Top Market Blogs

Earnings season came to an end yesterday with Wal-Mart's (WMT) release of its quarterly numbers.  Wal-Mart's report must have been bittersweet for market bulls since the S&P 500 rallied more than 6.5% this past earnings season. 

As shown below, the percentage of companies that beat earnings estimates for the reporting period finished at 60.4%.  This is slightly lower than the reading from the prior earnings season and 1.6 percentage points below the historical average of 62%. 

Looking at earnings beat rates by sector, Technology had the strongest reading at 68.2%, followed by Consumer Discretionary (65.7%), Industrials (65%) and Health Care (61.5%).  Telecom had the weakest beat rate at just 33%, while Utilities had the second weakest reading at 40%.  Energy, Materials, Financials and Consumer Staples all had readings weaker than the overall beat rate.

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I view the cut in the Chinese reserve requirement rate as very bullish for Chinese stocks. Changes in the direction of the RRR had a major impact on the Shanghai Composite Index in the recent past ... [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

Greece's second bailout has been agreed, but a leaked eurozone report suggests the heavily indebted country will need yet another. John Authers, FT's Long View columnist, discusses with Martin Wolf, FT's chief economics commentator, whether this latest package can possibly work. [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

As part of my daily routine, I publish all my reading (including snippets from other well-known commentators) in an Internet newspaper, “Investment Postcards Daily”. Click through to read the latest edition and register for a free subscription. [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

Adam Hewison, charting strategist of INO/Market Club, brings you another edition of his invaluable service of daily technical market updates. These analyses give you an overall perspective of market conditions, highlight a few key movers, and discuss how current events are affecting investment strategy. Click through to hear Adam's latest views on gold, silver, the US Dollar Index, the CRB Index, crude oil and the S&P 500 Index. [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

If you are an alumnus of the University of Stellenbosch, please click through ... [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

"Crude oil prices or Iran, no matter who blinks first, one thing for certain is that consumers most likely will end up footing the bill of higher fuel costs, and world economy would suffer as a whole in the process as well," said Dian Chu in this topical guest post. [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

Hedge fund manager Jim Chanos says slowing demand in China will continue and may have ripple effects around the global economy. [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

A picture speaks a thousand words ... [...]

Please visit the Investment Postcards blog (by clicking on the heading above) for the full article, as well as other interesting investment snippets.

In this article about the silver price, Will Bancroft takes a look at what the last year has delivered for silver investors, and what the future of silver investment might hold. Read on for more on what Professor Roy Jastram called “the restless metal”.

Silver has been its normal restless self this last year, but holders of silver bullion might not feel adequately rewarded. The metal of the moon has witnessed soaring highs to within touching distance of $50/ounce, two vicious chops, but the silver price crucially sits only a few per cent higher than in February 2011. Volatility is part and parcel of silver investment, but silver investors have not been rewarded this last 12 months with the price appreciation they might have hoped for. The gold silver ratio now sits just below 52.

Why no gains in the silver price?

In early November 2011 we wrote an article about how silver might resemble a rocket ready for launch. So what happened to the Silver Rocketship? Was the ship not fuelled? Was the launch cancelled before the countdown?

We cannot know for sure, but silver investors are still waiting. And, while we wait silver is getting less air time and focus it seems. Maybe after achieving the headlines amongst the precious metals, silver is waiting for its golden big brother to lead the next leg higher in terms of price discovery.

Dr Stephen Leeb sees the precious metal complex just waiting for the right kick higher. When talking to King World News, Dr Leeb commented that “I think the world right now is extraordinary complacent and that complacent attitude could come to an end at any point in time. When it does, gold will begin to fly.  New highs will come very, very quickly and beyond that we will be in another leg of this bull market”. Dr Leeb is watching for the right spark to ignite the gold price.

It is true that sometimes gold leads and silver follows more erratically behind. For large parts of 2010 and early 2011 silver led gold. Some commentators wait for gold to move into a new trading range higher before the silver price will be able to push through technical resistance in the mid 30 dollars per ounce range. It would be good to see silver spend some time trading with conviction above $40/ounce. Last time silver ran at $50/ounce it went to fast and too early.

China in the silver market

Given China’s claimed role in silver price moves from $16/ounce to the price levels of today, it was interesting to see some recent market commentary about a recent lack of buying activity from China over the short to medium term. If you subscribed to the theory that China had been stockpiling silver, you might have taken Standard Bank’s recent findings as validation for your thinking and useful context for the stalling of silver’s potential up-trend. We know the aforementioned Dr Leeb has been talking about Chinese stockpiling of silver for some time.

Perhaps the Chinese had decided to draw down some of their inventory of silver bullion? Analysis from South Africa’s Standard Bank suggests as much, and that the silver price will not be able to push through $35/ounce until Chinese buying power returns to the market.

Familiar face to the silver market, Walter De Wet, Standard Bank’s London based strategist, commented that “as long as China does not import silver, the price is unlikely to rally on a sustainable basis”. Mr De Wet continued that their estimates suggest Chinese warehouses hold enough silver to supply industrial activity for 15 months, having risen from 12 months in 2011. This contrasts to Chinese stockpiles of only 4 months industrial demand in 2009. The takeaway is that Standard Bank believes Chinese silver stockpiles need to fall below 10-12 months industrial supply “in order for demand-pull pressure to build”.

This makes some apparent sense, and perhaps adds some context to the last year in the silver price. A large part of the bid has simply not been present in the market.

Walter De Wet adds some extra context finding that China’s new demand for silver “is not very strong at the moment” when one considers that the premiums that previously existed in the Shanghai market over the London silver price have subsided. These premiums at times reached $5/ounce in summer 2011, yet in February 2012 have been more regularly below 50 cents. Demand for physical silver bullion from China has clearly been lower, so the Chinese are now less willing to pay over the spot silver price to source silver bullion.

Where to next for silver?

If the up-trend in the silver price has lost its main stimulant in lack of Chinese participation over the last six to nine months, then perhaps silver’s price action is not as disappointing as first felt. Some market commentators have even been pleased with silver’s resilience in recent months of trading.

Silver investors with an understanding of this peculiar market understand silver’s moods and emotions. Holding a silver investment this last 12 years for a gain of over 650% has not necessarily been easy, but then neither was holding Apple shares over the last 13 years. Between February 1998 and February 2012 shares of Apple have appreciated over 85 times, from 5.9 to 502 dollars, but investors were tested by vicious corrections and some lack of direction in the share price that at times extended into the medium term.

Whilst the silver price bides its time, silver remains a legitimate part of a portfolio. Gold and silver can still be considered some of the most rational investment assets in this type of fracture financial environment. Precious metals are no one’s liability, and this attribute continues to make them stand tall. Silver is still underpriced in historical terms, and the gold silver ratio has some way to go before returning to the long term average of 15.

During Apple’s 85 times appreciation the period from February 2007 to February 2009 was one of these trying periods. We find some similarities for silver investors here, but if Standard Bank is right we should see a silver price on the move again later in 2012 when Chinese buying power returns to the market. No one, including ourselves, can tell you exactly when silver might begin to reward investors again but the fundamentals that got silver moving in 2000 are still there in force. We need to understand the nature of silver investment, and silver’s tricky and volatile nature, if this experience for investors is to be more educational and less frustrating.

Now a good time to load up on silver? Buy silver bullion quickly and easily using our next generation dealing platform…

GDX gained by 3.03%  while GDXJ gained  3.63% and SIL gained 1.81%

Here are today’s best  performing Silver and Gold stocks:

I've been seriously slacking off on the blog the last several weeks.  I started some new work, and it involves teaching an intensive 8 week course, 1 hour per day, 4 days a week on trading. I "skeletoned" out the course (outlined it) but wanted to keep the charts fresh, so I usually don't complete the days presentation until the day of.  I didn't think this would ever be an issue, because there is a deadzone during the day, and I shouldn't be trading then anyway.  Unlike the super gambler gurus who think they have to trade every minute, every day, even when on a plane or before someone's funeral.

That's still no excuse for slacking off on the blog.  The remainder of this week will be tough, and next week I'm doing one on one training with a trader, but come March, I should be back in at least a more active groove then I am now.

Thanks for the e-mails, they mean the WORLD to me. I especially love the ones from the people that have left the super guru scam artists.  It makes my heart pitter patter.

If you aren't attending the Sunday night strategy sessions, you are missing out, and that's not just my late night ego talking either!  I've gotten tons of messages from people saying they are so glad I'm doing these and for free no less.  Check one out by signing up to my daily email list at http://stockmarkettrendsx.com for instructions on how to join us each and every week.

See ya Sunday at 8PM Eastern.

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Prior to today, oil had been trading in a pretty tight range between the low $90s and low $100s since the middle of last November.  As shown below, oil broke out of that range today as it surged past $105 to finish the day at $106.25. 

Now that oil has made a short-term breakout, its next stop is its 2011 high of $113.93.  If it takes out that level, traders will have their eyes set on the commodity's all-time closing high of $145.29 made back in mid-2008.

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Dow Theorists look for the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average to confirm each other.  That means that when one index makes a new high, the other should be making a new high as well.  When there is divergence between the two, as there is now, it could signal a trend reversal for the market. 

As shown below, the Dow Jones Industrial Average has been making new highs in recent weeks, while the Transports index has been struggling.  The Transports index is having a tough time even holding onto its 50-day moving average, while the DJIA remains overbought.  Time will tell how this plays out, but rest assured that we'll be hearing more and more about this negative divergence in the coming days.

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Next Wednesday the 29th is a leap day.  For you market historians out there, below we highlight the Dow's performance on leap days since 1900. 

There have been 21 leap days in which the market was open since 1900.  As shown below, it hasn't historically been a great day.  The average performance of the Dow on leap days has been -0.05% with a median return of -0.22%.  The Dow has only been positive on 7 of the 21 leap days (33%). 

There have been three leap days that fell on a Wednesday (which is the day leap day is on this year) since 1900, and the index has risen once and fallen twice.  The last leap day was February 29th, 2008, and that day the Dow had a big fall of 2.51%.

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Last Friday we asked readers whether they thought the S&P 500 would be higher or lower one month from now.  As shown below, 55% of respondents said lower, while 45% said higher.  So even though the index is currently just a couple of points off of its bull market highs, there certainly doesn't appear to be excessively bullish sentiment out there.

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Once again, someone famous and once again Warren Buffet is dismissing Gold. In comparing it to the bubbles in housing and Internet stocks, he feels he’ll ultimately be vindicated. In his annual letter to shareholders, Buffet trashed Gold as a bubble that is being driven by fear of other asset classes. He believes that those who buy today only do so because they believe the “ranks of the fearful will grow.”

Fear is a word that is tossed around all too often when ignorant commentators and analysts have to justify a rise in Gold. They can’t say its a bull market. They can’t say its supply and demand. They can’t explain the fundamentals. Fear is an incomplete explanation.

Fear should refer to fear or concern about the value of reserve currencies, not other asset classes. This is not rocket science. The developing world understands the value of Gold as various currencies under the weight of financially weak governments lost significant value throughout the 20th Century. Do you think the Pound or the Dollar has a bad track record? Consider the history of currency destruction in Eastern Europe, Latin America and Southeast Asia. It is multiples worse.

Generally speaking Buffet is right: stocks or businesses are a better investment than Gold. They make sense. They produce something, they earn profits. They grow. Even considering the survivorship bias, the trend for stocks historically is always higher. Gold is a speculation and always will be. However, Buffet fails to note the long-term cyclicality between stocks and Gold. The inverse relationship is clear and Gold’s time is now.

The current case for Gold is all to simple. The leading nations of the world must monetize current and future debts to prevent a potentially catastrophic deflationary depression. In a debt crisis, currencies lose substantial value. We are in a global debt crisis and ground zero is the developed world.

But Gold is a bubble! It’s gone up 10 years in a row and the public is in. Right?

Did you know the Dow Jones Industrial Average from 1985-1999 only had one year in the red and it was only a decline of 4%? Did you know the global allocation to Gold and gold-related investments is barely more than 1%? Furthermore, if Gold were in a bubble, we wouldn’t be seeing the large cap stocks trading at 12x trailing earnings (see GDX) nor would we see junior exploration companies trading at multi-year lows relative to Gold.

Clearly Buffet doesn’t understand Gold. He doesn’t mention its appeal as an inflation hedge or as a currency. He falsely assumes its rise is a result of only wild speculation and a disdain for everything else. He has no idea how under-owned Gold is nor is he aware of the valuations of the shares.

However, you can’t fault his reasoning for wanting to own stocks. He believes he can invest in companies that will benefit from inflation or continue to earn profits that will outpace inflation. He has investments in energy companies and agriculture companies. To some degree, those companies are affected by commodity prices. Why not consider an investment in Silver Wheaton or Franco Nevada? There has to be someone in Buffet’s camp that is intrigued by the precious metals royalty companies. They don’t have mining risk. They earn profits and pay a dividend.

In the long run Buffet will be right. Gold and gold shares will probably flame out in spectacular fashion. The public will get killed. However, this is closer to ten years away than one or two years in the future. Many were calling stocks a bubble in 1995. Not 1999. 1995! That was when the bubble was just getting started. The next breakout in the gold equities and the metals themselves will serve as a recognition move to the masses. It will be a springboard to an eventual bubble. This is a very volatile, cyclical sector so one must do Buffet-like due diligence in picking stocks. If you’d be interested in professional guidance in uncovering the best mining stocks for 2012, then we invite you to learn more about our service.    

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

Below is an excerpt from a commentary originally posted at www.speculative-investor.com on 19th February 2012.

Although it is a long way from being a mainstream view, over the past two months we’ve read several comments along the lines of: the financial world will soon be immersed in another 2008-style crisis, only worse. In some cases the commentator went as far as to suggest that the next crisis, which will probably soon begin, will make 2008 look like child’s play. What, then, do we think are the odds of a 2008 repeat?

There’s a high probability of another major financial crisis happening within the next three years. It is almost inevitable, because debt levels are higher now than they were in 2007 and because governments and central banks have stymied the corrective process with their many interventions. However, there is almost no chance that the next crisis will be similar to the last one, for the reason we cited a number of times during the course of last year in response to the “2008 repeat” forecasts that kept cropping up. Just to quickly recap, the monetary backdrop all but eliminated the potential for a 2008-style crisis last year.

The current monetary backdrop all but eliminates the potential for a 2008-style crisis anytime soon. In fact, a good argument could be made that the probability of a 2008 repeat is even lower now than it was at any time last year. The reason is that up until a couple of months ago the ECB was still implementing a tight monetary policy, thus partially negating the Fed’s ultra-easy stance. The ECB has recently fallen into line with the Fed, which should pave the way for a large increase in the rate of euro inflation over the months ahead.

The following chart from Michael Pollaro’s blog shows the contrast between the relatively slow rate of global monetary inflation that preceded the 2008 crisis and the current much-higher rate (the chart shows year-over-year rates of change in US$ supply (TMS2), euro supply and Yen supply). The rate of euro inflation is clearly still low, but as noted above it looks set to ramp up over the next few months due to the ECB’s recent policy shift.

Based on the February 17th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

We like Warren Buffett. We respect Warren Buffett. We’d love to sit and have lunch with him one day. As an investor, Warren Buffett is in a class all of his own. But the Oracle of Omaha just keeps bashing gold at every opportunity.

 

In an article published in Fortune Magazine, based on his upcoming annual Berkshire Hathaway shareholder letter, Buffett again dismissed the yellow metal. It is hard to argue with a man whose bank balance is a zillion times bigger than yours. Obviously he has been right plenty and has the bank balance to prove it.

But meantime, all the while that he has been bashing gold, it has bulldozed its way up and gold bugs have been laughing all the way to the bank.

 

Buffet attacks gold with the usual weapons in the anti-gold arsenal: gold has no inherent value; it underperforms stocks over time and has merely become a self-inflating bubble in its long climb to record highs.

 

Buffett observed in a 1998 speech at Harvard that “Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

 

At the time of his Harvard speech, the price of gold hovered at around $300 an ounce. If Buffett had invested just one of his many millions in gold that year, he would have $5.7 million today, that’s an average return above 13% a year.

 

And yes, it does make sense to keep gold in a vault. It’s valuable and rare. You keep it safe from theft– it keeps you safe from inflation, banking collapses and the devaluation of fiat currencies.

 

Since we’ve touched on currencies, let’s begin the technical part with the analysis of the USD Index. We will start with the very long-term chart (charts courtesy by http://stockcharts.com)

Our first chart is the very long-term USD Index chart. There is basically no change this week as the daily index movements have been too small to be visible from a 20-year perspective. The situation is still somewhat unclear for the long term but appears to be more bearish than not.

 

The short-term situation, however, is not that bearish. The USD has been moving slowly higher in the past days and this trend may continue for some time.

In the long-term S&P 500 Index chart, we see that a local top may already be in or is about to be reached. The significant rally of the past month without a meaningful correction increases the likelihood of a local top being formed soon. Markets simply cannot continue to move higher indefinitely without corrections.

 

As we compare recent trading patterns with the 2010 upswing, similarities are still in place. A continuation of this anomaly would imply that a correction is quite possible soon and we are near a local top now. Although it can’t be seen on the above chart, the Dow Jones Industrials and the Japanese Nikkei have both reached important resistance levels as well, a fact which also points to an end to the recent rally (or at least a pause) for these markets and the likely formation of a local top.

In the Broker Dealer Index (proxy for the financial sector) chart, we have some bullish implications, but it must be kept in mind that these are for the medium term, not the short term. At this point, we could still see a correction in the main stock indices and a verification of the breakout here. The financials then could move back to the previously broken declining resistance line based on several 2011 highs.

 

The situation in the general stock market is bearish for the short term, as important resistance lines have been reached or are now close at hand. After a significant rally without a meaningful correction, a downturn would be in tune with previous trading patterns and current investor sentiment.

 

The financial headlines across the Internet have generally shown that the media is very bullish for stocks at this time (General Motors’ profits highest in years!). Combining this fact with our bearish technical indicators suggests that a local top is very close.

The Correlation Matrix is a tool which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector. The metals and currency markets are negatively correlated while gold and the general stock market show a positive correlation. The pending local top in the general stock market is therefore likely to be bearish for the precious metals sector.

 

This is also in line with our previous comments from our essay on the short-term bearish outlook for gold (February 14th, 2012):

So, will gold decline from here? Most likely yes, but not very far. The additional confirmation of the short-term bearish case comes from the general stock market, as gold has been recently moving in tune with stocks. Consequently a turnaround in stocks could ignite a move lower in gold as well.

Summing up, the two main short-term drivers of the precious metals sector, stocks and currencies are both providing rather bearish influences at this time. Although the long-term fundamental picture is the most important (and the long-term trend for gold and silver are up), the short term columns here should not be ignored when the coefficients show significant strength with precious metals and other markets.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It’s free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
www.SunshineProfits.com

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All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

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