Blog Posts by Jeff Macke

Gold investors can make the long term case for the yellow metal as loud and often as they want, but the market price is the final arbiter investing success. By that objective measure the barbaric metal has had a tough run over the last 18 months.

Since peaking near $1,900 in early September 2011, gold has fallen more than 20%. Over the same period the S&P 500 is up more than 40%. Even for patient investors, that type of spread in performance is cause for concern if not outright panic.

Peter Schiff, outspoken author of The Real Crash and head of Euro Pacific Capital, says the euphoria has been well and truly beaten out of gold. "I've never seen such negative sentiment since I've been buying it," he says in the attached video. It's that negativity that Schiff thinks will provide a wall of worry for gold prices to climb in the coming months.

The move from gold to stocks is, in Schiff's words, based on a false narrative. "People think the U.S. economy is recovering." It's an illusion based on quantitative easing and inflation. When reality hits, as Schiff and other hawks think it must, stocks will crumble and the real value of gold will be realized.

In an apparent effort to lessen the shock value of their official earnings release next week, J.C. Penney (JCP) announced select results from their first quarter last night. There isn't enough lipstick in the world to conceal the porcine nature of the data.

Revenue for the period was $2.64 billion compared to $3.15 billion in the same period last year. Same-store-sales dropped 16.6% versus expectations of -13.2%. Most jarring of all is that JCP somehow managed to burn through $959 million in cash due to ongoing remodel expenses and the top-line shortfall.

Without the $1.75 billion loan JCP secured last month, the company would be in serious jeopardy. With the loan, the company has bought itself some time. Whether or not it's enough to complete the turnaround depends on how JCP spends the money. In the attached video Yahoo! Finance senior columnist Mike Santoli and I discuss JCP's chances of survival.

Santoli makes the observation that "under a normal situation" in which a fresh CEO came in to fix an organization, JCP's numbers could be dismissed as the result of Ron Johnson's ineptitude. Unfortunately JCP didn't hire an outsider but instead brought in Johnson's predecessor. The move implies JCP wants to go back to the way things were.

Related: JCP Apologizes, Promises to Listen to Scorned Customers

Two problems with going back to J.C. Penney's 2010 strategy: 1) It's not an option, as all the customers have been lost and half the stores have been remodeled; 2) Even if it were an option, JCP under Ullman was terrible.

According to government measures, inflation in the U.S. is all but non-existent. The officially endorsed Consumer Price Index (CPI) claims a mere 1.5% rise in prices over the 12 months ending last March. Food and energy, which are excluded from core inflation, rose 1.5% and fell 1.6% in the same release.

Suffice it to say Peter Schiff, founder of Euro Pacific Capital and author of The Real Crash, is skeptical of the data.

Citing The Economist's Big Mac index, Schiff says real inflation has been understated since the government started adjusting the way inflation was measured in the early 2000s. Since 2002 the Big Mac has risen in price at nearly three times the rate of overall inflation.

As Schiff sees it the discrepancy between the data points is "more anecdotal evidence that what we get from the government when it comes to inflation is not information but propaganda."

There's plenty of anecdotal evidence that inflation is running hotter than the government says, making it impossible to convince hawks that hyper-inflation isn't looming large. The problem with the theory is the unreliability of anecdotes.

On April 4th, the new Bank of Japan president Haruhiko Kuroda outdid the U.S. by launching the most aggressive quantitative easing program the modern world has ever seen. In an overt effort to combat deflation, Kuroda pledged to double the amount of Yen in circulation with the goal of raising Japan's rate of inflation to 2%.

Kuroda made a point of emphasizing that he wouldn't hesitate to expand the program if the inflation target wasn't met.

Not at all coincidentally the policy jump-started an already robust rally in Japanese stocks. The Nikkei 225 (^N225) now stands at levels not seen since 2008. U.S. investors long Japan via the iShares MSCI Japan Index ETF (EWJ) have seen shares rise more than 20% year-to-date and more than 12% since Kuroda unveiled his scheme.

Peter Schiff, president of Euro Pacific Capital and author of The Real Crash, says Japan is only making things worse by pursuing inflation. "Be careful what you wish for because you just might get it," he warns. "I think you're about to see a big dose of consumer price increases in Japan based on a weakening and that's not going to be good news for the Japanese economy or the Japanese consumer."

James Altucher has been a raging bull on stocks for long enough to have been mocked by some of the great luminaries of finance. In a column on his must-read website, James Altucher Confidential, he recalls being mocked by Nouriel Roubini, Zerohedge and Mish Shedlock, all for liking stocks at various points over the last few years.

Now that stocks are hitting all-time highs, Altucher may still be a wacko, but he's a less bullish one. In the attached video, he explains his reason for caution. It's simple supply and demand.

Since 2009 there has been a drumbeat of buyback announcements culminating in the massive $17 billion debt offering to fund buybacks and dividends completed by Apple (AAPL) last week. Coupled with the stubbornly moribund IPO market, the supply of stocks has been falling.

At the same time the public has been largely absent from the rally. There is some inflow evidence to suggest Main Street is coming back into equities but every uptick makes the prospect less appealing. "Demand is not quite there and supply is going up," Altucher explains. "Price is either going to stay flat or go down, so I would not be a buyer of the stock market."

For long suffering Apple (AAPL) shareholders it may not feel like it but the rally off the $385 was the "easy" part of the trade. At this point, shares are running headlong into a series of overhead resistance levels that could test the resolve of those who just got on board with the recovery.

That's the read the eponymous founder of Louise Yamada Technical Research Advisors. In the attached video, Yamada reminds viewers of the trading rule of thumb that "the greater the damage, the longer the need for repair."

Apple has withstood an enormous amount of damage from a chart perspective and the lows were put in over the last couple weeks. It's not inconceivable that shares could move back to the old highs or at least somewhere over $600. The company's massive debt deal and share buyback arguably change the fundamentals enough to obviate the charts.

Be as it may, Yamada suggests shareholders keep an eye on the following levels:

*$485: The 2009 uptrend for Apple. Shares gapped below this level earlier this year. Not a good sign.
*$500 - $530: The first mark for what's called a Fibonacci retracement. Hitting $485 would mark a 38% retracement of Apple's losses. Devotees of Fibonacci trading, and there's more of them than you may think, could be looking to take some profits there. Other Fib levels of note are $545 (50%) and $580 (62%). (Yamada rounds the numbers off in the attached video)
*$650: Broken support from last year.

Warren Buffett is many things. He's a billionaire, the best diversified investor in history, an exceptional options trader, and he writes the best shareholder letters you'll ever read. All of these wonderful virtues have been mercilessly hyped over the last three days. It's time for a gentle perspective check.

In a recent column on his website, entrepreneur and author James Altucher reminded his readers that Warren Buffett is Not Your Grandpa. He's not a financial adviser with a direct interest in the financial future of his acolytes.

"If you just blindly listen to Warren Buffett that's a way to go straight to the poorhouse," says Altucher who not incidentally wrote a book called Trade Like Warren Buffett. Altucher isn't a hater, he just finds it hard to reconcile the things Buffett preaches with what he actually practices.

Related: Buffett Opens Up About Fed, Keeps Successor Secret at Berkshire Meeting

For one thing Buffett doesn't actually hold stocks forever. In the last several years he's sold shares of Johnson & Johnson (JNJ), Intel (INTC), and a host of others. Buffett's ideal holding period may be forever but his average holding period is significantly shorter than eternity.

For the last four years stocks have been moving higher almost in lockstep with the investor suspicion that the gains are built on a foundation of sand. Blame it on the Fed, false hope, or another inflating bubble, but the truth is most people have missed the bulk of the stock market rally.

When emotions run this hot it's a perfect time to consider the technical picture. For the all the doubters of charting as a trading tool, technical analysis has two undeniable merits. First, they take emotion out of the equation. A chart is simply a depiction of historical price levels. No smiley or frowny faces allowed.

Much more importantly, other traders believe in charts. If enough traders think a chart "works" they'll buy or sell at that level. Ensuing price movement is simply a function of supply and demand.

Louise Yamada, National Treasure and founder of Louise Yamada Technical Advisors, suggests taking a step back and looking at the big picture. Despite the headline record-highs, Yamada views the intermediate picture as mixed, if not downright bearish.

Transports, small caps are mid-cap stocks are all giving sell-signals on a weekly basis. When individual sectors start meaningfully lagging the broader market, technicians call it a "divergence." Think of them as a flashing yellow light; there's no pressing need to stomp on the breaks, but a bit of prudence is in order.