If You Own These Stocks, Your Dividend Is in Danger

By Justin Spittler

Mining companies are having another horrible week. As Dispatch readers know, commodities are in a deep bear market. Over the past year, the Bloomberg Commodity Index, which tracks 22 different commodities, has fallen to its lowest level since May 1999. Many individual commodities have lost 30% or more in the last year. Since December 2014, coffee has dropped 30%, palladium has dropped 34%, and platinum has dropped 31%. Crashing commodity prices have forced many mining companies to drastically cut spending.

Yesterday, mining giant Freeport-McMoRan (FCX) suspended its dividend. Freeport is the seventh largest mining company and the second largest copper miner in the world. The suspension of Freeport’s dividend is a major event. Until recently, Freeport was one of the industry’s most generous dividend payers. It paid $4.7 billion in dividends between 2012 and 2014. Its stock yielded about 3.8% in 2014.

Click here to get a free trend analysis for Freeport-McMoran

Management hopes to save $240 million a year by not paying a dividend. Freeport will also reduce its copper production by 29%, and cut capital spending by $1 billion over the next two years.
Freeport’s stock jumped 3.7% yesterday. It’s still down 71% this year.

The price of copper, Freeport’s main source of revenue, has plunged.…
Copper has dropped 27% this year to a six year low. Crashing energy prices have also slammed Freeport. In 2013, Freeport loaded up on debt to acquire two oil and gas companies. Its timing was awful. At the time, the North American energy industry was booming. But since last June, the energy sector has entered one of its worst bear markets on record. The price of oil has plunged 66% to its lowest level since 2009. The price of natural gas has dropped 55%. Freeport’s sales have now declined five quarters in a row. The company lost $3.8 billion last quarter, after making a $552 million profit a year ago.

Investors hate dividend cuts.…
A dividend cut often signals that a company is in big trouble. Typically, a company will only cut its dividend when it runs out of other options. Companies will often shelve new projects, lay off workers, and slash executive compensation before touching their dividends.

Freeport is only one of several major commodity giants to cut its dividend this year...
Anglo American (AAL.L), the world’s fifth largest mining company, suspended its dividend on Tuesday. The company will not pay a dividend again until at least 2017.

Kinder Morgan (KMI), North America’s largest energy pipeline company, also cut its dividend on Tuesday. The company’s fourth quarter dividend will be 75% less than it planned.
The list goes on….Vale (VALE), the world’s largest miner.…Glencore (GLEN.L), the world’s third largest miner….and....

Peabody Energy (BTU), the world’s largest publicly traded coal company, all cut their dividends this year.
Widespread dividend cuts suggest that major miners are in “survival mode.” To us, this is a key sign that commodities may be near a bottom. While prices of certain commodities could easily go lower or stay low, commodities as a group may be in a bottoming process.

Oil dropped to a new six year low yesterday.…
As we mentioned, the price of oil has now dropped 66% since June 2014. This is oil’s second-worst drop since 1985. The only bigger drop happened during the financial crisis when oil plummeted 77%.
Low oil prices are crushing the “supermajors,” four of the world’s biggest oil companies. Third quarter sales for BP (BP) fell 41%, year over year. Sales for Exxon Mobil (XOM) and Chevron (CVX) both fell 37%. And sales for Royal Dutch Shell (RDS.A) fell 36%.

All four companies have announced drastic spending cuts to cope with falling revenues. BP cut spending on capital projects by about $6 billion this year. Exxon cut spending on capital projects by 22% in the third quarter. Chevron announced 7,000 layoffs after reporting poor third quarter results. And Shell abandoned a $7 billion oil project in the Arctic. Together, these companies have cut spending by more than $30 billion in just the last few months.

Even with huge spending cuts, the supermajors are still bleeding cash….
In October, The Wall Street Journal reported:

Spending on new projects, share buybacks and dividends at four of the biggest oil companies known as the supermajors – Royal Dutch Shell PLC, BP PLC, Exxon Mobil Corp. and Chevron Corp. – outstripped cash flow by more than a combined $20 billion in the first half of 2015, according to a Wall Street Journal analysis.

However, the supermajors have NOT cut dividends yet.…
For years, supermajor dividends have been one of the safest income streams on the planet. Shell hasn’t cut its dividend since the end of World War II. Exxon has increased or maintained its dividend for 33 consecutive quarters. Chevron has done the same for 27 consecutive quarters. Many investors consider these dividends untouchable. They’re often a foundational part of their holdings, like grandma’s ring or the family farm. However, if oil keeps plummeting, these companies might have to cut their dividends.

Dividend yields for the supermajors are soaring.…
Since January, Shell’s dividend yield has jumped from 5.1% to 8.1%. It’s nearing a historic high. BP’s dividend yield has jumped from 6.5% to 8.4% over the same period. Exxon’s has jumped from 3.0% to 3.9%. And Chevron’s has jumped from 3.8% to 5.0%. These yields are not going up because the companies are increasing payouts. They’re going up because these companies’ stock prices are falling.

The world’s biggest oil companies were not prepared for oil to drop below $40.…
Financial Times reported on Tuesday: Just weeks ago, BP and France’s Total each pledged to balance their books at $60 a barrel oil, saying they aimed to cover their dividends from “organic” cash flow by 2017.
Total (TOT) is another giant oil company that’s struggling. Total’s quarterly sales have dropped four quarters in a row. If oil continues to trade below $40, these companies might have no choice but to cut their dividends. In fact, their dividends might be at risk even if oil does rebound soon.

Even at $60, the three biggest European majors will need to take further cost cutting action to cover investor payouts…Total’s $6.8bn dividend would exceed its projected organic free cash flow by $800m two years from now. For BP, the cash shortfall is put at $500m. If these giant oil companies do cut their dividends, it could trigger huge selloffs. Many investors hold these companies specifically for their reliable dividends.

The article If You Own These Stocks, Your Dividend Is in Danger was originally published at caseyresearch.com.

Chart of the Day

The bear market in oil may be far from over. Today’s chart compares the Bloomberg Commodity Index, or BCOM, to the price of oil. As we mentioned earlier, BCOM tracks 22 different commodities. Commodities and oil both peaked in 2011. BCOM entered a bear market almost immediately after. Oil, however, didn’t have a big drop until mid-2014.

In other words, commodities have been in a bear market for four years…but oil has been in a bear market for less than two years. That’s one reason why major commodity companies have cut dividends but the oil supermajors haven’t…yet. Until major oil companies begin to cut dividends, we wouldn’t bet on a bottom in oil.

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The #1 Question About 20/30 Wealth Trader

It's only been a couple days since Bill Poulos announced the official opening of The 20/30 Wealth Trader program.

But the questions are already pouring in.

"How do I know this will work for me?"

"Do I need a large account to use this system?"

"How much time do I need to use this program?"

"Can this make me rich?"

Bill made this quick video to answer your questions. Have a look:

Your Questions About The 20/30 Wealth Trader
Answered Here

See you in the markets,
Ray C. Parrish
aka the Crude Oil Trader

p.s. Be sure to mark your calendar because The 20/30 Wealth Trader program opens at 1pm Eastern on Monday, December 14th. And watch your inbox over the weekend for a surprise announcement.

Watch "The #1 question about 20/30 Wealth Trader, a bold question and a surprising answer"....Just Click Here!

How The Best of Intentions Destroyed Liquidity

By Jared Dillian

I just got done grading the final exams for my class (took me 12 hours). It’s 100 short answer questions and two essays. One of the essay questions is about the Volcker Rule. “Paul Volcker, former Federal Reserve chairman, as part of the rulemaking process for Dodd-Frank, included a provision prohibiting proprietary trading by banks, known as the Volcker Rule. Do you agree or not agree with the Volcker Rule? Explain.”

The funny thing about asking someone what they think of a law is, if you leave the question open ended and you don’t really describe what the law does, the response is generally favorable. Out of a class of 20 students, only two or three opposed the Volcker Rule. Most of them were in favor of it, as they were in favor of Glass-Steagall when I asked them to write a paper on that.

Seems pretty straightforward. If you have these banks that you call “systemically important,” such that they could go out of business and get rescued by taxpayers, then you don’t really want them taking risks with their own capital, right?

I mean, look how this worked out in the past.

Milton Friedman once said that laws should be judged by their results rather than their intentions. Liquidity has disappeared, and it is directly attributable to the Volcker Rule. If you hear someone try to make an argument that it’s not, that person is probably a journalist or a professor with no first hand knowledge of the situation.

I remember when the Volcker Rule first passed, years ago, someone senior in the equity derivatives market asked me, “Do you really think they will have regulators going through your trades, one by one, line by line, asking you if it was your intent to make money?”

“That seems very unlikely,” I told him.....But that is what we got.

In addition to confiscating cell phones and monitoring phone conversations, chats, and emails, the vast army of compliance officers at investment banks really will go through a trader’s blotter line by line and determine if each trade was a bona fide hedging transaction or if he was trading for his own account. In single stocks, this is pretty straightforward—either you were buying GE for a client or you were buying it for yourself. But in derivatives, it’s not. If you get hit on the GE Jan 30 calls, you’re not going to be able to turn around and sell them—you have to sell something else.

For example, if you’re long too much vega, you may want to sell some short-dated stuff against it, putting on a term structure trade. Is that a hedge, or prop trading? It’s impossible to make that distinction. But the compliance guys try. The interpretation varies. In equity derivatives, traders generally get the benefit of the doubt. In credit, they don’t. You can’t sell bond B to hedge bond A. You literally have to sit there and try to sell bond A. This is why the bond market is such a mess, which we have talked about in this space before.

Of course, none of this gets us any closer to preventing an investment bank from blowing up, because the guy trading 500 call options on GE was never going to blow up the bank in the first place. On the other hand, the Volcker Rule never would have prevented Jon Corzine from blowing up MF Global with European sovereign bonds. If a CEO really wants to do something like that, is some compliance dork really going to stop him? To say that this regulation is a catastrophic failure would be an understatement. Liquidity has disappeared, with no discernible benefit. I’m a middlebrow market commentator, and I’m not supposed to say things like “This is dumb,” but this is really dumb. It doesn’t take an Austrian economist to figure out the unintended consequences.

In the old days (10 years ago), banks were the big liquidity providers. Let’s look at this a different way: do we want banks to continue to be liquidity providers, yes/no? Banks were not always liquidity providers. In the ‘90s, in equity options, it was the physical trading floors where all the risk was handled. Stocks, too. But the bond market has always been an upstairs phenomenon.

If banks aren’t going to be liquidity providers, then we need non bank entities to provide liquidity, and we need to encourage it. Some large hedge funds and some second tier (i.e., not systemically important) broker dealers are starting to do this. But it’s not enough.

The goal was to take a bank and turn it from a risk taking institution to a toll taking institution, where everything is traded on an agency basis, with a commission applied. The FX markets, which were once all risk, are starting to look like this. In equities, traders don’t do much aside from maintain relationships and plunk orders into auto trader, where they are preyed upon by the algorithms.

This is unsustainable, because how can you hire all these smart people from fancy schools and pay them all this money just to push a button—while all their communications are monitored? Nobody is happy with the current state of affairs. 10 years ago, you could sell 250,000 shares on the wire. Or $25 million of bonds.

I have two radical solutions. Here they are:

1. Repeal the Volcker Rule
2. End decimalization

When I came into the business, stocks still traded in fractions. On the options floor, I had to learn to add and subtract fractions in my head. Seriously—I ran drills on this, testing myself for speed. When I got to Lehman, to the program trading desk, I noticed something remarkable—we could send our orders to “wholesalers” like Spear, Leeds & Kellogg or Knight Trading. They would auto execute the orders up to 2,000 shares on the bid or the offer—for free.

Then decimalization happened. The preferential treatment lasted about another month, then they started charging us a penny a share. Market making went from being a profitable business to an unprofitable one.
Guess what—if market making is profitable, a lot of people will want to do it, and you will have a lot of liquidity. If market making sucks, nobody will want to do it, and you will have no liquidity.

Did the retail investor benefit? Maybe. Now he could go into his E-Trade account and execute something for a penny instead of 1/16. But if he was a shareholder in a mutual fund, the mutual fund portfolio manager now had to drop 250,000 shares into auto trader, getting preyed upon by the aforementioned algorithms, instead of getting it done for 1/8.

Then SEC Chairman Arthur Levitt led the charge for decimalization. More unintended consequences.
It’s not likely we’ll go back. Levitt was having conniptions about the length of time it was taking for the options market to decimalize, even though the computing power didn’t even exist.

Ask any portfolio manager today: Liquidity is the number one concern. That’s bullcrap. It’s like buying a house and having plumbing be your number one concern. It should just take care of itself.

Jared Dillian

If you enjoyed Jared's article, you can sign up for The 10th Man, a free weekly letter, at mauldineconomics.com. 

The article The 10th Man: How The Best of Intentions Destroyed Liquidity was originally published at mauldineconomics.com.

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Janet Yellen: The Best Pick Pocket in the USA

By Tony Sagami

“Some of the experiences [in Europe] suggest maybe we can use negative interest rates.”
—William Dudley, President of the New York Federal Reserve Bank

“We see now in the past few years that it [negative interest rates] has been made to work in some European countries. So I would think that in a future episode that the Fed would consider it.”
—Ben Bernanke

“Indeed, I would be open to the possibility of reducing the fed funds target funds range even further, as a way of producing better labor market outcomes.”
—Narayana Kocherlakota, President of the Minneapolis Federal Reserve Bank

If you are planning to travel to any major European city, you better watch your wallet because there are thousands of very skilled pickpockets looking to separate you from your valuables. Those pickpockets, however, will only get away with however much money you have in your wallet. Sure, a pickpocket can throw a major monkey wrench into your vacation, but the amount these European thieves take from you is peanuts compared to what Fed head Janet Yellen wants to steal from your bank account.

While Wall Street experts and CNBC talking heads regularly debate the "will they or won’t they" interest rate liftoff, a more important question is whether or not the Federal Reserve will follow the European model of negative interest rates. Negative interest rates are nothing unusual in Europe as several central banks lowered key interest rates below 0%.

Yup, that means investors essentially pay a fee to park their money.

That parking fee just got higher last week when the European Central Bank cut its already negative deposit rate from minus 0.2% to minus 0.3%. The ECB also expanded is current quantitative easing program. The European Central Bank, the Swiss National Bank, and the Danish National Bank all have interest rates below zero. In fact, the Danes have held their overnight rates at negative 0.75% since 2012.

The Swiss, however, are the undisputed leaders of the negative interest rate experiment. The SNB first moved to negative rates in December 2014 and then dropped rates to negative 0.75% in January of this year. The Swiss National Bank, by the way, meets in a couple of days, on December 10, and is widely expected to cut rates again.

The question, of course, is how negative can interest rates go? Before the end of December, I expect deposit rates in Switzerland to be between -100bps and -125bps. Remember, we’re not talking about some backwater, third world countries here. Switzerland and Germany are two of the wealthiest countries in the world, as well as the home of major financial and political centers.

And I’m not just talking about short term paper either. Finland, Germany, France, Switzerland, and Japan are all selling five year debt with negative yields. In fact, Switzerland became the first country in history to sell benchmark 10 year debt at a negative interest rate in April.

Don’t think that negative interest rates can happen in the US? Wrong!

You may have missed it, but the United States is now also a member of the “0% club”—most recently in October, when it sold $21 billion worth of 3 month bills at 0% interest.

However, that is not the first time. Since 2008, the US government has held 46 Treasury bill auctions where yields have been zero. The next step after zero is negative… and it’s becoming a real possibility. Welcome to the European model of starving savers to death!

The implications for investors are monumental.

Ask yourself, what would you do with your money if your bank started to charge you to deposit it there? Would you pay hundreds, perhaps thousands of dollars a year just to keep your money in a bank?

Option #1: Hold your nose and pay the fees.
Option #2: Move those dollars into the stock market; perhaps into dividend paying stocks.
Option #3: Buy real estate; perhaps income generating real estate.
Option #4: Invest in collectibles, like art or classic cars.
Option #5: Stuff your money under a mattress.

The point I am trying to make is, the rules for successful income investing have completely changed. If you are living (or plan on living) off the earnings of your savings, you better adapt your strategy to the new world of negative interest rates…..or plan on working as a Walmart greeter during your golden years.

Even if you think I’m nuts about negative interest rates coming to the US, there is no doubt that interest rates are not climbing anytime soon.

According to the Federal Reserve.....
"The Committee anticipates that inflation will remain quite low in the coming months.”
“The stance of monetary policy will likely remain highly accommodative for quite some time after the initial increase in the federal funds rate.”

With the US national debt approaching $19 trillion, our government doesn’t have any choice but to keep interest rates low. Sadly, our politicians are paying for their spendthrift ways by starving responsible savers.
But you can (and should) fight back by changing the way you think about investing for income. You can start by giving my high yield income letter, Yield Shark, a risk free try with 90 day money back guarantee.


Tony Sagami

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: Janet Yellen: The Best Pick Pocket in the USA was originally published at mauldineconomics.com

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Another Elephant Trade is Setting Up

It’s a bit unusual for us to reach out to you on the weekend during family time, but this is pretty important. We want to give you a heads up so you don’t miss out on this again. Here’s the situation. Pressure in the markets is building for a big move in the next few weeks. If it hits, this could drive the trends for the coming year.

And I can tell you firsthand that many professional traders and hedge funds will be blindsided by this. They just don’t get what’s driving the markets today. And as you know, that means this set up could be unusually intense (and potentially very profitable) as everyone panics when they discover they’re on the wrong side of the move.

Listen, if you want to grow a small account quickly, then this is the kind of move you need to catch and they only happen about once a year. Now, we want to take a minute to apologize. Here’s why. Our trading partner John Carter released a great free video [click here to watch it] then a special webinar training last week and he went into full detail about this elephant trade set up and how to ride it. And the feedback has been just amazing. Which is why we feel bad.

A whole ton of you missed out because we only sent out one email invitation to register for the webinar. So on Tuesday December 8th at 8 p.m. est John is going to do an encore training for you. Since this message is going out to everyone who missed last time, we strongly encourage you to grab your spot as soon as possible because space is limited.

Click Here to Register

This is NOT a replay. The training will be live so you can use what you learn the next day. John will cover any new market developments and tell you how he is trading them in his own account. I think you’ll agree, anyone can identify a big move in hindsight, but that doesn’t do you much good, right?

That’s why we think it’s so important to be transparent and show you John's positions and results in real time. To join us for this special training, grab your spot now.

Click Here to Register

By the way, in last week’s training John mentioned a Netflix set up that was forming and several attendees jumped on that and did very, very well. Now, quick trades like that don’t always happen in a live training, but sometimes they do. Remember though, the point of this training is really about how to grow your account fast by catching these big elephant trades.

If you missed the recent big move in the Euro, or AMZN, then you don’t want to miss what we believe will be the big trade of the next 12 months.

So Click Here to Register for this special training now before you forget.

See you Tuesday evening,
Ray C. Parrish
aka the Crude Oil Trader



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How Big the Gig Economy Really Is

By John Mauldin

There is growing awareness of what is being called the “gig economy.” It’s not just Uber driving or Airbnb. There are literally scores of websites and apps where you can advertise your services, get temporary or part time work, and do so from anywhere you happen to be.

Some “gigs” actually pay pretty good money, but they are for people with specialized skills who prefer to live a somewhat different lifestyle than the typical 9 to 5’er does. My hedge fund friend Murat Köprülü has been busy researching and documenting this phenomenon and regularly regales me with what he finds.

He goes and spends evenings and weekends with young gig workers, trying to figure out what it is they really do and how they make ends meet in New York City. It turns out they need a lot less to support their lifestyle than you might imagine, and they prefer working intermittent gigs, being able to do what they want, and having no boss.

A close look at the data indicates that the gig economy is indeed big and growing. But there is a great deal of debate among economists about how big it really is.

It’s Much Bigger Than the Employment Data Suggests

Gig workers don’t seem to show up clearly in the BLS employment data. Typically, we would expect those working in the gig economy to appear in the self employed category, but that category is actually drifting downward in numbers—relatively speaking.

But Harvard economist Larry Katz and Princeton’s Alan Krueger, who are working on research to document the rise of the gig economy in America, says that our current measures ignore the bulk of the gig economy.

 From a story at fusion.net:

Katz said two pieces of evidence suggest current measures of self-employment and multiple-job holding are “missing a large part of the gig economy.” The first is that the share of the employed (and of the adult population) filing a 1099 form, the tax document “gig economy” workers must file, increased in the 2000s, even as standard measures of self-employment declined in the 2000s. Other groups have confirmed this: Zen Payroll, a site that tracks the sharing economy, found increases in the share of 1099 workers across many major U.S. metros.

Source: Zen Payroll via Small Business Labs

And data from research group EconomicModeling.com show the share of traditional, 9-to-5 workers in the labor force has declined…..

Source: Fusion, data via EconomicModeling.com

… while those who categorize themselves as “miscellaneous proprietors” is climbing.

Source: Fusion, data via EconomicModeling.com

A recent survey found 60 percent of such workers get at least 25 percent of their income from gig economy work.

The problem with the BLS estimates is that they overlook a sizable chunk of the true gig economy.
And this report absolutely squares with what my friend Murat’s research is showing: that gig economy is not shrinking. On the contrary, it’s on the rise, and a quite rapid rise.

Subscribe to Thoughts from the Frontline

Follow Mauldin as he uncovers the truth behind, and beyond, the financial headlines in his free publication, Thoughts from the Frontline. The publication explores developments overlooked by mainstream news to help you understand what’s happening in the economy and navigate the markets with confidence.

The article was excerpted from John F. Mauldin’s Thoughts from the Frontline. Follow John Mauldin on Twitter. The article How Big the Gig Economy Really Is was originally published at mauldineconomics.com.


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John Carter's Next Free Webinar "How to Grow Your Account and Grow it Fast"

Our trading partner John Carter of Simpler Options is back with another one of his wildly popular free webinars. And as always this class will fill up fast so get your reserved seat asap, sign up here.

John always comes to us with a game changing timely trading method for current market conditions that we can put to work immediately, and this class is no different. John gave us a taste of what he has in store for us with a new free video this week. If you have not seen it watch "John's Proven Strategies for Q4 and 2016" here.

This weeks free webinar is Tuesday evening December 1st at 8 p.m. eastern time.

Reserve Your Seat to "How to Grow Your Account Fast" Now!

Here’s what you’ll learn from our free webinar:

  *  How to find stocks that are bucking the trend of the general market

  *  What are the key market internals to watch every day for early signals

  *  How to know which options to buy and when

  *  How to trade from the road

  *  How to trade for multiple account sizes

      and much more

Get your seat now and we'll see you Tuesday evening,
Ray C. Parrish
aka the Crude Oil Trader

P.S. Don’t worry if you can’t attend live. We’ll send you a link to the recorded webinar within 24-48 hours.


Get your reserved seat now....Just Visit Here!

               

New Video: John Carter's Proven Strategies for Q4 and 2016

 

There are very few traders that have as unique of a story as our friend and trading partner John Carter. From watching his dad place his trades as "hand draws" to becoming a successful trader himself. It wasn't an easy path he took.

There have been lots of bumps, direction changes, and heartbreak along the way. But through time John has learned that if you want to have a 6 figure trading account like his, options are your best way to get there.

Today John is sharing with us his latest free video that will give us an insight into how he will be using options to close out the year and moving forward into 2016.

Watch > John's Proven Strategies for Q4 and 2016

In this FREE video from John will give you two proven strategies he's using in 2016 that are sure to work for you. Now, when a trader like John Carter says "hey, here are my two best strategies" you'd be nuts not to at least hear him out and see if it can be applied to what you are doing.

So click here for his best two 2016 strategies

And here's what else he's showing you in this free video:

  *  His two proven Strategies John used to make 30k last week!

  *  How to make and find successful trades from your phone

  *  How to Successfully Trade 2016 Economic Disasters

  *  How to find trades that won't run your stops

John even shows you exactly what he's currently trading. This is my favorite part.....just watch!

See you in the markets putting this to work!
Ray C. Parrish
aka the Crude Oil Trader



While you are here get John's latest FREE eBook "Understanding Options"....Just Click Here!

Mike Seerys Weekly Recap of the Crude Oil, Gold, Coffee, Sugar and Markets

Over the past few weeks, the likelihood of a December rate hike by the Federal Reserve Bank has grown substantially. Both economic data and hints from a number of Federal Reserve policymakers now point towards a December rate hike and now on Wall Street 70% of investors polled believe a rate hike in December is possible. 

So let us take a look at the data and what Fed officials are saying that is making investors believe a hike is coming. Our trading partner Mike Seery  is back to give our us a recap of this weeks trading and help us put together a plan for the upcoming week.

Crude oil futures in the January contract are up 90 cents this Friday afternoon in New York settling at 42.00 last Friday while currently trading at 42.60 as this market has been on the defensive for quite some time due to the fact of massive worldwide supplies as I’ve been sitting on the sidelines at the current time. Oil prices are trading below their 20 and 100 day moving average hitting a double top at the 52 dollar level with the next major level of support at the contract low which was hit in late August around 40.00 as we could be entering a short position next week as the chart structure is starting to improve dramatically on a daily basis. Crude oil has stabilized in recent days due to the fact of terrorism and especially the possibility of that spreading to the Middle East, however worldwide supplies are massive and that is the real problem coupled with the fact of a strong U.S dollar which is higher once again today as the Federal Reserve basically will raise interest rates in the month of December which is also another negative, but as a trader I look for risk/reward to be in your favor and that could be in next week’s trade to the short side as I’m not convinced that prices are headed lower. In my opinion think if the oil market moves higher you’re going to need OPEC to cut production and I’m not sure if they are willing to do that at the current time, but if that does happen that would certainly put the short term bottom into this market.
Trend: Lower
Chart Structure: Improving

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Gold futures in the December contract settled in New York last Friday at 1,081 an ounce while currently trading at 1,081 unchanged for the trading week still trading below its 20 and 100 day moving average telling you that the short term trend is to the downside, however I’m sitting on the sidelines in this market as prices have dropped $100 in the last three weeks as the chart structure is awful at the current time. Earlier in the week prices traded at a new contract low of 1,062 and now has rallied for the 2nd straight day as I still see no reason to own gold at current time as money flows are coming out of the precious metals once again and into the equity markets as I think that trend will continue for the rest of 2015. Gold prices have stabilized here in recent days due to the fact of all the terrorism that is occurring throughout the world and it looks to me that that probably could continue here in the short term, but the easy money to the downside has been made in gold as I think you will start to see a consolidation of the recent downdraft in prices so avoid this market at the current time and look at other markets that are beginning to trend with less risk.
Trend: Lower
Chart Structure: Poor

Coffee futures in the March contract settled in New York last Friday at 115.80 a pound while currently trading at 122.75 up nearly 700 points for the trading week having one of the strongest weeks in quite some time bottoming out at the 115 level. As I’ve written about in previous blogs as I think coffee is in the process of bottoming, however at the current time I’m sitting on the sidelines waiting for a trend to develop as prices are trading above their 20 day but still below their 100 day moving average telling you that the trend currently is mixed. The contract low was hit around the 115 level as prices are getting very cheap in my opinion as we are starting to enter the volatile season as I think we are squeezing blood out of a turnip at these levels, but I will be patient and wait for better chart structure to develop therefore lowering monetary risk as I think over the long haul prices are headed higher. The next major resistance is at 125 which is just an eyelash away as the soft commodity markets except for cotton have rallied over the last several weeks as traders remember in early 2014 a drought hit key coffee growing regions in the country of Brazil sending prices sharply higher in just a matter of weeks.
Trend: Mixed
Chart Structure: Poor

Sugar futures in the March contract settled last Friday in New York at 15.04 a pound while currently trading at 15.04 unchanged for the trading week still in a very volatile trade as prices are swinging up and down on a daily basis as the chart still looks bullish in my opinion, however I am sitting on the sidelines as the chart structure is poor at the current time. Sugar prices are actually trading above their 20 and 100 day moving average which is one of the only few commodities you can say that about as the trend still remains higher with major resistance at 15.50 as strong demand continues to prop up prices here in the short term coupled with the fact of lower production numbers coming out of Brazil. Sugar prices have rallied around 35% over the last three months as this was a very bearish trend for the several years as prices used to trade in the 30’s in 2011 as that’s how far prices have come down due to over production in Brazil, but that scenario has changed going into 2016 as weather is now the main focus to drive prices higher.
Trend: Higher - Mixed
Chart Structure: Poor

Mike Seerys Trading Theory
What Does Risk Management Mean To You? I generally tell people that the reason people lose money in commodities is not due to the fact that they are bad at predicting where prices are headed, however they are bad when it comes to losing trades and refusing to take a loss which results for heavy monetary losses that are difficult to come back from. For example if a customer has $100,000 account in my opinion on any given trade he or she should risk 2% – 3% of the account value meaning if you are wrong the worst case scenario is still a $97,000 remaining balance, however what I always see is traders risking ridiculous amounts of money and instead of the 3% stop loss will risk 20% to 30% on any given trade or even higher therefore if you are wrong on two or three trades that $100,000 dollar account could dwindle down to nothing very quickly and I’ve seen it many times throughout my career. What many traders forget to realize is they might have 4 or 5 commodity positions on and if you have too many contracts on all at the same time and all of those trades go against you which is very possible the losses can add up to be staggering so what I am suggesting to you is if you have $100,000 account risk between $2,000 – $3,000 per trade so if you lose on five straight trades the worst case scenario is that your down $15,000 and still have an $85,000 balance which is very possible to still come back from and your still in the game.

Mike has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets. Get more of Mike's calls on this Weeks Commodity Markets


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The World's First Cashless Society Is Here - A Totalitarian's Dream Come True

By Nick Giambruno

Central planners around the world are waging a War on Cash. In just the last few years:

• Italy made cash transactions over €1,000 illegal;
• Switzerland proposed banning cash payments in excess of 100,000 francs;
• Russia banned cash transactions over $10,000;
• Spain banned cash transactions over €2,500;
• Mexico made cash payments of more than 200,000 pesos illegal;
• Uruguay banned cash transactions over $5,000; and
• France made cash transactions over €1,000 illegal, down from the previous limit of €3,000.

The War on Cash is a favorite pet project of the economic central planners. They want to eliminate hand-to-hand currency so that governments can document, control, and tax everything. This is why they’re lowering the threshold for mandatory reporting of cash transactions and, in some instances, simply making it illegal to pay cash.

In the U.S., central planners ratchet up the War on Cash every time the government declares a made-up war on something else…a war on crime, a war on drugs, a war on poverty, a war on terror…..

They all end with more government intrusion into your financial affairs. Thanks to these made-up wars, the U.S. government is imposing an increasing number of regulations on cash transactions. Try withdrawing more than $10,000 in cash from your bank. They’ll treat you like a criminal or terrorist. The Federal Reserve is at the center of the War on Cash. Its weapons are inflation and control over the currency denominations.

Take the $100 note, for example. It’s the largest bill in circulation today. This was not always the case. At one point, the U.S. had $500, $1,000, $5,000, and even $10,000 notes. But the government eliminated these large notes in 1969 under the pretext of fighting the War on Some Drugs. Since then, the $100 note has been the largest. But it has far less purchasing power than it did in 1969. Decades of rampant money printing have inflated the dollar. Today, a $100 note buys less than a $20 note did in 1969.

Even though the Federal Reserve has devalued the dollar over 80% since 1969, it still refuses to issue notes larger than $100. This makes it inconvenient to use cash for large transactions, which forces people to use electronic payment methods. This, of course, is what the U.S. government wants. It’s exactly like Ron Paul said: “The cashless society is the IRS’s dream: total knowledge of, and control over, the finances of every single American.”

Policymakers or Central Planners?

On stories related to the War on Cash, you may have noticed that the mainstream media often uses the word “policymakers,” as in “policymakers have decided to keep interest rates at record low levels.” When the media uses “policymakers,” they are often referring to central bank officials. It’s a curious word choice. As far as I can tell, there is no difference between a policymaker and central planner. Most people who want to live in a free society agree that central planning is not a good idea. So the media uses a different word to put a more neutral spin on things.

To help you think more clearly, I suggest substituting “central planners” every time you see “policymakers.”

The World’s First Cashless Society

In 1661, Sweden became the first country in Europe to issue paper money. Now it’s probably going to be the first in the world to eliminate it. Sweden has already phased out most cash transactions. According to Credit Suisse, 80% of all purchases in Sweden are electronic and don’t involve cash. And that figure is rising. If the trend continues - and there is nothing to suggest it won’t - Sweden could soon be the world’s first cashless society.

Sweden’s supply of physical currency has dropped over 50% in the last six years. A couple of major Swedish banks no longer carry cash. Virtually all Swedes pay for candy bars and coffee electronically. Even homeless street vendors use mobile card readers. Plus, an increasing number of government restrictions are encouraging Swedes to dump cash. The pretexts are familiar…fighting terrorism, money laundering, etc. In effect, these restrictions make it inconvenient to use cash, so people don’t.

So far, Swedes have passively accepted the government and banks’ drive to eliminate cash. The push to destroy their financial privacy doesn’t seem to bother them. This is likely because the average Swede places an unreasonable amount of trust in government and financial institutions. Their trust is certainly misplaced. On top of the obvious privacy concerns, eliminating cash enables the central planners’ latest gimmick to goose the economy: Negative interest rates.

Making The Negative Interest Rate Scam Possible

Sweden, Denmark, and Switzerland all have negative interest rates. Negative interest rates mean the lender literally pays the borrower for the privilege of lending him money. It’s a bizarre, upside down concept. But negative rates are not some European anomaly. The Federal Reserve discussed the possibility of using negative interest rates in the U.S. at its last meeting. Negative rates could not exist in a free market. They destroy the impetus to save and build capital, which is the basis of prosperity.

When you deposit money in a bank, you are lending money to the bank. However, with negative rates you don’t earn interest. Instead, you pay the bank. If you don’t like that plan, you can certainly stash your cash under the mattress. As a practical matter, this limits how far governments and central banks can go with negative interest rates. The more it costs to store money at the bank, the less inclined people are to do it.

Of course, central planners don’t want you to withdraw money from the bank. This is a big reason why they want to eliminate cash…so you can’t. As long as your money stays in the bank, it’s vulnerable to the sting of negative interest rates and also helps to prop up the unsound fractional reserve banking system. If you can’t withdraw your money as cash, you have two choices: You can deal with negative interest rates...or you can spend your money.

Ultimately, that’s what our Keynesian central planners want. They are using negative interest rates and the War on Cash to force you to spend and “stimulate” the economy. If you ask me, these radical and insane measures are a sign of desperation. The War on Cash and negative interest rates are huge threats to your financial security. Central planners are playing with fire and inviting a currency catastrophe.

Most people have no idea what really happens when a currency collapses, let alone how to prepare. How will you protect your savings in the event of a currency crisis? This just-released video will show you exactly how. Click here to watch it now.

The article was originally published at internationalman.com.

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