Occaisionally post on KTCC board w/r to fundamentals of that stock. Otherwise buying silver today:HL, SLW, CDE , AG and GG (gold).
If one is bullish on stocks because of further easings by central banks and the FED remaining "steady" then industrial demand for silver should continue to grow. At some point silver "should" decouple from gold. At the recent gold/silver conference in Denver many companies talked about peak gold and silver occuring in 2014 or 2015. After that world production will start to fall for both. Simple supply/demand dynamics from there-both gold/silver should move higher.
I'm a kid in candy store today, bought:SLW, AEM, ABX (I have enough AUY), and HL
Gold/silver ratio hit 68 today, the extreme high of its range. My take is retail investors are selling gold/silver to chase stocks higher. Physical demand has picked up in China this week as buyers have be paying $4-$5 above spot price. Everywhere central banks are easing, except the FED inducing $ strength. That may continue but we are at peak gold and silver w/r to production. Supply/demand dynamics favor higher prices after the current selling climax.
I have enough AUY for now, buying other stuff today. Fundamentals are getting better, yet it seems gold/silver in a selling climax.
I guess I'm a contrarian across the board. If Ray R. wife doesn't want to press charges or any of the other "victims" then the NFL should but out. If the owners have a behavior clause in the player's contract then, its the owners decision to enforce or not. Otherwise, we have a criminal justice system-which should be the same for everybody. If it not, then the country has much bigger problems then off-field antics by NFL players.
Still follow, but not a buyer. LTRX, in their last CC sail they are competing well against DGII. Joe Dunsmore , the CEO is stepping down or has stepped down, so the company is a bit leaderless. Other than SWIR, and a couple of good trading opportunities with NVTL, the growth of M-T-M has not materialized for:LTRX, DGII, SWIR, NVTL, SIGM.
In my view, LTRX is building a good business, but is a couple Qs away from meaningful l y/y growth. DGII needs to get a new CEO and give that CEO time to build DGII's business.
I do have in my notes, that it is a buy under $7.50. As you know I would prefer to see insider buyer, and a new CEO before I would become a buyer, but under $7.50 the stock becomes a compelling buy.
Part of my problem is, I see China, Eurozone and the US macro-econ slowing with the risk that the consensus opinion that:
1)The US is accelerating and
2)Easing by the ECB and the PBOC will bail out Europe and China
If central bank efforts are too little or not timely enough, then fundamentals should not support current stock prices. I want to be a buyer, after stocks have fallen and before the FED has to start easing again.
W/R to slowing macro-econ the US, a little tidbit came out of the KMX CC today. Tighter subprime lending crimped sales. A year ago subprime lending was 18.5% of sales, this past Q is was 13.8%.
YTD, for the industry for new cars, subprime lending has been running 30-33%. So, if subprime lending is getting tighter that market, in addition to used cars that KMX mostly sells, then new car sales will stop increasing y/y. Eventually that will mean inventories will have to be reduced, followed by production slowing, less overtime then layoffs.
A confirming stat are weekly RR car loading of vehicles. In the latest week they were up y/y .2% or essentially flat. The week before up 3.4%, prior week down 9.7%. Earlier in the year, RR car loadings were up greater than 10% week after week through June/July. So, if autos roll over, housing is already rolling over, exports other than grains and energy are rolling over, then what is left to power the economy? Back to school sales are the softest since 2009, so GDP growth, outside inventory accumulation, will have trouble getting above 2%-which is not good for job growth.
Still have not bought. Hardware division of ORCL, formally Sun Micro, reported y/ sales decline of 7.8% in ORCL's recent earnings report. So, I will not be a buyer of QLGC before Sept Q results are out.
Another tidbit today. Blackrock, has stated that the corp. bond market is broken as it has little liquidity. This is more confirmation of my view that "markets" are a mile wide, but only an inch deep. Meaning that if there is an "event", that induces selling, markets are so thin that "bids" will fade, inducing more selling-setting up a self reinforcing negative loop. Other markets with recent commentary that the "markets" are broke are:
1)Floating rate bank loans
All big markets, so if any were to breakdown, they could cause Lehman type scares. At least until the FED steps in.
Commented today on the strength of the $ and if it continues stronger it will be difficult for the FED to meet employment and inflation objectives. From the article I read, it is the 1st time a FED president has commented publically on the $ in 4 years. Implications:
Japan and the Euro-zone are specifically pursuing "beggar thy neighbor" policies by actively trying to weaken their currencies. It is my view, the US will have to do the same in the 1stH of 2015. So, instead of raising interest rates by mid-year 2015, the FED will pursue easing policies. Bullish for gold/silver and all commodities.
Given how weak gold/silver, the CRB index and just about all commodities have been, with the backdrop that US interest rates are going to rise, it may just take a macro-econ slowdown with slow job growth to change the "psychology" w/r to:
Commodity bull markets, even though a "bell rang" today with Dudley's comments, may not start for another 3-6 months.
Strong $ is also an indication of to restrictive supply of $s. In essence, the "world" got use to QE induced increased bank reserves month to month, so with that "fix" taken away, there is a shortage of $'s forcing liquidation of other assets. In recent weeks it has been a liquidation of commodities and a China slow down are forcing industry players to sell commodity holdings-which are used to secure loans. Today w/r to stocks, that maybe the next asset class to see "liquidation" as stocks are used to secure loans.
Until, the PBOC, ECB and FED juice up liquidity, then over the coming months a "deflationary scare" maybe developing. So far, the PBOC has been taking baby steps, the ECB baby steps, but the FED with the ending of QE is setting up a situation where there is a scarcity of $s to keeps markets well "greased". It may take the FED a few months, unless there is a financial event, before they have to reintroduce some sort of "easing" program. Until then, I would expect them to use OMO-open market operations-to flood the market with liquidity. We should see M2 take off in coming weeks/months.
Why it will be so important for the PBOC to start aggressively easing. Steel consumption in the month of August was down 1.9% y/y-the first y/y decline since 2000. That number was so soft that consumption YTD is now down .3%. As a result, stell companies in China are experiencing liquidity problems-dumping steel for export and selling off commodity inputs to service their debts.
Not only steel, but many other industries are operating just to service their debts. This is a situation that will either see many bankrupcies or through massive PBOC easing-to stimulate domestic growth-grind out of their "hole".
Until I "see" PBOC easing and FED easing, very few stocks interest me. Moves higher in GDX/gold/silver may just sniff out the central bank action I am looking for.
I bought some DGII just under $7.50 as it is a compelling buy, but does not currently have a catalyst. With $4 cash/share and sales/share estimates of $8 for FY15, the business is selling for (7.5-4)/8 or .4375 PSR. Under .5 PSR is where mfging companies are interesting to me. With the CEO leaving soon, the BOD may just sell the whole company to a large industrial firm. Otherwise, since I'm sitting is so much cash, it was worth taking an initial position.
Trying to buy more AEM today as well at $29.50.
Inflation in the US has been net/net falling for 34 years. Commodity indexes are at or near 5 year lows. Econ activity is rolling over in China, SA, Eurozone and soon the data will show the US. This is going to leave ample room for further central bank easing with most central banks already easing except the US-the BOJ easing aggressively and BPOC and the ECB doing so in baby steps.
The fundamental question that most economically important governments are going to face is, "How are we going to service all the public and private debt that is outstanding and increasing when GDP growth growth is slowing or nil and inflation is falling?". The obvious answer is GDP and inflation (nominal GDP) have to start moving higher. How will it do so?
Government spending increases with simultaneously run QE programs. It is going to have to happen in the Euro-zone, it is happening in China and Japan. Once data rolls over in the US, government spending will increase and the FED will become more dovish. Why and how will the FED become more dovish? The strong $ is telling us there is a scarcity of $s. The FED is going to have to increase the supply of $s. Without changing their language and/or interest rates, the can increase the supply of $s through open market operations. We would see this by watching M2 supply and M1 and M2 velocity.
It is going to have to happen as the current shortage of $ is causing world deflation, making everyone's debt service more difficult-we may just get a "deflationary scare" that i have been looking for for the past year.
How to play in next post.
Dodd-Frank has forced commercial and investment banks to substancially divest their commodity trading operations. Those business have been bought buy a handful huge commodity trading companies, based mostly in Europe and Asia-concentrating production, refining, transporting, storing and distributing of just about all commodities. With net/net capital taken out of the business, in the last few years, first prices have fallen, next investment in new capacity has been falling so soon new supply will be constrained. So depending on how fast these commodity trading companies can act as a cartel and how fast the FED supplies the world with more $s, we will see a reflation trade in commodities that starts within 6 months and last as long as inflation is not a problem-I'll estimate not above 5% in the US.
What to buy? The lost cost producers in: iron ore (BHP, RIO), coal (BTU, CLD), gold/silver/copper plays. Also, what should do well are regional banks as interest spreads should rise as inflation grinds higher. As far as the large commodity traders, the only one I know of right now that is public is NOBGF. For stocks in general, I think the FED is playing a dangerous game with the rising $. They may need an "event" to shock them into supplying more $s to the world. Such an event would be a negative for stocks in the short-run until it was apparent the FED is supplying enough liquidity. Some Eliot wave commentators have suggested the S&P 500 could fall to the mid 1800s or as low at the mid 1700s.
Currently, I am developing indicators to "time" the "bottom" of the next reflation trade. Right now my view is lower lows into mid Oct, with a rally but a retest of those Oct lows in early Dec. If M2 is rising 7+% plus by then, then a bottom maybe at hand at that time. M2 growth (10-week moving average) has been as low as 4.3% in recent weeks. It is going to have to get to 7+% to compensate for the end of QE. 10% would be better.