October crude oil closed lower on Monday extending this month's decline. October decline as the United Nations Security Council worked toward a resolution based on the Geneva accord between the U.S. and Russia. The Syria premium has basically been taken out of the market. The low range close sets the stage for a steady to lower opening when Tuesday's night session begins. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If October extends the decline off August's high, the 38% retracement level of the April-August rally crossing at 102.43 is the next downside target. Multiple closes above the 20 day moving average crossing at 105.56 are needed to confirm that a low has been posted. First resistance is the reaction high crossing at 110.70. Second resistance is August's high crossing at 112.24. First support is the reaction low crossing at 104.21. Second support is the 38% retracement level of the April-August rally crossing at 102.43.
October Henry natural gas closed lower on Monday and below the 20 day moving average crossing at 3.631 confirming that a short term top has been posted while opening the door for additional weakness near term. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term. If October extends today's decline, the reaction low crossing at 3.517 is the next downside target. If October renews the rally off August's low, the 50% retracement level of the May-August decline crossing at 3.842 is the next upside target. First resistance is the 50% retracement level of the May-August decline crossing at 3.841. Second resistance is the 62% retracement level of the May-August decline crossing at 4.003. First support is the reaction low crossing at 3.517. Second support is the reaction low crossing at 3.418.
The December S&P 500 closed lower for the third day in a row on Monday. The December Standard & Poor's 500 Index posted its largest setback in a month as financial shares slumped while investors watched speeches from Federal Reserve officials for clues on monetary policies. The low range close sets the stage for a steady to lower opening when Tuesday's night session begins trading. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that a short term top might be in or is near. Closes below the 20 day moving average crossing at 1666.23 would confirm that a short term top has been posted. If December renews the rally off August's low into uncharted territory, upside targets will be hard to project. First resistance is last Thursday's high crossing at 1726.50. Second resistance is unknown now that December is trading into uncharted territory. First support is the 10 day moving average crossing at 1694.10. Second support is the 20 day moving average crossing at 1666.23.
October gold closed lower on Monday as the U.S. economy continues to improve. The Federal Reserve's surprise decision to hold stimulus for now will help prices only in the short term. However, gold could drop below $1,250 an ounce before the end of the year as economic data strengthens and investors expect the Fed to start reducing its asset purchases. Today's high range close sets the stage for a steady to higher opening when Tuesday's night session begins trading. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 1365.80 are needed to confirm that a short term low has been posted. If October renews the decline off August's high, August's low crossing at 1272.10 is the next downside target. First resistance is the 20 day moving average crossing at 1365.80. Second resistance is August's high crossing at 1432.90. First support is last Wednesday's low crossing at 1281.80. Second resistance is August's low crossing at 1272.10.
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Monday, September 23, 2013
Thoughts from the Frontline: Rich City, Poor City
By John Mauldin
"The future is already here," intoned William Gibson, one of my favorite cyberpunk science fiction authors, "it's just not very evenly distributed." Paraphrasing Gibson, the pension crisis is already here; it's just not very evenly distributed. For the past two weeks we've been exploring the problems of state pension funds. This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research. Then again you may be pleasantly surprised and congratulate yourself on choosing a particularly adept hometown. And be on notice that, no matter what your personal conclusion and how well-grounded your analysis is, there will be people who live in your neighborhood who think you are utterly full of, well, let's just say "nonsensical matter" and leave it at that. This is a family letter.
Into the Transformational Future
First, a quick announcement. I am constantly asked where the future jobs will be, and I think hard about the answer to that very personal question (it's crucial to those of us who have young kids). Will we see Gibson’s dystopian world or Ian Banks' world of abundance? The answer is, of course, that secular growth in employment will come from the new, transformational technologies that are already being created all around us, truly new industries that will change everything and create opportunities for work that we can't even imagine yet, in the same way the automobile or telecommunications or the McCormick reaper both took some jobs away and created even greater opportunities. The transition is the thing, though. It will be filled with opportunities for some and forced change for others, while we wait for the future to become more evenly distributed. In the next few weeks, you are going to get a letter from me that will tell you about the newest addition to Mauldin Economics, the Transformational Technologies Alert, written by my longtime friend Pat Cox, who is no stranger to readers of this letter. Pat and I have long wanted to work together, exploring the future and especially biotech. He is the best, and you will want to join us from the very beginning. We invite you to charge ahead into the future with us, exploring opportunities that will begin to change your own life right now. And now back to pensions…
Through the courtesy of one of your fellow readers I've been given a treasure trove of data on 702 city pension plans. I won't say that I got lost in the data, but the search and rescue teams sent to find me had to go back for extra supplies. There were some very dark alleys that it took a while to find my way back out of. Not to mention some twists and turns that were totally surprising.
So first I need to say a big thank you to Gregg L. Bienstock and Justin Coombs of Lumesis for giving me access to their data. Gregg is a cofounder of Lumesis, and their signature software is called (appropriately enough, given the oceans of data they plumb) DIVER. They've compiled data on 54,000 issuers of municipal and state bonds from over 100 sources. They sent me an Excel file on the major pension plans of every state and the pension plans of cities with populations over 100,000. And Justin was kind enough to create multiple spreadsheets and graphs upon request and patiently explain their data. The bulk of the data in this letter is from http://www.lumesis.com. The opinions are my own and should not be attributed to Lumesis. From time to time we will also look at another fascinating study from the Pew Charitable Trusts on pensions and retiree healthcare in 61 cities.
As we have seen the last two weeks (here and here), the assumptions that states make about their future investment returns are fairly unrealistic and generally nothing like what they've achieved for the last 10 years. This makes their balance sheets look far better than they really are, and for some states the discrepancy is pretty stark. Witness Illinois, where unfunded pension liabilities run north of $280 billion, give or take. That is more than $20,000 for every man, woman, and child in the state. And the bill keeps rising every month as the state plows ever deeper in debt to its own future.
Keeping in mind the caveat that the percentages may actually be worse than reported, let's look at a few graphs on a state-by-state basis. This first graph shows the funded ratio of state pension plans through 2012. (Note: on all the graphs the large "island" below Louisiana is a representation of Puerto Rico. To its left is Alaska, and both are obviously not to scale.)
The next graph shows actuarial required contributions (ARC). The ARC is simply the amount of money required to fund the pension plan given the return assumptions of the plan. The important thing to note here is the amount of blue in the graph. If you ask your local politicians how their pension plan is doing, they can probably tell you with a straight face (and because they don't know any better) that their state's pension is fully funded. I note with some alarm that "conservative" Texas doesn't fare very well. While Texas claims funding above 80%, a more reasonable assumption on returns suggests it is no better than 43%. Can Rick Perry run for president as a conservative on that number? Then again, can New Jersey Republican governor uber-star Chris Christie run on his state's funding level of 33%? Just asking.
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, September 21, 2013
Excellent Crop Conditions Give Coffee Bulls Little Hope
Our trading partner Mike Seery has some thoughts for us this week....
The coffee market continues to go absolutely nowhere but slightly lower on the weekly charts as prices hit a new 4 year low trading below their 20 and 100 day moving average with extremely low volatility closing this Friday in the March contract at 117.75 and I had been recommending to be buying coffee last week with a very tight stop and that trade did not work, however it was a relatively small loss. Volatility in coffee in my opinion is almost at all time lows as prices really are very quiet for such a volatile commodity.
The problem in coffee is the fact that global supplies are huge with excellent crop conditions around the world with the possibility of prices getting down to the 100 – 110 level and I do think if you’re lucky enough to get those prices & you’re a long term investor I would be buying at major yearly support. When prices hit this low people stop growing and that’s what causes higher prices and when higher prices come in farmers grow more and that’s what causes lower prices but sometimes it pays to be patient. Trend lower, chart structure excellent.
Click here to get the rest of Mike's commodity calls this week.
Wednesday, September 18, 2013
The Next Bakken?
Just a few days ago, a hastily assembled team including Chief Energy Investment Strategist Marin Katusa and Casey Research Managing Director David Galland were preparing to fly to a secret location. A location where a small oil company is about to drill the first oil well into what appears to be a massive new oil bonanza.
But at the last minute, the oil company's lawyers canceled the trip and imposed a total communication blackout. They did so out of concern that regulators would think having the Casey Research team on site gave Casey Energy Report subscribers an unfair advantage.
While disappointed that the site visit was canceled, the Casey energy team has already extensively researched the company and are now free to tell their subscribers about it.
And that's why I'm writing to you today: the Casey energy analysts believe this company may have as much or even more potential than those companies that made billions in the now legendary Bakken formation.
To put that assertion into perspective, let me tell you a little bit about the Bakken. In case you're unfamiliar with it, it's a monster oil and gas deposit covering almost 15,000 square miles across North Dakota, Montana, and Alberta, Canada.
The latest US Geological Survey estimates that the Bakken contains upwards of 7.4 billion barrels of recoverable oil - and that is considered on the low end of the range. An executive of a company deeply involved in the Bakken recently estimated that the basin will ultimately yield 20 billion barrels.
And those who discovered the Bakken's tremendous potential ahead of the crowd are now very well off indeed....When It Rains, It Pours... Cash
Until 2005, the Bakken had been largely written off as uneconomic. Then leapfrogging advances in horizontal drilling technologies changed everything, triggering a land rush that made multimillionaires out of landowners and explorers.
Take Harold Hamm, for example. The founder and CEO of Continental Resources (CRL), Hamm, as Forbes magazine puts it, "is responsible for cracking the code of the Bakken."
In 2007, the same year that Continental was listed on the NYSE, the company was the first to complete lateral, multi-stage drilling over 1,280 acres in North Dakota.
One year later, Hamm was the first to demonstrate that the Three Forks formation, which was initially believed to be part of the Bakken, was a separate reservoir and might hold more oil than the Bakken itself.
The rest, as they say, is history. Hamm is now worth $11.3 billion, which makes him the 90th richest person on the planet.
But it's not just the wildcatters themselves that rake in the big money: Early bird investors in Continental Resources made gains of up to 459% within 14 months after the company's NYSE listing. And those who held on were looking at gains of 549% when CRL's stock peaked in February 2012.
In other words, had you trusted in Hamm's genius when he started out drilling in the Bakken, an investment of just $10,000 would have turned into $64,900 for you.
There's no question about it: The use of new technologies to unlock the Bakken, the Eagle Ford Shale, and other huge oil deposits previously considered uneconomic has been a game changer for North American energy supplies.
And you could be the beneficiary of the next Bakken-type windfall....The Next Bakken - But Even Better?
As I said before, the Casey energy analysts believe that the small company they've uncovered could be the next Continental Resources, sitting on unimaginable riches.
Over the last year this little company has quietly assembled a 2-million-acre concession in a region whose geological conditions for the production of oil and gas are actually far more promising than those in the Bakken.
And about one week from now, these resources could finally be proven to be in place. You can imagine what that could do to the company's share price.
The company's top executives appear to have a similar vision: Many of them have personally invested millions of dollars to fund the company and its current drill program.
In July, one director of the company, who is also the CEO of a major Canadian oil player, bought 200,000 shares at the market – bringing his holdings of the company's stock to a total of 1,235,237 shares.
I think his optimism is well placed, considering that the company's management includes seasoned Bakken veterans who not only recognize the potential of the "new Bakken," but also have the skills to get the oil out of the ground.
If the initial well now being drilled meets management's expectations, this small-cap company will be on the fast track for explosive shareholder returns, potentially for years on end. Be There When the Truth Is Unveiled - for a Chance at Staggering Returns
Best of all, so far only a handful of research firms have been paying attention to this virtually unknown company. Therefore, we are uniquely positioned to take advantage of the news released once the well data have been compiled.
In fact, within minutes of the company breaking the silence imposed by its lawyers, Casey’s analysts will be standing by to share their on the spot analysis with subscribers to the Casey Energy Report....even if it's the middle of the night.
To be fair, though, I have to remind you that this is a speculation, not a slam dunk investment. Drilling is always a risky business, so we have to keep our enthusiasm in check until the first well is completed and the initial flow data are logged.
If, however, the initial well test confirms that the company is sitting on the "next Bakken," the investment returns from its 2 million acre concession should be nothing less than spectacular. And the odds for that happening are excellent. Be Ready: Initial Drilling Results Are Expected on or Around Monday, September 16
Until the company has completed its flow tests and made a public announcement, Casey can't share any details about the company, or even the country where the next potential Bakken is located.
But once the company issues its own press release, everyone who is an active subscriber to the Casey Energy Report will receive our alert with an up-to-the-minute analysis and specific recommendation on how to invest.
In addition, to ensure that Energy Report readers get the full picture of this exciting new play, the Casey Energy team is now preparing a comprehensive report about the "next Bakken" and the small-cap company already supremely positioned to profit from it.
While no one can say exactly when the drill will reach the pay zone and the subsequent well flow test will be completed, the last estimate provided by the company before the lawyers instituted the communications blackout was mid September.
Based on Casey’s own analysis of the processes involved, they anticipate the company will be ready to release news on or about Monday, September 16. Of course, due to the nature of any drill program, this is only an estimate.
Regardless, once the testing is completed and the company issues its public press release, Casey Energy Report subscribers will immediately receive an Alert with our analysis - and their special report on the next Bakken.
Of course, it would be massively unfair (and poor business ethics) to release this information to non paying subscribers.
Not to worry, though. If you subscribe today, you can still participate in the earliest phase of what could become a flood of investment into the "next Bakken." Make a Bundle or Pay Nothing for Your Subscription
How much does it cost to get in on what could be the next Bakken? Thousands of subscribers to the Casey Energy Report pay $248 per quarter, an amount that may seem high to some.
However, that they were prepared to send an executive team to the secret well site - involving international flights and almost 11 hours in a car - should make it clear just how much potential we believe this investment has for our subscribers. If they're right, the potential returns will make the cost of your subscription pale by comparison.
But what if they're wrong, and the first well is a bust? What then?
It's simple: thanks to Casey’s 3-month, no-questions-asked, 100% money-back guarantee, if you don't make a bundle off this exciting new play within the first three months of your subscription, simply drop them an email and they'll promptly return every penny you paid.
It's a completely straightforward proposition that works entirely in your favor.
Of course, they're pretty confident you won't cancel your subscription.
Because they believe that they are about to make a lot of money on this stock, and that it will continue to provide exceptional returns for years (or until it is taken over by a larger company hungry for the 2-million-acre concession it has assembled on the next Bakken – and if that happens, it'll be just as good for us).
In a May 2010 interview broadcast on Business News Network, Chief Investment Strategist Marin Katusa spoke about Africa Oil, another early Casey energy pick. In that interview, he said, "This stock has a realistic potential to give you 10 to 15, even 20, times your money."
He was right: Africa Oil handed early investors a profit of over 1,200%.
In a recent email, Marin wrote, "Since that interview on Africa Oil, I have never made a similar forecast about a company, but I have no reservations saying that this new company easily has as much or more potential."
You do not want to miss out on this opportunity.
Getting in on the ground floor is as simple and easy as clicking here to sign up for the Casey Energy Report now.
Remember, Casey’s ironclad 100% money back guarantee means you've got nothing to lose to give the Casey Energy Report a try. With the drill turning and their energy team hard at work preparing its comprehensive report on the "next Bakken," now is definitely the time to act.
Sincerely,
Ray @ The Crude Oil Trader
P.S. It's important to highlight that members of the Casey Research team own shares in investment funds that have invested capital in this firm back from the time it was just an idea. That the company appears to have made good use of its capital to build its position on this potentially huge new oil play is all to the good and the only reason we are bringing this stock to the attention of our readers. To avoid a conflict of interest, Casey’s corporate policies (correctly) require them to provide advance notice to subscribers before they sell, which we don't see happening until the company has unlocked its full potential and its shares are trading at many multiples of where they are now.
If you, too, want to join in on this early stage play, be sure to sign up today - or at the latest before Monday, September 16. And don't forget: you either make a bundle or you simply cancel within 3 months for your money back. Even after three months, you can still cancel anytime and receive a prorated refund.
Don't miss this rare opportunity to get in on the ground floor.
Here again is the secure link to join Casey Energy Report.
But at the last minute, the oil company's lawyers canceled the trip and imposed a total communication blackout. They did so out of concern that regulators would think having the Casey Research team on site gave Casey Energy Report subscribers an unfair advantage.
While disappointed that the site visit was canceled, the Casey energy team has already extensively researched the company and are now free to tell their subscribers about it.
And that's why I'm writing to you today: the Casey energy analysts believe this company may have as much or even more potential than those companies that made billions in the now legendary Bakken formation.
To put that assertion into perspective, let me tell you a little bit about the Bakken. In case you're unfamiliar with it, it's a monster oil and gas deposit covering almost 15,000 square miles across North Dakota, Montana, and Alberta, Canada.
The latest US Geological Survey estimates that the Bakken contains upwards of 7.4 billion barrels of recoverable oil - and that is considered on the low end of the range. An executive of a company deeply involved in the Bakken recently estimated that the basin will ultimately yield 20 billion barrels.
And those who discovered the Bakken's tremendous potential ahead of the crowd are now very well off indeed....When It Rains, It Pours... Cash
Until 2005, the Bakken had been largely written off as uneconomic. Then leapfrogging advances in horizontal drilling technologies changed everything, triggering a land rush that made multimillionaires out of landowners and explorers.
Take Harold Hamm, for example. The founder and CEO of Continental Resources (CRL), Hamm, as Forbes magazine puts it, "is responsible for cracking the code of the Bakken."
In 2007, the same year that Continental was listed on the NYSE, the company was the first to complete lateral, multi-stage drilling over 1,280 acres in North Dakota.
One year later, Hamm was the first to demonstrate that the Three Forks formation, which was initially believed to be part of the Bakken, was a separate reservoir and might hold more oil than the Bakken itself.
The rest, as they say, is history. Hamm is now worth $11.3 billion, which makes him the 90th richest person on the planet.
But it's not just the wildcatters themselves that rake in the big money: Early bird investors in Continental Resources made gains of up to 459% within 14 months after the company's NYSE listing. And those who held on were looking at gains of 549% when CRL's stock peaked in February 2012.
In other words, had you trusted in Hamm's genius when he started out drilling in the Bakken, an investment of just $10,000 would have turned into $64,900 for you.
There's no question about it: The use of new technologies to unlock the Bakken, the Eagle Ford Shale, and other huge oil deposits previously considered uneconomic has been a game changer for North American energy supplies.
And you could be the beneficiary of the next Bakken-type windfall....The Next Bakken - But Even Better?
As I said before, the Casey energy analysts believe that the small company they've uncovered could be the next Continental Resources, sitting on unimaginable riches.
Over the last year this little company has quietly assembled a 2-million-acre concession in a region whose geological conditions for the production of oil and gas are actually far more promising than those in the Bakken.
And about one week from now, these resources could finally be proven to be in place. You can imagine what that could do to the company's share price.
The company's top executives appear to have a similar vision: Many of them have personally invested millions of dollars to fund the company and its current drill program.
In July, one director of the company, who is also the CEO of a major Canadian oil player, bought 200,000 shares at the market – bringing his holdings of the company's stock to a total of 1,235,237 shares.
I think his optimism is well placed, considering that the company's management includes seasoned Bakken veterans who not only recognize the potential of the "new Bakken," but also have the skills to get the oil out of the ground.
If the initial well now being drilled meets management's expectations, this small-cap company will be on the fast track for explosive shareholder returns, potentially for years on end. Be There When the Truth Is Unveiled - for a Chance at Staggering Returns
Best of all, so far only a handful of research firms have been paying attention to this virtually unknown company. Therefore, we are uniquely positioned to take advantage of the news released once the well data have been compiled.
In fact, within minutes of the company breaking the silence imposed by its lawyers, Casey’s analysts will be standing by to share their on the spot analysis with subscribers to the Casey Energy Report....even if it's the middle of the night.
To be fair, though, I have to remind you that this is a speculation, not a slam dunk investment. Drilling is always a risky business, so we have to keep our enthusiasm in check until the first well is completed and the initial flow data are logged.
If, however, the initial well test confirms that the company is sitting on the "next Bakken," the investment returns from its 2 million acre concession should be nothing less than spectacular. And the odds for that happening are excellent. Be Ready: Initial Drilling Results Are Expected on or Around Monday, September 16
Until the company has completed its flow tests and made a public announcement, Casey can't share any details about the company, or even the country where the next potential Bakken is located.
But once the company issues its own press release, everyone who is an active subscriber to the Casey Energy Report will receive our alert with an up-to-the-minute analysis and specific recommendation on how to invest.
In addition, to ensure that Energy Report readers get the full picture of this exciting new play, the Casey Energy team is now preparing a comprehensive report about the "next Bakken" and the small-cap company already supremely positioned to profit from it.
While no one can say exactly when the drill will reach the pay zone and the subsequent well flow test will be completed, the last estimate provided by the company before the lawyers instituted the communications blackout was mid September.
Based on Casey’s own analysis of the processes involved, they anticipate the company will be ready to release news on or about Monday, September 16. Of course, due to the nature of any drill program, this is only an estimate.
Regardless, once the testing is completed and the company issues its public press release, Casey Energy Report subscribers will immediately receive an Alert with our analysis - and their special report on the next Bakken.
Of course, it would be massively unfair (and poor business ethics) to release this information to non paying subscribers.
Not to worry, though. If you subscribe today, you can still participate in the earliest phase of what could become a flood of investment into the "next Bakken." Make a Bundle or Pay Nothing for Your Subscription
How much does it cost to get in on what could be the next Bakken? Thousands of subscribers to the Casey Energy Report pay $248 per quarter, an amount that may seem high to some.
However, that they were prepared to send an executive team to the secret well site - involving international flights and almost 11 hours in a car - should make it clear just how much potential we believe this investment has for our subscribers. If they're right, the potential returns will make the cost of your subscription pale by comparison.
But what if they're wrong, and the first well is a bust? What then?
It's simple: thanks to Casey’s 3-month, no-questions-asked, 100% money-back guarantee, if you don't make a bundle off this exciting new play within the first three months of your subscription, simply drop them an email and they'll promptly return every penny you paid.
It's a completely straightforward proposition that works entirely in your favor.
Of course, they're pretty confident you won't cancel your subscription.
Because they believe that they are about to make a lot of money on this stock, and that it will continue to provide exceptional returns for years (or until it is taken over by a larger company hungry for the 2-million-acre concession it has assembled on the next Bakken – and if that happens, it'll be just as good for us).
In a May 2010 interview broadcast on Business News Network, Chief Investment Strategist Marin Katusa spoke about Africa Oil, another early Casey energy pick. In that interview, he said, "This stock has a realistic potential to give you 10 to 15, even 20, times your money."
He was right: Africa Oil handed early investors a profit of over 1,200%.
In a recent email, Marin wrote, "Since that interview on Africa Oil, I have never made a similar forecast about a company, but I have no reservations saying that this new company easily has as much or more potential."
You do not want to miss out on this opportunity.
Getting in on the ground floor is as simple and easy as clicking here to sign up for the Casey Energy Report now.
Remember, Casey’s ironclad 100% money back guarantee means you've got nothing to lose to give the Casey Energy Report a try. With the drill turning and their energy team hard at work preparing its comprehensive report on the "next Bakken," now is definitely the time to act.
Sincerely,
Ray @ The Crude Oil Trader
P.S. It's important to highlight that members of the Casey Research team own shares in investment funds that have invested capital in this firm back from the time it was just an idea. That the company appears to have made good use of its capital to build its position on this potentially huge new oil play is all to the good and the only reason we are bringing this stock to the attention of our readers. To avoid a conflict of interest, Casey’s corporate policies (correctly) require them to provide advance notice to subscribers before they sell, which we don't see happening until the company has unlocked its full potential and its shares are trading at many multiples of where they are now.
If you, too, want to join in on this early stage play, be sure to sign up today - or at the latest before Monday, September 16. And don't forget: you either make a bundle or you simply cancel within 3 months for your money back. Even after three months, you can still cancel anytime and receive a prorated refund.
Don't miss this rare opportunity to get in on the ground floor.
Here again is the secure link to join Casey Energy Report.
Tuesday, September 17, 2013
Getting Shocked by Utility Stocks
By Dennis Miller
Retirees' portfolios need to be defensive, meaning they minimize risk but still have the potential for growth and income. Historically, this meant including a few widow-and-orphan stocks in your retirement portfolio....public utilities with nice dividends.Utilities experience little volatility, their dividends are solid, and the demand for their product is constant, regardless of how well the economy is doing. Government regulation also gives them a leg up, since utilities face little competition. They set their rates, consumers pay up with little fuss because they have few alternatives, and the utilities turn a profit.
So, we at Miller's Money Forever wondered, is it time to add one or two utilities to our own portfolio? As I talked through the idea with our chief analyst, I could hear him clicking away on his keyboard in the background. A little research on a couple of utilities quickly put things in perspective. Had we bought in to Exelon (EXC) in early May at the wrong time, we almost would have been stopped out by a 20% trailing stop, since the stock fell as far as 19%. We were both shocked.
But that's only one utility. What about the sector as a whole? With a few more clicks, we learned that the Utilities Select Sector SPDR (XLU), a $5.4-billion exchange-traded fund of utilities, had fallen as far as 11% since the beginning of May. That's an enormous move in such a short period of time for what many consider a staple sector for retirement portfolios.
Wait a minute here! Utility stocks are supposed be the ultimate safe investment. They didn't earn the nickname "widow and orphan stocks" for being volatile, so what the heck happened?
History Does Not Guarantee Future Performance
We ran an in-depth analysis and came up with a bit of a history lesson for me to pass along. Let's start with where defensive stocks stood prior to the rapid rate increase in Treasuries. With yields near record lows, investors piled in to dividend stocks in search of income. But they didn't pick just any type of stock—they specifically chose defensive stocks with a beta of less than one. For a quick review, a beta of one means a 10% move in the stock market should theoretically move the stock 10%. A beta of 0.5 means a 10% move in the market should move the stock only 5%.
In addition to retail investors, more sophisticated analysts suggested moving in to these stocks as well. One of the most common Wall Street valuation models examines three primary factors: dividends, beta, and the US Treasury rate. When the beta and Treasury rates are low and the dividend is high, a stock is shown to be more valuable. Based on this model, a stock's value is more dependent on Treasury rates and the dividend than what often drives value: cash flows and growth.
In a nutshell, because there are no safe, decent interest-bearing investments available, many billions of dollars went into utility stocks. In some sense, utilities began to act like bonds. And when interest rates rise, bond prices fall. As a result, what was once considered the definitive stable investment is now interest-rate sensitive, just like long term bonds.
In order to get a better visual of what's been happening, we tracked XLU's performance since May 1—a period of rapidly rising rates—and compared it to a theoretical beta-based utility performance as well as the S&P 500. With a beta of 0.63, XLU should move 6.3% whenever the market moves 10%. In many situations beta works well, but unfortunately, it doesn't capture every risk, including interest-rate risk.
The blue line traces the return on the S&P 500. The green line depicts how XLU theoretically should have moved based on its beta. The red line shows how it actually performed. Note the enormous difference, bottoming out as far as 11.2% down.
Although beta is typically used as a back-of-the-envelope measure of risk, it's not doing a particularly good job for utilities in a rising-rate environment. And while the S&P 500 has recovered from June's turbulence, utilities are still down for this period.
After I saw the data, I asked what we should expect in the future. While I suppose it makes little difference if a retiree is holding utility stocks for the dividends, utilities will likely lose value as interest rates rise. That could be a bit unnerving.
This could be a real problem for retirees, as it's common practice for investment advisors at major brokerage firms to put their more conservative investors in utilities. A seasoned veteran once told me that no broker ever got sued for putting clients' money into utilities. I wonder how many brokers and investment advisors have noticed the shift happening in utilities with higher rates.
In light of rising interest rates, we have refined our criteria for selecting solid and safe investments for the Money Forever portfolio. Unfortunately, not everyone was has caught on. Take a look at your portfolio to see whether you need to trim down your utilities exposure. Should the market crash, I'd rather be holding a utility than General Motors, but at the same time, if interest rates keep going up utilities will feel the pain.
I discussed this issue—as well as others facing retirees—in a very recent and timely online event called America's Broken Promise: Strategies for a Retirement Worth Living. This free event’s all-star cast explains the unique challenges retirees face today—challenges far different from what we were raised to expect.
The presentation is hosted by my colleague, David Galland of Casey Research, and features John Stossel, formerly on ABC's 20/20 and now with Fox Business Network, David Walker, former Comptroller General of the United States, Jeff White, President of American Financial Group, and me of course.
This is the one event you must see to ensure you retire on your own terms. Use this link to find out more and to sign-up.
COT Market Summary for Tuesday Sept. 17th - Crude Oil, Natural Gas, SP 500 and Gold
October crude oil closed lower on Tuesday. The low range close sets the stage for a steady to lower opening when Wednesday's night session begins. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Today's closes below last Tuesday's low crossing at 106.39 confirms that a short term top has been posted while opening the door for additional weakness near term. Closes above the 10 day moving average crossing at 107.93 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 107.93. Second resistance is the reaction high crossing at 110.70. First support is the reaction low crossing at 104.21. Second support is the 38% retracement level of the April-August rally crossing at 102.43.
October Henry natural gas closed slightly lower due to light profit taking on Tuesday. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are diverging but remain bullish signaling that sideways to higher prices are possible near term. If October extends the rally off August's low, the 50% retracement level of the May-August decline crossing at 3.842 is the next upside target. Closes below the 20 day moving average crossing at 3.598 would confirm that a short term top has been posted while opening the door for additional weakness near term. First resistance is the 50% retracement level of the May-August decline crossing at 3.841. Second resistance is the 62% retracement level of the May-August decline crossing at 4.003. First support is the 20 day moving average crossing at 3.598. Second support is the reaction low crossing at 3.483.
The December S&P 500 closed higher on Tuesday and the high range close sets the stage for a steady to higher opening when Wednesday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off August's low, weekly resistance crossing at 1705.00 is the next upside target. Closes below the 20 day moving average crossing at 1653.39 would confirm that a short term top has been posted. First resistance is Monday's high crossing at 1702.80. Second resistance is weekly resistance crossing at 1705.00. First support is the 10 day moving average crossing at 1670.96. Second support is the 20 day moving average crossing at 1653.39.
October gold closed lower on Tuesday and the low range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If October extends this month's decline, August's low crossing at 1272.10 is the next downside target. Closes above the 20 day moving average crossing at 1374.40 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1374.40. Second resistance is August's high crossing at 1432.90. First support is Monday's low crossing at 1302.90. Second resistance is August's low crossing at 1272.10.
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October Henry natural gas closed slightly lower due to light profit taking on Tuesday. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are diverging but remain bullish signaling that sideways to higher prices are possible near term. If October extends the rally off August's low, the 50% retracement level of the May-August decline crossing at 3.842 is the next upside target. Closes below the 20 day moving average crossing at 3.598 would confirm that a short term top has been posted while opening the door for additional weakness near term. First resistance is the 50% retracement level of the May-August decline crossing at 3.841. Second resistance is the 62% retracement level of the May-August decline crossing at 4.003. First support is the 20 day moving average crossing at 3.598. Second support is the reaction low crossing at 3.483.
The December S&P 500 closed higher on Tuesday and the high range close sets the stage for a steady to higher opening when Wednesday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off August's low, weekly resistance crossing at 1705.00 is the next upside target. Closes below the 20 day moving average crossing at 1653.39 would confirm that a short term top has been posted. First resistance is Monday's high crossing at 1702.80. Second resistance is weekly resistance crossing at 1705.00. First support is the 10 day moving average crossing at 1670.96. Second support is the 20 day moving average crossing at 1653.39.
October gold closed lower on Tuesday and the low range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If October extends this month's decline, August's low crossing at 1272.10 is the next downside target. Closes above the 20 day moving average crossing at 1374.40 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1374.40. Second resistance is August's high crossing at 1432.90. First support is Monday's low crossing at 1302.90. Second resistance is August's low crossing at 1272.10.
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Sunday, September 15, 2013
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See you in the markets tomorrow as you put this to work in your own trading.
Ray @ The Crude Oil Trader
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COT Week Ending Market Summary - Crude Oil, Natural Gas, SP 500 nad Gold
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October Henry natural gas closed higher on Friday. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If October renews the rally off August's low, the 50% retracement level of the May-August decline crossing at 3.842 is the next upside target. Closes below the 20 day moving average crossing at 3.568 would confirm that a short term top has been posted while opening the door for additional weakness near term. First resistance is the 38% retracement level of the May-August decline crossing at 3.680. Second resistance is the 50% retracement level of the May-August decline crossing at 3.842. First support is the 20 day moving average crossing at 3.568. Second support is August's low crossing at 3.154.
Ready to start trading crude oil? Start right here....Advanced Crude Oil Study – 15 Minute Range
The December S&P 500 closed higher on Friday. The high range close sets the stage for a steady to higher opening when Monday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off August's low, the reaction high crossing at 1684.40 is the next upside target. Closes below the 20 day moving average crossing at 1648.00 would confirm that a short term top has been posted. First resistance is Thursday's high crossing at 1683.00. Second resistance is the reaction high crossing at 1684.40. First support is the 10 day moving average crossing at 1657.60. Second support is the 20 day moving average crossing at 1648.00.
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October gold closed sharply lower on Friday extending the decline off August's high. The low range close sets the stage for a steady to lower opening when Monday's night session begins trading. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. If October extends this week's decline, August's low crossing at 1272.10 is the next downside target. Closes above the 20 day moving average crossing at 1380.40 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1380.40. Second resistance is August's high crossing at 1432.90. First support is today's low crossing at 1304.60. Second resistance is August's low crossing at 1272.10.
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Friday, September 13, 2013
Coffee Holds Above 20 Day Moving Average....you in?
However we are sticking our neck out here and are advising traders to get long this market placing a stop loss at 114 risking around $2000 per contract as coffee is now trading above its 20 day moving average but below its 100 day moving average with outstanding chart structure & extremely low volatility.
Some of the best markets I’ve ever seen have been the ones that have no reason to go up or down and this market has absolutely no reason to move higher with massive supplies across the globe & crops doing extremely well at this time, but this news is already priced into the market and one day this market will start to turn to the upside it’s just a matter of when.
TREND: MIXED – CHART STRUCTURE: EXCELLENT
Don't miss the second video in this weeks series "The Truth about Trading the Trend"
Thursday, September 12, 2013
COT Market Summary for Thursday Sept. 12th - Crude Oil, Natural Gas, SP 500, Gold, Coffee
October crude oil closed higher due to short covering on Thursday as it consolidates some of this week's decline. The high range close sets the stage for a steady to higher opening when Friday's night session begins. Stochastics and the RSI are bearish hinting that sideways to lower prices are possible near term. Multiple closes below the 20 day moving average crossing at 107.54 are needed to confirm that a short term top has been posted. If October renews this summer's rally, weekly resistance crossing at 114.83 is the next upside target. First resistance is August's high crossing at 112.24. Second resistance is weekly resistance crossing at 114.83. First support is the 20 day moving average crossing at 107.54. Second support is the reaction low crossing at 103.50.
Ready to start trading crude oil? Start right here....Advanced Crude Oil Study – 15 Minute Range
October Henry natural gas closed higher on Thursday. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 3.556 would confirm that a short-term top has been posted while opening the door for additional weakness near term. If October renews the rally off August's low, the 50% retracement level of the May-August decline crossing at 3.842 is the next upside target. First resistance is the 38% retracement level of the May-August decline crossing at 3.680. Second resistance is the 50% retracement level of the May-August decline crossing at 3.842. First support is the 20 day moving average crossing at 3.556. Second support is August's low crossing at 3.154.
Make sure to watch "The Simple Truths About Trends"
The December S&P 500 closed lower due to light profit taking on Thursday. The mid range close sets the stage for a steady opening when Friday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off August's low, the reaction high crossing at 1684.40 is the next upside target. Closes below the 20 day moving average crossing at 1646.44 would confirm that a short term top has been posted. First resistance is today's high crossing at 1683.00. Second resistance is the reaction high crossing at 1684.40. First support is the 20 day moving average crossing at 1646.44. Second support is August's low crossing at 1621.00.
Day Trading History of 16 Major Candlestick Patterns
October gold closed sharply lower on Thursday extending the decline off August's high. The low range close sets the stage for a steady to lower opening when Friday's night session begins trading. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If October extends this week's decline, August's low crossing at 1272.10 is the next downside target. Closes above the 20 day moving average crossing at 1382.20 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1382.20. Second resistance is August's high crossing at 1432.90. First support is today's low crossing at 1322.40. Second resistance is August's low crossing at 1272.10.
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December coffee closed slightly lower on Thursday but remains above the 20 day moving average. The high range close set the stage for a steady to higher opening on Friday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If December extends Wednesday's rally, August's high crossing at 12.70 is the next upside target. If December renews this summer's decline, monthly support crossing at 10.21 is the next downside target.
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Ready to start trading crude oil? Start right here....Advanced Crude Oil Study – 15 Minute Range
October Henry natural gas closed higher on Thursday. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 3.556 would confirm that a short-term top has been posted while opening the door for additional weakness near term. If October renews the rally off August's low, the 50% retracement level of the May-August decline crossing at 3.842 is the next upside target. First resistance is the 38% retracement level of the May-August decline crossing at 3.680. Second resistance is the 50% retracement level of the May-August decline crossing at 3.842. First support is the 20 day moving average crossing at 3.556. Second support is August's low crossing at 3.154.
Make sure to watch "The Simple Truths About Trends"
The December S&P 500 closed lower due to light profit taking on Thursday. The mid range close sets the stage for a steady opening when Friday's night session begins trading. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the rally off August's low, the reaction high crossing at 1684.40 is the next upside target. Closes below the 20 day moving average crossing at 1646.44 would confirm that a short term top has been posted. First resistance is today's high crossing at 1683.00. Second resistance is the reaction high crossing at 1684.40. First support is the 20 day moving average crossing at 1646.44. Second support is August's low crossing at 1621.00.
Day Trading History of 16 Major Candlestick Patterns
October gold closed sharply lower on Thursday extending the decline off August's high. The low range close sets the stage for a steady to lower opening when Friday's night session begins trading. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If October extends this week's decline, August's low crossing at 1272.10 is the next downside target. Closes above the 20 day moving average crossing at 1382.20 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 1382.20. Second resistance is August's high crossing at 1432.90. First support is today's low crossing at 1322.40. Second resistance is August's low crossing at 1272.10.
Get started trading commodities today. Here's your Free trading videos!
December coffee closed slightly lower on Thursday but remains above the 20 day moving average. The high range close set the stage for a steady to higher opening on Friday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If December extends Wednesday's rally, August's high crossing at 12.70 is the next upside target. If December renews this summer's decline, monthly support crossing at 10.21 is the next downside target.
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