Wednesday, January 29, 2014

Does It Really Look Like China Is In an Economic Slump?

For those who say that China's growth has slowed to 0% to 3% range, I point to this chart ...
Does that look like a crisis to you?

US Crude Oil Production at 25-Year High

The EIA issued its latest numbers oil storage, and they were a disappointment for the bulls. There was a build of 6.4 million barrels, compared to expectations of a build of just 2.1 million barrels.

We know that US crude oil production has been soaring. But it's nice to see a chart of just how much. Here's a chart I made using EIA data ...
In fact, US crude oil production is at its highest level since May of 1989.

Some other interesting oil stories

Is Texas oil about to replace Saudi crude in California?

US Refinery ownership and capacity has changed significantly since 2000

After multiple accidents, Feds caution on transporting oil by rail.  The volume of oil transported by rail jumped 31% in 2013.

US Crude Oil Imports Dropped Below 7 Million Barrels Per day. I think we all know why. The last time oil imports were this low was in January 2000, and we had a lot less people driving then.

Why America Should Keep Its Ban on Exports of Crude Oil.

The main argument here is that if we export oil, gasoline prices will go up. Another anti-export argument here:

For the OPPOSITE view -- coming from Alaska Sen. Lisa Murkowski, who is sloshing around in barrels of oil company money -- read THIS.

China steps up its own shale oil development.  Interestingly, China oil demand was down year over year, while its gasoline demand went up. My view: It's what happens when you have a sane energy policy

Nat-Gas to Gold -- Let Opportunities Unfold

The market outlook this morning is melting down like an ice cream sandwich on the sun-baked sands of Miami's South Beach. I'm so glad I recommended that Gold & Resource Trader subscribers exit three positions yesterday. One was a small loss, but two were nice wins, and in a short time frame, too.

Today, stocks are down and gold is up. I was hoping for more of a pullback in gold on dollar strength, but fear rules the market. So that raises the question: What will gold do when fear subsides?

When that happens, we'll see some kind of pullback, sure. But there are so many bullish things happening for gold right now -- some of them in China, some in Western ETFs, some elsewhere -- that I still think gold's uptrend is solidifying.

We still need a monthly breakout in gold. The big downtrend is in place until that happens. But there is a shift in the wind, and it looks bullish for gold.

Now some of you may be thinking: "Fear isn't going to subside for a long time. This is the beginning of the end -- the big sell-off that very smart people have been warning us about!"

Well, those people might be right. A stopped clock is right eventually. But then again, they were wrong all last year. I'm not saying I have a crystal ball. And there are risks in the market. I think most of the risks are China related, not the currencies of Turkey or Argentina or whatever f--'d up country is seizing the headlines now.  Those can be important IF a momentum of fear builds up because of all the brush fires going on in the emerging markets.  But for now, what I'm watching is copper, as I laid out in my Monday column.

(Updated chart)

It sure looks like copper is going to test its recent uptrend.  We'll what happens then. Also, iron ore prices are at their lowest level since July.

On the other hand, if you want something that is bullish, look at natural gas.
(Updated chart)

Thanks to cold weather that has depleted nat-gas in storage, prices are breaking out. We may see a re-test of the breakout. I would think that would be a buying opportunity in all sorts of things.  This is not a recommendation. Do your own due diligence before buying anything. And remember, weather pushes around nat-gas like a bully pushing around a skinny kid. Those pushes can come from more than one direction.

Other Things I'm Reading ...

‘Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil As I said, this is a worry, but I think the mainstream media is exaggerating that worry.

Is China's Economy Growing or Not? Some great analysis from Econbrowser, and there are lots of charts like this one of China's electricity output and industrial value added.

 Read the rest HERE.

The $604 billion that big tech firms have stashed offshore could threaten their credit ratings. Gee, it's hard to feel bad for these companies when they could be using that cash to boost dividends or invest in America. Anyway, here's a chart to go with that ...

Rare Earths Outlook. One analyst thinks China's output will decline, which will open up opportunities for other, non-China miners.  Okay, but we've been hearing that for years now, haven't we? I do think there are select opportunities in rare earths, but don't count on China scaling back production.

Obama says foreign investors prefer the US over China—and here’s his proof Because one study proves the whole shebang, right?

Obama appears to be referring to this study by consulting firm A.T. Kearney, which finds that for the first time since 2001, China isn’t the world’s favorite destination for foreign direct investment—the US is.

Obama's economic remarks from the State of the Union speech last night.  As I said on Twitter last night: 'President: "That can happen." Dude, not if the orange guy behind you has anything to say about it.'

Iraq and Iran plot oil revolution in challenge to Saudi Arabia Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020 and is collaborating with Iran on strategy in a move that will challenge Saudi Arabia's grip on the Organization of Petroleum Exporting Countries.

Combined, Iran and Iraq hold greater reserves of oil than Saudi Arabia and the potential with the help of international investment to match its capacity to produce oil, which currently stands at around 12.5 million barrels per day of crude.

Rebels in Syria Claim Control of Resources. Al-Qaeda in Syria -- which is financially backed by our best buddy Saudi Arabia -- now controls oil fields. And just to show you how confusing the whole issue is, that branch of Al-Qaeda is rumored to be working with the dictator Assad in Damascus -- you know, the guy they're supposed to be fighting.  Can we stay out of this quagmire, please?

Be careful today. Good luck, and good trades.

Monday, January 27, 2014

Doctor Copper's Warning

I"m not too worried about China's economy losing some momentum, or even the economic, political and other brushfires in the emerging markets.  At least not individually.  But together, they are a pattern that is spooking the market, and nowhere does that fear become more manifest than in the price of "Doctor" copper.

(Updated chart)
They call this metal "Doctor Copper" because it takes the pulse and temperature of the global economy.  Right now, Doctor Copper is a bit concerned. The real worry will set in if copper breaks its recent uptrend. 

Saturday, January 25, 2014

4 Cool Weekend Videos

Here are some videos I find interesting.

#1. PostHuman is a NSFW video that could be the start of something very good.

I'll have to keep an eye on director Cole Drumb and see if he follows up.

#2. Airlords of Airia. Check out the VFX on this crowdfunded film. It's a tossed salad of favorite sci-fi ideas. You've got steampunk, airships AND fire-breathing dragons.

The dubbing is atrocious, but still, cool-looking. What do you suppose the original language is? German? Polish? I'm thinking German. Here's a question -- if your dragons breath fire, why do they need to be mounted with gatling guns?

Here's a video called "Air" from an artist named Ducky. Has a great beat, and it's a hypnotic video. 
Ducky - 'Air' (official) from Rylee Jean Ebsen on Vimeo.

And here's a FunnyOrDie video about a young teen star who decides to get "dirty."

7 Top Saturday Charts and Links

1. Vanguard's new 2014 outlook note included this debt heat map for the major economies around the world.

2. Barry Ritholtz offers up some great charts on inflation, including …

Inflation expectations
short-term inflation expectations have declined somewhat with the recent declines in inflation, longer-term inflation expectations have not drifted down to any meaningful extent

Personal Consumption Expenditures

Personal Consumption Expenditures (PCE) inflation was essentially zero in the fourth quarter of 2013, significantly under the FOMC’s target. Throughout 2013, PCE inflation averaged about 1.0 percent, still below the 2 percent target. Meanwhile, core PCE inflation, which excludes the volatile energy and food components, averaged 1.1 percent for the first two months of the fourth quarter and over 2013 as well. While the FOMC is concerned about PCE inflation as a gauge of price stability, core PCE inflation is closely watched because there is some evidence that it predicts inflation over longer horizons better than total inflation.

CPI Inflation
CPI inflation in the fourth quarter was 0.9 percent, and core CPI inflation was approximately 1.6 percent. This is also what core CPI inflation averaged over the past year, though in the previous two years it averaged between 1.9 percent and 2.2 percent. Therefore, it too has shown a continual decline over the past two years.
See the rest of the inflation charts HERE
3. Bespoke points out that the equity market’s start for 2014 is similar to what has been seen over the last 20 years.

“If the pattern continues, look for continued weakness through next week before a rebound to close out the month."
4. Frank Holmes of US Global Investors has a chart of a “golden cross” for companies on the TSX-Venture.
Since many of these are junior miners, it is relevant to the kind of investments I follow.

Read the rest of his analysis HERE.
5. Gold just turned in its best performance in 16 months. And from the same link, the GFMS survey noted that despite the weak gold price in the last quarter of the year total output from mines reached 2,982 tonnes in 2013, up 4.1% from 2012 as miners processed more ore to protect their revenues from lower prices. 
6. Barrick Gold just recalculated its reserves based on $1,100 gold. This is down from $1,500 at the beginning of 2013. Considering that this company has been making one wrong move after another, I don’t know what to think at this point.
7. Finally, here’s my IU column for this week, “Four Forces for Gold’s Next Rally”

Thursday, January 23, 2014

Stocks Swoon, Gold Soars

Futures in multiple markets held hands and jumped off a ledge this morning, after China and US PMI both missed.

Flash U.S. PMI for January missed expectations, coming in at 53.7. Expectations were for a reading of 55 versus 54.4 prior. Anything over 50 shows growth. China was much worse –  the flash Markit/HSBC Purchasing Managers' Index fell to 49.6 in January from December's final
reading of 50.5. Again, that drop below the 50 line separates expansion of activity from contraction.

Two markets did well on this news.

One is the euro.  Interestingly enough, economic activity in the Eurozone reached its highest level since June 2011, coming in at 53.2. 

In fact, if you're looking for a beaten down market that seems to be makinga turn, Europe is worth a look.

The other market doing well is the gold market, though it may also be getting a boost on news that Sonia Gandhi, president of India's National Congress Party (and the Italian born widow of Rajiv Gandhi) is calling for India to ease its restrictions on gold imports.

As you probably know, India’s draconian restrictions slapped 10% import duty on gold and also dictate that 20% of all imports must leave the country as exports. The laws have actually hurt gold exports, and boosted gold smuggling. 

Other Gold News

You can download the latest Thomson/Reuters GFMS Gold Survey 2013 Update right here.  Free registration required.  Some of the highlights

  • China became the world’s top gold consumer in 2013.
  • World investment, which accounted for 28% of overall demand, fell 11% to 1,342 metric tonnes in 2013, its lowest in five years.
  • Last year's price crash triggered a jump in demand for jewelry, coins and bars, particularly in China. GFMS said Chinese jewelry fabrication surged 31% to 724 tonnes in 2013, its largest year-on-year tonnage gain since 1992. Overall jewelry demand hit a five-year high of 2,198 tonnes in 2013.
  • Central bank demand fell by a third last year to 359 tonnes.
  • GFMS sees $1,200 as a long-term floor for gold. Lower prices will ignite physical buying.
  • GFMS says the professional market seems to be over-obsessed with issues around the Fed’s proposed tapering program but that “private individuals in the traditional gold investing countries had no such qualms and as the price tumbled in the second quarter, hordes of these buyers appeared in the market.”

Overall, I’d call the GFMS report moderately bearish.  I expect them to be surprised. Like Today!

Here is Jesse’s latest take on gold. It’s worth reading. One more gold piece: The best damned article you'll read on gold all day.

Other News

More oil spilled in US rail incidents in 2013 than in the previous 37 years combined.  There’s a company that can fix – if not prevent, at least minimize – a lot of those incidents. It’s a recommended position in Gold & Resource Trader, and it’s doing very well. Hang on to that one.

Yesterday, most of China’s internet traffic diverted to a single mysterious house in Wyoming 

I love maps. Especially strange maps, or maps that make you think. Here’s a map showing the population of other countries jig-sawed into “extraordinarily” populated India.

Have a good day.

Wednesday, January 22, 2014

4 Hot Gold Stories for Wednesday

I have four gold stories for your reading pleasure ...

Gold Story #1: Germany's Gold

For years, Germany has lent out its 1348 metric tonnes of gold overseas, including a bunch in New York. A year ago, it announced it was going to repatriate half the gold (674 metric tonnes) it has lent out by 2020. Apparently, Germany recovered only 5 metric tonnes of gold from the U.S. in that year. Now ...
The Bundesbank plans to repatriate 30 to 50 metric tonnes of gold stored in New York this year.
 That's a huge jump in demand for gold in New York. I wonder if they have it on hand. Should be interesting.

Gold Story #3: Japan's Gold

Gold sales by Japan’s biggest bullion retailer surged 63% to a five-year high as prices slumped and investors sought refuge from Prime Minister ShinzoAbe’s campaign to stoke inflation and weaken the yen. Sales exceeded purchases for the first time since 2004. 

Gold Story #3: China Gold

Apparently, some companies in China thought it was a good idea to borrow a lot of gold and sell it into the market. After all, gold always goes down in price -- they could just buy the gold back at a cheaper price and pocket the difference.

Unfortunately, gold hasn't played along recently. Read more about it in "Chinese Gold Leasing: Hidden Danger."

Gold Story #4: Morgan Stanley Cries "DOOOOOM" for gold in 2014.

Morgan Stanley analysts cut their 2014 gold target by 12% to $1,160 an ounce and the prediction for 2015 reduced 13% to $1,138. Read it HERE.

Sean's view:Wall Street analysts are wringing their hands over the Federal Reserve’s next policy meeting on Jan. 28-29. That’s when markets think the U.S. central bank will announce a second cut to its $85 billion monthly bond purchases. According to the theory, this will be bad for gold. But the last time the Fed eased back on its QE program – last month -- gold went higher. So, I think any bad news for gold is probably baked in. And a pullback is a buying opportunity.

Other, Non-Gold Stories

World Economic Forum: 4 key threats that could each impact global stability in the next five to ten years

Freeport McMoRan Will Contest Indonesia's Export Tax
The Indonesian government on Jan. 11 gave Freeport and fellow miner Newmont Mining Corp a reprieve from a controversial mineral ore export ban, but then surprised the U.S.-based majors by imposing an export tax. As a result, Freeport could pay around $5 billion more in taxes over the next three years.

Sean's note: Yeah, damn right, I'd contest that tax, too! To the International Arbitration Panel!

Congress Just Quietly Passed A Bill Gutting Hazardous Waste Legislation Of course they did

Global companies hold some $7 trillion of cash - more than 2x the level of 10 years ago.

For the first time since 1999 oil demand in the US overtook that of China, the International Energy Agency (IEA) says. The US “shale revolution” has largely contributed, and analysts agree higher fuel consumption means the American economy is recovering.