positioned Russia to play an increasingly dominant role in the global gas scene with two general strategies: first, by building new pipelines to avoid transiting troublesome countries and to develop Russia’s ability to sell gas to Asia, and second, by jumping into the liquefied natural gas (LNG) scene with new facilities in the Far East.

Pretty bang on for a comment that was made over two years ago in print, don’t you think?

So, what’s next? Lots. Putin will continue to outsmart Obama. (Note to all Americans: the Russians make fun of you—not just for your poor choice of presidents, but also for your failed foreign policy that has led to most of the world hating America. But I digress.) You will see Russia announce a major nuclear deal with Iran, where the Russians will build, finance, and supply the uranium for many nuclear reactors. The Russians will do the same for China, and then Syria. With China signing the natural gas deal with Russia and the president of China publicly stating that it’s time to create a new security model for the Asian nations that includes Russia and Iran, it’s clear China has chosen Russia over the U.S.

We are now in the early stages of the Colder War.

The European Union will be the first victim. The EU is completely dependent on Russia for its oil and natural gas imports—over one-third of the EU-28’s supply of oil and natural gas comes from Russia. I’ve been writing for years about this, and I’m watching it come true right now: the only way out for the EU countries is to use modern North American technology to revitalize their old proven oil and gas deposits.

I call it the European Energy Renaissance, and there’s a fortune to be made from it. Our Casey Energy Report portfolio has already been doing quite well from investing in the European Energy Renaissance, but this is only the beginning. If Europe is to survive the Colder War, it has no choice but to develop its own natural resources. There are naysayers who claim that Europe cannot and will not do that, for many reasons. I say rubbish.

Of course, to make money from this European dilemma, it’s imperative to only invest in the best management teams, operating in those countries with the political will to do what it takes to survive… but if you do, you could make a fortune. Doug Casey and I plan on doing so, and so should you.

For example, two weeks ago in this missive, I discussed “The Most Anticipated Oil Well of 2014,” where if you invested, in just two weeks you could be up over 40%. Not only did I write in great detail about the company, I even interviewed the CEO because of the serious potential this high-risk junior holds. I said in that Dispatch that the quality of the recorded interview wasn’t first class, but the quality of information was. The company just put together a very high-quality, professional video showing its potential, and I include it here for all to watch.

Since my write-up, the company has announced incredible news. It’s only months away now from knowing whether or not it has made a world-class discovery. Subscribers to the Casey Energy Report are already sitting on some good, short-term profits with this story, but it keeps getting better.

The more the tension is building in Ukraine (and it’s going to get worse), the more money we’re going to make from the Colder War. There’s nothing you can do about the current geopolitical situation, but you can position yourself and your family to benefit financially from the European Energy Renaissance.

Now You Can Take the Lead… We Make It Simple

We expect great things from this company and other companies that are exposed to the European Energy Renaissance. You can read our ongoing guidance on this and our other top energy stocks every month in the Casey Energy Report. In the current issue, for example, you’ll find an in-depth report on the coal sector, uranium, and updates on all of our portfolio companies that are poised to benefit most from the European Energy Renaissance.

There’s no risk in trying it: If you don’t like the Casey Energy Report or don’t make any money within your first three months, just cancel within that time for a full, prompt refund. Even if you miss the cutoff, you can cancel anytime for a prorated refund on the unused part of your subscription.

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The article The Colder War and the End of the Petrodollar was originally published at Casey Research



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Wednesday, May 28, 2014

You Can’t Shoot Fish in a Barrel Without Ammunition

By Dan Steinhart, Managing Editor, The Casey Report


"FOMO"


I heard this acronym on a podcast last week. Having no clue what it meant, I consulted Google. Turns out it stands for “Fear of Missing Out.” Kids use it to describe their anxiety about missing a social event that all of their friends are attending. It struck me that investors experience FOMO too. And it usually leads to bad decisions.

From Prudent to FOMO

 

In the comfort of your home office, investing rationally is pretty easy. You think a bull market might be emerging, so you invest in the S&P 500.

But you’re not stupid. No one really knows where the stock market is headed, so you keep a healthy allocation of cash on the side to deploy the next time stocks trade at bargain prices. A prudent, rational plan.
But leave the house and things start to change. You notice that others seem to be making more money than you. First it’s the “smart money” raking in the dough—those who had the foresight and fortitude to buy during the last panic, when everyone else was retreating. You’re OK with that. Investing is their full-time job.

You can’t expect to compete with them.

But as the bull market charges higher, the caliber of people making more money than you sinks lower. The mailman starts giving you stock tips. And your gardener’s brand new Mustang, parked in your driveway just behind your sensible, 2011 Toyota Corolla, starts to irritate you.

Your brother-in-law is the last straw. He thinks he’s so smart, but he’s really just lucky to somehow always be in the right place at the right time. I mean, just last month you had to pick him up from a NASCAR tailgate after security kicked him out for lewd behavior—and now he’s taking the family to Europe with his stock market winnings?

If that guy can make $30,000 in the market in six months, you should be a millionaire. Now you feel like a sucker for holding so much cash. Why earn a pitiful 0.5% interest when you could be making… hang on, how much did the S&P 500 gain last year? 29.6%? Some quick extrapolation shows that if you invest all of your cash right now, you can retire by 2023. Factor in a couple family trips to Europe, and we’ll call it 2024 to be safe.

Cash Is Trash… Until It’s King

 

Such is the (slightly exaggerated) psychology of a bull market. FOMO is a powerful motivator and causes smart investors to do stupid things, like go all-in at the worst possible moment. Which is no small concern, since it undermines one of the most powerful investment strategies: keeping liquid cash in reserve to invest during market panics.

Take the roaring ‘20s as a long ago but pertinent example. The surging stock market of that era caused a whole lot of FOMO. Seeing their friends get rich, people who had never invested before piled into stocks.
Of course, we know how that ended. But there’s a fascinating angle that you may not have given much thought. I hadn’t until yesterday, when I finished reading The Great Depression: A Diary [click here to purchase on Amazon.com]. It’s a firsthand, anecdotal account written by attorney Benjamin Roth.

Roth emphasized that during the Great Depression, everyone knew financial assets were great bargains. The problem was hardly anyone had cash to take advantage of them.

Here are a few quotes from the book:

August 1931: I see now how very important it is for the professional man to build up a surplus in normal times. A surplus capital of $2,500 wisely invested during the depression might have meant financial security for the rest of his life. Without it he is at the mercy of the economic winds.
December 1931: It is generally believed that good stocks and bonds can now be bought at very attractive prices. The difficulty is that nobody has the cash to buy.
September 1932: I believe it can be truly said that the man who has money during this depression to invest in the highest grade investment stocks and can hold on for 2 or 3 years will be the rich man of 1935.
June 1933: I am afraid the opportunity to buy a fortune in stocks at about 10¢ on the dollar is past and so far I have been unable to take advantage of it.
July 1933: Again and again during this depression it is driven home to me that opportunity is a stern goddess who passes up those who are unprepared with liquid capital.
May 1937: The greatest chance in a lifetime to build a fortune has gone and will probably not come again soon. Very few people had any surplus to invest—it was a matter of earning enough to buy the necessaries of life.

In short, by succumbing to FOMO and investing all your cash, you might be giving up the opportunity to make a literal fortune. You can’t shoot fish in a barrel without ammunition.

Of course, the parallels from the Great Depression to present day crises aren’t exact. The U.S. was on the gold standard back then, meaning the Fed couldn’t conjure money out of thin air to reflate stock prices. Such a nationwide shortage of cash is unthinkable today, as Yellen & Friends would create however many dollars necessary to prevent stocks from plummeting 90%, as they did during the Great Depression.

That’s exactly what happened during the 2008 financial crisis, as you can see below. The Fed injected liquidity, and stocks rebounded rapidly. Compared to the Great Depression, the stock market crash of 2008 was short and sweet:


What does that mean for modern investors?

When the next crisis comes—and it will—there will be bargains. But because of the Fed’s quick trigger, investors will have to act decisively to get a piece of them.

What’s more, now that the US government has demonstrated beyond the shadow of a doubt that it will prop up the economy, bargains should dissipate even quicker next time around. After all, the hardest part of buying stocks in a crisis is overcoming fear. But that fear isn’t much of a detriment when Uncle Sam is standing by with his hand on the lever of the money-printing machine, ready to rescue the market.

Crises can creep up on you faster than you think. You may never know what hit you--unless you knew what to look for ahead of time. Watch Meltdown America, the eye opening 30-minute documentary on how to recognize (and survive) an economic crisis—with top experts including Sovereign Society Director Jeff Opdyke, investing legend Doug Casey, and Canadian National Security Council member Dr. Andre Gerolymatos.

Be prepared… it can (and will) happen here. Click here to watch Meltdown America now.


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Monday, May 26, 2014

Free trading webinar: The Insiders Guide to Growing a Small Account into a Big Account

Growing your account is not as hard as you think. And it won't take you decades to grow it if you do it the RIGHT (and safe) way. Let John Carter show you how he does it and how you can do it too.

Just click here to grab a seat to this Tuesdays [June 3rd] FREE webinar

He's pulling back the cloak on how he personally grows his accounts with super low risk, and max gains and control. He'll show you........

   *   His favorite low risk strategy to grow his account

   *  What stops to use and WHEN

   *  How to control risk without being timid

   *  How to secure your financial future.

   *  And a lot more...plus he'll be taking question

Seats are limited for this 'Insider Meeting', so get your name on the list TODAY:

Just Click Here to Reserve Your Seat to John's Meeting 

See you Tuesday!
Ray @ The Crude Oil Trader



Weekly futures recap with Mike Seery for week ending May 23rd

We've asked our trading partner Mike Seery to give our readers a weekly recap of the commodity futures market. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets......

Crude oil futures in the July contract rallied another $.70 this Friday afternoon trading at 104.45 a barrel hitting new 1 year highs as the trend continues to move to the upside at least here in the short term. The true breakout was when prices broke above 103 in Wednesday’s trade as I would place my stop loss at the 10 day low which is around 98 risking $5 or $5,000 per contract as the chart structure will improve over the next several days as there is strong demand going into the Memorial Day weekend for energy products. Crude oil futures rose almost $3 this week as prices look to head up to the next resistance level of 106 and if that level is broken I think we can retest the 110 level which was hit last August when we had the Syrian conflict and then prices dropped very quickly however this market is quite different as prices are rising due to demand and improving economies around the world as the U.S stock market hit all time highs once again today and with extremely low interest rates looking to stay for many years to come that recipe is very bullish crude oil and all other commodity and equity assets. If you look at this market on a seasonality basis prices generally tend to rise in the months of June, July and August as drivers are hitting the road and it looks like that same trend is already beginning so continue to play this market to the upside and if you currently have missed the recent rally look for a dip to enter.
TREND: HIGHER
CHART STRUCTURE: IMPROVING

Don't miss this weeks free webinar "The Insiders Guide to Growing a Small Account into a BIG Account".....Just click here!

Gold futures in the June contract basically traded unchanged for the trading week with very little volatility as this market has gone sideways over the last 7 weeks and is looking to breakout soon in my opinion. If you look at the daily chart we are starting to form a tight wedge and I do think if prices break the critical level of 1,265 the bear market will continue however if prices break out above 1,310 a bottom might be in place and time will only tell so at this point I’m sitting on the sidelines as there is no trend in this market, however this is starting to become an interesting chart, so keep a close eye on those 2 price levels as the longer we consolidate the more powerful the breakout becomes. Gold futures are trading just an eyelash below their 20 and 100 day moving average as volatility is extremely low at the current time so if you’re bullish this market I would look at bull call option spreads because the premiums are relatively cheap and if you’re bearish this market I would look at bear put spreads limiting your risk to what the premium costs as gold certainly will become extremely volatile once again it’s just a matter of time.
TREND: SIDEWAYS
CHART STRUCTURE: EXCELLENT

Coffee futures in the July contract are up 55 points this afternoon in New York currently trading at 182 a pound still trading below its 20 day but above its 100 day moving average settling last Friday at 185 as prices are still near 5 week lows. I’m recommending buying the coffee market if you’re lucky enough to get in at the 170 – 175 level as I do think crop estimates which should be coming out in the next couple weeks will show a worse production than anticipated sending prices higher and volatility higher as coffee can have tremendous price swings. The drought in central Brazil was very severe and I don’t think prices can head back down to the 140 level so if your trading a large enough account keep a very close eye on this market because the risk reward is always in your favor if you use a proper money management technique so look to be a buyer if prices should tumble into the low 170s.
TREND: SIDEWAYS
CHART STRUCTURE: IMPROVING

Get more of Mikes calls on cotton, cocoa, silver, orange juice and more......Just click here!




Wednesday, May 21, 2014

How to Grow a Small Trading Account into a BIG One

He's back! Our friend and trading partner John Carter of Simpler Options is back to answer the number one question he gets at the Simpler Options phone bank...."how can I trade using a small trading account"?

As you have probably already learned [like all of us] trading fees quickly erode our trading accounts even when we have some success when using a small account. Today John shows us how to put that all behind us.

Growth is on our minds, and I'm sure it's on yours.....so watch this free video from the industries leading educator and start growing and protecting your account today.

How to Grow a Small Account into a BIG One

Here's what you'll learn from John......

   *   The difference between trading for income vs. growth and what no one else will tell you about this

   *   The # 1 job of every trader has to accomplish or look for a new job

   *   Why you don’t want to focus on being right in trading and yes this is counter intuitive

   *   Examples of my favorite trades for growing a small account

   *   Position sizing appropriately for a small account and the types of stocks and ETFs to trade

John shows us all of his trades in his real 5K account that he'll be growing right before our eyes. And John explains in detail every method he uses to make it all happen.

Watch the video here...and thank me later

See you in the markets,
Ray @ The Crude Oil Trader

P.S.  please feel free to leave a comment after watching the video, we want to hear your take on what John is doing.




The Birth of a New Bull Market

By Jeff Clark, Senior Precious Metals Analyst


If I asked you why you think I’m bullish on platinum and palladium, you’d probably point to the strikes in South Africa, the world’s largest producer of platinum. Or maybe the geopolitical conflicts with Russia, the largest supplier of palladium. Maybe you’d even mention that some technical analysts say the palladium price has “broken out” of its trading range.

These are all valid points—but they’re reasons why a trader might be bullish. When the strikes end, or Russia ends its aggression, or short-term price momentum eases, they’ll sell.
And that will be a mistake.

Because underneath the headlines lies an irreparable situation with the PGM (Platinum Group Metals) market, one that will last at least several years and probably more like a decade. This market is teetering on the edge of a supply crunch, one more perilous than many investors realize. As the issues outlined below play out, prices will be forced higher—which signals that we should diversify into the “other” precious metals now.
The basic problem is that platinum and palladium supply is in a structural deficit. It won’t be resolved when the strikes end or Russia simmers down. Here are six reasons why…...

#1. Producers Won’t Meet the Cost of Production

The central issue of the striking workers in South Africa is wages. In spite of company executives offering to double wages over the next five years, workers remain on the picket line.

Regardless of the final pay package, wages will clearly be higher. And worker pay is one of the biggest costs of production. And the two largest South African producers (Anglo American and Impala), which supply 69% of the world’s platinum, are already operating at a loss.


Once the strike settles, costs will rise further. Throw in ongoing problems with electric power supply, high regulations, and past labor agreements, and there is virtually no chance costs will come down. This dilemma means that platinum prices would need to move higher for production to be maintained anywhere near “normal” levels. Morgan Stanley predicts it will take at least four years for that to occur. And if the price of the metal doesn’t rise? Companies will have no choice but to curtail production, making the supply crunch worse.

#2. Inventories Are Near the Bottom of the Barrel 

 

One reason platinum price moves have been muted during the work stoppage is because there have been adequate stockpiles. But those are getting low. Impala, the world’s second-largest platinum producer, said the company is now supplying customers from its inventories. In March, Switzerland’s platinum imports from strike-hit South Africa plummeted to their lowest level in five and a half years, according to the Swiss customs bureau.

Since producers can’t currently meet demand, some customers are now obtaining metal from other sources, including buying it in the open market. As inventories decline, supply from producing companies will need to make up the shortfall—and they’ll have little ability to do that.

#3. The Strikes Will Make Recovery Difficult and Prolonged

Companies are already strategizing how to deal with the fallout from the worst work stoppage since the end of apartheid in 1994…
  • Amplats said it might sell its struggling Rustenburg operations. Even if it finds a buyer, the new operator will inherit the same problems.
  • Impala said that even if the strike ends soon, its operations will remain closed until at least the second half of the year.
  • Some companies have announced they may shut down individual shafts. This causes a future problem because some of these mines are a couple of miles deep and would require a lot of money to bring back online—which they may balk at doing with costs already so high.
  • It’s not being advertised, but a worker settlement will almost certainly result in layoffs since some form of restructuring will be required. This could trigger renewed strikes and set in motion a vicious cycle that further degrades production and makes labor issues insurmountable.

#4. Russian Palladium Is Already in a Supply Crunch

When it comes to palladium, Russia matters more than South Africa, since it provides 42% of global supply. Remember: palladium demand is expected to rise more than platinum, due to new auto emissions control regulations in Asia.

But Russia’s mines are also in trouble…
  • Ore grades at Russia’s major mines, including the Norilsk mines, are reported to be in decline.
  • New mines will take as long as 10 years to come online. It could take a decade for Russian production to rebound—if Russia even has the resources to do it. This stands in stark contrast to global demand for palladium, which has grown 35.8% since 2004.
  • Russia’s aboveground stockpile of palladium appears to have dwindled to near extinction. The precise amount of the country’s reserves is a state secret, but analysts estimate stockpiles were 27-30 million ounces in 1990.
Take a look at reserve sales today:


Many analysts believe that since palladium reserve sales have shrunk, Russia has sold almost all its inventory. As unofficial confirmation, the government announced last week that it is now purchasing palladium from local producers. This paints a sobering picture for the world’s largest supplier of palladium—and is very bullish for the metal’s price.

#5. Demand for Auto Catalysts Cannot Be Met

The greatest use of PGMs is in auto catalysts, which help reduce pollution. Platinum has long been the primary metal used for this purpose and has no widely used substitute—except palladium.

But that market is already upside down.


Palladium is cheaper than platinum, but replacing platinum with palladium requires some retooling and, on a large scale, would worsen the supply deficit. As for platinum (which does work better than palladium in higher-temperature diesel engines), auto parts manufacturers are expected to use more of it than is mined this year, for the third straight year. Some investors may shy away from PGMs because they believe demand will decline if the economy enters a recession. That could happen, but tighter emissions controls and increasing car sales in Asia could negate the effects of declining sales in weakening Western economies.

For example, China is now the world’s top auto-producing country. According to IHS Global, auto sales in China are projected to grow 5% annually over the next three years. PricewaterhouseCoopers forecasts that sales of automobiles and light trucks in China will double by 2019. That will take a lot of catalytic converters. This trend largely applies to other Asian countries as well. It’s important to think globally when considering demand.

The key, however, is that supply is likely to fall much further than demand.

#6. Investment Demand Has Erupted

Investment demand for platinum rose 9.1% last year. The increase comes largely from the new South African ETF, NewPlat. At the end of April, all platinum ETFs held nearly 89,000 ounces—a huge amount when you consider it was zero as recently as 2007.

Palladium investment fell 84% last year—but demand is up sharply year-to-date due to the launch of two South African palladium ETFs, pushing global palladium holdings to record levels. And like platinum, there was no investment demand for palladium seven years ago.

Growing investment demand adds to the deficit of these metals.

The Birth of a 10 Year Bull Market

 

Add it all up and the message is clear: by any reasonable measure, the supply problems for the PGM market cannot be fixed in the foreseeable future. We have a rare opportunity to invest in metals that are at the beginning of a potential 10-year bull run. Platinum and palladium prices may drop when the strikes end, but if so, that will be a buying opportunity. This market is so tenuous, however, that an announcement of employees returning to work may be too little, too late. We thus wouldn’t wait to start building a position in PGMs.

GFMS, a reputable independent precious metals consultancy, predicts the palladium price will hit $930 by year-end and that platinum will go as high as $1,700. But that will just be the beginning; the forces outlined above could easily push prices to double over the next few years.

At that point, stranded supplies might start coming back online—but not until after major, sustained price increases make it possible.

The RIGHT Way to Invest

In my newsletter, BIG GOLD, we cover the best ways to invest in the metals themselves (funds and bullion), but for the added leverage of investing in a profitable platinum/palladium producer, I have to hand the baton over to Louis James, editor of Casey International Speculator.

You see, most PGM stocks are not worth holding, so you have to be very diligent in making the right picks. Remember, the dire problems of the PGM miners are one reason we’re so bullish on these metals. However, Louis has found one company in a very strong position to benefit from rising prices—and its assets are not located in either South Africa or Russia.

It’s the only platinum mining stock we recommend, and you can get its name, our full analysis, and our specific buy guidance with a risk free trial subscription to Casey International Speculator today.
If you give it a try today, you’ll get three investments for the price of one: Your Casey International Speculator subscription comes with a free subscription to BIG GOLD, where you’ll find two additional ideas on how to invest in the PGMs.

If you’re not 100% satisfied with our newsletters, simply cancel during the 3 month trial period for a full refund—but whatever you do, make sure you don’t miss out on the next 10 year bull market.  

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The article The Birth of a New Bull Market was originally published at Casey Research



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Monday, May 19, 2014

The Most Anticipated Oil Well of 2014

By Marin Katusa, Chief Energy Investment Strategist

Large international oil companies (IOCs) and the largest national oil companies (NOCs) are all anxiously watching an oil well that’s being drilled by a North American company in a little, out of the way country in Europe. In fact, this country—Albania—has recently garnered so much attention from Big Oil due to the results of the elephant potential of this oil deposit that the Albanian Energy Ministry just decided to establish an open tender system for the next round of sales of blocks with major oil and gas potential. If you’re not familiar with it, “open tender” is an auction process where the highest bidder gets the land blocks.

The Energy Ministry wouldn’t do this unless the demand were significant, and when Doug Casey and I visited the region recently, we were very impressed with its world-class potential. We’re both excited to see the oil well results that are slated to come out within the next few months—so are the IOCs and NOCs, and so should you. To share our excitement, Doug and I thought it would be a great idea to literally bring you into the room to see and hear what we see and hear—and thanks to modern technology, I present to you today the Casey Energy Report (CER) Crossfire.

One of the few times I filmed a CER Crossfire was with Keith Hill from Africa Oil. It’s not something I do regularly—only when I’m really excited about a company. The company we have on CER Crossfire today, Petromanas Energy (PMI.V), is chasing world class, elephant oil deposits, but rather than deepwater Africa (like Keith did with Africa Oil), it’s drilling deep onshore in Europe.

As you will hear me discuss in the video, the last time I’ve seen a company chasing deep world class oil deposits with this kind of massive upside was Africa Oil. Shell, one of the largest IOCs, is paying almost all of the US$70 million this oil well costs to drill to earn its 75% share of the project, and it will do the same with the next well. We haven’t seen such a high reward-to-risk ratio in a long time. So, rather than reading a long missive, I invite you to watch this edition of the Casey Energy Report Crossfire with Glenn McNamara, the CEO of Petromanas. I think it will definitely be worth your time.



Now You Can Take the Lead… We Make It Simple

We expect great things from this company. You can read our ongoing guidance on Petromanas and our other top energy stocks every month in the Casey Energy Report. In the current issue, for example, you’ll find an in depth field report on the Europe trip Doug and I took, what we learned at our site visits, and which companies are poised to benefit most from the budding European Energy Renaissance. There’s no risk in trying it: If you don’t like the Casey Energy Report or don’t make any money within your first three months, just cancel within that time for a full, prompt refund.

Even if you miss the cutoff, you can cancel anytime for a prorated refund on the unused part of your subscription. You don’t have to travel 300+ days a year to discover the best energy investments in the world—we do it for you. Click here to get started.


The article The Most Anticipated Oil Well of 2014 was originally published at Casey Research.com.



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Friday, May 16, 2014

New LNG Plant in North Dakota will Supply Oil and Gas Producers

A new natural gas liquefaction plant is slated to come online this summer in North Dakota to reduce the flaring of gas in the Bakken Formation and provide fuel for Bakken oil and gas operations. The developer, Prairie Companies LLC subsidiary North Dakota LNG, announced earlier this month that the plant would provide an initial 10,000 gallons per day (gal/d) of liquefied natural gas (LNG), and could expand to 66,000 gal/d. Assuming a 10% processing loss, the plant would take in a maximum of 6 million cubic feet per day (MMcf/d) once expanded. In 2012, North Dakota vented and flared 218 MMcf/d of natural gas because of record high oil production and insufficient pipeline takeaway capacity for natural gas produced as a byproduct.

Hess Corporation will supply the natural gas for liquefaction at Prairie's Tioga natural gas processing location. After the LNG is produced, it will be sent via truck to storage sites at drilling locations, where – once regasified – it can be used to power rigs and hydraulic fracturing operations as well as LNG vehicles. LNG itself cannot burn; in its liquefied state, its temperature is minus-260 degrees Fahrenheit. However, as a liquid, it takes up only 1/600th of its volume as a gas, so LNG is an excellent form to store or transport natural gas. Currently, most drilling operations run on diesel, and converting to natural gas provides potentially significant cost savings given the current differential between diesel and natural gas prices. In 2012, EIA estimated that nationally oil and gas companies consumed more than 5 million gal/d of diesel in their operations, representing a significant expense.

While conversion to natural gas might not be possible in many cases, in the past few years, several companies have developed and are marketing technologies that would allow drilling rigs and fracturing pumps to run in both dual fueled and or single fueled modes.

Although the liquefaction plant will be the first LNG project in the Bakken, some producers have begun using natural gas to power their operations, citing cost savings, access to natural gas, and environmental benefits. Statoil uses compressed natural gas (CNG) to fuel some of its drilling equipment. The natural gas is produced in the Bakken and compressed using General Electric's CNG in a Box system.

Additionally, outside of the Bakken, other companies have successfully used natural gas to power drilling operations. In 2012, Seneca Resources and Ensign Drilling installed GE LNG fired engines on drilling rigs in the Marcellus Shale. Apache, Halliburton, and Schlumberger have successfully used CNG and LNG to power hydraulic fracturing operations in the Granite Wash formation in Oklahoma.

Some of these companies have estimated fuel savings on the order of 60% to 70% compared to diesel, as well as payback on the conversion investment in about a year. The basic economics that have driven the recent interest in converting or manufacturing more heavy duty trucks to run on LNG are driving some of the interest in converting to natural gas for fueling stationary oil and gas operations.

Posted courtesy of the EIA


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Wednesday, May 14, 2014

Gold Prediction using Statistics & Technical Analysis

Here is my gold prediction (silver and gold mining stocks, should be the same) looking forward 24 months.
Since the top in gold in 2011 gold has been selling off. Depending on how you analyze the market, this 3 year sell off could be seen as consolidation within a major cyclical bull market or that it’s in a bear market. But know this, either way, the outlook is bullish, and all gold has to do is find a bottom here and rally above the $1400 per ounce level. This would kick start a major feeding frenzy of gold buying.

Gold bear market in the past have on average corrected 33% and lasted a total of 550 days. So if we look at the stats of the current pullback in gold it has dropped 38% and about 700 days long. Time for a bottom and bull market? It sure seems like it.

You can see my recent report on the U.S. Dollar and Gold Forecast.
 

Gold Prediction Technical Outlook:

Gold remains in a down trend, but looks to be starting a possible stage 1 basing pattern. Technical analysis is pointing to strength as the MACD moving higher, relative strength, and the down trendline show price and momentum being bullish.

A few weeks ago the chart completed a Golden Cross. This is not shown on the chart, but it is when the 50 SMA crosses above the 200 SMA. Investors tend to look at this as a major long term buy signal, although I do not use it for any of my analysis or timing of the market.

If historical data, statistics, and technical analysis prove to be correct we can expect gold to rise. My gold prediction is for price to reach $2300 - $2500 per ounce within 24 months.

Gold Prediction

Gold Prediction Conclusion:

The average gold bull market last roughly 450 days and posts a gain of 95%. So with the current correction which is beyond these levels already, expect price to firm up this year and complete the stage 1 base. Note that until gold breaks out of its Stage 1 Basing pattern, I will remain bearish/neutral on the metal. There is a huge opportunities else where unfolding.

Chris Vermeulen

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Puerto Rico’s Stunning New Tax Advantages

By Nick Giambruno, Senior Editor, International Man

Chances are that you have heard something about the stunning new laws in Puerto Rico that give unbelievable tax benefits for mainland Americans who move to the island. Benefits that are so incredible that many at first thought they were simply too good to be true…...but they most certainly are not.


With strategies that purport to legally allow US citizens to avoid having to pay taxes, the first thing that usually comes to mind is some sort of cockamamie scheme. This is because the US government is no slouch when it comes to shaking down its citizens. It’s mind boggling expenditures necessitate this. It would be dangerously foolish in the extreme to think you could slip one past them.

However, the tax benefits of becoming a resident of Puerto Rico are not an illusion, nor some type of scam. They are very real, 100% legal, and could change your life. That is not hyperbole. They have already changed the lives of many. These benefits are why scores of mainland Americans have already made the move—including two members of Casey Research. Many more have seriously considered it. To spur job growth and economic activity in general, the Commonwealth of Puerto Rico introduced extraordinary tax incentives for incoming residents and service businesses.

Specifically, for Puerto Rican residents and businesses that qualify—mostly expatriates from the U.S. mainland or their enterprises—the recently enacted Act 22 and Act 20 provide for a zero tax rate on capital gains and certain interest and dividends earned by individuals, and for low single digit tax rates on qualifying service income earned by corporations operating in Puerto Rico.

Puerto Rico is no novice at sculpting tax rules to attract foreign investors and expatriates. For decades the country has offered tax incentives to many types of businesses, especially manufacturers, which is why today you’ll find plants belonging to Praxair, Merck, Pfizer, and other big names dotting the island’s lush interior.
Due to the ever-increasing extra-territorial regulations they are forced to comply with, many countries and foreign financial institutions are showing American citizens the “unwelcome mat.” Puerto Rico, on the other hand, is a newly tax-friendly jurisdiction that is—and will continue to be—open to Americans.

One accountant who specializes in offshore structures remarked, “This is the biggest opportunity I’ve seen in 25 years.”

He’s right: this is truly an astounding and unique opportunity for individual Americans; there is no other way to legally escape the suffocating grip of these taxes besides death or renunciation of U.S. citizenship. This is because the US is the only country in the world that taxes its nonresident citizens on all of their income regardless of where they live and earn their money. For this reason, an American who moves to a zero tax jurisdiction like Dubai, for example, still pays a full U.S. tax bill. A Canadian expat working in Dubai would have no income tax bill at all.

Note: The US does exclude up to $99,200 of foreign earned income (salary, wages, etc.) from taxation if certain conditions are met, but there is no break for an overseas American’s investment income.

American are in the uniquely unfavorable position of having arguably the worst tax policies and a government that can effectively enforce them. For many, it is a tight and suffocating tax leash. It is no wonder, then, why record numbers of Americans are giving up their citizenship to escape these onerous requirements. Even if you do decide to take the plunge and renounce your US citizenship, there’s a good chance you’ll get stung with the costly exit tax and also may have trouble reentering the US.

There is, however, another way, thanks to the new options in Puerto Rico. American citizens can effectively gain many of the tax benefits of renunciation without actually having to do so. Due to Puerto Rico’s situation as a commonwealth of the U.S., its residents are not subject to US federal income taxes from income generated in Puerto Rico.

Previously this did not make any practical difference, because although Puerto Rican residents are not subject to U.S. federal taxes, they are subject to Puerto Rican taxes, which are often at similar levels to those on the U.S. mainland. However the situation has changed immensely, with the two powerful, new laws that exempt new Puerto Rican residents from certain key taxes from the Puerto Rican government.
 .
Anyone who relocates to Puerto Rico can apply for these tax incentives—including mainland U.S. citizens, who can find similar benefits nowhere else in the world, thanks to the island’s unique legal situation.

Casey Research has done a thorough boots on the ground investigation and found that the tax advantages are real and that for many Americans, including individuals operating on a modest scale, they are a huge opportunity that could truly be life changing. The findings were recently published in a comprehensive A-Z guide on the Puerto Rico option. Click Here to Learn More.


The article Puerto Rico’s Stunning New Tax Advantages was originally published at Casey Research



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Tuesday, May 13, 2014

Why the Market Should Pay More Attention to Sports and Poker

Did your coach ever tell you not to signal before you made a move, or do you know why it’s so important to have a good poker face if you’re trying to bluff? It’s because it’s pretty hard to trick a person that can see what you’re going to do next. What does this have to do with trading the markets for consistent profit?


The market signals before just about every move it makes.


So, why doesn’t this make the market incredibly easy to predict? It’s because most traders don’t know the market’s “tell.” That’s why you learn to watch your opponent’s position in sports, or to watch your opponent’s pulse and face in poker. If you don’t know that a nervous twitch means your neighbor is trying to bluff you with his pair of twos, then how do you know he doesn’t have the cards? On the other hand, if you know his “tell”, you can anticipate his bluff even if the rest of the table thinks he’s got a strong hand. Doc Severson spent a lot of time (and a lot more money) looking for those signs in the market, but as James Bond remarks in Casino Royale, “It was worth it to discover his tell.”


Learn the Market’s Tell
 

After years of study and testing (he was an engineer, after all), Doc Severson found a way to see the market “signal” before it makes a move. He used it to position himself before the 2013 S&P rally, and he is seeing the market signal another big move now. He’s already preparing his positions for this move, and he wants to show you how to anticipate them as well.


How to Predict the Next Big Move for Yourself (Free Video)

 

Monday, May 12, 2014

Yellen’s Wand Is Running Low on Magic

By Doug French, Contributing Editor

How important is housing to the American economy?

If a 2011 SMU paper entitled "Housing's Contribution to Gross Domestic Product (GDP) quot; is right, nothing moves the economic needle like housing. It accounts for 17% to 18% of GDP. And don't forget that home buyers fill their homes with all manner of stuff—and that homeowners have more skin in insurance on what's likely to be their family's most important asset. All claims to the contrary, the disappointing first quarter housing numbers expose the Federal Reserve as impotent at influencing GDP's most important component.

The Fed: Housing's Best Friend

 

No wonder every modern Fed chairman has lowered rates to try to crank up housing activity, rationalizing that low rates make mortgage payments more affordable. Back when he was chair, Ben Bernanke wrote in the Washington Post, "Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance."

In her first public speech, new Fed Chair Janet Yellen said one of the benefits to keeping interest rates low is to "make homes more affordable and revive the housing market."

As quick as they are to lower rates and increase prices, Fed chairs are notoriously slow at spotting their own bubble creation. In 2002, Alan Greenspan viewed the comparison of rising home prices to a stock market bubble as "imperfect." The Maestro concluded, "Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole."

Three years later—in 2005—Ben Bernanke was asked about housing prices being out of control. "Well, I guess I don't buy your premise," he said. "It's a pretty unlikely possibility. We've never had a decline in home prices on a nationwide basis." With never a bubble in sight, the Fed constantly supports housing while analysts and economists count on the housing stimulus trick to work.

2014 GDP Depends on Housing

 

"There's more expansion ahead for the housing market in 2014, with starts and new-home sales continuing to rise at double-digit rates, thanks to tight inventory," writes Gillian B. White for Kiplinger. The "Timely, Trusted Personal Finance Advice and Business Forecast(er)" says GDP will bounce back. Fannie Mae Chief Economist Doug Duncan says, "Our full-year 2014 economic forecast accounts for three key growth drivers: an acceleration in spending activity from private-sector forces, waning fiscal drag from the federal government, and continued improvement in the housing market."
We'll see about that last one.

Greatest Housing Subsidy of All Time Running Out of Gas

 

With the central bank flooding the markets with liquidity, holding short rates low, and buying long term debt, mortgage rates have been consistently below 5% since the start of 2009. For all of 2012, the 30 year fixed mortgage rate stayed below 4%. In the post gold standard era (after 1971), rates have never been this low for this long. The Fed's unprecedented mortgage subsidy has helped the market make a dead cat bounce since the crash of 2008. After peaking in July 2006 at 206.52, the Case-Shiller 20 City composite index bottomed in February 2012 at 134.06. It had recovered to 165.50 as of January. However, while low rates have propped up prices, sales of existing homes have fallen in seven of the last eight months. In March resales were down 7.5% from a year earlier. That's the fifth month in a row in which sales fell below the year earlier level.

David Stockman writes, "March sales volume remained the slowest since July 2012." He listed 13 major metro areas whose sales declined from a year ago, led by San Jose, down 18%. The three worst performers and 6 of the bottom 11 were California cities. Las Vegas and Phoenix were also in the bottom 10, with sales down double digits from a year ago. This after housing guru Ivy Zelman told CNBC in February, "California is back to where it was in nirvana." Considering the entire nation, she said, "I think nirvana is not far around the corner… I think that I have to tell you, I'm probably the most bullish I've ever been fundamentally, and I'm dating myself, been around for over 20 years, so I've seen a lot of ups and downs."

Housing Headwinds

 

Housing is contributing less to overall growth than during both the days of 20% mortgage rates in the 1980s and the S&L crisis of the early 1990s. In Phoenix, where home prices have bounced back and Wall Street money has vacuumed up thousands of distressed properties, the market has gone flat. In Belfiore Real Estates' April market report, Jim Belfiore wrote, "The bad news for home builders is they have created a glut of supply in previously hot market areas… Potential buyers, as might be expected, feel no sense of urgency to buy because they believe this glut is going to exist indefinitely."

Nick Timiraos points out in the Wall Street Journal that with a 4.5% mortgage rate and prices 20% below their peak, "… homes are still more affordable than in most periods between 1990 and 2008." So why is demand for new homes so tepid? And why have refinancings fallen 58% year over year in the first quarter?
"Housing's rocky recovery could signal weakness more broadly in the economy," writes Timiraos, "reflecting the lingering damage from the bust that has left millions of households unable to participate in any housing recovery. Many still have properties worth less than the amount borrowers owe on their mortgages, while others have high levels of debt, low levels of savings, and patchy incomes."

More specifically, "So far we have experienced 7 million foreclosures," David Stockman, former director of the Office of Management and Budget, writes. "Beyond that there are still nine million homeowners seriously underwater on their mortgages, and there are millions more who are stranded in place because they don't have enough positive equity to cover transactions costs and more stringent down payment requirements." Young people used to drive real estate growth, but not anymore. The percentage of young home buyers has been declining for years. Between 1980 and 2000, the percentage of homeowners among people in their late twenties fell from 43% to 38%. And after the crash, the downtrend continued. The percentage of young people who obtained mortgages between 2009 and 2011 was just half what it was ten years ago.

Young people don't seem to view owning a home as the American dream, as was the case a generation ago. Plus, who has room to take on more debt when 7 in 10 students graduate college with an average $30k in student loan debt? "First time home buyers are typically an important source of incremental housing demand, so their smaller presence in the market affects house prices and construction quite broadly," Fed Chairman Ben Bernanke told homebuilders two years ago.

There's not much good news for housing these days. For a little while, the Fed's suppression of interest rates juiced housing enough to distract Americans from weak job creation and stagnant real wages. Don't have a job? No problem! Just borrow against the appreciation of your house to feed your family. But Yellen's interest rate wand looks to be out of magic. The government had a pipe dream of white picket fences for everyone. But Americans can't refinance their way to wealth. Especially in the Greater Depression.

Read more about the Fed’s back-breaking economic shenanigans and the ways to protect your assets in the Casey Daily Dispatch—your daily go-to guide for gold, silver, energy, technology, and crisis investing.

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The article Yellen’s Wand Is Running Low on Magic was originally published at Casey Research



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Sunday, May 11, 2014

Are Valuations Really Too High?

By John Mauldin


The older I get and the more I research and study, the more convinced I become that one of the more important traits of a good investor or businessman is not simply to come up with the right answer but to be able to ask the right question. The questions we ask often reveal the biases in our thinking, and we are all prone to what behavioral psychologists call confirmation bias: we tend to look for (and thus to see, and to ask about) things that confirm our current thinking.

I try to spend a significant part of my time researching and thinking about things that will tell me why my current belief system is wrong, testing my opinions against the ideas of others, some of whom are genuine outliers.

I have done quite a number of media interviews and question and answer sessions with audiences in the past few months, and one question keeps coming up: “Are valuations too high?” In this week’s letter we’re going to try to look at the various answers (orthodox and not) one could come up with to answer that basic question, and then we’ll look at market conditions in general. This letter may print a little longer as there are going to be a lot of charts.

I am back in Dallas today, getting ready to leave Monday for San Diego and my Strategic Investment Conference. I’m really excited about the array of speakers we have this year. We’re going to share the conference with you in a different way this year. My associate Worth Wray and I are going to do a brief summary of the speakers’ presentations every day and send that out as a short Thoughts from the Frontline for four days running. Plus, for those who are interested in my more immediate reactions, I suggest you follow me on Twitter. There are still a few spots available at the conference, as we have expanded the venue, and if you would like to see who is speaking or maybe decide to show up at the last minute (which you should), just follow this link. Now let’s jump into the letter.

Take It to the Limit

First, let’s examine three ways to look at stock market valuations for the S&P 500. The first is the Shiller P/E ratio, which is a ten year smoothed curve that in theory takes away some of the volatility caused by recessions. If this metric is your standard, I think you would conclude that stocks are expensive and getting close to the danger zone, if not already in it. Only by the standards of the 2000 tech bubble and the year 1929 do you find higher normalized P/E ratios.



But if you look at the 12 month trailing P/E ratio, you could easily conclude that stocks are moderately expensive but not yet in bubble territory.



And yet again, if you look at the 12 month forward P/E ratio, it might be easy to conclude that stocks are fairly, even cheaply priced.



In a Perfect World

Earnings are projected to grow rather significantly. Let’s visit our old friend the S&P 500 Earnings and Estimate Report, produced by Howard Silverblatt (it’s a treasure trove of data, and it opens in Excel here.

I copied and pasted below just the material relevant for our purposes. Basically, you can see that using the consensus estimate for as-reported earnings would result in a relatively low price to earnings ratio of 13.5 at today’s S&P 500 price. If you think valuations will be higher than 13.5 at the end of 2015, then you probably want to be a buyer of stocks. (Again, you data junkies can see far more data in the full report.)



But this interpretation begs a question: How much of 2013 equity returns were due to actual earnings growth and how much were due to people’s being willing to pay more for a dollar’s worth of earnings? Good question. It turns out that the bulk of market growth in 2013 came from multiple expansion in the U.S., Europe, and United Kingdom. Apparently, we think (at least those who are investing in the stock market think) that the good times are going to continue to roll.



The chart above shows the breakdown of 2013 return drivers in global markets, but this next chart, from my friend Rob Arnott, shows that roughly 30% of large cap U.S. equity (S&P 500) returns over the last 30 years have come from multiple expansion; and recently, rising P/E has accounted for the vast majority of stock returns in the face of flat earnings.



The Future of Earnings

What kind of returns can we expect from today’s valuations? There are two ways we can look at it. One way is by looking at expected returns from current valuations, which is how Jeremy Grantham of GMO regularly does it. The following chart shows his projections for the average annual real return over the next seven years.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – Please Click Here.



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Saturday, May 10, 2014

Commodities Market Recap and this Weeks Stops and Trading Numbers....Crude Oil, Natural Gas, Gold, Silver, Coffee, Sugar and More!

We've asked our trading partner Michael Seery to give our readers a weekly recap of the futures market. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets......


Crude oil futures are trading below their 20 day but still above their 100 day moving average stating that the trend is mixed as I am currently sitting on the sidelines as there is no trend currently. The fundamentals are bearish in oil as stock piles are at 85 year highs as prices peaked at 104 last month now looking at support between 97-98 dollars a barrel as I think lower prices are ahead however I am not currently participating in this market so wait for better chart structure to develop.
TREND: MIXED
CHART STRUCTURE: OK

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Natural Gas Futures. I had been recommending a long position in the June natural gas as prices broke down yesterday hitting a 10 day low and stopping us out of the market for a loss so sit on the sidelines and wait for better chart structure to develop. This was a disappointing trade as I thought prices were going to break above 5.00 but that did not happen so it’s time to lick your wounds and find a better trend.
TREND: MIXED
CHART STRUCTURE: SOLID

Gold futures in the June contract settled last Friday at 1,309 while going out today around 1,290 down by about $20 for the trading week as the Ukrainian situation has stalled sending gold prices back down into the recent trading range. Gold futures are trading below their 20 but right at their 100 day moving average as prices have been consolidating in the last 5 weeks trading in a $30 range as I’ve been sitting on the sidelines waiting for a better chart pattern to develop but if you are looking to get into this market on the long side I would buy at today’s prices placing my stop at the 10 day low of 1,365 risking around $2,500 per contract and if you’re looking to get short this market I would sell at today’s price while putting my stop loss at 1,310 risking around $2,000 as the chart structure is relatively tight at the current time. Gold prices rallied from 1,180 all the way up near $1,400 an ounce 2 months ago so this is basically the 50% retracement and I think you will see a consolidation for quite some time so keep a close eye on this chart as it appears to me that a breakout is looming.
TREND: MIXED
CHART STRUCTURE: EXCELLENT

Is it Time to Admit That Gold Peaked in 2011?

Silver futures in New York continued their bearish trend this week settling last Friday at 19.55 finishing lower by about $.45 for the trading week as I still think there’s a possibility that a spike bottom occurred in last Fridays trade as $19 has been very difficult to break on the downside. Silver futures have come all the way from slightly above $22 in late February all the way down to today’s level and from $35 in 2013 so this is been a bear market for well over 1 year as there seems to be a lack of interest, however eventually silver will turn around and join the rest of commodities higher but at this point there’s just very little interest. Silver futures are trading below their 20 and 100 day moving average telling you that the trend is lower and as I’ve talked about many times before if you have deep pockets and you’re a longer-term investor I think prices down at these levels are relatively cheap and if prices went lower I would continue to dollar cost average as there is real demand for silver.
TREND: LOWER
CHART STRUCTURE: EXCELLENT

Here's our Critical Line in the Sand for Silver

Coffee futures in the July contract were sharply lower this week finishing down over 1150 points this Friday afternoon to close around 184.00 a pound and I’ve been recommending a long position in coffee for quite some time as we got stopped out at the 194 level today which was the 2 week low so sit on the sidelines and wait for another trend to develop as prices could possibly retest the recent lows of around 170. Coffee futures are trading below their 20 day and above their 100 day moving average as the trend is sideways to lower currently so look for another market that is in a stronger trend but keep a close eye on this market as I do think prices are limited to the downside and I would be an interested buyer around the 165 level which was hit in early April. Coffee prices broke above to new contract highs 3 weeks ago but prices have just petered out here in recent weeks as crop estimates start to come out in the next several weeks.
TREND: MIXED
CHART STRUCTURE: POOR

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Sugar futures finished the week down around 20 points trading in nonvolatile action as prices are testing support at 17.07 settling this Friday at 17.20 and if that level is broken then I would place my stop loss above the 10 day high which stands at 18.03 risking around 100 points or $1,100 dollars per contract. The chart structure is excellent at the current time as the trend is lower as prices are trading below their 20 & 100 day moving averages as prices have been in a 100 point trading range over the last month so keep a close eye on the 17 level for a possible short as the soft commodities have turned negative recently. TREND: MIXED
CHART STRUCTURE: OUTSTANDING

Why Are So Many Boomers Working Longer?

When Do You Add To Your Winning Trade? This has always been a very interesting question because it can create a situation of going from rags to riches or from riches to rags in a very short amount of time. Many times I see traders abuse pyramiding or adding to positions with utter lack of any type of money management system in place and letting it ride which usually ends up in a complete wipeout of capital and sometimes even worse.

Commodity prices can move very quickly with large gains or loses like we experienced in the 2008 crash of stock and commodity prices, so you always have to use stops and not fall in love or marry a position. In my opinion the answer to this question is add only once to the trade if that position has made you at least 2%-3% of your account balance while still having stop losses on all positions that equal 2% loss at a maximum risk. Remember your stop loses will be different on both positions because of the fact that you entered those trades at a different date and price.

There are many different theories about how long does a meaningful consolidation have to last before you enter a trade on the breakout to the up or downside? In my opinion I always want to see a consolidation that lasts at least 8 or more weeks before I would consider entering. The reason that I want a longer consolidation is to try and avoid a bunch of false breakouts such as a 10 or 15 day consolidations which happen all the time, so I am trying to put the odds in my favor by trading the breakout of at least 8 weeks or more and the longer such as a 11 or 13 week consolidation the better. At this present time cocoa is in a major consolidation.

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Friday, May 9, 2014

What You and Monica Lewinsky Might Have in Common

By Dennis Miller

Collateral damage can assume many forms—and though some may be more newsworthy than others, the latter are no less real, nor any less frightening.


On Tuesday, controversial radio talk show host Rush Limbaugh called Monica Lewinsky “collateral damage in Hillary Clinton’s war on women,” saying that President Bill Clinton and his wife destroyed the former White House intern “after he got his jollies, after he got his consensual whatevers.”

Last month, Jeremy Grantham, cofounder of GMO, a Boston based asset management firm that oversees $112 billion in client funds, dubbed savers “collateral damage” of quantitative easing and the Federal Reserve’s continued commitment to low interest rates.

Would it be worse to be known as the “president’s mistress” for more than a decade and, as Lewinsky claims, to be unable to find a normal job? Maybe. But it’s no laughing matter either to find yourself penniless in your “golden years.”

Signs of Monetary Collateral Damage Among Seniors

 

The 55-plus crowd accounts for 22% of all bankruptcy filings in the U.S.—up 12% from just 13 years ago—and seniors age 65 and up are the fastest growing population segment seeking bankruptcy protection. Given the wounds bankruptcy inflicts on your credit, reputation, and pride, it’s safe to assume those filing have exhausted all feasible alternatives.

But even seniors in less dire straits are finding it difficult to navigate low interest rate waters. Thirty seven percent of 65 to 74 year olds still had a mortgage or home equity line of credit in 2010, up from 21% in 1989. For those 75 and older, that number jumped from 2% to 21% during the same timeframe—another mark of a debt filled retirement becoming the norm. With an average balance of $9,300 as of 2012, the 65 plus cohort is also carrying more credit card debt than any other age group.

While climbing out of a $9,300 hole isn’t impossible, the national average credit card APR of 15% sure makes it difficult. For those with bad credit, that rate jumps to 22.73%—not quite the same as debtor’s prison, but close.

None of this points to an aging population adjusting its money habits to thrive under the Fed’s low interest rate regime.

Minimize Your Part of Comparative Negligence

 

A quick side note on tort law. Most states have some breed of the comparative negligence rule on the books. This means a jury can reduce the monetary award it awards a tort plaintiff by the percentage of the plaintiff’s fault. Bob’s Pontiac hits Mildred’s Honda, causing Mildred to break her leg. Mildred sues Bob and the jury awards her $100,000, but also finds she was 7% at fault for the accident. Mildred walks with $93,000. (Actually, Mildred walks with $62,000 and her lawyer with $31,000, but I digress.)

Comparative-negligence rules exist because when a bad thing happens, the injured party may be partly responsible. For someone planning for retirement, the bad thing at issue is too much debt and too little savings. Through low interest rates, the Federal Reserve is responsible for X% of the problem.

Though ex-Fed chief Bernanke doesn’t seem to see it that way—in a dinner conversation with hedge fund manager David Einhorn, he asserted that raising interest rates to benefit savers wouldn’t be the right move for the economy because it would require borrowers to pay more for capital. Well, there you have it. And there’s nothing you can do about that X%. You can, however, reduce or eliminate your contribution.
In other words, you don’t have to be collateral damage; you can affect how your life plays out.

Money Lessons from Zen Buddhism

 

This might sound like a “duh” statement, but it bears repeating from time to time. Inheritance windfall from that great-aunt in Des Moines you’d forgotten about aside, there are two ways to eliminate debt and retire well: spend less or make more.

Rising healthcare costs, emergency car repairs, and the like are real impediments to reducing your bills. Costs rooted in attempts to “keep up with the Joneses,” however, are avoidable. Those attempts are also futile. A new, even richer Mr. Jones is always around the bend.

Instead of overspending for show, make like a Buddhist and let go of your attachment to things and your ego about owning them. Spring for that Zen rock garden if you must and start raking.

One of the wealthier men I know drove around for years with a gardening glove as a makeshift cover for his Peugeot’s worn out, stick shift knob. It looked shabby, but this man wasn’t a car guy and had no need to impress. As far as I know, the gardening glove worked just fine until he finally donated the car to charity and happily took his tax deduction. Maintaining your car isn’t overspending, but you catch my drift. Dropping efforts to show off can benefit us all.

That said, keeping up isn’t always about show. You may feel pressure to overspend just to be able to enjoy time with your friends and family. Maybe you can no longer afford the annual Vail ski week with your in laws or the flight to Hawaii for your nephew’s bar mitzvah. Maybe your friends are hosting caviar dinners, but you’re now on a McDonald’s budget and can no longer participate.

Spending less in order to stay within your budget can mean missing out on experiences, not just stuff. If you’re in this camp, there’s no reason to hang your head. As I mentioned above, you can spend less or you can make more. The latter is far more fun.

An Investment Strategy to Prevent You from Becoming Collateral Damage

 

While it’s tempting to start speculating with your retirement money, resist. If you have non-retirement dollars to play with and the constitution to handle it, carefully curated speculative investments can give you a welcome boost. However, if all of your savings is allocated for retirement, just don’t do it.

Unless you’re still working, how, then, can you make more money in a low-interest-rate world? At present, my team of analysts and I recommend investing your retirement dollars via the 50-20-30 approach:
  • 50%: Sector diversified equities providing growth and income and a high margin of safety.
  • 20%: Investments made for higher yield coupled with appropriate stop losses.
  • 30%: Conservative, stable income vehicles.
No single investment should make up more than 5% of your retirement portfolio.

Whether you’re designing your retirement blueprint from scratch or want to apply our 50-20-30 strategy to your existing plan, the Miller’s Money team can help. Each Thursday enjoy exclusive updates on unique investing and retirement topics by signing up for my free weekly newsletter.

Don’t let the Fed’s anti-senior and anti-saver policies unravel your retirement.  

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