Tuesday, December 31, 2013

Happy New Year's Eve - 5 Stories to Blow Your Mind at Year's End


Gold fell hard this morning, then the dip buyers jumped in, and now my recommended gold miners are up on the day. Randgold especially. It seems like we exited the Gold Double Short ETF (DZZ) just in time. Go figure. I'll be over here in the corner, trying to make sense of this, aka beating myself over the head with a rock.

Some stories and news of note ...

#1 China and Gold ... Not All News Is Bullish News

China imported less gold in November compared to the month before, according to the latest data published by the South China Morning Post. Gross imports in November were just 107,36 tonnes, compared to a 7-month high of 147,92 tonnes in October. Despite the drop in imports compared to one month ago, imports were still higher compared to the same month of 2012.
Read the rest and see more charts HERE.

#2 The New York Times Runs the Best Correction Ever
Unfortunately, it runs 49 years too late. "D'OH!"

3. A Supermarket worker downsized by Safeway Gets Cinematic Revenge.

He makes a trailer comparing downsizing to an alien invasion. Awesome!

4. Watch This Video ... It Will make You Smarter.

This is the story of Prince Rupert's Drop. If you're into physics, high-speed video, explosions, or the feeling of your jaw falling open in an involuntary expression of sheer wonderment, watch the video. You won't be disappointed.

5. The Most Amazing Scientific Images of 2013.

Just click through. 

Bonus: America in 2013, told in Charts.

Extra bonus: 14 Inspirational Quotes for the New Year

I hope your 2013 was good. I hope your 2014 is wonderful. Best wishes for the New Year.

Monday, December 30, 2013

Ugliness in Gold: The Charge of the Bear Cavalry

Gold got hit with an ugly stick going into today's close, with a late-day sell-off taking it below $1,200.

Now, everyone is watching support from June. But which support?  You could use a candlestick chart, where you can see the daily dip in June lines up nicely with Fibonacci support.



But I prefer a close-only chart. It takes out the intraday noise. Fibonacci support is still there, but it hasn't been tested, as you can see.



The question becomes, is gold headed down to test 1,000? Or is that too obvious?

For now, anyway, the bears are in charge.

Death Ray Laser Spider Bot

I think I've found something that will improve my trading enormously in 2014.  A death ray laser spider bot ...
How will this death ray laser spider bot improve my trading, do you ask? That's not the kind of question you ask a man with a death ray laser spider bot, buddy. Anyway, it's for trading purposes, I assure you, so I can definitely write it off on my taxes.

And if not, then the IRS gets a visit from the death ray laser spider bot! See how that works out? Bwa-ha-ha!

Sunday, December 29, 2013

Sunday Reading

Here are some things I"m reading this morning, as I avoid the work I should be doing.

Brain function 'boosted for days after reading a novel'
Reading a gripping novel causes biological changes in the brain which last for days as the mind is transported into the body of the protagonist

We still don’t really know how bicycles work
Forget mysterious dark matter and the inexplicable accelerating expansion of the universe; the bicycle represents a far more embarrassing hole in the accomplishments of physics.

These 5 Things Will Get Cheaper In 2014
Cars ... winter coats .. .Textbooks ... TVs ... Cruise liner vacations.

Here's a photo of Times Square in New York taken 105 years ago.
It wouldn't surprise me to see war-zeppelins or giant robots looming in the background of that picture.

Here's a photo of the London Eye the day the royal baby was born in 2013 ...

The lightning strike in the background makes the birth of George, son of Prince William and his wife Kate, positively Shakespearean.

NSA Intercepted Children’s Letters To Santa
Because, obviously, Santa is a socialist who violates US airspace with impunity. Well, okay, that's not the reason. The real reason is only slightly less stupid. Click through to read about Operation Milk Cookies (I'm not making that part up).

Hazards of Revolution
The pattern set in Chechnya has been repeated elsewhere with depressing frequency. The extent of the failure of the uprisings of 2011 to establish better forms of governance has surprised opposition movements, their Western backers and what was once a highly sympathetic foreign media. The surprise is due, in part, to a misunderstanding of what the uprisings were about.

Oligarchs, Demagogues and Mass Revolts . . . Against Democracy
The use of mob violence and “mass revolts” to serve the interests of oligarchical and imperial powers against democratically-elected governments has been a common strategy in recent times.

Not mentioned in this story -- though I think it should be -- is the Brooks Brothers Riot that stopped the Bush/Gore Recount in Florida in 2000.

 But maybe that one wasn't "popular" enough, LOL.

No Evidence Al Qaeda 'Had Any Role' In Benghazi Attack
Not that certain people will let that stop them.

There could be 10,000 drones buzzing around America's skies by 2017, reckons the FAA

Thursday, December 26, 2013

Updated: Gold, the US Dollar, and the See-Saw of Pain

Here's an update on my gold versus the US dollar chart ...

Updated chart

The See-Saw of Pain seems to be working in gold's favor, if briefly. We'll see what next week/next year brings.

Hot Facts for Boxing Day

Happy Boxing Day.  It's so-called in most of the English-speaking world — but not, apparently, the U.S. — because the day after Christmas is when you put money, canned goods and the gifts you really didn't want in the poor box at Church. It historically started with the Church of England.

At least, that's one story.  The other involves Good King Wenceslas, who was a real person, not just the subject of a Christmas carol. In fact, the Christmas carol tells the story of how Wenceslas started Boxing Day. This was back in the darkest days of the Middle Ages, before 1,000 AD.  Christianity wasn't a sure thing at that time. Wenceslas' own mother was a pagan up until her marriage. Bohemia was beset on all sides by enemies. But through it all, Wenceslas managed to be of good cheer and tried to set a good example.

According to song — no, not Bohemian Rhapsody — the other song, the Christmas carol — Wenceslas was surveying his land on St. Stephen’s Day — Dec. 26 — when he saw a poor man gathering wood in the middle of a snowstorm. The King gathered up surplus food and wine and carried it through the blizzard to the peasant’s door.

A strange side note -- Wenceslas didn't become a king until after his death. And he was murdered. By his brother! Yeesh! Why hasn't HBO done a miniseries on him?  

Saint Stephen, AKA, the Guy the Pharisees Loved to Hate

And who was Saint Stephen, anyway?  None other than the first martyr of Christianity (aside from Jesus himself, of course, but let's not get into a deep discussion about that). 

Anyway, St. Stephen was a deacon in the early church at Jerusalem. He was a noisy fellow who pointed out inconvenient things; the pharisees hated him. They hated him with the white-hot rage of a thousand burning desert suns.

So, Deacon Stephen was accused of blasphemy. At his trial he made a long speech fiercely denouncing the Jewish authorities who were sitting in judgement on him. How'd that go? Well, he was stoned to death. Stephen's martyrdom was witnessed by Saul of Tarsus (later renamed Paul), a Pharisee who would later convert to Christianity and become an apostle.

Yeah, THAT Paul. 14 of the 27 books in the New Testament have been attributed to Paul, and approximately half of the Acts of the Apostles deals with Paul's life and works. Paul came up with the idea that salvation is based on Faith and not earned by good works (good works, or rather the corrupted idea of good works, being the basis for "buying your way into heaven").

So if not for Stephen, there would be no Paul, and if not for Paul ... well, Christianity would look a lot different, for sure!

So that's why St. Stephen's Day is so important. And if you were trying to burnish the image of a recently murdered Duke/King that you wanted to have canonized, you might link him to an important event on St. Stephen's Day, which is a day celebrating someone else who got murdered.

This is why I'm thinking the whole Wenceslas story may be more hype than history.  But it's a great story, so let's go with it.

Anyway, my newest column at Investment U is up. In this one, I go over some other holiday traditions and triva you may not know about.  Here's an interesting bit you may not know ...

You Can Thank St. Francis for TWO Christmas Traditions

Who did the first manger scene in a church? St. Francis of Assisi started both Christmas carols and nativity plays. In 1223, St. Francis decided the Christmas mass was in a rut. So, he had an entire manger scene built in his church in Italy, replete with hay, actors, and animals.

St. Francis also thought the singing too drab for Christmas. So he took a couple of popular tunes of the day and wrote new words for them telling the story of the birth of Christ.

Church elders said he was crazy. History judges him a saint.

Read the rest of my list of interesting traditions and trivia HERE.

I'm really tempted to publish my original because the edits are ticking me off.  But eh, let it go, right?  I hope to let go a lot of things in 2014.

Wednesday, December 25, 2013

Merry Christmas -- Cool Game of the Day

I got some cool games for Christmas. Since I'm a boardgame geek, that's not a huge surprise.  What surprised me is how quickly my wife was able to get one particular game from Amazon Prime, because I only mentioned it this past weekend. 

This is probably the first one I'll inflict on my family ...



You can see the factions include Dinosaurs, Pirates, Zombies and Wizards.

And I also got the Awesome Level 9000 Expansion, with Killer Plants, Steampunks, Bear Cavalry and Ghosts.

I can't wait. Game on!

We also played Galaxy Trucker which I received today.  Great game, but I'm terrible at it!


Tuesday, December 24, 2013

Your Christmas Eve Awesome

Dueling Tesla coils -- with a robot accompanist playing drums -- play the theme to Pacific Rim.

If Santa brings me something half this cool, Christmas morning will be majorly awesome.

This is also pretty awesome ...

Christmas Eve: Stop Reading Blogs and Spend Time With Your Family Edition

Just a few notes before I go enjoy a busy day of Christmas festivities, church, Christmas pageant, and big ham supper tonight.

Hooray, Florida is finally leading the nation in something to be proud of!

  • One more chart -- Sure, the Fed is "tapering" its QE program by $10 billion.  Let's put that in perpective, courtesy of Sprott analyst David Franklin, who posted this chart of the Fed's balance sheet ...


(source)


If you want to read the other, competing ideas about what the star could have been, here you go.

Finally, since I'm not going to get around to it tomorrow, Merry Christmas to Jesse, IWNATTOS, Otto, Josh, Barry,  Bonddad, Bill, and all the other blogs I read on a regular basis. Keep up the good work, and I look forward to more great things from you in 2014.

Merry Christmas to all -- God bless us every one.

Monday, December 23, 2013

3 Chart Ghosts for Christmas Eve Eve

Our office is empty.  I assume this lack of co-workers is a sign; maybe I'm about to be visited by three ghosts. I like to think of Christmas Eve Eve as "Christmas Acceptance." In other words, this is the day you accept that you are not going to get everything done that you planned to do, you accept that you are going to be spending Christmas with or without certain people, and you accept that like it or not, this is what you are going to weigh at Christmas.  In other words, stop struggling and enjoy the slide into merriment and wassail.

I am also accepting the fact that as fast as I decorate our tree with chocolates, somebody -- Santa's elves, maybe? -- is eating them up. However, I will not accept that Paul McCartney's Christmas music is now Classic Oldies.  Surely you jest!

In any case, I have a story to scriven.  But before I go, I will visit you with three "ghosts" of my own. These are visions that may affect your future ... (cue spooky music)

The Ghost of Christmas Past:  And by the past, I mean 2013.  It's time for everyone to publish their Charts of the Year.  I don't agree with Business Insider's list of the Charts of the Year -- they left many good ones out, while keeping many that I can't imagine many people give a hoot about. But there are some good ones, like this chart of Labor Force Participation ...



Along with this chart, Krisna Guha of ISI asks: "The key question for 2014 is: to what extent will participation rebound as jobs continue to strengthen?"

I have a one-word answer for that: Robots.  We'll see. Read the rest of BI's charts of the year HERE.

The Ghost of Christmas Bull Markets. Michael Santoli (@michaelsantoli) tweeted a chart that I think should have been on BI's list -- a chart showing that bull markets can run for longer than anyone expects.


Michael writes: Trust me, in Dec '87 no one said  "Only 1/3 done" RT @CiovaccoCapital: Bull Markets can last a long time - see 82-'0

The Ghost of Christmas Hotness.  Natural gas is still turning out to be one of our better trades. Here's a story summing up the recent price drivers nicely.  And one of the charts ...



The story was published Friday. Over the weekend, I heard that people were running around in shirt-sleeves from Boston to Virginia, as unseasonably warm weather gripped that part of the country. And yet natural gas is up again this morning. That market is hot-hot-hot!

That's it for today.  Remember to knock off early today. It won't kill you, and spreading a little Christmas cheer might help you live longer. It worked for Scrooge.

Friday, December 20, 2013

7 Hot Reads for Friday ... and 1 Christmas Video

This is the last full trading day before Christmas (because if you expect to get anything done on Monday you're kidding yourself).  We're at the start of the holiday sillly season.

Here's what I'm reading today.




The grand total of bills signed into law in the 113th Congress is 58. That’s the lowest one-year output since at least 1947, and only the tiniest fraction of the 6,366 bills introduced by lawmakers, according to House and Senate records.

2. Shanghai Gold Exchange Contract Volume Surges on Price Slump

“Quite a number of investors in China have been waiting in the wings for a bargain-hunting opportunity,” said Liu Xu, senior analyst at Capital Futures Co. in Beijing. “Volumes also jumped as some investors, who had bought before the Fed meeting betting on an inutile-gesture from the Fed, had to close out their positions now.”

3. What Will Be The Biggest Economic Stories of 2014? Some good ideas here; it's well worth the read.

4. Obama and the Democrats Are Mussolini-Style Corporatists, Just Like the Republicans
"Obamacare IS corporatist. Here we have the industries that are significant contributors to why the American medical system is so overpriced – the health insurers and Big Pharma – actually playing a major role in writing the legislation.

"And how is it not a sop to large companies to have the government require that citizens buy your product or else pay large tax penalties? Mr. Market certainly thought so, for the price of health insurer and drug company stocks jumped the day the ACA passed. And remember, the beneficiaries of Obamacare extend beyond the insurers and pharmaceutical makers. Hospitals, who increasingly engage in oligopoly pricing (most surgeries need to be done in hospitals), also come out even stronger."

5. GDP Growth Kicks Into Higher Gear. I included this chart in a Gold & Resource Trader issue I sent out today ...



My comment on the chart: "The Bureau of Economic Analysis reported today that real gross domestic product increased at an annual rate of 4.1% in the third quarter of 2013 (that’s the change from the second quarter to the third quarter).  In the second quarter, real GDP increased 2.5%.

"So, it seems that the economic momentum in the US economy shifted into higher gear in the third quarter."

6. Silver Bells May Soon Be Ringing
They say that a bell never rings at the top and the bottom of the market. But there’s some real jingling going on in silver right now. And it may just be the start of something big. Could you profit from it? Yes!

7. Investing in Diamonds 2014. "We have seen a further increase in demand from our Chinese investors for high grade Fancy Color Diamonds ...  We have noticed as well that there has also been a stable increase in demand for smaller Fancy Color Diamonds, mainly in yellows, and other various colors for jewelry by the ever growing middle class, which is predicted to grow three-fold in the next decade. This translates into over 750 million people, or twice the full population of the USA. This does not include the similar increase from India, where similar growth will also occur."

8. I'll close out with a Special Christmas Edition of "Between Two Ferns" hosted by Zach  Galifianakis, with guests Tobey Maguire, Samuel L. Jackson, and a musical appearance by Arcade Fire.
 

Thursday, December 19, 2013

Thursday Outlook -- Gold and NatGas

The breakdown in gold today is disappointing.  That said, my gold miners are holding up better than gold itself. But that's pretty small consolation.  We'll see what happens at the test of $1,180.  However, I have to say that I don't see anything to change the market's direction in the short term. Therefore, it's likely the short-term trend will remain intact until something changes.

I have to say the my nat-gas picks are doing well.  That's due in part to the record drawdown in nat-gas inventories, down 285 bcf from a week ago.



source

Stocks came in at 488 Bcf less than last year at this time and 261 Bcf below the 5-year average of 3,509 Bcf. That was enough to send the price of nat-gas springboarding higher. Natgas hit its highest intraday price since July 2011.

Remember my heads-up on Nat-gas last week? What do ya know.

Interesting note: This winter and next are both expected to be colder-than-average winters (according to the EIA). So we can expect nat-gas consumption to be up. But every oil company I talked to in San Francisco bragged about how they'd switched all their gas rigs over to oil rigs.  Hmm.  If you're in the nat-gas contract drilling business, I'd say you could make some serious coin as all these energy companies are caught with their pants down.

Just something to keep in mind. And now, 5 links of interest ...

1. Make a Silver Christmas Tree. Weird science you can do at home with the kids without blowing yourself up.

2. Households are adding to debt again. See the nifty chart ...

Source

It's the first increase in U.S. household debt since before the financial crisis in the third quarter of 2008.

3. Astronomers have discovered a mini-planet orbiting a Jupiter-sized planet near another star. From the looks of things, the Jupiter-sized body went on a rogue path through the other planetary system, snagged this other planet out of orbit and now both are leaving the star behind.  It's basically the prequel to "When Worlds Collide."

4. Speaking of outer space, do you know there's a sculpture on the moon? And no, it does not say "Made In China".

5. Four Takeaways from the Fed December Meeting. The Voice of Sauron speaks.

Have a good rest of your Thursday.

Monday, December 16, 2013

4 Top Stories & Charts for Monday

1. Nobody expects a big correction ...

It depends on how much faith you put in market cycles, but the second year of a Presidential cycle is usually a rough one.  Hence, 2014 should see a major correction. But would you see that as a buying opportunity?


There is a lot more to it. You can read it all here.

2. Bloomberg's outlook on gold is food for da bears. Gold Funds See Unprecedented 31% Slump With World Losing Faith

Some highlights (or lowlights) ...

  • Holdings in the 14 biggest ETPs plunged 31 percent to 1,813.3 metric tons since the start of January, the first annual decrease since the funds started trading in 2003, data compiled by Bloomberg show. The removals erased $69.7 billion in the value of the assets as prices fell by the most since 1981. A further 311 tons will be withdrawn next year, according to the median of 11 analyst estimates compiled by Bloomberg.
  • The pace of ETP outflows has slowed to about 40.7 tons a month on average since June, compared with 97.7 tons a month in the first half, according to data compiled by Bloomberg. Holdings fell 28.6 tons this month. The amount held in ETPs reached a record 2,632.52 tons on Dec. 20 last year.
  • Some of the economic conditions that prompted investors to buy gold over the past few years no longer exist. The U.S. unemployment rate that touched a 26-year high of 10 percent in October 2009 after a recession in the world’s largest economy dropped last month to a five-year low of 7 percent, the government reported Dec. 6. The U.S. economy grew at an annual rate of 3.6 percent in the third quarter, the strongest in 18 months. Inflation in the U.S. is running at a 1 percent annual rate, half the pace of the past decade.
  • Gold consumption in China, poised to overtake India as the biggest buyer this year, may increase 29 percent to 1,000 tons in 2013, the WGC estimates. Gold in Europe is being refined from larger bars suitable for local users into smaller sizes favored in Asia, while Deutsche Bank AG and UBS AG are among banks that opened vaults to store metal in the region this year.
3. U.S. close to oil production record, nat gas overtakes coal

  • By 2016, the U.S. will be close to a crude-oil production record of 9.6 million barrels a day, the Energy Information Administration said Monday in a preview of its annual outlook.
  • Natural-gas production, however, was seen as growing steadily, with a 56% increase between 2012 and 2040, when production will reach 37.6 trillion cubic feet. Natural gas will overtake coal as the main fuel for U.S. electricity generation by 2040.
  • The EIA also predicted U.S. residents will drive even less than it expected last year. Annual increases in vehicle miles traveled in light-duty vehicles will average 0.9% from 2012 to 2040, compared with 1.2% per year seen in the 2013 outlook. The rising vehicle fuel economy of those light-duty vehicles “more than offsets” modest growth in miles traveled, resulting in a 25% decline in light-duty vehicles energy consumption between 2012 and 2040.

4. Finally, here is a Calvin & Hobbes cartoon snow-sculpture brought to life. Awesome.


Saturday, December 14, 2013

6 Hot Weekend Reads -- Gold, Genentically Modified Food, and More

My story about gold, frankincense and myrrh, the gifts of the three wise men, is a reader favorite this week. http://www.investmentu.com/2013/December/gold-frankincense-myrrh.html

 China's demand for gold remains "voracious." China imported 148 metric tonnes of gold in October, the second highest recorded level. The record was in March 2013 when China imported 224 tonnes. October marked China's 26th consecutive month of being a substantial net gold importer.

Via Goldcore and Bloomberg

China is worried that genetically modified foods are an American trap. "America is mobilizing its strategic resources to promote GM food vigorously ... This is a means of controlling the world by controlling the world's food production."


Washington D.C. is increasingly irrelevant, and why that may be good for the nation.

"All over America, communities are failing. Once-mighty Rust Belt capitals that made steel or cars are now wastelands. Elsewhere, struggling white rural America is stocking up on canned goods and embracing the politics of chaos, sending pols to Washington ready to hit the default button and start the whole national experiment all over again.

"But in Camden, chaos is already here." 

Read more in Apocalypse, New Jersey. Another great story by Matt Taibbi.

Friday, December 13, 2013

Happy Friday!


I hope you had a good week. Next week will be better.

Chart of the Day -- Performance of Gold, Nat-Gas, Solar, Oil and More

Here's a chart of what's working, and what's not, using a performance chart. I would put platinum on the chart, but its recent performance is indistinguishable from gold. Silver was doing better in September and October, but over this time frame, its performance tracks palladium.
(Updated chart)

See my analysis on natural gas from earlier this week.

Good luck out there.


Thursday, December 12, 2013

Thursday's Top Reads

Here are the stories I'm reading this morning.

On gold ...

Peak Chinese Gold Demand: Has 2013 Seen The Most Consumer Appetite For A While? Sean's note -- take this with a large grains of salt, because none of the regular forecasters saw China's demand at the high level it is this year.

The view from India: "Brace yourself for another round of selling in gold" The analyst from the awesomely named firm of Kamal Bang says that people in India are asking themselves why they should have to pay such premiums over the international price of gold (because they're buying smuggled gold). Yeah, I guess that's why all those gold smugglers in India are calling it quits, right? Not.

Banks forecast gold in a range of $1,000 to $1,200 through next year  For what it's worth.

Those who bought the worst-performing industries and stocks in 2011 at the beginning of 2012 were handsomely rewarded.  The same thing happened the next year -- the worst performing stocks of 2012 did very well in 2013.  With 2013 nearly over, and gold miners beaten into the dirt, will they do well next year?

On virtual currencies ...

JPMorgan to Enter the Virtual Currency Race Sean's note -- but have they found some way to rig the market?

On the US Economy ...

Here's Why Companies Will Plow Cash Into The Real Economy In 2014. Again, for what it's worth, but it's an interesting perspective with historical precedence.

For another piece of historical precedence, read Does Stock Market Strength Beget More Strength

Looking for Stronger Economic Growth in 2014 -- Bill McBride at Calculated Risk

The 361 Capital Research Briefing is always a good read.  And it's quite bullish. Along those lines, also read The Most Important Economic Stories of 2013 -- in 41 Graphs

And one chart you should see ...
In the last two years, the Santa Claus rally came early, then we saw a fade for most of December. Is that going to happen this year? If so, that would be a great set-up for what should be a bullish 2014.

Wednesday, December 11, 2013

Gold, the US Dollar, and the Seesaw of Pain

For a long time, the relationships between gold and the US dollar have been out of whack. Usually they're on what I call the "seesaw of pain" -- when one goes up, the other goes. down. But for months, they've moved in the same direction, as you'll see on this chart.
 (Updated chart)

As you can also see on the far right side of this chart, in the past week, we've seen gold head higher while the US dollar goes lower. That's the first time this has happened since mid-October, which was itself a change from the previous trend. Is the relationship between gold and the dollar back to normal? And if so, why?

Here's another question: Why is the US dollar slumping?  The economy is improving. The November jobs report was solid. 3rd quarter GDP was revised up to +3.6%, in line with the recent stronger ISM manufacturing readings. Motor vehicle sales for November also made a post-recession high. Gasoline usage is up year over year and is expected to keep increasing, another sign of economic health. And Congress has worked out a budget deal that should prevent another painful battle in Washington. In short, while America's road to recovery may be painfully slow, we seem to be picking up speed. And at least we're going faster than Europe.

But maybe it's a relative expectations game. And I'm talking expectations about the euro and to a lesser extent, the British pound.

On Monday and Tuesday, there was a European Finance Ministers meeting. The european finance ministers made real progress on a banking union framework. Why is that important? Because it would once and for all remove the potential for individual banks (like those in Greece, Spain, Ireland, Italy, etc.) to bankrupt an entire EU country.

A banking union will create a central European regulator to close troubled banks and create a centralized European fund to recapitalize banks and make depositors whole again.

The main sticking point was the Germans, because they know they'll be writing the checks. But they seem to be over it now.

And this is a real fundamental positive for Europe. If you can take a potential future financial crisis off the table, Europe looks a lot more attractive.

The other development was that Bank of England head Marc Carney made a speech in New York. He acknowledged that the UK economy is recovering.  He also said that the UK will need low rates into the future. But anyone with eyes can see that Britain's housing prices are skyrocketing. Add in an improving economy, and it's likely that the UK will raise its benchmark interest rate sooner rather than later.

So, if the outlook for both the euro and the pound sterling is improving, then relatively speaking, the US dollar loses some of its safe haven status.  And that, I believe, is why the US dollar is going lower ... and also part of why gold is suddenly looking better.

The other part of gold's recent perkiness is Chinese demand for gold, which is enormous and growing. But I'll write more on that another time, as well as selling of gold by exchange-traded products. That may be winding down.

Stay tuned.
 

Monday, December 9, 2013

Bullish Chart of the Week

I could show you a few bullish charts, but this one really strikes home. Remember when a lot of people were writing off natural gas?

(Updated chart)

Natural gas is surging due to the cold weather that has most of America in its grip. At the end of last week, the average price of natural gas in New England for December settled at $14.52 per million British thermal units (MMBtu), according to the Intercontinental Exchange monthly index. Last year at this time, it was just over $10.

Now, let me show you two more charts. First, who is the big winner from this cold weather? I'd say Marcellus, judging by this EIA chart ...




In fact, the Marcellus region, located in Pennsylvania and West Virginia, is expected to exceed 13 billion cubic feet per day (Bcf/d) this month. That would be 18% of total US natural gas production this month. As recently as 2010, the Marcellus region produced less than 2 Bcf/d.

But sure, cold weather has sent nat-gas higher.  Will it last?  A lot of that depends on the weather.  But here's one more chart, of natural gas in storage ...


Natural gas is near its maximum. But gas in storage is also starting to turn lower, as those big reserves are drawn down. That's a bullish turn of events that should keep nat-gas prices elevated for a while, unless we see unseasonably warm weather.

Place your bets accordingly.  Good luck and good trades.

Friday, December 6, 2013

San Francisco Metals and Energy Update

Thursday was a whirlwind day at the energy and mining conference I attended in San Francisco. I had an excellent amount of one-on-one face time with companies, in one private meeting after another. I found at least one company I want to buy ... and a few I wouldn't touch with someone else's 10-foot-pole.

I heard a great phrase to describe some of the junior explorers -- "penny dreadfuls." It's not that these companies are run by bad people. But I see no reason to buy a company that has only $6 million in the bank and needs to spend $50 million in the next two years. And even after all that, it will have years to go before it becomes a mine, if ever.

Meanwhile, the outlook on gold is something I'll call "grimly determined."  No one is willing to call a bottom in the gold price.  But many are saying that with companies at these prices, they're just too cheap to pass up.

As Agnico Eagle’s chief financial officer, David Smith, said “Frankly, if you aren’t buying now, when are you buying?”

I’ve seen some great companies in San Francisco, including …

  • A company that is racing ahead to develop a rich deposit of a wonder material that is changing the world around you.
  • A silver and gold producer that has demonstrated it knows how to make bargain-basement deals when everyone else is panicked … and will have enormous potential when prices turn higher again.
  • An energy company that is leveraged to the price of oil and gas in Europe, which is higher than in North America. In the case of nat-gas, much higher. The company is growing its cash flow, grodwing its dividend and making smart acquisitions.

I was impressed by these and many more. Subscribers to my Gold & Resource Trader will see the best of them. Stay tuned for analysis, videos and more next week.

Thursday, December 5, 2013

Bullish move in gold on Wednesday,but ...

On Wednesday, something very interesting happened in gold.  First, it made a new five-month low, as it has done every day this week. Then  the monthly ADP national employment report for November came in at a strong 215,000 rise in workers. That handily beat market expectations of a rise of around 170,000.  That should have sent gold lower.  But you know what gold did? Gold went higher.

When something goes up on bearish news, that's a pretty bullish sign.

However, we have to keep this in context.  The damage in gold is more like carnage.  It has a lot of work to do. For starters, I'd like to see spot gold close above last week's close of 1,251.40.

(Updated chart)

Then we'd have two bullish weeks in a row.

If that happens, the bears will likely start to cover. Gold has two more trading days to do it.  Will it happen? Wait and see.

Tuesday, December 3, 2013

Bullish or Bearish? Setting the Table for 2014

The broad market has pulled back the last couple days. This is a very data-heavy day, so we could see some more swings. But remember, the pullback in the S&P 500 is in the context of a broader rally.



Now we have to think about 2014. Are you bullish or bearish?

First, let's get politics out of the way. Ask yourself, does the market care who is or isn't President?
Source: Yardeni.com

Obviously, the market doesn't give a flying fig whether the President is Republican or Democrat. You could make a case that Congress has held back economic growth by sitting on its hands and refusing to spend money rebuilding bridges, roads and other infrastructure, but the market generally goes up no matter who is in charge.

Now, what else does the market have going for it? Here's a short list ...
  • Record corporate profits
  • Near record-low interest rates
  • Improving federal deficit relative to our economy
  • Improving housing and jobs picture
  • Reasonable stock valuations
  • Declining oil prices
  • Low inflation

You want a picture? Here's one ...
Source

The S&P 500’s operating profit margin is at a record high of 9.7% (based on the trailing four-quarter average). Wow! Is this as good as it gets? Or can it get better?

Is there anything bearish? Two things.  Let's start with wage stagnation, as this chart makes clear ...



Source

Wage increases have averaged only 1.8% since 2009. That's the downside of soaring corporate profit margins. The companies aren't sharing with rank-and-file employees.

On the plus side, the ISM manufacturing index is up, construction spending is increasing and gas prices remain low(er), which increases relative purchasing power. So maybe wages will start to improve.

And the second big worry is that the Fed will start its "tapering" in December. I don't believe it will, but I could be wrong.

So are you bullish or bearish?

As you read this, I'm in San Francisco for a pow-wow with mining and energy companies. 

It should be interesting. Gold has hit a fresh five-month low in every session this week. Technically, having broken resistance at $1,220, the metal is now vulnerable to touch long-term support of $1,200. That, in turn, opens the door to a test of the 3-1/2 year low of $1,180 hit in June.

 Stay tuned.

Monday, December 2, 2013

The Rise of the Machines: Amazon's Drone Delivery Service

Amazon.com is working on delivering packages by "octocopter" drones. The new service will be called "Prime Air." 
Prime Air would be able to get customers their products only a half-hour after they click the "buy" button. Jeff Bezos' "optimistic" estimate to "60 Minutes" was that Prime Air will be available to customers within 4 to 5 years.

I guess this new service will be useful for people who have a crack-like addiction to online shopping ... when it finally launches.  In the meantime, it's certainly fodder for online comedians. Here is my favorite ...

Source

But this is pretty darned funny ...



I say if the drones aren't equipped with frickin' laser beams, Bezos just isn't putting his heart into it.

Gold, Energy, Charts and More for Monday

I'm flying to San Francisco this week, where I will be interviewing CEOs and other reps from a bunch of mining and energy companies. I'll post videos for my subscribers later in the week, so they can form their own opinions about these companies and what the CEOs have to say.

In the meantime, here are some things that have caught my eye.

Precious Metals

Thanks to the government crackdown on imports, Indian gold demand ahead of the Diwali festival season has been cut in half.

Holdings in gold-backed ETPs fell to 1,841.9 metric tonnes on Nov. 29, the lowest since March 2010, according to  Bloomberg data.

What's more, November saw $1.4 billion exiting gold-tracking ETFs, according to BlackRock. That brings the 2013 year-to-date outflow for the group to $36.4 billion. Gold ETFs around the world hold $74.1 billion, according to the same figures.

Speaking of November, spot gold showed a decrease of around 5.5% for the month. Gold hasn't dropped that much in November (which seasonally should be a bullish month) since 1978, according to data from the World Gold Council. In November 1978, gold fell 20%.

Historically speaking, gold has averaged a gain of 1.4% during November over the last 45 years, according to research by online gold exchange BullionVault and CNBC. Obviously, this time it's different.

You want some optimism? BMR points out that "what followed after that horrible November 1978, by the way, was an immediate climb that intensified throughout 1979 and eventually resulted in a quadrupling of the Gold price over a period of just 14 months"

Other Metals

China is expected to produce 770 million tons of steel this year, a record for the country.

Meanwhile, Mexican drug cartels ship iron ore to China, and China ships chemicals used to make methamphetamines to Mexican ports. Call it "Breaking Badder." Or "Breaking Malo." Hollywood, call me.

China

Not only is China getting grabby about airspace over flyspeck islands that no one lives on, it's also using ancient shipwrecks to lay claim to most if not all of the South China Sea. And who's going to tell them "no"? Too bad we spent all our treasure fighting endless wars in the Middle East, eh?

Energy

The United States will pass Saudi Arabia and Russia to become the world’s top oil producer in 2015, according to the International Energy Agency. Also, the IEA raised its forecast of global oil demand  to 101 million barrels per day (bpd) in 2035, up from 86.7 million bpd in 2011. That far out, those forecasts are Amazing Karnak-esque.

Meanwhile, OPEC expects overall demand for its crude to drop by about 300,000 barrels a day next year. Tensions are rising in the group over which members should trim back production. Couldn't happen to a nicer buncha people.

Global Economy

Morgan Stanley's Global Economics research team has a new note out looking ahead at 2014 titled Five Key Transitions.
In it, they identify five big themes that characterize what the regions of the globe are going through right now:


  1. US: From QE to credible forward guidance on interest rates.
  2. Japan: From deflation to (moderate) inflation.
  3. Europe: From financial fragmentation to a credible banking union.
  4. China: From leverage-driven growth to reform-driven growth.
  5. EM: From broken traditional to sustainable new growth models.

As MS sees it, the more these transitions are accomplished in 2014, the more likely we'll see robust global growth

Meanwhile, Bank of America Merrill Lynch has a chart showing that European equities have seen the longest streak of inflows in 11 years.

Finally, in the U.S. retail spending over Thanksgiving weekend dropped for the first time in at least seven years. Warning sign, or will Cyber-Monday (today) save retailers?Stay tuned.