Series 3 and Opening Paragraph From The International Forecaster

My Comments: I've passed the Series 3 and will be listing it with a CTA soon...more on that as it develops.

Opening paragraph from Bob Chapman, The International Forecaster. The dollar and bonds are sinking, fast...and in real terms(priced in gold) stocks may soon follow...all of this money has been running as fast as it can into anything real gold, silver, commodities, ect...If stock markets begin to roll over and the proceeds choose not to hide in bonds or cash but instead real assets, that will be a scary sign that we could be on the door step of big inflation...

What we are about to tell you may be the most important information that we have imparted in almost 50 years. something very bad is looming – we don’t know the exact configuration yet, but we think the key is the collapse of the dollar, which will send gold and silver to considerably higher prices. These events could unfold over the next 2 to 4 months. There could be devaluation and default of the US dollar and American debt. You must have at least a 6-month supply of freeze dried and dehydrated foods, a water filer for brackish water, and assault weapons with plenty of ammo and clips. You should put as much of your wealth as you can in gold and silver coins and shares. You should not own any stocks in the stock market except gold and silver shares, you should not own bonds the exception being Canadian government securities, you should not own CDs, cash value life insurance policies and annuities. And, needless to say, except for your home you should be totally out of real estate, residential and commercial because it will remain illiquid for many years to come. Continue to pay your normal debts down because we do not know how they will be treated when we arrive at devaluation and default. We certainly don’t want to have to tell you this, but the way things are shaping up it doesn’t look good. As we write this the dollar is breaking 80 on the USDX. Interest rates are climbing, and have broken out to the upside. Gold and silver are poised to break into new high territory and the stock market is preparing to retest 6,600 on the Dow. You have been warned, act accordingly.

Weekly Update

After the recent joy in the financial markets, it seems as though an intermediate trend reversal is upon us. Over the following weeks, the US Dollar, Japanese Yen and US Treasuries should rally and everything else is likely to decline.

Over the past two months, global financial markets rebounded sharply and they seem to have run ahead of the economy. Today, there is a lot of hype about the 'green shoots' and risk appetite has returned with a vengeance. Consider the following:

a. The US$ has fallen sharply over the past few days
b. US government bond yields have risen sharply
c. Major world currencies (Aussie, Canadian etc.) have risen sharply
d. VIX has collapsed
e. Credit spreads have narrowed
f. LIBOR has declined to 0.73 bps

Most importantly (and worryingly!), there seems to be a widespread belief that the actions of the policymakers have stabilised the economy. At this stage, nobody knows whether this is true but the financial markets have fully discounted this outcome. So, if the much-anticipated second-half recovery doesn't take place, financial markets will probably weaken over the summer months.

After the horrific crash last autumn, we certainly don't want to be caught in the eye of the 2009 storm! Accordingly, we are liquidating roughly half of our 'long' positions in order to capture the recent gains and limit the downside over the tricky summer months. Now, if the markets continue to head higher, roughly 50% of our clients' capital will still participate in the advance. However, if do get another sell-off over the coming weeks, only half of our clients' capital will be exposed to market risk. Once the market risk has subsided and the correction has run its course, we will re-invest capital in our preferred growth producing assets.

Based on the market action over the past few days, it seems to us that a multi-week correction has now commenced. The Dow Jones has recently formed an important double top and it has broken below its rising uptrend channel. Usually, such breaks are followed by further declines and it looks as though the Dow Jones may fall to the 7,400-7,500 area. Moreover, the Japanese Yen has started to strengthen again and this is a negative omen for the financial markets. If the economic news and credit conditions worsen, the Dow Jones may fall even further than the above estimate. So, we are protecting our clients' capital by selling into this strength. It is our firm belief that taking some money off the table at this juncture is prudent and will give us the opportunity to re-invest at lower levels.

In summary, we suspect that stocks, most commodities and precious metals will decline over the following weeks. Accordingly, our advice is to sell at least half of your 'long' holdings into this strength. If a correction unfolds, it will be positive for the US Dollar and Japanese Yen so we suggest that you keep cash in these currencies over the summer months. Longer-term, we prefer the Canadian and Australian Dollars but they've gone up too much too quickly and may fall over the coming weeks.

Gold Technical Picture

My Comments: I concur with every said in the video...Seasonally gold should be weakening. However price is indicating further upward momentum. And this is why you need some technical analysis to compliment fundamental analysis and seasonal trends. Using price as an indicator, in my opinion, trumps all other indicators in short to medium terms...wait for pull backs and use tight stops.

Ditto for silver...

Video here...

The Madoff Affair

Jim Rogers on CNBC Asia

My Comments: Completely agree with him on the suckers rally. He seems to think we see new market lows. I'm not so sure of this. I agree that the problems haven't been fixed, but with what is going on in the recent downturn of the dollar and bonds, investors might not hide there. If we see the inflation that he is predicting some of money will go to stock markets and could use a the large correction that he mentions as a buying point.
My Comments: Choosing silver over gold is a vote for inflation. Yes the IMF continues to talk about selling Gold...It should push gold lower but if central banks and Govts buy it all up then it might depend on what they decide to do with the gold if the purchase it.

Iraq objects to Floating Tankers, May Cut Oil Output

My Comments: Good write up on oil contango...Short of a currency collapse, short to medium term the supply overhang will keep oil prices in check...I still "think" we have seen the bottom and prices prob will get up into the $60's and $70's...but they will struggle untill the contango ends...

What isn't mentioned in the article is that the supply overhang greatly discourages production and exploration which only adds to the long term supply problem...

Full article here...

Weekly Update

It looks as though the much anticipated correction/consolidation is here. Global stock markets made a recovery high a few days ago and since then, they've faced some selling pressure. Now, we're aware that many people are waiting for a huge cataclysmic decline but so far this hasn't happened. On the contrary, global markets aren't declining by much and the more time passes by, the lesser the chances of a major crash. So, if the bear market is indeed alive and well, it is for the bears to prove. If stocks don't fall to a new low soon, the bulls will be proven right. Our view remains that there is an 80% probability that the bear-market is now over and we are in the early stages of a cyclical bull-market where prices could rise for 2-3 years.

Look; we don't believe that the global economy will suddenly jump back to life. However, as investors, we must keep in mind the gigantic policy stimulus which has been administered all over the world. Never before in history have we seen such a huge policy response. And it seems that the markets have already started to feel its effect. For instance, the 3-month LIBOR rate has now declined to 85bps, which means that banks are starting to lend to each other. Furthermore, credit spreads are narrowing and this is another positive development. Technically, the Volatility Index (VIX) has also declined to below 32 and over 36% of the stocks on the NYSE have climbed above their 200-day moving averages. Now, whether you believe in the 'Green Shoots' hype or not, the credit and stock markets are showing signs of improvement. Our expectation is that after a near-term correction, global stocks will resume their advance. So, we'd suggest you deploy additional capital during this pullback.

Commodity markets are mixed with some strength in the energy complex and choppy action in the metals. Crude oil is now trading just below $60 per barrel and we expect it to reach $70-75 with the rally in equities. As per our expectation, the price of natural gas has sprung back to life and we foresee further gains in the weeks ahead. Although there is plenty of supply at the moment, we expect natural gas production to fall towards the end of the year. Most gas companies have reduced their exploration & drilling activity and this should create supply problems in a few months time. So, we recommend that you maintain your exposure to the energy complex. As far as metals are concerned, gold is still trading below US$1,000 per ounce and it should stay subdued over the summer months. The yellow metal is likely to form an important low in July/August so wait before adding to your positions in bullion and the miners. A similar story should play out for silver - lows in the summer followed by a powerful rally.

Over in the bond market, US Treasuries have firmed somewhat and yields are starting to decline. After peaking at 3.29%, the 10-Year US Treasury yield has dropped back to 3.1% and the 30-Year US Treasury yield is currently sitting at 4.06%. As the stock/commodity markets correct over the following days, it is likely that the US government bond market will strengthen and this implies lower interest-rates. So, our near-term view on US government bonds is slightly positive at this point. Longer-term though, we expect a major decline in US Treasuries and a rise in yields.

Finally, in the currencies department, the US Dollar Index has broken below its March low and this is bearish. Furthermore, it seems as though the US Dollar Index has formed an important "head & shoulders" topping pattern, which means that the American currency should decline in the period ahead. Over the past few days, major world currencies have strengthened against the US Dollar and our preferred currencies have been the biggest beneficiaries. Both the Aussie and Canadian Dollars have appreciated sharply and they should rally some more against the world's reserve currency. So, keep your positions and buy more Aussie and Canadian Dollars on any near-term pullback.

Stocks fall on weak retail sales, foreclosure jump

Investors are looking at the economy more skeptically.

Stocks retreated more than 2 percent on Wednesday and bond prices rose after two reports suggested the economy is not bouncing back as quickly as investors hoped.

The Commerce Department said retail sales unexpectedly fell in April for the second straight month, while RealtyTrac Inc. reported a troubling rise in home foreclosures.

My Comments: Back to reality. I've discussed this for some time. May is a seasonally weak month and for this to be a healthy begining to a bull rull its important to have significant retracements to test to conviction of the market. Funny how a "retail slump" is unexpected. To whom is it unexpected? Retail slumps are the new norm.

S7P500 Broke an uptrend line. Former resistence/now support at 873 needs to hold to maitain a bullish chart...

Full atricle here...

Enjoy the rally while it lasts - but expect to take a sucker punch

Bear market rallies can be explosive. Japan had four violent spikes during its Lost Decade (33pc, 55pc, 44pc, and 79pc). Wall Street had seven during the Great Depression, lasting 40 days on average. The spring of 1931 was a corker.

James Montier at Société Générale said that even hard-bitten bears are starting to throw in the towel, suspecting that we really are on the cusp of new boom. That is a tell-tale sign.

"Prolonged suckers' rallies tend to be especially vicious as they force everyone back into the market before cruelly dashing them on the rocks of despair yet again," he said. Genuine bottoms tend to be "quiet affairs", carved slowly in a fog of investor gloom.

My Comments: I like the way he put this...my guess (and its just a guess) is that Dow 8500-9000 could be good shorting grounds or at least go overweight in cash.

We can now test the Friedman-Bernanke hypothesis that the Fed could have halted the Depression by letting rip with bond purchases. Japan was not a proper test. It eked out a recovery of sorts earlier this decade by embracing QE, but only in the context of a global boom and a yen crash.

My Comments: As much as I liked Milton Friedman, I doubt this works...

Full article here...

Puru's Weekly update

Market conditions continue to improve amidst widespread disbelief and skepticism. Our view remains unchanged - there is an 80% probability that the bear-market is now over and we are in the early stages of a strong bull-market which will last until the central banks start raising interest-rates. The developing markets in Asia and Latin America bottomed out last autumn and they've now gone past the January highs. Markets in the West seem to have bottomed out in March and as per our expectation, they are under performing the emerging markets. Look, we've had a very strong rally since March and the markets may correct over the following weeks but there is no guarantee of this happening. In any event, we expect the bear-market lows to hold and it wouldn't be surprising if the S&P500 closed the year around the 1,100 level.

My Comments: Its to still to early to make a call on the S&P500. Especially with the banks cooking the books. Wait for a retracement and analyze further.

The broad economy remains weak for now but there are some early signs of improvement. Our world has never experienced such a large scale policy response and it is our firm belief that this wall of money will do wonders for asset prices. Although the broad economy may only recover by year-end, financial markets are already moving in anticipation of this recovery. Now, we are aware that many astute investors are waiting for further declines but this may be wishful thinking based on their psychological commitment to their bearish bias. The longer the market holds up, the lesser the odds of another vicious decline. Time is a great healer and with interest-rates and bond yields at record-lows, it is only logical that investors are moving cash towards growth producing assets. So, our advice is to follow the money rather than the expert opinions of economists and pundits. Remember; it is darkest before dawn and economic news is always most bearish around major market bottoms. In our view, this is a superb opportunity to allocate capital to the fast-growing economies of Asia and Latin America.

Over in the commodities markets, it is nice to the energy complex showing signs of life. Crude oil is now trading around US$56 per barrel and we expect it to climb to US$75 per barrel by year end. If the economy recovers by then, we may see still higher levels. Whether you like it or not; our world faces a severe liquid fuels crisis and every investor must allocate a large portion of their capital to energy. Most of the world's largest oil fields are now past peak production and capital spending on new projects has diminished significantly. This isn't a conspiracy theory, 'Peak Oil' is a fact! Over the following years, the price of energy will sky-rocket and upstream oil companies and oil servicing stocks will make a fortune. We recommend exposure to them along with physical crude oil. Apart from crude oil, natural gas seems to have formed a low and should now play catch up with oil. Recently, we bought physical natural gas and it is our belief that the price of this commodity will be much higher in the future. Finally, the price of uranium has also perked up and uranium stocks are on fire. So, after a near-term correction, investors may consider buying into some of the uranium miners.

My Comments: I really like the Natural gas recommendation here. It should flatten out, and pull back some but it is forming a rounded reversal pattern. Try UNG the Nat Gas ETF...Peak oil is a truth and will impact oil prices if it plays out the way he says. However what if during late 2008 we experienced Peak Demand? This could curtail oil prices even in a Peak Oil scenario. I'm not sure what will happen and I'm not making a prediction or a call, I just want to me prepared to protect my capital in either scenario. As of right now the timing is right and for Puru's call and its safe to buy oil and natural gas.

In the metals department, the action is choppy. Silver and copper have firmed in the past week but we are now entering the seasonally weak time of the year. Accordingly, we suggest that you wait for the usual summer pull-back before adding to your positions in this sector.

Over in the fixed income markets, US government bonds are weakening. The 10-year yield has now risen to 3.29% and the 30-year yield has gone up to 4.26%. For many months, we've been warning about the bubble in US Treasuries and it seems that our assessment is proving to be correct. Although US government bonds may rally in the near-term, their long-term outlook is pathetic at best. Courtesy of the global policy response, a wall of money is now here and an inflation tsunami is headed this way. Best to get out of cash and fixed income assets.

Finally, in the world of currencies, the US Dollar is rolling over and major world currencies are now rising. Our preferred currencies (Aussie and Canadian) have rallied nicely and they should go up some more. The European currencies are also benefiting from the US Dollar weakness and any further strength in the Euro and Sterling would be a good opportunity to exit.

Gold Technicals

I've shared this technical outlook on gold with a few people...this is a good presentation of the point I was trying to make. The trend line is in the process of being broken and a couple consecutive closes over $920 (previous short term high) would look bullish. The point that he fails to mention is that May is a seasonally brings in a weak period for gold lasting into the summer months. This could be a final blastoff before the summer correction/consolidation.

Another angle to play it is silver, which looks more bullish than gold right now.

Just my thoughts...

Video here...

If Insiders are selling, why should I be buying?

I recently wrote about reports that insider selling was at record highs and buying was practically non-existent. The selling has become even more alarming in the last week and the buying has slowed to an absolute trickle. Below you’ll find the list of latest insider buys and sells. The sells are staggering with the amounts ranging from $3MM to $63MM (and I was only able to copy one page). The buys, on the other hand, are meager and range from $100K to $635K (the $800K purchase is a few months old and shouldn’t be in the data). You’ll also notice that the screen came up with just 18 total purchases vs 170 total sales (the lowest of sell screen data were sales of over $400K which is not shown here due to the large size of the results).

Full article here.

My Comments: If they are selling why should we be buying? This say just about as much for the rally as the change in mark-2-market to mark-2-fantasy. Nothing has changed except people are still making bad decisions(i.e...buying this rally). Sell in may and go away is the saying. To be fair we could rally all through May. But from this point things are less predictable.