The Next Financial Disaster Starts Here

By Dan Steinhart

Individual investors take note….

Some of the world’s best money managers are betting on the biggest financial disaster since 2008. You won’t hear about this from the mainstream media. Networks like NBC or CBS don’t have a clue… just like they didn’t have a clue the US housing market would collapse in 2007.

Carl Icahn, a super successful investor who’s the 31^st richest person in the world, said this investment is in a bubble. He said that it’s “extremely overheated”… and that “there’s going to be a great run to the exits.” And this investment isn’t some complex derivative that only Wall Street and hedge funds can buy. Millions of investors hold it in their brokerage accounts.

The dangerous investment is junk bonds.

Junk bonds are usually issued by companies with shaky finances. They pay high interest rates to compensate investors for their high risk. Low interest rates have pushed investors into these risky bonds. Junk bonds are one of few places where investors have been able to get a decent income stream.

In 2008, the Federal Reserve cut interest rates to near zero to fight the financial crisis. It has held rates near zero ever since. Right now, a 10 year US government bond pays just 2.3%. That’s half its historical average, and near its all time low.

Investors looking for income have turned to junk bonds. This chart shows the growth in junk bonds since 2002. As you can see, junk bonds didn’t grow much from 2002 to 2008. But when the Fed cut rates to zero in 2008, junk bond issuance took off:

JPMorgan reports that the number of junk bond issues soared 483% between 2008 and 2014. You might be thinking that you don’t own junk bonds… so why should you care? It’s true that many investors don’t own junk bonds directly. But many do own them through junk bond ETFs.

The Financial Times recently explained why junk bond ETFs are dangerous.… junk bond ETFs give the illusion of liquidity. Not all that long ago, bankers and asset managers promised to turn subprime mortgages into gold plated, triple A rated bonds.

Today, the apparently miraculous transformation is of deeply illiquid credit instruments, such as junk bonds and leveraged loans, into hyper-liquid exchange traded funds. Junk bonds are not “liquid.” That means there aren’t many investors buying and selling them every day. The Wall Street Journal reported that each of the top 10 bonds in the largest junk bond ETF traded just 13 times a day on average.

That’s not a typo. Investors only buy and sell these junk bonds 13 times per day on average. For comparison, investors buy and sell 47 million shares of Apple (AAPL) on average every day. Junk bond ETFs are extra dangerous because they make junk bonds appear liquid. HYG, the largest junk bond ETF, trades more than 6.8 million shares per today on average. That’s more than McDonald’s stock.

But as Howard Marks, hedge fund manager and one of the most respected investors in the world recently explained:

No investment vehicle should promise greater liquidity than is afforded by its underlying assets. If one were to do so, what would be the source of the increase in liquidity? Because there is no such source, the incremental liquidity is usually illusory, fleeting, and unreliable, and it works (like a Ponzi scheme) until markets freeze up and the promise of liquidity is tested in tough times.

Because junk bond ETFs create the illusion of liquidity, most investors don’t see the danger. They think they can sell their junk bonds ETFs just as easily as they could sell shares of Apple. They’re wrong. If too many people sell junk bonds at once, it could overwhelm the market and cause prices to crash.

Now, none of this has been a problem yet because junk bonds have been in a bull market. According to Bank of America, junk bonds have gained 149% since 2009. But as Howard Marks added, ”Nothing is learned in the investment world in good times.” … “Most of these vehicles haven’t been tested in tough times.”

All bull markets eventually end. When this one ends, junk bonds could cause huge losses to investors who don’t know about these risks. Junk bonds could easily drop 15% or more in one month.

And here’s the craziest part….Some of the world’s smartest and most successful investors are are betting on this exact outcome. They’re betting that the junk bond market will crash.

They’re calling it “The Next Big Short.”

You probably heard about the few hedge fund managers who made a killing when US housing collapsed in 2007. Dallas-based hedge fund manager Kyle Bass made $500 million by betting against housing. John Paulson made $4.9 billion by betting against mortgages. Today, one of the largest private equity firms in the world is raising money to bet against junk bonds... just like Bass and Paulson bet against housing in 2007.

The Wall Street Journal reports:

Apollo [one of the world’s largest private equity firms] has been raising money from wealthy investors for a hedge fund that snaps up insurance-like contracts called credit-default swaps that benefit if the junk bonds fall. In marketing materials reviewed by The Wall Street Journal, Apollo predicted: “ETFs and similar vehicles increase ease of access to the high yield [junk] market, leading to the potential for a quick ‘hot money’ exit.”

Other hedge funds like Reef Road Capital and Howard Marks’ Oaktree Capital are also raising money to bet on a junk bond crash.

As you can see from the chart of HYG’s (the largest junk bond ETF) price, junk bonds are down since June:

There’s no way to know if this is the beginning of the end of the junk bond bull market. But if it is, huge losses could come very soon. If you’ve made money investing in junk bonds, it’s time to cash in. Don’t bet against some of the best investors in the world who expect junk bonds to crash. We recommend selling junk bonds now.

P.S. Because this risk and others have made our financial system a house of cards, we’ve published a groundbreaking step by step manual on how to survive, and even prosper, during the next financial crisis. In this book, New York Times best selling author Doug Casey and his team describe the three ESSENTIAL steps every American should take right now to protect themselves and their family.

These steps are easy and straightforward to implement. You can do all of these from home, with very little effort. Normally, this book retails for $99. But I believe this book is so important, especially right now, that I’ve arranged a way for US residents to get a free copy. Click here to secure your copy.

The article The Next Financial Disaster Starts Here was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Closing the Sausage Factory

By John Mauldin

“Bureaucracy destroys initiative. There is little that bureaucrats hate more than innovation, especially innovation that produces better results than the old routines. Improvements always make those at the top of the heap look inept. Who enjoys appearing inept?”

– Frank Herbert, Heretics of Dune

“Economies naturally grow. People innovate as they go through life. They also look around at what others are doing and adopt better practices or tools. They invest, accumulating financial, human and physical capital.

Something is deeply wrong if an economy is not growing, because it means these natural processes are impeded. That is why around the world, since the Dark Ages, lack of growth has been a signal of political oppression or instability. Absent such sickness, growth occurs.”

– Adam Posen, “Debate: The Case for Slower Growth”

Today’s letter will be shorter than usual, because I’m at Camp Kotok in Grand Lake Stream, Maine, where the first order of business today is trying to outfish my son (not likely to happen, this year). But I’ve been looking closer at productivity barriers, and I want to give you some points to ponder.

The New Normal?

Like many of you readers, I’m old enough to remember a time when 2.3% annual GDP growth was a disappointment. We always knew America could do better. Not anymore, apparently. Some people actually cheered last week’s first estimate for 2Q real GDP growth. It was 4.4% in nominal terms, but inflation brought the figure back down. While certain segments are growing like crazy, for the most part we are muddling along in a slow growing malaise. You might even call it “stagnant.”

I for one still think the United States can do more. We have a large population of intelligent people who want to build a solid future for their children. They’re willing to work hard to do it. If that’s not happening – and clearly it isn’t – some barrier must be standing in their way. What is this barrier to productivity and growth? There are actually several, but government red tape is one of the biggest. I thought about this after reading an excellent Holman Jenkins column in the Wall Street Journal last week.

Jenkins led me to an audio recording of an interesting discussion on “The Future of Freedom, Democracy and Prosperity,” conducted at a symposium held at Stanford University’s Hoover Institution last month.
Government research & development funding has fallen off considerably from its peak in the 1970s moonshot days. This holds back worker productivity. The federal government is doing too much to slow down business and not enough to boost it.

The three economists who spoke at Stanford all pointed to important productivity barriers emanating from Washington DC.....

One of the participants, Hoover economist John Cochrane, spoke of fears that America is drifting toward a “corporatist system” with diminished political freedom. Are rules knowable in advance so businesses can avoid becoming targets of enforcement actions? Is there a meaningful appeals process? Are permissions received in a timely fashion, or can bureaucrats arbitrarily decide your case by simply sitting on it?

The answer to these questions increasingly is “no.” Whatever the merits of 1,231 individual waivers issued under ObamaCare, a law implemented largely through waivers and exemptions is not law-like. In such a system, where even hairdressers and tour guides are subjected to arbitrary licensing requirements, all the advantages accrue to established, politically connected businesses.

The resources that businesses put into complying with government regulations is staggering. I have often envied people outside the highly regulated financial industry for their freedom to operate rationally. In my business we seem to spend half our time – and an ungodly fraction of our money – just maneuvering through the regulatory morass.

Intrusive federal regulations touch every part of the economy:

• Energy and mining companies have to deal with environmental protection rules.
• Drug companies and health care providers must satisfy the FDA and Medicare.
• Cloud technology companies have to process FBI and NSA demands for user information.
• Retailers and consumer product makers are required to abide by the fine print on millions of product labels.

I could go on, but you get the point. Anything you do attracts bureaucratic oversight now. We may laugh at “helicopter parents” hovering over their children at school, but we all have a helicopter government looking over our shoulders at work.

Before anyone calls me an anarchist, I think some government regulation is perfectly appropriate. We all want clean drinking water. Everyone appreciates knowing our cars meet crash survival standards. I’m glad FAA is keeping order in the skies.

The problem arises when agencies enforce confusing, contradictory, and excessive regulations and try to micromanage the nation’s businesses. Every business owner I know is glad to play by the rules. They just want to know what the rules say, and that is frequently very hard to do.

A few weeks ago, in “Productivity and Modern-Day Horse Manure,” I explained that growth is really quite simple: if we want GDP to grow, we need some combination of population growth and productivity growth.

The US population is growing, thanks mainly to immigration, but the effectiveness of the workforce is another matter. Baby Boomer retirements are rapidly removing productive assets from the economy. To offset that trend, we need to make younger workers more productive.The red tape that constantly spews out of Foggy Bottom is not helping matters.

Regulatory Capture

The red tape hurts the economy overall, but it does help certain parties. The largest players in any niche often “capture” their regulators. Then they use their influence to tilt enforcement away from themselves and toward smaller competitors.

Put simply, new regulations can be great for your business if you are already well established and have the resources to comply with government mandates. New entrants rarely have those resources. The resulting lack of competition boosts profits for the big players but hurts consumers. The competition that would normally lead to better, less expensive goods and services never happens.

Holman Jenkins makes another great point about how over regulation affects growth.

Another participant, Lee Ohanian, a UCLA economist affiliated with Hoover, drew the connection between the regulatory state and today’s depressed growth in labor productivity. From a long-term average of 2.5% a year, the rate has dropped to 0.7% in the current recovery. Labor productivity is what allows rising incomes. A related factor is a decline in business start ups. New businesses are the ones that bring new techniques to bear and create new jobs. Big, established companies, in contrast, tend to be net job shrinkers over time.

Recall our economic growth formula: population growth plus productivity growth. The US population grew at a peak rate of 1.4% in 1992, and growth has been trending down ever since. Now it is around 0.75% per year. Add that to 0.7% productivity growth, and you see why Jeb Bush’s 4% growth target will be so hard to hit.

Blame Flows Downhill

Business leaders love to complain about the bureaucrats who run Washington’s alphabet-soup agencies. I think the problem goes deeper. With only a few exceptions, the regulators I’ve met over the years have been competent professionals. They weren’t intentionally trying to hurt my business. Often the regulations confused them as much as they confused me.

The real blame, I think, starts on Capitol Hill. Our legislative process is a sausage factory. Congress passes vague, complicated laws riddled with exceptions for this and zero tolerance for that. The result is superficially attractive but a mess inside. People in the alphabet agencies then have to remove the sausage skin and make sense of the contents. This would be a tough job for anyone. I certainly don’t envy them.

Jenkins mentions Obamacare’s convoluted waivers and exemptions. Even its advocates admit the law is a crazy mess. But how and why did it get that way?

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.

The article Thoughts from the Frontline: Closing the Sausage Factory was originally published at mauldineconomics.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Weekly Crude Oil, Gold, SP 500, Coffee and Sugar Markets Recap with Mike Seery

Fridays can be very telling, and while Fridays close in crude oil was not a clean break through support commodity traders need to be on their toes for Mondays open. So there is no better time to have our trading partner Mike Seery back to give our readers a recap of last weeks commodity futures market and help us put together a plan for the upcoming week. Mike has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Crude oil futures in the September contract settled last Friday in New York at 47.12 a barrel while currently trading at 44.10 trading lower for the 3rd consecutive trading session as I’ve been recommending a short position over the last 8 weeks and if you took that trade place your stop loss above the 10 day high which currently stands at 49.52 as the trend seems to be getting stronger to the downside. Crude oil futures are trading far below their 20 and 100 day moving average telling you that the trend is sharply lower as the chart structure will not improve until later next week as it certainly looks to me that oil prices will retest $40 a barrel as a strong U.S dollar continues to put pressure on oil and many of the commodity markets.

Remember as a trader you must trade with the path of least resistance and the oil market is clearly to the downside as picking bottoms and picking tops is extremely difficult to do successfully over the course of time. Traders reacted to Friday mornings monthly unemployment report showing around 215,000 new jobs created as it certainly looks like an interest rate hike could be eminent in the month of September which is also very bearish the commodity markets in general so continue to play this to the downside, however if you did not take the original trade you have missed the boat as I don’t like to chase markets so look at other markets that are beginning to trend.
Trend: Lower
Chart Structure: Solid

Get our latest FREE eBook "Trading Options Made Easy"....Just Click Here!

Gold futures in the December contract settled last Friday in New York at 1,095 an ounce currently trading at 1,095 as this market has been incredibly nonvolatile at the current time as prices have gone nowhere over the last three weeks as I’ve been recommending a short position from 1,170 & if you took that trade place your stop loss above the 10 day high which currently stands at 1,103 risking around $8 dollars or $250 per mini contract plus slippage and commission as the chart structure is outstanding.

I have been trading the commodity markets for a longtime and I can’t remember gold trading in such a nonvolatile manner as prices continually go nowhere which is putting me to sleep as I’m getting frustrated in this market because as a trader you want to look at markets that are moving but the risk/reward is in your favor so I will just keep the proper stop loss and if you are stopped out move on and look at other markets.

Gold futures are still trading below their 20 and 100 day moving average telling you that the trend is to the downside as a strong U.S dollar continues to keep a lid on the precious metal prices and I think that’s going to continue in 2015, however the stock market has hit a six month low and I think that’s starting to support prices as gold has had a very difficult time breaking 1,080 which is been hit on a half dozen occasions only to rally as prices remain in a very tight consolidation but continue to remain short.
Trend: Lower
Chart Structure: Outstanding

Free Webinar Replay "How to Find the Next Hedge Fund Darlings"....Just Click Here!

The S&P 500 reacted negatively toward the monthly unemployment report and is trading lower for the 2nd consecutive trading session down another 14 points this afternoon in Chicago trading at 2064 in the September contract as I recommended a short position in Thursday trade while placing your stop loss above the 10 day high at 2110 now risking 44 points or $ 2,200 per mini contract plus slippage and commission as the chart structure is very tight at the current time.

If you have been following my previous blogs you understand I like to sell breakouts as this has not broken out to the downside, however the Dow Jones industrial has hit a six month low and has broken out so I chose the S&P 500 so take a shot as the commodity and stock markets around the world look vulnerable to another leg down.

If you take this trade my recommendation is to place your stop above the 10 day high, however you can also place the stop above the all time high which is 2127 which might be a better place if your account balance can withstand that loss in case we are wrong but it seems hard to believe with commodity prices plunging on a daily basis that the stock market can retain these lofty levels in my opinion as I've been recommending short positions in many of the commodity markets for several months as I think there are problems developing that we don't know just yet.
Trend: Lower
Chart Structure: Solid

You Might Want to Know What's Behind our "Big Trade"

Coffee futures in the September contract settled last Friday at 125.25 while currently trading at 128 a pound up around 300 points for the trading week now trading above its 20 day but still below its 100 day moving average as I’ve been recommending a short position getting stopped out breaking even on this recommendation as this trade fizzled out at the very end.

I’m currently recommending to sit on the sidelines in the coffee market at this time as I’m a little disappointed getting stopped out, however we must move on and look at other markets that are beginning to trend as I’m still recommending a short position in sugar, cocoa, and cotton at the current time but keep a close eye on coffee as the trend can still remain bearish in the next couple of days as the chart structure still remains extremely tight so I’m not giving up on this trade but when prices hit a 10 day high it’s time to move on.

Many of the commodity markets were higher this afternoon as the U.S dollar reversed earlier gains but we are not seeing any real strength in the coffee market at the current time as the long term down trend line is still intact but I’m a short term trader which means I look for a four week high and four week lows as an entry point as you must be nimble and flexible and not always have a biased opinion as prices can change on a dime.
Trend: Mixed
Chart Structure: Solid

Sugar futures in the October contract settled in New York last Friday at 11.14 while currently trading at 10.65 a pound as I’ve been recommending a short position from around 11.50 and if you took that trade continue to place your stop loss above the 10 day high which now stands at 11.64 as the chart structure will start to improve later next week. Sugar futures are trading far below their 20 and 100 day moving average as the trend seems to be getting stronger on a weekly basis trading lower for the 2nd consecutive trading session as I think there is a possibility that sugar will crack 10.00 in next week’s trade as crude oil prices continue to plunge therefore pressuring sugar so continue to play this to the downside in my opinion as the risk/reward is still in your favor.

Many of the commodity markets were higher today including several soft commodities as the U.S dollar reversed earlier gains as many markets were probably oversold but to predict day to day action is extremely difficult as I would rather follow the path of least resistance which is to the downside as I’m strictly a trend follower so continue to take advantage of any rallies as I still think lower prices are ahead as supply issues continue to keep a lid on prices and unless lower production happens in 2016 I think prices grind much lower over the course of time.
Trend: Lower
Chart Structure: Solid

Get more of Mike's calls on this Weeks Commodity Markets

The Next Silver Bull May Have Already Started

By Laurynas Vegys

Silver is down 7.1% this year. Will this weakness persist? To find out, let’s look at the key factors in the silver market this year.

• Like gold, silver fell as the US dollar rose on the back of expectations that the Fed will hike rates.
• World demand for physical silver fell 4% in 2014, largely due to a record 19.5% drop in investment demand.
• Silver exchange traded funds (ETFs) did not see big liquidations in 2014. ETF holdings grew by 1.4 million ounces and recorded their highest year end level at 636 million ounces.

The first two factors helped push silver 19.9% lower last year. That’s more than gold or any other precious metal fell. Despite this, silver production rose 5% in 2014. That added to the pressure on prices.

Why did miners produce more silver when prices were falling? Because of:

• By-product metal. Around 75% of the silver mined is a by-product at gold or base metal mines. These producers will keep mining silver, almost regardless of price.
• Reduced cash costs. The primary silver producers have cut costs since they peaked in 2012. The main way miners do that is by boosting production to achieve economies of scale.
• Bull market hangover. Precious metals were in a major bull market from 2001 to 2011. Producers built a lot of mines in response. Nobody wants to pull the plug on a new mine that’s losing money if they think prices will go higher.

That’s the backdrop. Now let’s look at this year’s fundamentals.

Supply

Silver mine output has risen for 12 consecutive years (silver mine supply is a little different, due to hedging, but also trending upward). This year could break this trend. Industry experts at GFMS forecast up to a 4% decline in silver output in 2015. Why? It’s not rocket science. There are now fewer major new mines under construction due to lower metals prices. That leaves scrap supply. But scrap comes from jewelry, and sellers are price sensitive. People like to sell granny’s silver tea set when prices are up. We expect subdued scrap supply until silver heads much higher.

Demand

Investment demand - that’s us - is a big chunk of total silver demand: 18.4% as of the latest figures.
There was a big drop in investment demand last year: 19.5%. This tells us that most short-term investors and sellers have left the market. We don’t know any “silver bugs” who were selling. That means that today’s bullion is in stronger hands. And that means that any new buying will have a strong impact on prices.
But will there be buyers?

The Silver Institute expects more silver demand from investors this year. They say that the first half of 2015 sales of silver bars were the fifth highest on record.

Photovoltaics (PV) is another source of silver demand that many analysts expect to rise in 2015 and beyond. Global PV demand is set to increase by 30% in 2015, according to IHS analysts. China alone has plans to install 17 gigawatts of solar capacity by the end of the year.

The solar industry consumes a small amount of silver compared to jewelry and other electronics. Yet, if PV demand delivers in 2015, it will become the third-largest source of fabrication demand for silver.

Wildcard: Tesla plans to put batteries big enough to power a house in every home. What happens if that takes root is anyone’s guess… but it will be big. Really big. And the impact on demand for silver would be just as huge.

The Deficit

Silver supply went into deficit during much of the big run up from 2001 to 2011. That may happen again. Silver Institute expects the silver supply deficit to grow to 57.7 million ounces in 2015. (Note that even if physical mine supply is up, net supply can be down if a lot of the mine supply was forward sold as hedges.) If the institute is right, it’ll be bullish for silver prices.

The Dollar and the Fed

We believe the dollar is grossly overvalued, and we are not alone. HSBC thinks the greenback’s rise since 2014 could be in its final stage. For the three months between April and June, the US dollar fell against every developed-market currency (save for the yen and the New Zealand dollar).

Many investors seem convinced that the Fed will raise interest as soon as September. We view this as unlikely at this stage. Yes, tightening US monetary policy would propel the dollar to new highs. But an even stronger dollar would mean slicing billions off the US GDP; not exactly a desirable situation from the standpoint of the Fed given the sluggish growth of the economy.  We think the Fed could delay raising rates until 2016. It might even stop talking about rate hikes indefinitely. Each delay, the dollar will get whacked, and that’s good for precious metals.

On the other hand, if the Fed does nudge rates higher this year, it would likely dampen the stock market. That would increase demand for silver and gold. This could push silver prices much higher, given the small size of the market.

The Gold-Silver Ratio

The gold-silver ratio (GSR) tells you how many ounces of silver you need to buy one ounce of gold. The record shows that the GSR often surges during a recession. (See the shaded areas on the chart below.)

Silver is about 17 times more abundant than gold in the earth’s crust. Silver and gold prices were close to this ratio for most of history. These facts make many investors think that the GSR should be 17-to-1 and that eventually it will be.

They may be right, but we’ve never found the GSR to be a strong predictor of gold or silver prices. To us, the GSR “suggests a lot but proves nothing.”

Conclusion

The fundamentals are positive for silver in 2015: less mine supply, and the healthy demand we already see is bullish. The greater demand that’s possible could create a real supply crunch. As a result, we expect silver to hold on throughout 2015 and perhaps even increase faster than gold, if the whole precious metals sector turns positive this year.

As for guessing the future, we have no crystal ball. We can say that Louis’ case for 2015 as a win-win year for silver is backed by the numbers.

P.S. If silver moves off its current level of $15 and into the $20 or $30 areas, silver investors could make large gains. But owners of a unique silver-related security could make gains that are five... 10... even 100 times greater. And right now is a once-in-a-decade chance to buy them very, very cheap.

Our friends at Casey Research are the world’s leading experts in this sector. And they’re EXTREMELY bullish on this rare opportunity. Read on here for details.

The article The Next Silver Bull May Have Already Started was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

The Next Big Bull Run....Can you guess what sector we are talking about?

There’s a tiny sub sector of the market that explodes in value every 5-10 years.

  *  In the late 70’s some investors saw gains of 2,464%, 13,025%,
      and 3,479%.
  *  In the mid 80s there were gains of 5,445%, 7,650%, and 7,011%.
  *  And in the early 90s and mid 2000s we saw 3,050%, 2,431%, and
      2,054% gains.

These numbers are simply incredible.....

Our trading partner Doug Casey is telling us that right now the sector is once again ripe for huge gains. I strongly encourage you to check this situation out. You might not get the chance again for another decade. The profit potential on this opportunity is so high and so explosive that we would be a little disappointed if it was “only” good for 500% gains.

I believe the next huge rally in this sector is right around the corner.

And to help you beat the flood of investors that will rush into this investment once the bull run starts, Doug and his staff, the analysts at Casey Research, have put all of their research online, visit here.

I strongly encourage you to check it out....visit the "Casey Research Group"

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

P.S. This is by no means “cherry picking” the best gains from these rallies. Here’s a better list of some of the gains investors saw when this unique sector went on a tear.

Stock #1 up 26,040%
Stock #2 up 4,376%
Stock #3 up 1,874%
Stock #4 up 1,850%
Stock #5 up 1,827%
Stock #6 up 5,692%
Stock #7 up 2,431%
Stock #8 up 3,090%
Stock #9 up 3,050%
Stock #10 up 1,400%
Stock #11 up 1,600%
Stock #12 up 971%
Stock #13 up 2,464%
Stock #14 up 1,567%
Stock #15 up 13,025%

And there’s many, many more. Get the story behind these huge gains right here! 

When China Stopped Acting Chinese

By John Mauldin

“The one thing I know for sure about China is, I will never know China. It's too big, too old, too diverse, too deep. There's simply not enough time.”

– Anthony Bourdain, Parts Unknown

Much of the world is focused on what is happening in Greece and Europe. A lot of people are paying attention to the Middle East and geopolitics. These are significant concerns, for sure; but what has been happening in China the past few months has more far reaching global investment implications than Europe or the Middle East do. Most people are aware of the amazing run up in the Shanghai stock index and the recent “crash.” The government intervened and for a time has halted the rapid drop in the markets.

There have been a number of concerns about what this means for the Chinese economy. Is China getting ready to implode? Certainly there are those who have been predicting that outcome for some time. In this week’s letter I am going to try to explain both what caused the Chinese stock market to rise so precipitously and then fall just as fast and why we have to view China’s stock market differently from its economy.

As I have been saying for several years, in order for the Chinese economy to continue to grow, the Chinese must shift their emphasis from industrial production and infrastructure investment to a services oriented economy. That is indeed what they are trying to do, and we are beginning to see signs of the services sector taking on a role as important to the Chinese economy as services are to the US economy. They have a long way to go, but they have begun the trip.

A Transformation Like No Other

When the US stock market crashed in October 1987, commentators on that era’s primitive financial media (I recall seeing them on the large wooden box in my living room) rushed to distinguish between the country’s economy and its stock market.

The American economy, they said, is just fine. Life will go on, and businesses will make money. As it turned out, that was good analysis – and it still is today – and not just for the United States. Stock markets do reflect the economy over time, but they can lead it or lag it for years.

Anyone who owns China stocks has probably sought solace in such thinking the last few weeks. The Chinese stock bubble is deflating in spectacular fashion. The sharp decline and Beijing’s flailing efforts to stabilize the market have many economists seeing deeper trouble.

We’ll compare and contrast the Chinese stock market and economy by looking at an unusual but very reliable data source. With apologies to Anthony Bourdain, whom I quoted at the beginning of the letter, we can know China. We just have to ask the right people the right questions.

Back in 1987, as American investors were licking their wounds, the Shanghai skyline looked like this:

Here is a 2013 view from the same spot:

Photo credit: Carlos Barria, Reuters

A lot can change in 26 years. Transformations like this are commonplace in China. Gleaming cities now tower over what was undeveloped land a decade or two ago. Most of those cities even have people living in them, although the ghost cities are legendary.

You can crunch any numbers you like in any way you like, and it will be clear that China’s rapid growth is unprecedented. It is changing the course of human history. China has moved more than 250 million people from living a medieval lifestyle in the country to living and working in these fabulous new cities. And they have built the infrastructure to connect and supply them.

Worth Wray and I explored China from many different perspectives in our e-book, A Great Leap Forward? Our all-star cast of China experts variously see both opportunity and risk. The book is getting rave reviews. If you’re interested in an in-depth analysis of China, it’s the place to start (Click here for more information and to order the book.)

In thinking about China last week, I skimmed through the book and noticed something that, with the benefit of hindsight, is simply stunning. The paragraphs I read brought all the pieces together to explain the Chinese stock market’s epic drawdown.

China GDP Versus China Beige Book

The part that made me sit up straight was in the contribution by Leland Miller of China Beige Book. His chapter “How Private Data Can Demystify the Chinese Economy” comes at the Chinese economy from a unique angle.

We all know government economic data isn’t always reliable. That is especially true in China. It is the only country in the world that can report its GDP quarter after quarter and never have to revise its calculations. That is just the most obvious of its economic data manipulations.

Even knowing that, most China analysts still rely on that GDP number, because it is all they have. That is beginning to change because of the work of Leland Miller. Leland, along with his colleague Craig Charney, decided to build an alternative analysis to government GDP numbers. Using the same methodology that the Federal Reserve uses in its quarterly Beige Book, they gather data from a network of observers all over China. Their clients – who include the world’s largest central banks – provide granular data that gives a much deeper view of the Chinese economy.

In A Great Leap Forward? [get it here on Amazon] Leland describes how China Beige Book picked up on a major change in Chinese businesses. He says the country’s 2014 slowdown was different.

The slowdown of 2013 was the result of subtle credit tightening, few signs of which were evident in official data right up until the June interbank credit crunch caused a market panic. Small and medium-sized companies during that period still wanted to access credit but found – TSF data notwithstanding – that it was difficult if not impossible to do so. 2014, intriguingly, has proven to be a very different story.

One of the most interesting dynamics we’ve tracked across corporate China has been the historical disconnect between company performance and the willingness of those companies to continue to borrow and spend. In many sectors, particularly troubled ones such as mining and property, firms typically reacted to poor results in a peculiarly Chinese way: they doubled down.

Too often, the thinking appeared to be: good results were good, but bad results were not necessarily bad, because the government was expected to step in and bail them out. Perhaps with subsidies, perhaps by ordering loans to be rolled over to another day. Firms often chose to act in demonstrably non-commercial ways.

Since early 2014, however, our data suggest a startling transformation. During the second quarter, CBB data showed a particularly broad deceleration in revenue growth nationwide: for the first time in our survey, not one sector showed on quarter improvement. Yet firms reacted to this slowdown in a surprisingly rational way: capital expenditure growth fell broadly, as did capex expectations, as did loan demand – all to the lowest levels in the history of our survey. The third quarter then showed yet another quarter of weak loan demand, with even lower levels of current and expected capex.

Firms watching the economic slowdown didn’t want to spend – and they didn’t want to borrow either. For the time being, they preferred to watch events unfold from the sidelines.

Leland says, and I agree, that this was a positive development. Both businesses and investors need the discipline of free markets. Experiencing failure forces everyone to learn what works and what doesn’t work.

In a phone call this week, Leland told me their data actually pinpointed this change in the second quarter of 2014. He thinks it was the most important single quarter in Chinese economic history. I’m sure that Leland, as an Oxford educated China historian, doesn’t say that lightly. It was in that quarter, Leland thinks, that Chinese business leaders “stopped acting Chinese.” Faced with falling demand, they did the rational thing and stopped adding new capacity. As he says in the excerpt above, they didn’t want to spend or borrow.

They just sat on the sidelines. That was a good business decision. Unfortunately, it wasn’t consistent with Beijing’s master plan.

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.

The article Thoughts from the Frontline: When China Stopped Acting Chinese was originally published at mauldineconomics.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Weekly Crude Oil, Gold, Silver, Coffee and Sugar Markets Recap with Mike Seery

There's been plenty of traders calling for a bottom in most commodities this week....but not so fast. So there is no better time to have our trading partner Mike Seery back to give our readers a recap of last weeks commodity futures market and help us put together a plan for the upcoming week. Mike has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Crude oil futures in the September contract settled last Friday in New York at 48.14 a barrel while currently trading at 47.90 down slightly for the trading week still trading below its 20 and 100 day moving average as I’ve been recommending a short position over the last several months and if you took that trade place your stop above the 10 day high which now stands at 51.41 as that will improve on a daily basis starting next week. Crude oil futures are trading below their 20 and 100 day moving average telling you that the trend is to the downside as there is very little bullish fundamental news to push prices higher in the short term and I think that will continue for quite some time as the U.S dollar still remains relatively strong despite today’s steep decline.

Many of the commodity markets continue to go lower as deflation is a worldwide problem and has been over the last several years especially when the United States stopped there quantitative easing program which propped up all asset prices including most commodities. With the possibility of China slowing down the perception is that demand will also slow down so continue to place the proper stop loss which is just a little over $3 away as this trade as fallen out of bed over the last two months, but if you have missed this recommendation sit on the sidelines and look for another market that’s beginning to trend as you have missed the boat.
Trend: Lower
Chart Structure: Excellent

Get our latest FREE eBook "Learn How Human Emotions Produce Patterns in the Markets"....Just Click Here!

Gold futures in the December contract settled last Friday at 1,086 while currently trading at 1,194 experiencing a wild trading session this Friday afternoon with the U.S dollar trading sharply lower as I’ve been recommending a short position in the August contract as we rolled over into the December contract today so continue to place your stop loss above the 10 day high which stands at 1,110 an ounce. Gold futures have traded sideways for the last two weeks and looks to be forming some type of short term bottom, but I will stick to my trading rules and keep the proper stop loss as I still see no reason to own gold but if we are stopped out move on and look at other markets that are beginning to trend as we have been short from around the 1,170 level as prices have stalled out in recent weeks. The problem with the precious metals and gold in particular is the fact that all of the interest lies in the S&P 500 which is still hovering around all time highs as money flows continue to come out of the precious metals and into the equity markets as I think that trend is to continue throughout 2015 and at this point I would rather own stocks than own gold so continue to play this to the downside in my opinion while risking 2% of your account balance on any given trade.
Trend: Lower
Chart Structure: Outstanding

Free Webinar Replay "How to Find the Next Hedge Fund Darlings"....Just Click Here!

Silver futures in the September contract settled last Friday at 14.49 an ounce while currently trading at 14.80 up about $.30 for the trading week still trading below their 20 & 100 day moving average as I’ve been short from 15.80 and if you took that trade place your stop loss at 14.99 which is the 10 day high as the chart structure is outstanding at the current time. Silver prices continue to bounce off of 14.50 as it looks to be forming a bottoming pattern but I will stick to my rules as we are just an eyelash away from getting stopped out as silver had a 40 cent trading range this Friday afternoon as the U.S dollar is down 100 points, however the trend is still lower and if we are stopped out move on and let’s find another market that’s beginning to trend as volatility is relatively low at the current time.

The Federal Reserve continues to want the inflation rate to hit 2% so they can start to raise interest rates but at this point there is very little worldwide demand for any commodity especially due to the fact that China looks to be falling off a cliff as they are the largest importer of commodities in the world and if you have not sold silver at this time the risk/reward is highly in your favor risking $.20 or $200 per mini contract plus slippage and commission as we will see what Monday’s trade brings.
Trend: Lower
Chart Structure: Outstanding

You Might Want to Know What's Behind our "Big Trade"

Coffee futures settled higher for the 3rd consecutive trading session settling last Friday at 122.25 a pound while currently trading at 125.30 still trading below its 20 and 100 day moving average as I’ve been recommending a short position from the 128 level and if you took that trade place your stop loss above the 10 day high which currently stands at 128.20 as the chart structure is outstanding at the current time. The next major level of support is the contract low around 120 but I still think we can retest the January 2014 lows of 105 and if you did not take the original trade I would still sell at today’s price as the risk is around 300 points or 1,200 risk per contract plus slippage and commission. I am currently recommending short positions in cocoa, sugar, coffee as volatility is relatively low but as a trend follower I will stick to my guns on this and continue to place the proper stop loss while maintaining the proper risk management strategy of 2% of your account balance on any given trade.
Trend: Lower
Chart Structure: Outstanding

Sugar futures in the October contract settled last Friday in New York at 11.24 a pound while currently trading at 11.16 basically unchanged for the trading week as I’ve been recommending a short position from around 11.50 and if you took that recommendation the chart structure is outstanding at the current time so place your stop above the 10 day high at 11.72 risking around 50 points or $550 per contract plus slippage and commission. Sugar futures are trading far below their 20 and over 150 points below their 100 day moving average telling you that the trend is getting stronger to the downside as oversupply and over production should continue to put pressure on prices despite the fact that the U.S dollar is down over 100 points but that’s still not supporting sugar prices at this time. The reason I decided to take this trade was the fact of extremely tight chart structure which lowers monetary risk as that met my criteria to enter into a trade as I still think that there’s a possibility that prices could break 10.00 a pound in the next several weeks so continue to play this to the downside as the risk/reward is highly in your favor in my opinion.
Trend: Lower
Chart Structure: Excellent

Get more of Mike's calls on this Weeks Commodity Markets

The Wall Street Titanic and You

By Tony Sagami

“I would highlight that equity market valuations at this point generally are quite high.”

—Janet Yellen

Are you worried about the stock market? If you are, you’re in the minority of investors.
Greece… China… don’t worry about it!

At least that seems to be Wall Street’s reaction to what could have been a catastrophic fall of dominoes if the European and Chinese governments hadn’t come to the rescue with another massive monetary intervention.

If you think you’ve heard the last about Greece or a Chinese stock market meltdown, you’re in the majority. Investors are pretty darn confident about the stock market.

The John Hancock Investor Sentiment Index hit +29 in the second quarter, the highest reading since the inception of the index in January of 2011.

However, overconfidence is dangerous and often accompanies market tops.

If you listen to the hear no evil cheerleaders on Wall Street and CNBC, you might be inclined to think the bull market will last a couple more decades, but we haven’t had a major correction since 2011, and the Nasdaq hit an all time high last week.

Investors are so enthusiastic that the exuberance is spilling beyond stock certificates to the high brow world of collectible art.

Investment gamblers are shopping up art in record droves. In the last major art auction, prices for collectible art reached all time highs, and somebody with more money than brains paid $32.8 million for an Andy Warhol painting of a $1 bill.

Who says a dollar doesn’t buy what it used to?

I’m not saying that a new bear market will start tomorrow morning, but I’m suggesting that bear markets hurt more and last longer than most investors realize.

The reality is that bear markets historically occur about every four and a half to five years, which means we are overdue. And the average loss during a bear market is a whopping 38%. Ouch!

On average, a bear market lasts about two and a half years… but averages can be misleading.
In the 1973-74 bear market, investors had to wait seven and a half years to get back to even. In the 2000-02 bear market, investors didn’t break even until 2007.

Unless you, too, have drunk the Wall Street Kool Aid, you should have some type of emergency back up plan for the next bear market. There are three basic options:

Option #1: Do nothing, get clobbered, and wait between two and a half and 10 years to get your money back. Most people think they can ride out bear markets, but the reality is that most investors—professional and individual alike—panic and sell when the pain gets too severe.

Option #2: Have some sort of defensive selling strategy in place to avoid the big downturns. That could be some type of simple moving average selling discipline or a more complex technical analysis. At minimum, I highly recommend the use of stop losses.

Option #3: Buy some portfolio insurance with put options or inverse ETFs. That’s exactly what my Rational Bear subscribers are doing, and I expect those bear market bets to pay off in a big, big way.

Whether it is next week, next month, or next year—a bear market for US stocks is coming, and I hope you’ll have a strategy in place to protect yourself.

If you'd like to hear what worries me most about the stock market, here is a link to an interview I did last week with old friend and market watchdog Gary Halbert.

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: The Wall Street Titanic and You was originally published at mauldineconomics.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Europe: Running on Borrowed Time

By John Mauldin 

“I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.”

– Romano Prodi, EU Commission president, December 2001

Prodi and the other leaders who forged the euro knew what they were doing. They knew a crisis would develop, as Milton Friedman and many others had predicted. It is not conceivable that these very astute men didn’t realize that creating a monetary union without a fiscal union would bring about an existential crisis. They accepted that eventuality as the price of European unity. But now the payment is coming due, and it is far larger than they probably anticipated.

Time, as the old saying goes, is money. There are lots of ways that equation can work out. We had an interesting example last week. Europe and the eurozone pulled back from the brink by once again figuring out how to postpone the inevitable moment when all and sundry will have to recognize that Greece cannot pay the debt that it owes. In essence they have borrowed time by allowing Greece to borrow more money.

Money, I should add, that, like all the other Greek debt, will not be repaid.

I’ve probably got some 40 articles and 100 pages of commentary on Greece and the eurozone from all sides of the political spectrum in my research stack, and it would be very easy to make this a long letter. But it’s a pleasant summer weekend, and I’m in the mood to write a shorter letter, for which many of my readers may be grateful. Rather than wander deep into the weeds looking at financial indications, however, we are going to explore what I think is a very significant nonfinancial factor that will impact the future of Europe. If it was just money, then Prodi would be right – they could just create new economic policy instruments, whatever the heck those might be. But what we’ve been seeing these last few months is symptomatic of a far deeper problem than can be addressed with just a few trillion euros, give or take.

But first, I’m going to reach out and ask for a little help. I have just signed an agreement with my publisher, Wiley, to do a new book called Investing in an Age of Transformation. I’ve been thinking about this book for many years, and it is finally time to write it. As my longtime readers know, I believe we are entering a period of increasingly profound change, much more transformative than we’ve seen in the past 50 years. And not just technologically but on numerous fronts. There are going to be substantial social implications as well. Imagine the entire 20^th century fast-forwarded and packed into 20 years, and you will get some idea of the immensity of what we face.

Now think about investing in this unfolding era of change. Companies will spring up and disappear faster than ever. Corporations will move into and out of indexes at an increasingly rapid rate, making the whole experience of index investing – which constitutes the bulk of investing, not just for individuals but for pensions and large institutions – obsolete.

Just as we wouldn’t think of relying on the medical technology of the early 20^th century, I’m convinced that we need a significantly new process for investing that doesn’t depend on the concept of indexing created deep in the last century. In an age of exponential change, being wrong in your investment style will no longer mean you simply underperform: you will not merely be wrong; you will be exponentially wrong.

Of course, the flipside is that if you get it right, you will be exponentially right. We will be exploring some new investing concepts in Thoughts from the Frontline as I write the book, since this letter is actually part of my thinking process. I’ve been spending a great deal of time lately exploring new ways of thinking about the markets, different ways to manage risk, and strategies to take advantage of overwhelming change.

This project will be significantly more complex than any book I’ve attempted so far. I’m looking for a few research interns or assistants to help me on various topics. Some topics are technological in nature, and some are investment-oriented. You can be young or old, retired or working in any number of fields; you just have to be passionate about thinking about the future and be able to spend time exploring a topic and going back and forth with me through shared notes and conversations. It’s a plus if you write well. If you are interested in exploring a topic or two, drop me a note at transformation@2000wave.com, along with a resume or a note about your background, plus your area of interest. Now let’s jump to the letter.

The More Things Change

Almost four years ago, in an article on Bloomberg with the headline “Germany Said to Ready Plan to Help Banks If Greece Defaults,” we read this paragraph:

“Greece is ‘on a knife’s edge,’” German Finance Minister Wolfgang Schäuble told lawmakers at a closed-door meeting in Berlin on Sept. 7 [2011], a report in parliament’s bulletin showed yesterday. If the government can’t meet the aid terms, “it’s up to Greece to figure out how to get financing without the euro zone’s help,” he later said in a speech to parliament.

Over the last few weeks he took a similar hard line, offering the possibility that Greece could take a “timeout,” whatever in creation that is, and only the gods know how it could work for five years.
Reports of the final meeting before the agreement with Greece was reached demonstrated that there is little solidarity in the European Union. The Financial Times offered an unusually frank report of the meeting:

After almost nine hours of fruitless discussions on Saturday, a majority of eurozone finance ministers had reached a stark conclusion: Grexit – the exit of Greece from the eurozone – may be the least worst option left.

Michel Sapin, the French finance minister, suggested they just “get it all out and tell one another the truth” to blow off steam. Many in the room seized the opportunity with relish.

Alexander Stubb, the Finnish finance minister, lashed out at the Greeks for being unable to reform for half a century, according to two participants. As recriminations flew, Euclid Tsakalotos, the Greek finance minister, was oddly subdued.

The wrangling culminated when Wolfgang Schäuble, the German finance minister who has advocated a temporary Grexit, told off Mario Draghi, European Central Bank chairman. At one point, Mr Schäuble, feeling he was being patronised, fumed at the ECB head that he was “not an idiot”. The comment was one too many for eurogroup chairman Jeroen Dijsselbloem, who adjourned the meeting until the following morning.

Failing to reach a full accord on Saturday, the eurogroup handed the baton on Sunday to the bloc’s heads of state to begin their own an all night session.”

That meeting ended with Angela Merkel and Alexis Tsipras arguing for 14 hours and giving up. Donald Tusk, the president of the European Council (and former Polish Prime Minister), forced them to sit back down, saying, “Sorry, but there is no way you are leaving this room.”

Essentially, they were arguing over what form of humiliation Greece would be forced to swallow.
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.

The article Thoughts from the Frontline: Europe: Running on Borrowed Time was originally published at mauldineconomics.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Weekly Crude Oil, Gold, Silver, Coffee and Sugar Markets Recap with Mike Seery

It's been a terrible week for the crude oil bulls. And our trading partner Mike Seery is back this week to give our readers a weekly recap of crude oil as well as the futures market. Mike has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Crude oil futures in the September contract are trading far below their 20 and 100 day moving average telling you that the trend is to the downside after settling in New York last Friday at 51.21 currently trading at 48.45 down nearly $3 for the trading week as I’ve been recommending a short position for the last two months and if you took that trade place your stop loss above the 10 day high which currently stands at 54.00 a barrel.

The trend in the commodity markets is weak as everything seems to be melting down and remember as a commodity trader in my opinion you must trade with the trend so continue to play this to the downside. Crude oil has huge worldwide supplies coupled with a strong U.S dollar as I think prices will re-test the $45 level so continue to place the proper stop loss trying to get as much as 75% of the trend as picking tops and bottoms is impossible over the long haul in my opinion.

The stop loss will not improve for another week so you’re going to have to be patient as volatility currently is high and should remain so for weeks to come as I still believe prices are too expensive.
Trend: Lower
Chart Structure: Improving

Get our latest FREE eBook "Learn How Human Emotions Produce Patterns in the Markets"....Just Click Here!

Gold futures in the August contract settled last Friday in New York at 1,132 an ounce while currently trading at 1,082 down about $50 for the trading week continuing its remarkable bearish trend as I’ve been recommending a short position when prices broke 1,170 and if you took that trade continue to place your stop loss above the 10 day high which currently stands at 1,160 as the chart structure will start to improve on a daily basis starting next week.

Gold prices are trading far below its 20 and 100 day moving average telling you that the short-term trend is to the downside as the next level of support is around 1,050 as I think that could be tested in next week’s trade as there’s no reason to own gold and if you’ve been reading any of my previous blogs you understand how bearish I am of the entire commodity sector as a whole. Silver prices are also hitting a six year low as I’m also recommending a short position in that market as all of the interest lies in the S&P 500 which is slightly lower this afternoon as money flows continue to come out of the precious metals and into the stock market and I don’t see that trend ending any time soon.

The U.S dollar is near a six week which continues to keep a lid on commodity prices coupled with the fact of higher U.S interest rates possibly coming later in the year as both act as negative influences on commodities historically speaking.
Trend: Lower
Chart Structure: Poor

Free Webinar Replay "How to Find the Next Hedge Fund Darlings"....Just Click Here!

Silver futures in the September contract settled last Friday at 14.83 an ounce while currently trading at 14.33 down $.50 for the trading week as I’ve been recommending a short position when prices broke 15.80 and if you took that trade place your stop above the 10 day high at 15.50 as the chart structure will improve starting next week. I sound like a broken record as I continue to recommend bearish commodity plays as deflation is the problem not inflation as a strong U.S dollar will continue throughout 2015 in my opinion as gold prices are sharply lower this week as I’ve been recommending a short position in that market as the commodity market looks to have another leg down in my opinion.

The problem with the precious metals and silver is the fact that all the interest lies in the S&P 500 which is right around its all time highs as nobody wants to own the precious metals as a safe haven as the trend is your friend and clearly the trend in silver is to downside with the next major support at $14 and if that’s broken who knows how low prices could actually go. Silver futures are trading below their 20 day and far below their 100 day moving average telling you that the trend is getting stronger to the downside, however if you have missed the original recommendation sit on the sidelines and wait for the risk/reward to be in your favor which includes better chart structure.
Trend: Lower
Chart Structure: Poor

You Might Want to Know What's Behind our "Big Trade"

Coffee futures in the September contract settled last Friday at 128.40 while currently trading at 122.00 down around 600 points for the trading week as I’ve been recommending a short position and if you took that trade continue to place your stop loss above the 10 day high which currently stands at 132.50 as the chart structure will start to improve later next week. The original recommendation was to sell around the 128 level as the chart structure at that time was outstanding as the risk/reward was is your favor however, if you have not taken this trade you’re going to have to wait for some type price rally before entering. Coffee futures are trading below their 20 and 100 day moving average telling you that the trend is to the downside as I think a possible retest of the January 2014 lows around 105 could happen in the weeks to come due to the fact with large worldwide supplies coupled with the fact of a strong U.S dollar versus the Brazilian Real so I remain bearish.
Trend: Lower
Chart Structure: Poor

Trading Options with "Small Lots"......Can be Done with Any Size Account

Sugar futures in the October contract settled in New York last Friday at 11.96 while currently trading at 11.34 hitting a six year low as I’m currently sitting on the sidelines as the chart structure is poor as the 10 day high is too far away at 12.80 but I want to keep an eye on this market as the chart structure will improve next week as it looks like we will be playing this to the downside. Sugar futures are trading below their 20 and 100 day moving average as the long term and short term trend remain intact as the commodity markets in general remain weak and if you’ve been following my blogs you understand that I’ve been recommending a short position in many different sectors, however a 150 point risk in sugar is too high as the risk/reward is not in your favor in my opinion but I’m certainly not recommending any type of bullish position as over supplies continue to keep a lid on prices.
Trend: Lower
Chart Structure: Poor

Get more of Mike's calls on this Weeks Commodity Markets