Here’s What I Recommend in the Stock Market: Zip, Zero, Nada by CHARLES HUGH SMITH | JUNE 20, 2014
My own advice that I try to live is: invest in yourself, not Wall Street Timing matters, as fundamentals have no impact in a euphoric blow-off top or in a panic-driven, bidless crash.. I recently received an email from a reader suggesting I back up my opinions by publishing my own trading positions. The reader suggested that failure to put my money where my mouth is diminished the gravitas of the opinions published here
He suggested that if I really believed in The Generational Short: Banks, Wall Street, Housing and Luxury Retail Are Doomed, I should bet against these for however long it took the trend to manifest– decades if necessary. I understand the credibility value of putting my money where my mouth is: without some evidence that the writer is walking the walk, then we assume he/she is merely talking the talk or talking his book, i.e. supporting his positions publicly while he unloads the position in private. There are fundamental problems with publishing one’s trading positions as a gambit for credibility, and it’s worth delineating them because they reflect the inherent uncertainties of trading and prognostication. 1. Markets do not trade on fundamentals. Though pundits and punters may refer to various fundamentals (price-earnings ratios, etc.) to justify their expectations of future stock prices, markets trade on emotions and the zeitgeist generated by Central Planning intervention, both publicly announced and secretly executed. As a result, any analysis of fundamentals is for historical context only. Misguided attempts to predict what the market should do if fundamentals mattered rarely succeed, for the simple reason that fundamentals don’t matter. They are invoked after the fact to justify one trend or another. Here is a chart of the Dow Jones Industrial Average (DJIA). Did the fundamentals of the corporations that make up the DJIA fluctuate as wildly between 2000 and 2014 as the DJIA
itself? The answer is no: what fluctuated wildly was the emotions of punters and the risk appetite set by Central Planning interventions.
2. Timing matters. Deteriorating fundamentals have no impact in a euphoric blow-off top, just as improving fundamentals have no impact in a panic-driven, bidless crash. I’ll use coffee to illustrate the point. As a hobby, I watch a lot of markets, and last year coffee started to look constructive after a multi-year decline from over $2.60 to $1.20. I tend to be early on these kinds of trend reversals, and indeed I was early, as one more low lay ahead in November 2013. The classic “buy” signal occurred in January, when price popped above the 20-week moving average and that resistance became support.
If I’d announced opening a long position in coffee in late July, 2013, anyone following me into the trade would have experienced a 15% decline by November. Had they sold or been stopped out, it was a losing trade. If they’d held their position for a mere 7 months, they would have gained about 75%– on an annualized basis, around 120%. If they’d built a position over time (as many experienced traders do), the rise off the bottom would have afforded a relatively low-risk opportunity to add to the position. The inverse head-and-shoulders (the right shoulder was traced out in late January/early February) offered another relatively low-risk chance to add to the position. The use of options to add to gains and/or hedge losses would have offered some basic risk management to the trade. An imperfect entry trade was a loser if sold in November and never re-entered, and a highly profitable winner if held and/or added to. The larger point is that trading requires far more than a commentary establishing the fundamentals. It requires the discipline and experience to construct a trading plan for the position and the discipline to execute the plan. It requires an awareness of risk and the zeitgeist of Central Planning interventions, which work until they don’t. A position sold inopportunely generated a loss while the exact same position generated outsized gains if held or added to according to a trading plan that accounted for the possibility of being early to the trend change. In my opinion, markets reflect a dynamic somewhat akin to the Heisenburg uncertainty principle of quantum mechanics, which holds that precision is fundamentally limited by Nature: the more precisely the position of a particle is determined, the less precisely its momentum can be known,
and vice versa. In an analogous fashion, the more precisely we can determine the likelihood of a trend change, the less precisely we can determine the timing of the trend change–and vice versa. (I’ll call this the Smith Market Uncertainty Principle until someone informs me that others have published the principle under a different name.) Posting anything less than a full trading plan is intrinsically misleading, and the likelihood of an inexperienced trader following the plan is low. (I know, having been that inexperienced trader many, many times.) It’s possible to be right about the fundamentals and lose money trying to trade those fundamentals. It’s also possible to be wrong about the fundamentals and make a boatload of money trading Central Planning interventions. My own advice that I try to live is: invest in yourself, not Wall Street.
Inflation? Only If You Look At Food, Water, Gas, Electricity And Everything Else by MICHAEL SNYDER | ECONOMIC COLLAPSE | JUNE 20, 2014
Have you noticed that prices are going up rapidly? If so, you are certainly not alone. But Federal Reserve chair Janet Yellen, the Obama administration and the mainstream media would have us believe that inflation is completely under control and exactly where it should be. Perhaps if the highly manipulated numbers that they quote us were real, everything would be fine. But of course the way that the inflation rate is calculated has been changed more than 20 times since the 1970s, and at this point it bears so little relation to reality that it is essentially meaningless. Anyone that has to regularly pay for food, water, gas, electricity or anything else knows that inflation is too high. In fact, if inflation was calculated the same way that it was back in 1980, the inflation rate would be close to 10 percent right now.
But you would never know that listening to Federal Reserve chair Janet Yellen. In the video posted below, you can listen to her telling the media that there is absolutely nothing to be concerned about… And it is really hard to get too upset with Janet Yellen. After all, she reminds many people of a sweet little grandmother. But the reality of the matter is that she is simply not telling us the truth. Everywhere we look, prices are aggressively moving higher. Just the other day, the Bureau of Labor Statistics announced that the price index for meat, poultry, fish, and eggs has just soared to a new all-time high. This is something that I have repeatedly warned would happen. Just check out this article and this article. And it isn’t just meat prices that are going up. One of the largest coffee producers in the entire world just announced that it is going to be raising coffee prices by 9 percent… It took the Fed long enough but finally even it succumbed to the reality of surging food prices when, as we reported previously, it hiked cafeteria prices at ground zero: the cafeteria of the Chicago Fed, stating that “prices continue to rise between 3% and 33%.” So with input costs rising across the board not just for the Fed, but certainly for food manufacturers everywhere, it was only a matter of time before the latter also threw in the towel and followed in the Fed’s footsteps. Which is what happened earlier today when J.M. Smucker Co. said it raised the prices on most of its coffee products by an average of 9% to reflect higher green-coffee costs. Not that coffee isn’t expensive enough already. It absolutely stuns me that some people are willing to pay 3 dollars for a cup of coffee. I still remember the days when you could get a cup of coffee for 25 cents. Also, I can’t get over how expensive groceries are becoming these days. Earlier this month I took my wife over to the grocery store to do some shopping. We are really ramping up our food storage this summer, and so we grabbed as much stuff on sale as we could find. When we got our cart to the register, I was expecting the bill to be large, but I didn’t expect it to be over 300 dollars. And remember, this was just for a single shopping cart and we had consciously tried to grab things that were significantly reduced from regular price. I almost felt like asking the cashier which organ I should donate to pay the bill. Sadly, this is just the beginning. Food prices are eventually going to go much, much higher than this. Also, you should get ready to pay substantially more for water as well.
According to CNBC, one recent report warned that “your water bill will likely increase” in the coming months… U.S. water utilities face a critical economic squeeze,according to a new report—and that will likely mean higher prices at the water tap for consumers. A survey by water-engineering firm Black & Veatch of 368 water utility companies across the country shows that 66 percent of them are not generating enough revenue to cover their costs. To make up for the financial shortfall, prices for water are heading upward, said Michael Orth, one of the co-authors of the report and senior vice president at Black & Veatch. “People will have to pay more for water to make up the falling revenues,” he said. “And that’s likely to be more than the rate of inflation.” Of even greater concern is what is happening to gas prices. According to Bloomberg, the price of gasoline hasn’t been this high at this time of the year for six years… Gasoline in the U.S. climbed this week, boosted by a surge in oil, and is expected to reach the highest level for this time of year since 2008. The pump price averaged $3.686 a gallon yesterday, up 1.2 cents from a week earlier, data posted on the Energy Information Administration’s website late yesterday show. Oil, which accounts for two-thirds of the retail price of gasoline, gained $2.49 a barrel on the New York Mercantile Exchange in the same period and $4.88 in the month ended yesterday. The jump in crude, driven by concern that the crisis in Iraq will disrupt supplies, may boost pump prices by 10 cents a gallon at a time when they normally drop, according to forecasts including one from the EIA. And the conflicts in Iraq, Ukraine and elsewhere could potentially send gas prices screaming far higher. In fact, T. Boone Pickens recently told CNBC that if Baghdad falls to ISIS that the price of a barrel of oil could potentially hit $200. Of course the big oil companies are not exactly complaining about this. This week energy stocks are hitting record highs, and further escalation of the conflict in Iraq will probably send them even higher. Meanwhile, a “bipartisan Senate proposal” (that means both Democrats and Republicans) would raise the gas tax by 12 cents a gallon over the next two years. Our politicians have such good timing, don’t they? Ugh. And our electricity rates are going up too. The electricity price index just set a brand new record high and there are no signs of relief on the horizon… The electricity price index and the average price for a kilowatthour (KWH) of electricity both hit records for May, according to data released today by the Bureau of Labor Statistics.
The average price for a KWH hit 13.6 cents during the month, up about 3.8 percent from 13.1 cents in May 2013. The seasonally adjusted electricity price index rose from 201.431 in May 2013 to 208.655 in May 2014â€”an increase of about 3.6 percent. If our paychecks were increasing at the same rate as inflation, perhaps most families would be able to weather all of this. Unfortunately, that is not the case at all. As I wrote about recently, median household income in the U.S. is nowabout 7 percent lower than it was in the year 2000 after adjusting for inflation. And if realistic inflation numbers were used instead of the government-manipulated ones, it would look a lot worse than that. Inflation is a hidden tax that all of us pay, and it is systematically eviscerating the middle class. So what are prices like in your neck of the woods? Is your family feeling the pain of inflation? Should consumers fear inflation? VIDEO BELOW http://www.youtube.com/watch?v=CuGbDyfuqgI
Treasuries Go Down As Traders Do Not Trust The Federal Reserve Chair Janet Yellen Inflation View by CATHERINE STREARNS | STIXS.IN | JUNE 21, 2014
The treasuries went down for the second day since the investors had an unnerving doubt regarding the outlook of the Janet Yellen, the chair of the Federal Reserve which showed recent data that increased consumer prices that were described as noisy instead of as a sign of inflation that was faster than expected. A large gauge of the expectations of the U.S. inflation for 5 years hit the highest level in over a year soon after Yellen stated a couple of days ago that the a low interest rate commitment was made by the Fed and brushed aside a rise in the U.S. consumer price index that is more than what is estimated. 10 year notes will be going towards a third consecutive drop prior to the U.S. reports that comes out the next week which analysts state will signify a rise in home sales and increased confidence in the improvement of the economy. The Director of the Strategies for fixed-income in GPM Securities LCC at New York, Adrian Miller stated – “The market is voting with its feet and lifting rates because it doesn’t agree with Yellen’s conclusion on CPI.” The yield of the Treasury’s 10 year note went up by 2 base points, which is a 0.02% increase that hit a 2.64% increment at around 10:07 a.m. at NY as per Bloomberg Bond trader prices. The 2.5% security that matures in May 2024 went down by 5/32 which is a $1.56 per $1000 face that amounts to about 98 25/32. This yield went up by four bases during this week and went up during the end of May by 2.48%. The yield of five years that gained about 3 basis points and went up by 1.71% and pushed it further to make in a gain for the fourth consecutive time. Trends in Inflation The index-linked bonds of the U.S. did better than their counterparts in the U.K. or Germany this year. As per the Bank of America Merrill Lynch indexes, they have a return of 5.2% as opposed to 2.9% for securities of Germany and British linkers that returned 3.9%. Morgan Stanley of London’s fixed income strategist, Anton Heese stated – “Inflation has been surprising on the upside in the U.S., in contrast to the downside in Europe. The market is starting to price in a recovery in U.S. inflation trends, as the economy recovers.” No, WWII Did Not End The Great Depression VIDEO BELOW http://www.youtube.com/watch?list=UU7TvL4GlQyMBLlUsTrN_C4Q&v=pa4LRo9L-Dg Creature From Jekyll Island A Second Look at the Federal Reserve VIDEO BELOW http://www.youtube.com/watch?v=bhMacPvc5qc Money, Banking and the Federal Reserve VIDEO BELOW http://www.youtube.com/watch?v=YLYL_NVU1bg The Truth About Your Birth Certificate VIDEO BELOW http://www.youtube.com/watch?v=cfnJ1rOFK7o
Middle-Class Americans Not So Middle Class by JOYCE LUPIANI | THE CW TUCSON | JUNE 12, 2014 America's middle class is not as well off as you might think If you are part of the middle class in the United States, you probably already know this. Even though the United States is among the top five wealthiest nations, America’s middle class is not as well off as you might think. According to the new Credit Suisse Global Wealth Report, the middle class in the U.S. comes in at number 19 for global median wealth. Countries higher on the list include Australia at No. 1, Japan at No. 5, Canada at No. 10, and Ireland at No. 13. CNN says the reason the average middle-class Spaniard and Italian is worth more than the average middle-class American is because home ownership rates are much higher in Europe. In addition, average wages for the middle class in the U.S. have dropped in the last 13 years. The average wage was $56,080 in 1999. In 2012, it was $51,017. On the other hand, the United States as a nation ranks No. 4 among the top five wealthiest countries. It follows Switzerland, Australia and Norway. The average American’s net worth is $301,000. But, the average middle-class person is only worth about $44,000. So, why the big gap? Super rich Americans are skewing the average. The United States has 42 percent of the world’s millionaires, and 49 percent of those are worth more than $50 million. Click here for a list of 20 countries and the average and median net worth in each. Middle-class Americans not so middle class VIDEO BELOW http://www.infowars.com/middle-class-americans-not-so-middle-class/
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