Stocks Fall as Gold and Oil Jumps Amid Tension Over Ukraine - FED

The FED has made it very clear that it will raise its benchmark interest rate, the federal funds rate. This could have severe consequences and even lead to a financial crisis. They are too far behind the curve and will be labeled a major policy error in the future, most likely. They have put themselves in a situation where they are now their own hostage. They need more leadership to describe what a soft landing is going to look like. They have been too slow to act, and now they are going too fast. The “Powell Put” has now been put out to pasture.

We believe that the FED will make more rate hikes than they have announced. Goldman Sachs thinks there will be four 25-basis-point increases in the federal funds rate in 2022. Jamie Dimon, CEO of JPMorgan Chase, said, “he wouldn’t be surprised if there were even more interest rate hikes than that in 2022. There’s a pretty good chance there will be more than four. There could be six or seven. I grew up in a world where Paul Volcker raised his rates 200 basis points on a Saturday night.”

Mr. James Bullard of the St. Louis FED spoke out in an arrogant tone that aggressive action is now required. The markets translated this to mean that the FED was going to call an emergency meeting as soon as this coming week to hike interest rates by no less than 50 basis points. This sent interest rates soaring and stock prices plummeting.....Read More Here. 

U.S. Stock Market Stalls Near a Double Peak

The U.S. stock market stalled early this week as earnings started to hit. A number of news and other items are pending with earnings just starting to roll in. There have been some big numbers posted from JP Morgan and Goldman Sachs. Yet, the markets have reacted rather muted to these blowout revenues.

We believe this is a technical “Double Top” set up in the making. The NASDAQ has been much weaker than the S&P and the Dow Industrials. We believe the US stock market is reacting to the reality of earnings and forward guidance after the recent rally in price levels over the past 9+ weeks. If we are correct and this Double-Top pushes price levels lower, then this technical resistance level may become the price ceiling headed into Q3 and Q4 2020.

Let's start with the E-MINI S&P 500 Weekly Chart....Continue Reading Here

Warning: This Could Be the Start of a Global Banking Crisis

By Justin Spittler

Europe’s banking system is collapsing. Over the past year, shares of Deutsche Bank (DB), Germany’s biggest bank, have plunged 56%. Swiss banking giant Credit Suisse (CS) is down 62% over the same period. Yesterday, both stocks hit record lows.

Dozens of other European bank stocks have also crashed. The Euro STOXX Banks, which tracks 48 of Europe’s largest banks, is down 48% over the past year. This is a major issue. That's because banks are the cornerstone of the financial system. They keep money flowing through the economy. If they’re struggling, it often means the economy is having major problems. Right now, European banks are flashing bright warning signs. That’s not just bad news for Europe—it’s also a serious threat to the rest of the world.

In today’s Dispatch, we’ll show you why Europe’s banking crisis could turn into a global banking crisis. You’ll also learn how to transform this threat into a chance to make big gains.

European banks are struggling to make money..…
Spanish banking giant BBVA’s (BBVA) profits fell 54% last quarter. First quarter profits at Deutsche Bank were down 58%. Swiss bank UBS’s (UBS) profits plunged 64%. European banks are hurting for a couple reasons. One, Europe is growing at the slowest pace in decades. Banks are making fewer loans as a result.

Two, negative interest rates are eating European banks alive. If you’ve been reading the Dispatch, you know negative rates are the latest radical government policy. They basically flip your bank account upside down. Instead of earning interest for keeping money in the bank, you pay the bank to hold your money.

Negative rates are clearly bad for savers. They’re also hurting Europe's biggest banks. That’s because these huge institutions have to pay their “bank,” the European Central Bank (ECB). Today, European banks pay £4 for every £1,000 they store at the ECB for a year. That might not sound like a lot. But it adds up quick when you manage trillions of euros like these banks do.

Last week, investors got another reason to avoid European banks..…
On Thursday, Great Britain voted to leave the European Union (EU), which it’s been in since 1973.
The “Brexit,” as the media is calling it, blindsided investors. As we explained yesterday, the market was expecting Great Britain to stay in EU. The unexpected outcome triggered a global stock market crash.

U.S. stocks had their worst day since August. Japanese stocks had their worst day in five years. European stocks had their biggest decline since the 2008 financial crisis. Friday’s global selloff erased $2.1 trillion in value from global stocks. It was the global stock market’s worst day in history. The panic didn’t die down much over the weekend. By the end of Monday, another $930 billion had disappeared from the global stock market.

European bank stocks were hit the hardest..…
Deutsche Bank plunged 22% between Friday and Monday. Credit Suisse fell 23%. UBS fell 20%. Barclays (BCS) and Royal Bank of Scotland (RBS) each plunged 37%. Both stocks are down more than 57% over the past year. These are gigantic moves in a matter of days. Remember, we’re not talking about small biotech stocks. These are some of the most important financial institutions on the planet.

Government officials are scrambling to contain the crisis..…
Today, the Bank of England (BoE) injected £3.1 billion into Britain’s banking system. It’s pledged to inject as much as £250 billion to stabilize its financial system. The BoE made its cash injection hours after the Bank of Japan (BOJ) pumped $1.5 billion into its banking system. As we'll show you in a second, we don't believe this will end well. That's because this excessive money printing (sometimes called "quantitative easing") doesn't stimulate the economy like governments intend it to.

Credit Suisse says other central banks could soon print more money too. Bloomberg Business reported on Friday:

“Market liquidity and overall liquidity in the U.K. is drying up as we speak in a very rapid way,” said John Woods, chief investment officer for Asia-Pacific at Credit Suisse Private Banking, told Bloomberg TV in Hong Kong. “It’s highly likely that we see monetary easing in a coordinated response” from central banks across the world, he said.

Great Britain is headed for a recession..…
A recession is when an economy shrinks two quarters in a row. Goldman Sachs (GS) says Britain could be in a recession by early 2017. But here’s the thing. We don’t think the BoE will let this happen. That’s because central bankers will do anything, including using reckless, unproven monetary policies, to avoid a recession these days.

Credit rating agency Standard & Poor’s agrees with us. Reuters reported today:

"Brexit is likely to represent a drag of about 1.2 percent of GDP for the UK in 2017," Jean-Michel Six, S&P's chief economist for Europe, the Middle East and Africa told a conference call for investors on Tuesday. "We have a significant slowdown but growth remains positive although obviously in a much more disappointing way. That is because we anticipate a very strong monetary response on the part of the Bank of England, in the form of additional quantitative easing, in the form of a further cut in interest rates," he added.

Bank of America (BAC) and Deutsche Bank also expect the BoE to fire up the printing press again. Bank of America says it could happen as soon as August.

QE won’t help Great Britain’s economy..…
As we told you above, QE doesn’t work. As regular readers know, the Federal Reserve pumped $3.5 trillion into the U.S financial system after the 2008 financial crisis. This massive money printing effort was supposed to juice the economy. But the U.S. is growing at its slowest pace since World War II. QE also failed to jumpstart Japan’s economy, which hasn’t grown in two decades. There’s no reason to think it will work this time.

If you’re nervous about the global financial system, we encourage you to take action today.…
The first thing you should do is own physical gold. Gold is real money. It’s held its value for thousands of years because it has a unique set of attributes: It’s easy to transport, easily divisible, and durable. You can take a gold coin anywhere in the world and folks will immediately recognize its value.

Unlike paper money, central bankers cannot create gold from nothing. It’s the ultimate antidote to crumbling paper currencies. That’s why the price of gold often soars when governments print money. This year, gold is up 24%. It’s trading at the highest price in two years. But it could go much higher as governments continue to run reckless monetary experiments.

If you want big profits from rising gold prices, own gold stocks..…
Dispatch readers know gold miners are leveraged to the price of gold. A small jump in the price of gold can cause gold stocks to surge. Gold’s 24% jump this year has caused GDX, a fund that tracks large gold stocks, to soar 96%. We believe this gold stock rally is just getting started. During the 2000 and 2003 gold bull market, the average gold stock gained 602%. The best ones soared 1,000% or more.

Nick Giambruno, editor of Crisis Investing, has recommended two gold stocks this year..…
He already closed out one of them for a quick double. It surged 103% in 14 months. Nick’s other gold stock is up 30% since March and is still dirt cheap at today's levels. Nick currently rates this stock a "Buy"…and says it could soon start paying a double digit dividend yield if gold keeps rising.

You can learn more about Nick’s gold stock by taking advantage of our special 60%-off sale for Crisis Investing. If you sign up today, you’ll be enrolled in a trial membership, which gives you 90 days risk-free to decide if the service is for you. But we encourage you to act soon. This special offer ends soon, and we likely won’t open this offer again for a long time.

You can learn more about this incredible offer by watching this video presentation. You’ll also learn about an even bigger threat to your wealth than Europe’s banking crisis. As you’ll see, almost no one is talking about this coming crisis. Yet, it could cause millions of Americans to lose their entire life savings. By the end of this video, you’ll know how to protect yourself. And just as importantly, you’ll know how to profit from this coming crisis. Click here to watch this free video.

Chart of the Day

U.S. bank stocks are also headed lower. Today’s chart shows the performance of the Financial Select Sector SPDR ETF (XLF) over the past year. XLF holds 94 major U.S. financial companies including behemoths JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC). You can see XLF is down 11% since last June. While that's not as severe as the near 50% drop in European banks over the same period, it's still a clear sign to stay away.

U.S. banks have many of the same problems as European banks. Like Europe, the U.S. economy is growing at the slowest pace in decades. And while the U.S. economy doesn’t have negative rates yet, Fed Chair Janet Yellen has said they aren’t “off the table” if the U.S. economy runs into trouble. The arrival of negative rates to the U.S. could tip bank stocks into a crisis, just like they have in Europe.

The article Warning: This Could Be the Start of a Global Banking Crisis was originally published at caseyresearch.com.

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Why the Fed Is So Wimpy

By John Mauldin

Another in what seems to be a small parade of scandals involving secretly recorded tapes of Federal Reserve regulators emerged last week. What a number of writers (including me) have written about regulatory capture over the past decade was brought out into the open, at least for a while. My brilliant young friend (40 seems young to me now) Justin Fox, editorial director of the Harvard Business Review and business and economic columnist for Time magazine, published a thoughtful essay this week, outlining some of the issues surrounding the whole concept of banking regulations.

Yes, the latest scandal involved Goldman Sachs, and it took place in the US, but do you really think it’s much different in Europe or Japan? Actually, there are those who argue that it’s worse in those places. This does not bode well for what happens during the next crisis (and there is always a next crisis, hopefully far in the future, though they do seem to come more frequently lately).

Writes Justin:

The point here is that if bank regulators are captives who identify with the interests of the banks they regulate, it is partly by design. This is especially true of the Federal Reserve System, which was created by Congress in 1913 more as a friend to and creature of the banks than as a watchdog. Two-thirds of the board that governs the New York Fed is chosen by local bankers. And while amendments to the Federal Reserve Act in 1933 shifted the balance of power in the Federal Reserve System from the regional Federal Reserve Banks (and the New York Fed in particular) to the political appointees on the Board of Governors in Washington, bank regulation continues to reside at the regional banks. Which means that the bank regulators’ bosses report to a board chosen by … the banks.

For those who would like a bit more bearish meat, I offer you a link to John Hussman’s latest piece, “The Ingredients of a Market Crash.”

I’m in Washington DC today at a conference sponsored by an association of endowments and foundations. They have a rather impressive roster of speakers, so I have found myself attending more sessions than I normally do at conferences. Martin Wolf and David Petraeus headline a very thoughtful group of managers and economists, accompanied by an assortment of geopolitical wizards. I’ve learned a lot.
No follow-on note today. I need to get back to my classroom education….

Your loving the fall weather analyst,

John Mauldin, Editor
Outside the Box

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Why the Fed Is So Wimpy

By Justin Fox
Harvard Business Review HBR Blog Network
September 26, 2014

Regulatory capture – when regulators come to act mainly in the interest of the industries they regulate – is a phenomenon that economists, political scientists, and legal scholars have been writing about for decades.  Bank regulators in particular have been depicted as captives for years, and have even taken to describing themselves as such.

Actually witnessing capture in the wild is different, though, and the new This American Life episode with secret recordings of bank examiners at the Federal Reserve Bank of New York going about their jobs is going to focus a lot more attention on the phenomenon. It’s really well done, and you should listen to it, read the transcript, and/or read the story by ProPublica reporter Jake Bernstein.

Still, there is some context that’s inevitably missing, and as a former banking regulation reporter for the American Banker, I feel called to fill some of it in. Much of it has to do with the structure of bank regulation in the U.S., which actually seems designed to encourage capture. But to start, there are a couple of revelations about Goldman Sachs in the story that are treated as smoking guns. One seems to have fired a blank, while the other may be even more explosive than it’s made out to be.

In the first, Carmen Segarra, the former Fed bank examiner who made the tapes, tells of a Goldman Sachs executive saying in a meeting that “once clients were wealthy enough, certain consumer laws didn’t apply to them.”  Far from being a shocking admission, this is actually a pretty fair summary of American securities law. According to the Securities and Exchange Commission’s “accredited investor” guidelines, an individual with a net worth of more than $1 million or an income of more than $200,000 is exempt from many of the investor-protection rules that apply to people with less money. That’s why rich people can invest in hedge funds while, for the most part, regular folks can’t. Maybe there were some incriminating details behind the Goldman executive’s statement that alarmed Segarra and were left out of the story, but on the face of it there’s nothing to see here.

The other smoking gun is that Segarra pushed for a tough Fed line on Goldman’s lack of a substantive conflict of interest policy, and was rebuffed by her boss. This is a big deal, and for much more than the legal/compliance reasons discussed in the piece. That’s because, for the past two decades or so, not having a substantive conflict of interest policy has been Goldman’s business model. Representing both sides in mergers, betting alongside and against clients, and exploiting its informational edge wherever possible is simply how the firm makes its money. Forcing it to sharply reduce these conflicts would be potentially devastating.

Maybe, as a matter of policy, the United States government should ban such behavior. But asking bank examiners at the New York Fed to take an action on their own that might torpedo a leading bank’s profits is an awfully tall order. The regulators at the Fed and their counterparts at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation correctly see their main job as ensuring the safety and soundness of the banking system. Over the decades, consumer protections and other rules have been added to their purview, but safety and soundness have remained paramount. Profitable banks are generally safer and sounder than unprofitable ones. So bank regulators are understandably wary of doing anything that might cut into profits.

The point here is that if bank regulators are captives who identify with the interests of the banks they regulate, it is partly by design. This is especially true of the Federal Reserve System, which was created by Congress in 1913 more as a friend to and creature of the banks than as a watchdog. Two-thirds of the board that governs the New York Fed is chosen by local bankers. And while amendments to the Federal Reserve Act in 1933 shifted the balance of power in the Federal Reserve System from the regional Federal Reserve Banks (and the New York Fed in particular) to the political appointees on the Board of Governors in Washington, bank regulation continues to reside at the regional banks. Which means that the bank regulators’ bosses report to a board chosen by … the banks.

Then there’s the fact that Goldman Sachs is a relative newcomer to Federal Reserve supervision – it and rival Morgan Stanley only agreed to become bank holding companies, giving them access to New York Fed loans, at the height of the financial crisis in 2008. While it’s a little hard to imagine Goldman choosing now to rejoin the ranks of mere securities firms, and even harder to see how it could leap to a different banking regulator, it is possible that some Fed examiners are afraid of scaring it away.

All this is meant not to excuse the extreme timidity apparent in the Fed tapes, but to explain why it’s been so hard for the New York Fed to adopt the more aggressive, questioning approach urged by Columbia Business School Professor David Beim in a formerly confidential internal Fed report that This American Life and ProPublica give a lot of play to. Bank regulation springs from much different roots than, say, environmental regulation.

So what is to be done? A lot of the classic regulatory capture literature tends toward the conclusion that we should just give up – shut down the regulators and allow competitive forces to work their magic. That means letting businesses fail. But with banks more than other businesses, failures tend to be contagious. It was to counteract this risk of systemic failure that Congress created the Fed and other bank regulators in the first place, and even if you think that was a big mistake, they’re really not going away.

More recently, there’s been a concerted effort to take a more nuanced view of regulatory capture and how to counteract it. The recent Tobin Project book, Preventing Regulatory Capture: Special Interest Influence and How to Limit It, sums up much of this thinking. While I’ve read parts of it before, I only downloaded the full book an hour ago, so I’m not going to pretend to be able to sum it up here. But here’s a thought – maybe if banking laws and regulations were simpler and more straightforward, the bank examiners at the Fed and elsewhere wouldn’t so often be in the position of making judgment calls that favor the banks they oversee. Then again, the people who write banking laws and regulations are not exactly immune from capture themselves. This won’t be an easy thing to fix.

update: The initial version of this piece listed the Office of Thrift Supervision as one of the nation’s bank regulators. As David Dayen pointed out (and I swear I knew at some point, but had totally forgotten), it was subsumed by the OCC in 2011.

Justin Fox is Executive Editor, New York, of the Harvard Business Review Group and author of The Myth of the Rational Market. Follow him on Twitter @foxjust.

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The article Outside the Box: Why the Fed Is So Wimpy was originally published at Mauldin Economics

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What GM, GS and XOM Do, So Does the Broad Market

Over the years working with professional traders I found it interesting how each individual has their bellwether stock they follow to gauge the stock markets trend and identify reversals before they take place.

About 10 years ago I traded with a floor trader who swore that whatever GS (Goldman Sachs) did the market followed. Another said he only used XOM (Exxon Mobil), while Stan Weinstein says GM (General Motors) was the stock to follow.

While each of these traders have been highly successful with their bellwether stock, I wanted to cover these in more detail and show you have to get the best of each of their strategies working for you. This will help you properly time the market, identify the overall market health and at which point you should be getting long or short stocks in your portfolio.

Just Click Here to Watch this Quick Video

If you would like to successfully trade both bull and bear markets then join my trading and investing newsletter today and catch the next hot sectors for 2014 using my ETF Trading Strategies.

Chris Vermeulen
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Ignore Banks' Bearish Statements on Gold

By Jeff Clark, Senior Precious Metals Analyst

Goldman Sachs has lowered its gold price projections and says the metal is headed to $1,200. Credit Suisse and UBS are bearish. Citigroup says the gold bull market is over.

So I guess it's time to pack it in, right?

Not so fast. As we've written before, these types of analysts have been consistently wrong about gold throughout this bull cycle. Another reason to disagree, however, is history; we've seen this movie before. In the middle of one of the greatest gold bull markets in modern history, the one that culminated in the 1980 peak, gold experienced a 20 month, one way decline. Every time it seemed to stabilize, the bottom would fall out again. From December 30, 1974 to August 25, 1976, gold fell a whopping 47%.

1976 had to be a tough year for gold investors. The price had already been declining for a year – and it just kept on sinking. Since that's similar to what we're experiencing today, I wondered, What were the pundits were saying then? I wanted to find out.

I enlisted the help of two local librarians, along with my wife and son, to dig up some quotes from that year. It wasn't easy, because publications weren't in digital form yet, and electronic searches had limited success. But we did uncover some nuggets I thought you might find interesting.

The context for that year is that the IMF had three major gold auctions from June to September, dumping a lot of gold onto the market. Both the US and the Soviet Union were also selling gold at the time. It was no secret that the US was trying to remove gold from the monetary system; direct convertibility of the dollar to gold had ended on August 15, 1971.

The public statements below were all made in 1976. You'll see that they aren't all necessarily bearish, but I included a range to give a sense of what was happening at the time, especially regarding the mood of the gold market. I think you'll agree that much of this sounds awfully darn familiar. I couldn't resist making a few comments of my own, too.

To highlight the timing, I put the comments into a price chart, pinpointing when they were said relative to the market. Keep in mind as you read them that the gold price bottomed on August 25, and then began a three-and-a-half year, 721% climb…

[1] "For the moment at least, the party seems to be over." New York Times, March 26.

[2] "Though happily out of the precious metal, Mr. Heim is no more bullish on the present state of the stock market than any of the unreconstructed gold bugs he's had so much fun twitting of late. He's urging his clients to put their money into Treasury bills." New York Times, March 26.

Me: These comments remind me of those today who poke fun at gold investors. I wonder if Mr. Heim was still "twitting" a couple years later?

[3] "'It's a seller's market. No one is buying gold,' a dealer in Zurich said." New York Times, July 20.
Turns out this would've been an incredible buyer's market – but only for those with the courage to buy more when gold dropped still lower before taking off again.

[4] "Though the price recovered to $111 by week's end, that is still a dismal figure for gold bugs, who not long ago were forecasting prices of $300 or more." Time magazine, August 2.
The "gold bugs" were eventually right; gold hit $300 almost exactly three years later, a 170% rise.

[5] "Meanwhile, the economic conditions that triggered the gold boom of 1973 through 1974, have largely disappeared. The dollar is steady, world inflation rates have come down, and the general panic set off by the oil crisis has abated. All those trends reduce the distrust of paper money that moves many speculators to put their funds in gold." Time magazine, August 2.

This view ended up being shortsighted, as these conditions all reversed before the decade was over. Does this sound similar to pundits today claiming the reasons for buying gold have disappeared?

[6] "Our own predictions are that gold will go below $100, with some hesitation possible at the $100 level." As stated by Mr. Heim in the August 19 New York Times.

Yes, this is the same gentleman as #2 above. I wonder how many of his clients were still with him a few years later?

[7] "Currently, Mr. LaLoggia has this to say: 'There is simply nothing in the economic picture today to cause a rush into gold. The technical damage caused by the decline is enormous and it cannot be erased quickly. Avoid gold and gold stocks.'" New York Times, August 19.

You can see that these comments were made literally within days of the bottom! Take note, technical analysts.

[8] "'Gold was an inflation hedge in the early 1970s,' the Citibank letter says. 'But money is now a gold-price hedge.'" New York Times, August 29.

Wow, were they kidding?! This reminds me of those dimwits journalists who said in 2011 to not invest in gold because it isn't "backed by anything."

[9] "Private American purchases of gold, once this was legalized at the end of 1974, never materialized on a large scale. If the gold bugs have indeed been routed, special responsibilities fall on the victorious dollar." New York Times, August 29.

The USD's purchasing power has declined by 80% since this article declared the dollar "victorious."

[10] "Some experts, with good records in gold trading, declare it is still too early to buy bullion." New York Times, September 12.

Too bad; they could've cleaned up.

[11] "Wall Street's biggest brokerage houses, after having scorned gold investments during the bargain days of the late 1960s and early 1970s, made a great display of arriving late at the party." New York Times, September 12.

No comment necessary.

[12] "He believes the price of bullion is headed below $100 an ounce. 'Who wants to put money over there now?'" As stated by Lawrence Helm in the New York Times, September 12.

The price of gold had bottomed two weeks before, making the timing of this advice about the worst it could possibly be.

[13] Author Elliot Janeway, whose book jacket states, "Presidents listen to him," was asked by a book reviewer about his preferred investments. He writes: "Then, gold and silver? He likes neither. In fact he writes: 'Any argument against putting your trust in gold, and backing it up with money, goes double for silver: silver is fool's gold.'" New York Times, November 21.

Mr. Janeway ate his words big-time: from the date of his comments to silver's peak of $50 on January 21, 1980, silver rose 1,055%!

[14] "Mr. Holt admits that 'in 1974, intense speculation caused the gold price to get too far ahead of itself.'" New York Times, December 19.

So, anything sound familiar here? Yes, it was a brutal time for gold investors, but what's obvious is that those who looked only at the price and ignored the fundamentals ended up eating their words and dispensing horrible advice. Investors who followed the "wisdom of the day" missed out on one of the greatest opportunities for profit in their lifetimes.

I was pleased to learn, though, that not all comments were negative in 1976. In fact, in the middle of the "great selloff," there were those who remained stanchly bullish. These investors must've been viewed as outliers – they, much like some of us now, were the contrarians of the day.

Also from 1976…

• "Many gold issues, in fact, are down 40 percent or more from their highs. Investors who overstayed the market are apparently making their disenchantment known. The current issue of the Lowe Investment and Financial Letter says, 'We are showing losses on our gold mining share recommended list… but keep in mind that these shares are for the long-term as investments.'" New York Times, March 26.
  
  Sounds like what you might read in an issue of a Casey Research metals newsletter..

• "The time to buy gold shares," [James Dines] declares, "is when there is blood in the streets." New York Times, September 12.
  
  If you glance at the chart above, Jim's comments were made within two weeks of the absolute low.

• "We're recommending to clients that they hold gold and gold shares," [C. Austin Barker, consulting economist] says. "The low-production-cost mines in South Africa might be interesting to buy for the longer term because I see further inflation ahead." New York Times, September 12.
  
  Investors who listened to Mr. Barker ended up seeing massive gains in their gold and gold equity holdings.

• "The probability of runaway inflation by 1980 is 50%... In light of this, the only safe investments are gold, silver, and Swiss francs,'" said the late Harry Browne on November 21 in the New York Times.
   

• "In the longer run, [Jeffrey Nichols of Argus Research] believes gold's price trend 'is much more likely to be upward than downward.'" New York Times, December 19.
  
  The "longer run" won.

• "'I think the intermediate outlook for gold is a period of consolidation and a bit of dullness,' says Mr. Werden. 'However, six or nine months from now, we could see renewed interest in gold.'" New York Times, December 19.
  
  He was right; within nine months gold had risen 13.5%.

• "Mr. Holt offers some advice to investors who are taking tax losses on their South African gold shares – some of which are selling at just 30 to 35 percent of their peak prices in 1974. 'If leverage has worked against you on the way down,' he reasons, 'why not take advantage of it on the way up?'" New York Times, December 19.
  
  Solid advice for investors today, too.

• "What's his [Thomas J. Holt] prediction for the future price of gold? 'A new high, reaching above $200 an ounce, within the next couple years.'" New York Times, December 19.
  
  His prediction was conservative; gold reached $200 nineteen months later, by July 1978.

It's clear that there were positive "voices in the wilderness" during that big correction, and as we all know, those who listened profited mightily.

There were other interesting tidbits, too. For example, gold stocks had been performing so poorly for so long that some advisors suggested a strategy we also hear today…

• "It is probably too late to sell gold shares, the stock market's worst-acting group these days, except for one possible strategy: selling to take a tax loss and switching into a comparable gold security to retain a position in the group." New York Times, September 12.

Even back then, it was widely known that gold often bucks the trend of the broader markets…

• "You might put a small portion of your money into gold shares and pray like the dickens that you lose half of it. In that way, chances are that if gold shares go down, the rest of your stock portfolio will go up." New York Times, September 12.

Gold miners provided critical revenue and jobs, just like today. From the August 2 issue of Time magazine…

• "South Africa, the world's largest gold producer, is being hurt the most. The price drop will cost it at least $200 million in potential export earnings this year."

• "Layoffs at the gold mines would make it even worse – the joblessness could intensify South Africa's explosive racial unrest."

• The Soviet Union, the world's second-largest gold producer, is feeling the price drop, too. The Soviets depend on gold sales to get hard currency needed to buy US grain and other imports."

Gold was also used as collateral…

• "The international gold market was also roiled yesterday by a report by the Commodity News Service that Iran was negotiating to lend South Africa roughly $600 million, predicated on a collateral of 6.25 million ounces of gold."

And just like today, there were plenty of stupid misguided US politicians: From the New York Times on August 27:

• "The drop in gold bullion prices from $126, which was the average at the first IMF auction June 2, provoked the Swiss National Bank to attack Washington's attitude toward the metal as 'childish.' Aside from the estimated $4.8 billion of gold reserves held by Switzerland, bankers there advocate some role for the metal as a form of discipline against unrestricted printing of paper money."

That last statement from the Swiss bankers is hauntingly just as true today.
Last, you know how the government in India has been tinkering with the precious-metals market in its country? And how it's led to smuggling? From the New York Times on August 27:

• "India announced it was resuming its ban on the export of silver. India is believed to have the largest silver hoard and the government there freed exports earlier this year as a means of earning taxes levied on overseas sales. However, most silver dealers minimized the significance of India's move yesterday. As one dealer explained, 'Smuggling silver out of India is so ingrained there that the ban will have no effect on the flow. It never has. Indian silver will continue to ebb and flow into the world market according to price.'"

So what's the difference in mood today vs. the mid-1970s? Nothing! This shows that the same concerns, fears, and confusion we have now existed at a similar point in the gold market then. There were also those who saw the big picture and stayed vigilant. Virtually every comment made in 1976 could apply to today. Keep in mind that most of the statements above are from two publications only; there are undoubtedly many more similar comments from that year.

The obvious lesson here is that patience won out in the end. It took the gold price three years and seven months to return to its December 1974 high. It only took another 18 months to soar to $850. Today, that would be the equivalent of gold falling until June this year, and not returning to its $1,921 high until April, 2015. It would also mean we climb to $6,227 and get there in November, 2016. Could you wait that long for a fourfold return?

This review of history gives us the confidence to know that our gold investments are on the right track. I hope you'll join me and everyone else at Casey Research in accepting this message from history and staying the course.

So, what will your kids or grandkids read in a few decades?

• "Buy gold. It's going a lot higher." Jeff Clark, Casey Research, March 24, 2013.

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The 2 Energy Sectors You Should Invest in This Year

Goldman Sachs Issues Sell Rating on RIG....Dan Dicker Says Something Quite Different

Transocean (RIG) is one of the day's largest large cap losers after Goldman Sachs initiates coverage with a Sell rating. The firm notes that while RIG has dominated the ultra deepwater business, its rigs need extensive upgrades to keep them compliant in the post Macondo world which consensus estimates don't fully reflect.

Dan Dicker, president at MercBloc, has a very different take on how to play Transocean. And that is what makes a market. If you are a regular reader here then you know that we here at The Crude Oil Trader have very little respect for any call coming out of Goldman Sachs in the oil patch.

Here what Dan had to say today on CNBC.....



How to Trade Oil ETFs When $100 Per Barrel is Reached

Ex-Credit Suisse Oil Head McKenna Starts Mastic Hedge Fund

Kieran McKenna, who traded oil for Credit Suisse AG and JPMorgan Chase & Co., started a hedge fund that will accept money from outside investors next month, according to Mastic Investment Advisory AG, his new company.

The Mastic Commodity Fund, based in Zug, Switzerland, will begin trading oil and energy products this month with partners’ capital, Mastic Investment said in an email. McKenna resigned from Credit Suisse as global head of oil in July to set up the firm. He declined to give details on the fund’s size or targets.

McKenna, 36, joins ex bankers from firms including Goldman Sachs Group Inc. and Morgan Stanley who have set up hedge funds after the Volcker rule limited risk taking by banks following the collapse of Lehman Brothers Holdings Inc. in 2008.

“We have seen no let up in appetite from investors looking to back new ventures if you can present them with managers with a good pedigree and track record,” said Daniel Caplan, a managing director in London for Deutsche Bank AG’s unit that provides leverage to hedge funds and helps them raise money from investors. “That’s true across all asset classes.”

Money managers founded 578 new hedge funds in 2011 through June, the best six months for startups since the first half of 2007, according to data from Chicago based Hedge Fund Research Inc. that covers all types of hedge fund.

The Mastic fund will make “extensive use” of options and has a relative value biased strategy, according to the company’s email. “There are contrasting outlooks from the fundamental hydrocarbon supply and demand balance issues that remain unresolved,” McKenna said.

Brent-WTI Spread

Relative value investment strategies seek to profit by targeting price gaps between different commodities, or different grades of the same commodity. They can also seek to exploit differences between maturity dates for the same commodity.

West Texas Intermediate crude, the U.S. benchmark grade, rallied 18 percent last month as U.S. demand increased and inventories declined in Cushing, Oklahoma. The December contract traded at $94.33 a barrel at 12:14 p.m. in London.

The gap between WTI and costlier Brent, the standard for more than half of the world’s crude, reached a record $27.88 a barrel on Oct. 14 and was at $17.45 today. Cushing is the largest crude-trading and storage hub in the U.S.

McKenna’s partners in Mastic Investment are John Thompson and Erik Serrano Berntsen, who founded Energy Alpha Strategies Ltd., a London based, commodity focused investment firm. Berntsen is chief operating officer at Mastic Investment.

McKenna’s departure from Credit Suisse came after the Zurich based bank replaced an almost five year trading alliance with Glencore International AG, the world’s largest commodities trader, with a so called consulting agreement in January.

He joined Credit Suisse in 2008 from JPMorgan and became global head of oil and products for the alliance. He was also a senior oil trader at Citadel LLC in Chicago and London. McKenna started his career in 1997 at Goldman Sachs, where he traded North Sea crude and options, according to Mastic Investment.


Posted courtesy of Bloomberg BusinessWeek News.

The U.S. ...... Top Crude Oil Producer By 2017?

We have been known to poke some fun at the oil futures predictions that have come out of Goldman Sachs the past couple of years. Most have been almost laughable. But we can't help but report on a statement coming out of Goldman Sachs this week as they predict the U.S. to be the leader in crude oil production in 2017. Honestly, if we had some leadership in Washington we would be the worlds leading oil producer and all of our economic woes a thing of the past. Both, are yet to be seen.

In the release Goldman Sachs is saying that U.S. oil production should reach 10.9 million barrels a day by 2017, a third higher than 8.3 million barrels currently. Russia, now the top oil producer, should see production increase only 100,000 barrels in the same period, for an output of 10.7 million barrels a day.

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How Many Times Have we Seen This Movie.....Goldman Sachs says Oil Going Much Higher!

Analysts from Goldman Sachs are declaring that oil prices will likely increase in the near to intermediate term. Price action so far on Tuesday has just about totally negated the nasty red candle from Monday. Oil continues to consolidate near the lows and will eventually either breakdown to new lows and possibly test the 200 period moving average or we will see an extension higher to the $103 – $105 / barrel price level. The daily chart of oil futures is shown below:

In the longer term, we remain extremely bullish on energy as the fundamentals indicate that oil demand will likely continue to rise while supply levels remain flat or begin to increase. Oil prices are likely to go much higher than what most analysts are expecting. For now, I’m going to be watching the key support level illustrated above. If oil prices continue to consolidate at these levels a breakout is nearly inevitable. The question remains which way will oil break?



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OPEC to Increase Production, Oil Services Companies Show a Jump in Profits

It appears we will start the week with a pull back in crude oil prices as Saudi Arabian Oil Minister Ali al-Naimi released a statement that OPEC will increase supply to meet what seems to be inevitable increased demand coming out of China and India. Our "friends" at Goldman Sachs are saying this only indicates that OPEC is using it's spare production supply and should only further the bulls story.

We personally have learned to not let Goldman Sachs lead the way in our oil trading but you also can't ignore it. While retail investors have less effect on oil markets then some other sectors, Goldman Sachs can increase that interest with their apparent media attention grabbing abilities.

But it's North American demand that is making most hedge funds and commercial buyers take a bigger interest in the "crude oil bull story" this week as a report from Commodity Futures Trading Commission showed that these investors have ramped up their net long positions 0.4 percent in crude contracts in the week ended Jan. 18th.

The oil services sector is giving traders additional confidence as Schlumberger reported better than expected quarterly profit on Friday followed by Haliburton releasing fourth quarter reports showing their net profit rose to $605 million, or .66 cents per share, from $243 million, or 27 cents per share, a year earlier. Revenue jumped 40 percent to $5.16 billion in the quarter after analysts had expected revenues to be $4.88 billion.

So do we open Monday morning selling the news on these companies? It's the numbers we trust and here's what we are using for Mondays trading......

Crude oil was lower overnight as it extends last week's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 88.45 would confirm that a short term top has been posted. If March renews this winter's rally, weekly resistance crossing at 93.87 is the next upside target. First resistance is this year's high crossing at 93.46. Second resistance is weekly resistance crossing at 93.87. First support is the reaction low crossing at 88.45. Second support is the reaction low crossing at 88.07. Crude oil pivot point for Monday morning is 89.40.

Natural gas as it extends the rally off October's low. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term. If March extends the rally off October's low, the 62% retracement level of the June-October decline crossing at 5.025 is the next upside target. Closes below the 20 day moving average crossing at 4.478 are needed to confirm that a short term top has been posted. First resistance is the overnight high crossing at 4.823. Second resistance is the 62% retracement level of the June-October decline crossing at 5.025. First support is the 10 day moving average crossing at 4.554. Second support is the 20 day moving average crossing at 4.478. Natural gas pivot point for Monday morning is 4.719.

Gold was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible. If February extends this month's decline, the reaction low crossing at 1331.10 is the next downside target. Closes above the 20 day moving average crossing at 1380.40 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1366.30. Second resistance is the 20 day moving average crossing at 1388.40. First support is last Friday's low crossing at 1337.00. Second support is the reaction low crossing at 1331.10. Gold pivot point for Monday morning is 1342.60.


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Bloomberg: Crude Oil Rises on Gain in Chinese Output, Reduced European Debt Concern

Crude oil climbed on greater than forecast growth in U.S. private employment and Chinese manufacturing and on signals the European Central Bank will act to prevent the spread of the region’s debt crisis. Prices surged as much as 2.8 percent as companies in the U.S. boosted payrolls the most since November 2007, according to figures from ADP Employer Services. Chinese manufacturing grew at the fastest rate in seven months. Futures reached the day’s high after Goldman Sachs & Co. said oil will average $110 a barrel in 2012, up from a forecast $100 of a barrel next year.

“As the global economy goes, so goes oil,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “The economic numbers in China and elsewhere today have been very strong and point to accelerating growth.” Crude oil for January delivery increased $2.16, or 2.6 percent, to $86.27 a barrel at 12:30 p.m. on the New York Mercantile Exchange. Prices climbed to $86.47, the highest level since Nov. 12.

Brent crude oil for January settlement rose $2.32, or 2.7 percent, to $88.24 a barrel on the London based ICE Futures Europe exchange. Goldman increased its forecast for U.S. gross domestic product growth next year to 2.7 percent from 2 percent. The U.S. economy will expand 3.6 percent in 2012, according to a report sent to Goldman Sachs clients today. The global economy will expand 4.6 percent next year and 4.8 percent in 2012, the bank said.

“Goldman has been banging the bull drum all year,” said Phil Flynn, a Chicago-based analyst and trader with investment adviser PFGBest.......Read the entire article.


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Energy Sector Buzz: China North East Petroleum Down In Late Trading

China North East Petroleum reported third quarter results that fell well short of the one analyst estimate on Thomson Reuters. Total oil production plunged 40% on severe flooding. The oilfield services company also said it's working on improving its control environment and has engaged an outside firm to help with it's restatement process. Shares slipped 4.9% to $6.60 in after hours trading.

Exploration and production company Gastar Exploration Ltd. (GST, $4.64, +$0.35, +8.16%) said it has acquired about 59,000 net acres of leasehold in the Marcellus Shale, a natural gas rich rock formation. Terms of the acquisition, which is expected to close in mid-December, weren't disclosed.

Goldman Sachs started coverage on oil service provider RPC Inc. (RES, $26.97, -$1.53, -5.37%) with a sell rating, saying the market for U.S. pressure pumping remains very tight, stocks are near all time highs and Street estimates imply that the cycle goes through 2012.

Northern Oil and Gas Inc. (NOG, $22.07, +$1.29, +6.21%) boosted the size of its planned stock sale as the offering priced at a mere 2.6% discount to Thursday's close.



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Goldman Sachs: Oil Will Be "Substantially Higher" by 2012

Crude oil prices will be “substantially higher” by 2012 as the global stockpile surplus shrinks and excess production capacity drops, according to Goldman Sachs Group Inc., the most profitable bank in Wall Street history. Global economic growth will drive oil demand and reduce inventories, which are still “exceptionally high” in developed countries including the U.S., the world’s biggest user of crude, Goldman said in a report dated yesterday. Spare capacity held by the Organization of Petroleum Exporting Countries will decline as the 12-member group, which pumps 40 percent of the world’s oil, boosts supply to meet demand, the bank said.

“Despite the recent rally, we believe that forward price levels offer good hedging opportunities,” Goldman analysts, led by Allison Nathan in New York, said in the report. “We continue to expect improving fundamentals will provide additional support to prices.” Oil climbed to the highest in two years yesterday, and is up 7 percent this month, on speculation the Federal Reserve’s stimulus program will weaken the dollar, bolstering the investment appeal of commodities. U.S. crude inventories plunged 7.4 million barrels last week, the biggest drop since September 2008, according to an American Petroleum Institute report yesterday.

The Fed said Nov. 3 it will buy an additional $600 billion of Treasuries through June to spur the economy. Investors should have an “overweight allocation” on commodities because this policy, along with the global recovery, is positive for prices, according to Goldman.......Read the entire article.


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Phil Flynn: Fundamentally Flawed

Another failed upside breakout as the global oil market continues to wallow in this endless trading range. As the bull and bear frustrations continue to mount, I have heard traders on both sides of the market that tell me that somehow the markets are wrong and that the fundamentals do not justify the current price. In other words that the market is somehow fundamentally flawed and that the price is out of whack with either your bullish or perhaps bearish reality. Oil bulls are frustrated with the lack of investment that they see in the oil industry and feel we are over estimating the drop in demand.

They point to China and its explosive growth and its growing appetite for oil. They say that the market is not correctly accessing event risk especially with the type of talk coming out of Iran and Israel in recent days especially in the aftermath of European sanctions. The oil bulls say that despite the drop in demand that as the economy continues to recover oil supplies will tighten faster than you think. The latest to express that frustration was noted oil bulls Goldman Sachs who just recently exclaimed that crude oil prices are “significantly” below the level warranted by fundamentals.....Read the entire article.

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Crude Oil Trades Near 11 Week High on Goldman "Crude Too Cheap" Statement

Crude oil traded near an 11 week high in New York as equities rallied around the world and Goldman Sachs Group Inc. said crude prices are too cheap. Oil was at about $79 a barrel before a government report due tomorrow that may show U.S. fuel supplies increased last week. Goldman Sachs said futures prices are “significantly” below the level warranted by “fundamentals,” offering buying opportunities for this year and next.

“We expect an average of $92 next year, so on a longer term horizon prices are too cheap, but not far too cheap,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. “Crude faces some resistance around $80 as although fundamentals are slowly improving they’re not yet strong enough.” Crude for September delivery was at $79.28 a barrel, up 30 cents, in electronic trading on the New York Mercantile Exchange at 1:23 p.m. London time. Brent crude for September settlement traded at $77.82 a barrel, up 32 cents, on London’s ICE Futures Europe exchange. Futures rose as high as $79.60 a barrel on July 23, the highest intraday price since May 6.

European stocks rose for a sixth day as UBS AG and Deutsche Bank AG reported earnings that beat estimates and the Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules. The Stoxx Europe 600 Index gained 0.6 percent to 258.65. Goldman Sachs said in a report yesterday that the balance between supply and demand will continue to tighten in the second half of this year as global economic growth boosts demand, returning inventories to “more normal” levels.....Read the entire article.

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Are Gulf Oil Disaster Stocks Way Oversold?

Goldman Sachs Daniel Boyd feels the market sell down for offshore drillers is overdone.

Goldman:
Investor fears related to the six month moratorium on deepwater drilling in the US Gulf are overdone from a fundamental perspective, in our view as this represents just 3%-5% of annual revenues for the major companies. We ultimately expect the financial impact to be minimal (3%-7% of EPS in 2010 and we are slightly lowering our estimates to reflect this) and temporary given not only the importance of DW to US oil supply but that many of the rigs will move to international locations where there are current shortages.

They're approaching the trough valuations they hit when the world was ending in early 2009:

Here's a stock-by-stock breakdown of the price to book valuations:

Look for 2Q earnings as a positive catalyst:

With P/B and EV/GCI at “reasonable” trough levels, we recommend longer-term investors buy the group now though recognize that short-term investors might prefer to wait until either the oil spill is contained, which will give more confidence that the DW drilling ban will be lifted in six months, or 2Q results which we expect to confirm our view that global fundamentals will remain strong.

Mr. Boyd is also particularly bullish on another gulf disaster stock, outside of the drillers, Halliburton

(HAL)

We maintain our Buy rating on Halliburton. We think that the shares are now discounting trough assumptions given that it is trading at just an average historical multiple of the actual 1Q2010 trough in earnings.

Perhaps these are the smarter BP-disaster plays, the stocks which have fallen hard along with BP due to the gulf disaster, but aren't nearly as exposed to the ballooning potential liabilities.

From Vincent Fernando at The Business Insider

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Phil Flynn: Goldman Gets Rolled

Oil prices are beginning to shake off the fall-out from the Goldman Sachs fraud allegations yet at the same time, the market is worried about the longer term ramifications of these charges. Set aside the fact of Goldman’s guilt or innocence at this point, it's the larger issue of confidence in the overall market place that raises the largest concern. The timing of these charges that we now know was voted at the SEC along party lines makes one worry about the political influence over the market place. If The SEC is being controlled by the government to push financial reform it could be more dangerous to the economy than Goldman’s alleged fraud.

The Wall Street Journal Editorial page that I wanted to quote yesterday until my computer crashed stated, “The Securities and Exchange Commission's complaint against Goldman Sachs is playing in the media as the Rosetta Stone that finally exposes the Wall Street perfidy and double dealing behind the financial crisis." Our reaction is different: Is that all there is? After 18 months of investigation, the best the government can come up with is an allegation that Goldman misled some of the world's most sophisticated investors about a single 2007 "synthetic" collateralized debt obligation (CDO)? Far from being the smoking gun of the financial crisis, this case looks more like a water pistol. The Journal said, “Let's deconstruct the supposed fraud, in which Goldman worked with hedge fund investor John Paulson, who wanted to bet on a decline in the subprime mortgage market. The SEC alleges that Goldman let Paulson & Co. dictate the mortgage backed securities on which investors would speculate via the CDO, and then withheld from investors Paulson's role on the other side of the transaction.

The SEC also alleges that Goldman deceived ACA Management a unit of the largest investor on the other side of the deal and the firm officially selecting which mortgage backed securities everybody would bet on into believing that Mr. Paulson was actually investing in an "equity" tranche on ACA's side of the deal. Regarding the second point, the offering documents for the 2007 CDO made no claim that we can find that Mr. Paulson's firm was betting alongside ACA. The documents go so far as to state that an equity tranche was not offered by Goldman, as ACA must have known since it helped put the deal together and presumably read the documents. The SEC complaint itself states that ACA had the final word on which assets would be referenced in the CDO. And in some cases, ACA kicked out of the pool various assets suggested by the Paulson firm.

More fundamentally, the investment at issue did not hold mortgages, or even mortgage backed securities. This is why it is called a "synthetic" CDO, which means it is a financial instrument that lets investors bet on the future value of certain mortgage backed securities without actually owning them. Yet much of the SEC complaint is written as if the offering included actual pools of mortgages, rather than a collection of bets against them. Why would the SEC not offer a clearer description? Perhaps the SEC's enforcement division doesn't understand the difference between a cash CDO—which contains slices of mortgage backed securities and a synthetic CDO containing bets against these securities.

More likely, the SEC knows the distinction but muddied up the complaint language to confuse journalists and the public about what investors clearly would have known: That by definition such a CDO transaction is a bet for and against securities backed by subprime mortgages. The existence of a short bet wasn't Goldman's dark secret. It was the very premise of the transaction.” The Journal also points out that, “By the way, Goldman was also one of the losers here. Although the firm received a $15 million fee for putting the deal together, Goldman says it ended up losing $90 million on the transaction itself, because it ultimately decided to bet alongside ACA and IKB. In other words, the SEC is suing Goldman for deceiving long-side investors in a transaction in which Goldman also took the long side. So Goldman conspired to defraud . . . itself?

The Journal asks, "Did Goldman have an obligation to tell everyone that Mr. Paulson was the one shorting subprime?" Goldman insists it is, "normal business practice" for a market maker like it not to disclose the parties to a transaction, and one question is why it would have made any difference. Mr. Paulson has since become famous for this mortgage gamble, from which he made $1 billion. But at the time of the trade he was just another hedge fund trader, and no long side investor would have felt this was like betting against Warren Buffett.

“Not that there are any innocent widows and orphans in this story. Goldman is being portrayed as Mr. Potter in "It's a Wonderful Life," exploiting the good people of Bedford Falls. But a more appropriate movie analogy is, "Alien vs. Predator," with Goldman serving as the referee. Mr. Paulson bet against German bank IKB and America's ACA, neither of which fell off a turnip truck at the corner of Wall and Broad Streets."

Some would argue that the global economy suffered when the housing bubble burst yet at the same time are these financial instruments to blame or is the government, the great enablers, and their policies that allowed the housing bubble to develop? The IBD points out that the financial reform bill fails to address some of the root causes of the financial crisis like, “The 1977 Community Reinvestment Act (CRA) was used as a bludgeon to force private banks to lend to unworthy bowers. Politicized (Government Sponsored Entities) Fannie Mae and Freddie Mac that became the chief funding mechanism for this corrupt housing policy and its bad loans."

For crude oil the Goldman news was bearish but as the markets asses the facts of the case it is unlikely that this case will lead to many others. The White House is already trying to distance themselves from the Goldman charges because any implication that the White House had a say in the timing of these allegations may indeed be fraudulent in itself and an abuse of power. The White House cannot be seen as having a major regulatory authority being used to further its own political agenda. This is not Venezuela for heaven’s sakes. It isn’t, is it?

The volcano pressured oil with an estimated demand destruction of roughly 2 million barrels of oil a day, some due to canceled flights and also decreased economic activity. The bulls' confidence has been shaken and oil needs to continue its rebound. The removal of economic optimism could mean the focus on over supply and sluggish demand may weigh. We still feel the best way to play the market right now is to take advantage of these very wide trading ranges.


You can reach Phil at pflynnpfgbest.com and watch him every day on the Fox Business Network!


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