Starting to read and catch more commentary by analysts that world $ liquidity is just too low-which has been a "theme" of mine for several months. As we are witnessing, the $ is making new highs against many of our trading partners, commodities are hitting 5-13 year lows and world GDP estimates are coming down. It is all because the FED is not supplying enough $s that the world is demanding to transact business. Also, China has been holding their currency stable vs the $, but let is weaken today from 6.2049/$ to 6.2145/$ as posted by the Kitco website. If this trend continues, then China will be exporting their deflation to the US. As a consequence, the FED will have to increase more liquidity to compensate.
Bottom line, I'm buying little until is is apparent the FED has started to ease. Now they could increase interest rates and still ease if they were active in open market operations by buying treasuries-adding liquidity to the banking system which would "funge" its way around the world over time.
Interesting developments in the NG market. For the most recent week production y/y was up only 4%-earlier in the year it was close to 10%. With additional export capacity coming on stream later in the year-more pipeline capacity to Mexico and LNG's exports from the Sabine Pass facility-domestic demand plus exports will be greater than new supply if y/y production remains up 4% y/y or below. This could be the "bullish" turn NG has needed to move the trading range from $2.50 to $3.00 to $3.50-$4.00 sometime in the 1st Q of next year.
Yes, I agree. There was an "activist" investor in PCTI the last 2 or 3 CCs that was putting pressure on PCTI mgt to use their excess cash for special dividend and/or more aggressive stock buy back. Instead PCTI made an acquisition that soon there after lost its largest customer. I think this guy is selling and is not yet done.
From other company's results, I get the feel that Telco capX spending was soft for the June Q and will continue to be into the 3rd Q. If so, scanner sales will likely be soft-PCTI's highest gross margin product line. In addition, from a recent press release it appears that product line got a new sales manager-perhaps the prior one was not producing good enough results. I've staid away from buying any PCTI in recent weeks. However, after the Q is out and if the stock get low enough-closer to $6-I'll be a buyer.
UPL and ECA are highly leveraged and mostly unhedged for 2016. With the consensus that the $ will remain strong, hence commodities weak, many money managers are liquidating tertiary oil/NG positions-so that they only own most liquid mega cap companies. I expect oil/NG to bottom late this Q or by the middle of the 4thQ, so I have not been a buyer either. The "key" for me will be what the FED is going to do as far as adding liquidity to financial markets to weaken the $.
Commandor, despite there being a world of difference between value and stock prices it is none the less amazing to see UPL and ECA under 9 yesterday. I have not been watching the group since selling UPL over a year ago in the 20s. Is the Iran nuclear deal and reduction of trade sanctions at the root of this?
Did buy TAHO and FSM near the close today.
Consistent with prior comments that the $ is to strong, it is making new highs or close to multi-year highs vs the:Euro, Canadian $, Aussie $, NZ Kiwi, S.K. won, Mexico Peso, Brazilian Real just to name a few. Bottom line, exporters are having a tough time and mfgers that have import competition, such as steel-the SLX made a multi-year low today-are getting crushed. This is all a negative for higher paying mfging jobs and the 3/1 multiplier effect. High paying oil/NG jobs are also continuing their decline.
Just after today's comments, the FED's Fischer came out with commentary that inflation is too low in the US. "He" will have to stop the DXY from going higher.
Not yet today, but may later in the day.
For gold/silver their are two questions to answer for the bullish case. When will the DXY stop rising, which is the main reason gold/silver and other commodities going down? With nearly all countries, not just Greece, having debt issues (world debt to GDP at all time high 286% vs world GDP with GDP growth slowing yet debt continuing to increase) what will central banks policy responses be to enable debt service to be relatively painless?
The answer to Q1 marks the bottom for gold/silver, CRB index, BCON commodity index etc etc. The answer to Q2 determines deflation, defaults on a grand scale and world depression or central banks inducing inflation to lower real interest rates, keep nominal rates low as well to "rob" from savers to subsidize borrowers to be able to service their debt. To induce inflation, which most central banks want to be around 2%, they will have to increase liquidity, especially the FED, as the world is demanding more $s, but the FED has been stingy so the DXY goes up commodities down. If the world is to get to 2% inflation, commodities will have to rise-oil will have to bottom-the FED has to stop the assent of the $.
In my view, the FED has been relatively accommodating the last 4 weeks-as measured by M2, its balance sheet, reverse repo and free bank reserves, they need to do much more. Demand pull inflation is not happening, so the FED is going to have to "engineer" cost push inflation. Gold/silver bottoms when oil (energy) bottoms with a few days of each other.
It has been my view oil bottoms in the 4th Q unless some supply disruptions occur earlier or there is some "financial event" that forces the FED to "ease".
HON actually had flat gross income vs last year, but EPS came out higher by 9.1%. Still the market celebrates HON's great numbers-but they were flat.
From all that I have been able to read about Greece, I have found what the costs (estimated) of them staying or leaving the Euro. If they leave, creditors will get 25% of their money, if Greece stays, the "hope" is they will get 60% payback-the difference being about 100 billion Euro.
Implication, if Greece were to leave, in the coming weeks, and estimates are correct, the ECB's entire capital base would be wiped out as the ECB is into Greece about 130 billion Euro and their capital is about 98 billion euro. This is why the ECB is bending over backwards to keep Greece in. Now does it matter if the ECB's capital is zero and their balance sheet go to infinite leverage. It should, as the only "prescription" would be for world massive monetary easing to reliquify the ECB, IMF, Eurozone banks and anyone else into Greece. Where is that money coming from? It will have to come from the FED and PBOC.
So the extend and pretend game with Greece goes on, but the day of reckoning has to come-the math is just too compelling.
INTC operating income down 24.6% y/y, yet non-gap EPS flat y/y $.55 vs $.55/share.
Buybacks and tax-rate % financial engineering is masking terrible results. When the #$%$ hit the fan, there will be a big air-pocket for stocks because in a "bear" market mode, the skeptics will rule as opposed to the "greater fools".
According to Central bank of India, paper market for gold trading is 92X more than the physical market. US silver coin premium is at a one year high of 22% vs 13% earlier in the month-because there is a physical shortage of silver.
Gundlach said today, given the weak nominal GDP numbers, the FED should be "easing". MS, in recent days, has put out research that China maybe be exporting recession in the next 2 years. From another source, because car sales will down y/y in Chine for the month of June (the first y/y decrease in two years), inventories are now 145 days vs the normal 24-36 days.
Canada central bank lowered interest rates and took down future estimates GDP and inflation. BOJ kept QE and interest rates the same, but lowered their GDP and CPI outlooks.
If you look at JNJ's operating income y/y it was down 17%-this stock should sell for 8-10 PE vs double that. Every week Greeks's banks are closed, increases the bailout money needed by 10 billion Euro-the deal as it stands now is totally inadequate and does not reflect reality.
In my view, stocks are way over valued, gold/silver are being held down by paper markets-while physical demand is robust-and the FED is playing a game of "chicken" with the world by holding out the notion that the US economy and the world economy are strong enough for the US to raise rates when, in fact, the FED will have to "ease" to avert world recession-making debt service impossible for millions of debtors (government, businesses and individuals) around the world.
10-4! SMSI has been holding $1.10. I bought some AG today as their silver mines are all in Mexico whose Peso continues to make new lows vs the $.
Commodity indexes: BCON, CRB and S&P GSCI all getting close or making new lows since 2009 as well as copper making a 6 year low at $2.39. I draw two conclusions:
1)World economy is weak and getting weaker
2)The FED is not supplying enough $s to the world for commerce and financial transactions.
Until the FED reverses course, new data comes out each Thursday-expect the same type markets-stocks should go down as well.
On a more micro level, according to the CFTC the "market" is net short 10,600 silver contracts and the US Mint has run out of silver coins to sell for a couple weeks. W/R to gold, the CFTC reports net long gold contracts are around 15,000 contracts-a 9 year low. Volume on both today (CME) was 185,000 for gold and 86,000 for silver. Above 150,000 (gold) and 50,000 (silver) are big volume days. So, was today a selling climax? No, not just yet but we are getting close and sentiment is getting further into "bearish" territory.
In my view, the FED is playing a game of "chicken" with financial markets and the US economy. As I posted before, they are going to wait for consistent negative data before easing. The longer they wait, the bigger they will have to go. Even though it has been hurting, I bought more silver stocks today:HL, SLW and PAAS.
The "story" for gold/silver for the next 2-5 will be told in the next 3-9 months. How so? It is my view that policy responses by central banks will determine the "story" for gold/silver. If the responses are to:
1)Add more liquidity
2)Increase QE programs and/or
3)Lower interest rates
Then gold/silver should move much higher as the supply of paper currencies will increase much faster than the new supply of gold/silver. Currently, as of 5/15, world M2 measured in $s for the largest economies are growing at an annual rate of 4.4%. The supply of new gold/silver is about 1%. So, already fiat currencies are growing much faster than "hard" money. If the debt problems around the world are met by more central bank easing, then world M2 will move into the high single digit % area. Gold/silver prices will have to rise on simple demand supply dynamics. Initially gold/silver may fall as debt "defaults" are deflationary and will cause many to move into the $ and perhaps cause a "grab for liquidity" sell off. But over time as central bank easing programs kick in-gold/silver will catch a bid that will last for years.
We have already seen the PBOC "blink" as they announced a "backdoor" QE program by offering to underwrite stock brokers customer's margin accounts-basically a QE program to buy stocks. I suspect the ECB, along with other Euro-zone financial players, will have to "ease" to cover their losses on Greeks bonds-which should be written down 50% or so.
Two central banks increased their QE programs-the ECB and Sweden. The ECB expanded what they can purchase by adding state backed company debt. Sweden lowered interest rates from -.25% to -.35% and increased QE by 50%-all in a effort to lower their currency.
China stock markets down again, now down close to 25% from the high reached 6/12-increasing pressure to lower interest rates, reserve requirements and in my view introduce QE later in the year.
US had soft jobs number for June-perhaps putting the FED on hold as far as their schedule to increase rates-6 between now and the end of 2016-to get the FED funds rates to 1.625% by the end of 2016.
All the above should be bullish for gold/silver as central banks are desparate to throw money at the economy to keep an even keel vs increasing goods and services. In summation the supply of paper currencies are growing much faster than the supply of gold/silver.
Also of note today, the S&P GSCI Industrial Metals index hit a 6 year low-that is a sign world GDP weakness even though US construction spending for the month of May hit an 8 year high. It is also a sign that the $ is too high which is also evidenced by the export sub index being below 50 in today's ISM mfging report. Still the FED is going to wait until macro-econ data turns consistently soft before easing. Right now housing and autos, subsidized by artificially low interest rates, are holding the economy up.