Why Are We Such Suckers For Prediction?

In his book “The Black Swan” Nassim Taleb says, “We have seen how good we are at narrating backwards, at inventing stories that convince us we understand the past. In spite of the empirical record we continue to project into the future as if we were good at it, using tools and methods that exclude the rare events.” Funny isn’t it, since the big, rare, unpredictable events are precisely what shape the world. Events like the automobile and the World Wars, the internet and the Beatles.

I think it’s ironic that by accepting we have little control over most things, actually gives us greater control over what might happen.

My Comments: Great writeup and I think it can be applied to several different areas of life, investing, ect...

Full read here...

Weekly update from Puru

The stealth bull-market continues and the price action remains solid. Although trading volumes have been weak over the past few months, the market's breadth is very strong with the advance/decline line breaking out a new recovery high. Moreover, the number of new 52-week lows on the NYSE have dried up to 1, whereas the number of stocks breaking to new 52-week highs have increased to 60. Remember, during last October's crash, over 2,200 stocks on the NYSE dropped to a new 52-week low on the same day! That selling panic marked the internal low for the bear-market and ever since, we have seen an improvement in the market's technicals. Furthermore, it is good to note that the Volatility Index (VIX) has now declined to 24.5 and the TED Spread (difference between 3-month LIBOR and yield on the 3-month US Treasury Bill) has plummeted to well below the historical average. This is a good indicator and confirms that the banking system is no longer stressed.

There can be no doubt that we are likely to see more foreclosures over the following year as a second wave of Option-ARM and Alt-A resets hit the US. However, we are of the view that with the steep yield curve and 'free money' from the governments, most banks will be able to withstand any credit losses which may arise from defaults. Therefore, we may see some more jitters but we'd be extremely surprised if the bear-market lows were violated over the following months. At present, our clients' capital is fully invested in our preferred businesses and markets and we would suggest that you hold on to your existing positions. If we do get a pull-back, consider allocating more capital to resources and emerging Asia. If you are good at selecting individual companies, then you can also allocate capital to quality businesses which are outside the resources complex.

For our part, we have identified superb companies which are dominant businesses in their respective fields. Before we allocate capital to any business, we carefully evaluate the financial statements of the past 10 years and we prefer to see consistent earnings growth, growing market share, high returns on equity, low debt levels and most importantly; a reasonable price tag. At present, more than 60% of our clients' capital is invested in the resources complex, but we have also selected superb businesses in the telecom, industrial machinery, retailing and consumer discretionary sector. Remember, last year's bear-market severely punished all stock prices and even the good companies weren't spared. In our view, this represents a fantastic opportunity to acquire partial stakes in outstanding businesses. Now, I must confess that I don't know where the market will be in a few weeks time, but I can say with certainty that this recession will end and and good businesses will continue to thrive over the medium to long-term. The best time to buy assets is when everyone else is nervous. Uncertainty is an investor's best friend, over-confidence is his enemy. So, we would sincerely recommend that you ignore all the 'end of the world' forecasts and convert your temporarily powerful investment dollars into sound assets. Make no mistake; monetary inflation is a fact, deflation is a theory. Over the past century, cash has lost almost all its purchasing power via inflation and this trend will continue for as long as central banks control the monetary levers. So, there is no point in hoarding cash over the medium to long-term.

Over in the commodities complex, the price of crude is trading around $72 per barrel and it should rise exponentially over the coming decade. So, allocate capital to quality upstream companies and oil services stocks. We would suggest that you avoid investing in the oil majors as they are struggling to maintain reserves and production. Instead, independent exploration and production companies should produce more growth over the medium to long-term. Over in the metals department, copper is staying firm and other base metals are also appreciating in value. This is due to an explosion in Chinese imports and perhaps due to the debasement of currencies.

Wherever you care to look, in the entire commodities complex, we are dealing with rising demand and struggling supplies. A few years ago, we entered an era of resource scarcity and this problem will intensify over the coming decade. Put simply, our planet's resources cannot sustain the emergence of an Asian middle-class. Asia has over 3 billion people and you can imagine the drain on the planet's resources even if a third of this population (1 billion) demanded a better quality of life. Fortunately, for the commodities investor, this will translate into mouthwatering profits.

Finally, in the world of currencies, the US Dollar Index is bouncing along an important support level and in our opinion, it will decline over the medium to long-term. Our preferred currencies (Aussie and Canadian Dollars) are strengthening and we expect this trend to continue. Over in the US government bond market, interest-rates have declined somewhat and we expect them to stay range-bound for a few more months. Over the longer-term however, we anticipate US interest-rates to rise dramatically as the American government struggles to raise capital.

Dollar Update

My Comments: If support holds, and the dollar bottoms out, this is bearish for equities, foreign currencies, commodities, Real Estate, ect. However if it fails the opposite is true. The trend is down and we can expect it to continue until proven otherwise. I'm seeing a few hints that it might be proven otherwise.

My Comments: On the Chart.

Weekly Update from Puru

The bull-market continues to climb the 'wall of worry' and the recent market action has been impressive. Rather than declining sharply in order to eliminate the overbought conditions, global stock markets are simply consolidating their recent gains. Remember; we are approaching the first anniversary of last year's autumn crash and investor sentiment is turning jittery. Nonetheless, stock markets are showing signs of strength by refusing to break down and every near-term correction is being met by renewed buying. In terms of technicals, the market's breadth is impressive with the NYSE advance/decline line reaching a new recovery high, meanwhile sagging volume remains a concern. In our view, if the markets manage to remain steady for another month or so, strong buying will emerge and we will witness rising volumes as traders return from their summer vacations. So, rather than a repeat of last year's horror show, it is probable that we will see a strong advance towards year-end.

Over the past few days, China's stock market has declined sharply but we view this pullback as a routine correction within an ongoing bull-market. Although the Shanghai Composite Index may decline further over the coming days, the downside seems to be limited and long-term investors may want to add to their positions during this period of weakness. Look. Since the turn of this decade, we have maintained that China is destined to become the next great country in the world. Fortunately, Beijing has done a fabulous job of managing China's economy during this recession and the stage is now set for superb long-term growth. Accordingly, every investor must have some exposure to China and now is the time to buy quality businesses in one of the fastest growing economies in the world. Apart from China, our other preferred markets (India and Vietnam) are also performing well and we suggest that you hold on to your long-term positions. If we do get a near-term pullback, consider allocating more capital to these developing markets.

Over in the world of natural resources, our view remains that our planet is sleepwalking into a monumental supply crunch and the end result will be a historic crisis. Whether you like it or not, hard data confirms that the era of cheap energy is over and we will see acute shortages of hydrocarbons over the following decades. It is worth noting that during this severe recession, global demand for crude oil has only shrunk by 2.6% and usage in the emerging world has continued to rise! So, what will happen when consumption picks up again? Who will rise to the challenge and produce the extra oil? Our research leads us to believe that it will be extremely difficult (if not impossible) to significantly ramp up oil production from these levels. Therefore, we expect the price of crude oil to rise exponentially over the medium to long-term. And once the depletion rates accelerate, we will see acute shortages followed by rationing. In light of the above, our recommendation is to allocate a large portion of your investment portfolio to energy (upstream oil/gas companies and oil service stocks).

Elsewhere in the commodities complex, base metals' prices are firming and this is another positive development. Yesterday, copper closed at $2.75 per pound and after a near-term correction, it should rise further. Similarly, other base metals are also rallying and this could be due to a pick up in industrial demand. As China, India and the other developing nations continue to industrialise and urbanise, there will be a huge demand for industrial commodities. Unfortunately, supplies won't be able to keep up and the result will be a big bull-market in commodities. So, our suggestion is to buy and hold on to diversified mining and steel companies as these businesses are likely to produce sound operational results over the following years. As far as precious metals are concerned, both gold and silver are in the latter stages of a multi-month consolidation period. If the bull-market is intact, we should see upward breakouts soon and the rally will probably last until spring next year. So, our advice is to hold on to gold and silver mining stocks.

In the money and debt markets, the US Dollar Index is bouncing along an important support level and it looks as though it will weaken sharply over the following months. The US is running a huge budget deficit and almost half of this hole will be financed by printing US Dollars. So, it is probable that the US Dollar will decline against the more sound currencies such as the Canadian and Australian Dollars. Furthermore, the currencies of emerging Asia should also strengthen against American money. Finally, the action in US Treasuries is choppy with the 10-year Note yielding 3.42% and the 30-year Bond yielding 4.24%. Over the past few days, yields have dropped somewhat and they could go lower in the near-term. However, over the long-term, we expect US yields to rise significantly as America struggles to raise capital from foreign investors.

Everything the Government Runs is Bankrupt

My Comments: Can't add anything else. He nailed it.

Toxic Loans Topping 5% May Push 150 Banks to Point of No Return

Missed payments by consumers, builders and small businesses pushed 72 lenders into failure this year, the most since 1992. More collapses may lie ahead as the recession causes increased defaults and swells the confidential U.S. list of “problem banks,” which stood at 305 in the first quarter.


My Comments: When I hear banks going broke I can only think of two things...One, they paid taxes on past earnings that were used to bailout C, JPM, WFC, BAC, GS, GE, GM, ect...Is this socialism for big business or fascism? And second, when is FDIC going to run out of money?

Full article here...

Weekly Update from Puru

The stealth bull-market continues amidst widespread disbelief and skepticism. Over the past week, market action has been constructive and several technical indicators have recently improved. At present, stocks are consolidating their recent gains and apart from periodic corrections, we expect them to rally over the next 2-3 years.

Yes, the West still faces problems in terms of too much debt and rising foreclosures but the markets seem to have discounted these worries. After the horrendous decline last autumn, most major stock markets have broken out to new recovery highs and this is bullish action. Now, it is conceivable that we may get some jittery pullbacks as we approach the anniversary of last year's crash, but our suggestion is to buy the dips.

My Comments: Yes it is possible that these prices have discounted these things. But a more likely scenario is that we are experiencing the beginning of irrational prices.

We continue to favor the developing markets in Asia and recommend exposure to China, India and Vietnam. All these markets are likely to produce exceptional growth over the medium to long-term.

Over in the energy complex, the price of oil is holding above $70 per barrel and it should rise exponentially over the following decade. The reality is that dwindling supply is facing rising demand and this will translate into much higher prices. Eventually, we will see shortages and oil may only be used for aviation and agriculture. So, in our view, every investor should allocate a meaningful portion of their capital to the upstream oil companies and the energy service companies. If our homework is correct, oil drillers and oil service businesses will make a small fortune over the coming decade.

At current levels, the price of natural gas is extremely cheap and it should rally as soon as industrial demand returns. Accordingly, we suggest that you maintain your exposure to gas producing companies.

Over in the metals department, the price of copper has climbed to a new recovery high ($2.92 per pound) and this is a good sign for the global economy. Other base metals are also rallying hard and they should appreciate further over the following months. Accordingly, we suggest that you keep your positions in diversified mining companies and add more capital on pullbacks.

As far as precious metals are concerned, the action in gold and silver has been as exciting as watching paint dry. It seems as though the lengthy consolidation is in its final phase and we should see a big move over the following months. If the bull-market is still intact (our view), then both gold and silver should break upwards before year-end. So, hold on to your bullion and precious metals mining shares.

My Comments: This is what I was pointing out in my last gold chart update. Price is in a slap fight within this wedge and don't expect to see anything phenomenal until we breakout of it in either direction.

Over in the world of currencies, the US Dollar is coming under pressure against our preferred money - Australian and Canadian dollars. As the commodities bull-market gathers steam, both these currencies should benefit immensely and we remain long-term bulls.

My Comments: Take a look at my last post and chart on the dollar. Its reasonble to see that we are carving out a bottom in it. This is contrary to what Puru is forecasting. In otherwords price is hinting that there is demand for dollars at this price. I would need to see the technicals that I pointed out in the dollar to reverse downward to be fully onboard with him.

Dollar Index

My Comments: You'll notice the MACD and Stochastic divergence on the daily chart. This hints that the dollar could be carving out a bottom of some kind. Pay attention to the upper trend line and if it is broken would be a signal that the inflation trade is on hold...With the Stock markets looking toppy to me, a sell off in the equities would send some cash out of Euro, Aud, GBP, CAD and back to the greenback. And keep in mind that I think the inflation trade is the big theme but its important to sideline those opinions when price starts to hint otherwise...

Weekly Update with Puru

Global stock markets are consolidating their recent gains and this is impressive given the sharp rally since March. Rather than correcting sharply, stock markets are clearing the overbought conditions by grinding sideways. Our view remains that we are in the early stages of a 2-3 year cyclical bull-market which will probably end when central banks tighten monetary policy by raising interest-rates. Until that happens, asset markets should continue to benefit from the massive stimulus provided by the establishment. Now, there can be no doubt that this recession is much more severe that the typical slowdown seen in the past few decades, but the current situation is nowhere near as bad as the depression years of the 1930s. Well, it seems that other people are also coming to the same conclusion and this explains the recent re-pricing of risky assets such as stocks and commodities.

As far as stock markets are concerned, emerging Asia is providing leadership and we expect this trend to continue throughout this cycle. So far, two of our favourite markets (China and India) have led the pack. Over the following months, we expect Vietnam to play catch up. These three Asian economies are growing rapidly and long-term investors should be rewarded by owning quality businesses in these nations. Accordingly, we suggest that you hold on to your positions and perhaps allocate additional capital during temporary pull-backs.

In the commodities complex, the price of crude oil is trading around $70 per barrel and it is likely to soar over the following years. Whether you like it or not, the world's oil production is peaking at a time when usage is on the rise. All other things being equal, this supply and demand imbalance should result in much more expensive oil. If our homework is correct, the price of oil will probably rise at an increasing rate over the following years and ultimately we will see shortages. In fact, the supply situation is so dire that within a decade or two, oil may only be used for aviation and agriculture. Obviously, it is difficult to forecast how high the price of crude will go but last year's record of $147 per barrel should be easily surpassed. Over the past few weeks, we’ve allocated a major proportion of our clients’ capital to quality businesses in the energy industry and we suggest that you do the same. To be precise, we’ve invested in upstream oil/gas companies, oil drilling contractors and businesses engaged in producing alternative sources of energy. Dominant businesses in these sectors should produce satisfactory growth over the following years.

Over in the metals department, copper has shot up to a new recovery high and this is an encouraging sign. It is worth noting that most of the high-grade ore in the world has already been mined and copper companies are now being forced to mine lower-grade ore. This development together with the rising cost of energy should underpin copper’s bull-market. Along with copper, most of the other base metals are also rising and the boom should continue for the foreseeable future. Long-term investors should consider an investment in diversified mining companies. As far as precious metals are concerned, both gold and silver are still trapped in a trading range and if the bull-market is still intact (our view), they should soon commence a powerful advance. Therefore, investors should hold on to their physical bullion and perhaps allocate some capital to precious metals’ mining shares.

In summary, it looks as though the secular boom in commodities and emerging Asia has resumed and investors should focus on acquiring partial stakes in dominant businesses positioned to benefit from resource-scarcity and the urbanisation of China and India. After thorough research, we’ve identified superb companies which boast durable competitive advantages, solid balance-sheets and attractive valuations. If history is any guide, such quality businesses should deliver outstanding returns over the medium to long-term. And we suggest that you focus on the big picture by allocating your capital to the strongest companies in our preferred sectors and markets.

My Comments: Dont fight the charts and they are all pointing up at the moment. As long as you understand that this rally will end (some day) and have a plan to exit, you're okay. Fundementally the rally is bogus and if/when it rolls over we could see a big drop in either real or nominal prices. Pay attention.

Gold Chart

The Right shoulder of the year long head and shoulders formation in gold is consolidating into a wedge/triangle. either directin gold decides to break out of should be a significant move. Since we are in an uptrend, I expect that gold will break to the upside. Watch this triangle as a key indicator for the timing and the completion or failure of the head n shoulders.

Insiders are selling

Despite a near 50% rally in the stock market and “better than expected” earnings across the board, we’re continuing to see unprecedented levels of insider selling and record low levels of insider buying. The buyers in recent weeks have accumulated just over $26MM in stock ($16.5MM of which was one buyer). Meanwhile, the sells amount to over $300MM. That’s a staggering 1:30 ratio if you back out the one larger buy.

My Comments: We've known about this for some time now and it obviously hasn't had any effect on price. They could be wrong and as prices keep moving up they are but if prices break sharply there are a lot less people willing to step in and buy.

Full Article here...

A $100 million bonus

Citigroup (C) is considering paying a $100 million bonus -- to one guy.

This is the same Citigroup that received $45 billion in bailout money. The same Citigroup that will soon be 34% owned by the U.S. government. The same Citigroup that has lost 95% of its share value since 2007.

My Comments: There is an ongoing uproar over Citigroup doing this. I'm perfectly fine with this. The man signed a contract and performed. Pay him. Case closed.

However, there is talk Obama is going to send one of his "Czars" to amend that contract. So I guess Obama gets to decide which contracts are valid and which aren't (just like the contract that GM and Chrysler had with their bondholders).

The bottom line is this guys salary (although probably excessive) is going to be taken from him. and if the govt doesn't like having to deal with these issues then next time they should just let the banks fail and he can find a new job. Problem solved.

Whats in the Bag?

Visit msnbc.com for Breaking News, World News, and News about the Economy

My Comments: Great layout of the feds transactions. The whole thing reminds me of a game show where a contestant can "Risk it all!" for a chance at whats in the mystery bag. It usually turns out to be a horrible deal for the contestant. My guess is that it will turn out to be horrible for the taxpayers...

Weekly Update from Puru

The recent market action suggests that the bear-market low is now behind us.

Over the past few days, most of the stronger emerging markets broke out to new recovery highs. Furthermore, over the past couple of days, even the lagging stock markets in the West managed to climb to new recovery highs. It is noteworthy that yesterday, the Dow Jones Industrial Average break through its overhead resistance and closed above the psychologically important 9,000 level. Moreover, both the S&P500 and the NASDAQ also rose to new recovery highs. This is very impressive action and consistent with our view that we are now in the early stages of a cyclical bull-market which could continue for 2-3 years. You may recall that in January's edition of Money Matters, I stated that we felt that we were already in a cyclical bull-market and it seems that our assessment was correct. Yes, it is true that only a couple of weeks ago, we were expecting a multi-week pullback but the markets resolved their overbought conditions via a sideways consolidation instead of another correction. Accordingly, we have now parted ways with our defensive investment position and in the past week, we have re-invested our capital in our preferred markets in emerging Asia and the commodities complex. Our view remains that emerging Asia and commodities remain in a secular bull-market which will probably end in a gigantic bubble in the future.

In the business of investing you must remember that economic news is always the most rosy at market tops and most negative at major bear-market bottoms. This is why we take our cues from the market action instead of the experts. Over the following months, many economists and experts will continue to be skeptical about this rally and this is due to the fact that they are psychologically committed to their bearish outcomes. We suggest that you ignore the 'noise' and focus your attention on the market action which NEVER lies. Remember, all the hopes, aspirations and fears of all market participants are distilled into the price action on a daily basis and for now, the majority of investors seem to be forecasting better times ahead. We are aware that there are no guarantees in this business and there is always a possibility that this is a false dawn, but the odds of this are diminishing by each passing day. Put simply, if you are a bear, time is not on your side. The longer the markets continue to trend upwards, the greater the chances that the central-bank sponsored reflation is working. Look. We have just witnessed the greatest stimulus in the history of capitalism and it looks as though the policymakers have clipped off the final stage of this bear-market. If our view is correct, this is a fantastic time to be investing in the strongest sectors and markets of the global economy. Capital allocated now should see above-average growth over the next business cycle.

Over in the energy markets, crude oil has bounced up from the recent lows and it should strengthen considerably over the following years. As soon as demand picks up again, our world will witness a horrific energy shock due to 'Peak Oil'. Our research confirms that the majority of oil provinces in the world are now past peak production and this will cause the price of crude to spike higher over the medium-term. So, we suggest that you allocate a large portion of your investment portfolio to upstream energy companies and the energy service stocks. Furthermore, in the energy complex, natural gas is still scraping along its crash lows and patient investors should be rewarded over the next 12-18 months. Our advice is to invest in quality natural gas companies. Finally, alternative energy companies are now extremely attractive and we have recently allocated capital to superb solar companies. We recommend that you do the same. As the various governments push towards alternative sources of energy and Mr. Obama introduces the 'Cap & Trade' system, the alternative/clean energy sector should be a big winner.

In the world of metals, the action is also bullish. Recently, copper has broken out to a new recovery high and this is an indication that the global economy may not be as weak as some suggest. Other base metals are also perking up and should rally further. This is a great time to invest in diversified mining companies which are trading at super-cheap levels. Over in the precious metals department, both gold and silver are concluding their usual, lengthy consolidations and if the bull-market is still intact (our view), then both these metals should rocket higher over the following months. We expect gold and silver to resume the next upleg within a month or so and the rally should continue until spring next year. So, this is an ideal time to load up on physical bullion and precious metals mining shares.

Finally, in the realm of currencies, the US Dollar has started to weaken again and this is another sign that reflation is working. Although the private-sector debt in the West continues to contract, various governments are borrowing massive amounts in US Dollars and this is exerting downward pressure on the greenback. Our expectation is that the American currency will continue to depreciate against the commodity-currencies (Aussie and Canadian Dollars) and it should also slide against the currencies of emerging Asia. So, keep your cash in these currencies.

China to Deploy Foreign Reserves

“This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”

My Comments: Because of the size of their reserves, selling their dollars and bonds for other assets would take some time. If this isn't a smoke screen we will get hints when prices react.

“Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

My Comments: Yikes!

Full article here...

Special update from Puru

It looks as though the bear-market low is now behind us. Over the past couple of days, a number of leading stock markets have broken out to new recovery highs. Yesterday, both the S&P500 and NASDAQ also hit a new recovery high. This is very positive action and it seems as though the market is now looking beyond the weak US economy and it sees better times ahead. Remember, the market is rising amidst disbelief and skepticism; not many trust the rally - yet, the stock markets show no sign of correcting. The cyclical bull is climbing the 'wall of worry' and the longer the markets can stay firm, the lesser the odds of a dramatic plunge.

In our view, central-bank sponsored reflation seems to be working in the emerging markets and our preferred investment themes (emerging Asia and resources) are showing leadership. It is noteworthy that China is setting new highs on a daily basis and Hong Kong has also broken through its overhead resistance. Furthermore, South Korea and Taiwan have also reached new recovery highs. Over in Latin America, Mexico has climbed to a new recovery high and Brazil is about to play catch up. Given that the stronger markets are breaking to new highs, we will be very surprised if the markets resumed their bear-market.

Based on the bullish market action, we are parting ways with our defensive investment position and re-investing capital in our preferred companies. We are also re-investing capital in China, India and Vietnam. It is our contention that emerging Asia will provide stellar returns over the following months as more and more capital flows to this part of the world. So, we suggest that you ignore the apocalyptic forecasts and allocate capital to the strongest segments of the economy. If history is any guide, this cyclical bull-market should continue for 2-3 years and it will only end when central banks start tightening monetary policy. In the meantime however, investors in emerging Asia and commodities should be able to make some large profits.

Finally, it seems as though the 18-month consolidation in gold is nearing completion and if the bull-market is still intact, the yellow metal should rally sharply over the following months. We expect a break above $1,000 per ounce within the next 3 months and this will set the stage for a move to roughly $1,300 per ounce by next spring. So, this is an ideal time to add to your gold holdings.

My Comments: H's completely changed his tune and I agree with it...to be clear I have no idea what is going to happen and I don't "think" that we are beginning a 2-3 year bull market, but prices are moving higher and that's all that matters as long as you have an exit strategy...What if the market only runs for one year then crashes...or how about a new bubble that no even thought about gets blown up and popped...the markets change and we need to adapt to them...If you think your going to buy and hold any asset, your in for rough times...

Greenlight Holds Bullion

Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter.

“At a minimum this will provide some savings as the costs of storing gold are less than the fees” for the SPDR Gold Trust, the New York-based firm said yesterday in a letter to investors.

Einhorn, 40, told clients in January he was buying gold for the first time amid the threat of inflation from higher government spending. The firm, started in 1996, held 4.2 million shares of SPDR Gold Trust in the first quarter, making the gold- backed ETF its biggest holding. Gold has climbed 5.8 percent this year.

The firm’s Greenlight Capital LP fund gained 16.3 percent in the second quarter, bringing its return this year to 21.5 percent boosted by investments in Ford Motor Co. debt, according to the letter, a copy of which was obtained by Bloomberg News. The fund lost 23 percent last year.

My Comments: I keep hearing gold bugs talk of a Comex default and there not being as much gold as reported...well, if more and more funds trade in ETF for bullion we will find out if there is any truth to it at all...

Full article...here

How Ron Paul Would Fix the Economy

My Comments: To sum it all up...Let capitalism work. Strong businesses survive and the weak die.

Flip Flop by Puru

You may recall that last autumn, I stated that the bear-market had ended and that a new cyclical bull-market had commenced. Back then, the entire world was gripped in fear and some of my readers felt that I had lost my mind. Well, the recent market action is supportive of my view and the rally of the past few days suggests that we are in the early stages of a cyclical bull-market.

As you are aware, a few weeks ago, we liquidated all our ‘long’ positions in stocks and commodities (except natural gas). This was a tactical move to protect capital as we were expecting some sort of correction after the strong rally off the March lows. Well, it looks as though the market is working off its overbought condition by simply consolidating sideways rather than declining in a decisive manner. This is extremely bullish and a sign that demand is returning at higher levels.

Look. We all know that the US economy is weak and there are immense problems in America’s housing market. However, in the business of investing, the markets usually lead the economy and the recent market action suggests that the bears are losing the battle. At this stage, I don’t really know why the market is rallying but the fact is that prices are trending higher. Furthermore, several other technical factors are also suggesting that we are indeed in the early stages of a cyclical bull-market.

Consider the below data:

• The VIX has now dropped below 30

• The LIBOR rate is below its long-term average

• New lows on the NYSE have shrunk to 2

• New highs have expanded to 40 – highest reading since October 2008

• Advance/decline line has broken out to a new high

• Credit spreads have narrowed considerably since last autumn

• Asian markets are leading the way with China at a new 52-week high

• Markets are rising on horrendous economic news – climbing the “wall of worry”

• Most people don’t trust this rally

Looking at the chart of the Dow Jones (Figure 1), it looks increasing likely that the bear-market low is now behind us. Note that the price has now climbed above both the 50-day and 200-day moving averages; something which didn’t occur throughout the bear-market. Moreover, the MACD indicator (bottom panel of the chart) has just turned bullish and this shows that the Dow is likely to go higher.

Figure 1: Dow Jones about to confirm bull-market?

For the moment, we are still maintaining a defensive investment position but we will re-invest capital in our preferred holdings in resources and emerging markets IF the Dow manages to close above 9,100. In doing so, the Dow will confirm the bull-market and we will ride the profitable trend over the following months.

My Comments: This seems like a fair analysis and it show that he has learned something important...deal with what is and not with what you think. Its okay to have opinions and convictions but have a plan when they turn out to be wrong.

S&P 500 Rally Poised to End, DeGraaf Says: Technical Analysis

The U.S. stock market may follow a path similar to Japan’s benchmark Nikkei 225 Stock Average from 1992 to 2000, he said. The average fell 40 percent during that span even as it posted five quarterly advances of at least 10 percent.

“Japan from 1992 to 2000 was in what aviators call a phugoid -- which is just this long oscillation in price,” deGraaf said. “It looks to us like there’s a reasonable probability that we’re going to enter into a similar period, with more government intervention and all these things that tend to come about after a bubble, particularly one that’s been driven by credit.”

My Comments: Our up current situation is often compared to Japan's "Lost Decade"...Recently we've had an explosive rally with surprising earnings...All of this contradiction leads to one thing. Confusion. A simple solution is to accept the uncertainty and use it to your advantage. Understand that it doesn't matter what happens next or who predicts what if you have a plan...

Full article here...