Stocks & Equities

Show This Chart to Your Bullish Friends

It’s hard to be bearish in December. 

This is the time of good cheer, dancing sugar plums, and brandy-spiked eggnog. It’s also the time of rising stock markets. 

More so than any other month of the year, December has a bullish bias. Going back to 1950, stocks showed gains in December 47 out of 63 years. That’s 74% of the time. If we only go back to 1970, the bulls are 35 for 43 – an 81% win rate. 

So like I said, it’s tough to be bearish during this time of year. But it’s also tough to overlook this…

The daily chart of the S&P 500 below shows the index breaking down from a bearish rising-wedge pattern. 

Yl-48210111 SZMFSDNVBX

Previous breakdowns in May and August led to modest 6% and 4.4% pullbacks, respectively, over the following month. Something similar this time around would set a target for the index somewhere between 1,740 and 1,700. 

Yesterday, the S&P 500 tested its first red support line at about 1,780. After falling for four straight days, stocks are oversold enough that they could bounce from this level over the short term. 

However, any bounce that fails to rally the S&P 500 to a new all-time high above 1,813 will form a “lower high” on the chart. That’s a reversal pattern, and it increases the chances the next decline will take out support at 1,780 and spark a move toward one of the lower support lines. 

So go ahead and be cheery. Be merry and full of goodwill. And be bullish if you like. But be careful, too. Given the look of this chart, stocks have more downside. 

Best regards and good trading, 

Jeff Clark

 

Further Reading: 

Earlier this week, Jeff revealed another reason for caution: One specific thing happened within months of every single market peak of the last 41 years. And it might be happening again right now. Get all the details here

One of the stock market’s most reliable indicators is also pointing to a reversal. “We now have a broad stock market sell signal,” Jeff writes. “And the first sign that at least a short-term top may be in place.” See the chart right here.

 

Having replaced savings with debt on both the national and individual levels, I think it’s well past time for Westerners to take a few lessons from our creditors in the East. Many Americans consider gold a “barbarous relic,” but in Asia, the yellow metal remains the bedrock of individual savings plans. This means that either greater than half of the world’s population are barbarians, or they’ve held onto an important tradition that our culture has forgotten.

A Culture of Gold

One of the most important elements of Eastern gold demand is that it is not limited to educated investors or the higher classes, as often seems to be the case in the West. Throughout Asia, no matter one’s social status, precious metals are the first assets people choose to protect their wealth. There is not even a glimmer of doubt about the enduring value of hard money.

A recent Bloomberg article quotes a Chinese woman, “I don’t know anything about the stock market and I don’t have enough money to buy property, so I figured gold is the safest choice.”

Some might write off this philosophy as naïve, but her logic is founded in centuries of tradition, borne of hard-won experience. The same goes in India and across South Asia, where gold is an essential part of local religious customs. From wedding dowries to temple offerings, gold carries a caché in Asia that most Westerners can’t fathom.

Consider the US as a comparison. Here, newlyweds are more likely to receive a house full of fancy appliances than any assets that might form the foundation of long-term financial independence.

After a couple of generations of US-dollar dominance, Americans have become lazy with our wealth. While we exploit our economic power by going into debt for fancy cars, big-screen TVs, and expensive smart phones, our creditors are steadily stockpiling gold.

A River of Gold from West to East

Asia’s love affair with gold became worldwide news when the price of the yellow metal dropped last April. Asian consumers saw the price drop as a fortunate buying opportunity, and metals dealers were swamped with orders for both bullion and jewelry. Premiums skyrocketed across the continent, but this did not slow demand.

With all this demand, shouldn’t gold’s global spot price have continued rising? Unfortunately, many Westerners were selling into the Eastern demand. In fact, the stagnant spot price concealed a historic transfer of real wealth.

The rising price of gold over the past decade had lured many Western investors into the paper gold market through precious metals exchange-traded funds (ETFs). To ETF investors intent on fast growth rather than long-term capital preservation, the recent drop in price was viewed as a sell signal, not an opportunity.

By the end of September, gold ETFs had sold off about 700 metric tons of physical gold – more than half of it in just the second quarter. The World Gold Council reports that the majority of these outflows have been absorbed by Asian demand.

However, Western selling was enough to keep the global spot price from recovering. Instead of more capital flowing into gold, it was the gold itself which was flowing from Western financial institutions to Eastern households.

The latest data shows that consumer demand for physical gold in the first three quarters of 2013 hit a historical record of 2,896.5 metric tons. 90% of the year-over-year increase in this demand came from Asia and the Middle East.

Meanwhile, Americans have been distracted by one record high after another in the domestic stock market.

Governments Intervene

When reporting on Asian gold demand, the Western media tends to focus on nations like India, which has practically declared war against gold buyers this year in a misguided attempt to curb its trade deficit.

The Indian government raised tariffs on the metal to a record 10%, and now requires importers to re-export 20% of their gold. India’s central bank even went as far as asking temples around the country to divulge how much gold they were storing, though many refused.

Thailand and Vietnam have taken similar steps to subdue their populations’ gold demand, even though the primary outcome has been to increase gold smuggling.

These governments’ measures have received the most attention because they fit nicely into the Western narrative that gold is an old-fashioned asset that does more harm than good in modern economies. But the truth is that the only ones harmed by gold are Western governments!

China Rising

Last month, China officially surpassed India as the world’s largest consumer of gold. Unlike New Delhi, Beijing is encouraging its citizens’ gold lust by easing restrictions on the gold trade. The People’s Bank of China (PBOC) is preparing to expand the number of businesses allowed to import and export gold on a large scale. It has also increased the amount of tax-free gold citizens are allowed to bring into the country.

Meanwhile, China is finally pulling away from the US dollar. A month after China’s government news agency called for a “de-Americanized world,” a deputy governor at the PBOC said, “It’s no longer in China’s favor to accumulate foreign-exchange reserves.”

Simply put, China is planning to wind down its own stimulus program of buying US dollars, and instead allow the value of the yuan to appreciate. In preparation for this shift, China has been diversifying its foreign exchange reserves into gold. The PBOC has not released official numbers on its gold reserves since 2009, but experts have begun to speculate that its current holdings are far larger than previously estimated.

A Rude Awakening

This is the time when the West realizes that its great reservoir of wealth has run dry, as the gold has all flowed East.

When China stops buying US Treasuries, the Fed will remain the only major buyer of US debt. This will drive interest rates up, thereby sticking the US government with obligations it cannot possibly fulfill. Ultimately, this will be the death knell for the dollar, as the Fed will be forced to significantly expand its QE program to assume the role as Treasury-buyer of last resort.

Mom-and-pop gold buyers throughout the East probably do not understand all the subtleties of the foreign exchange markets, but an undying appreciation for gold is built into their culture. Make no mistake: the East is the engine of the 21st century global economy – and it is riding on rails of gold.

This holiday season, consider breaking with our recent Western tradition of giving gifts of no enduring value. Instead, take the opportunity to turn some of your paper dollars into gifts that will still have value when your kids are grown.

Peter Schiff is Chairman of Euro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices. 

Click here for a free subscription to Peter Schiff’s Gold Letter, a monthly newsletter featuring the latest gold and silver market analysis from Peter Schiff, Casey Research, and other leading experts. 

And now, investors can stay up-to-the-minute on precious metals news and Peter’s latest thoughts by visiting Peter Schiff’s Official Gold Blog.

“We’ll Get A Crash That’s Commensurate With The Size Of This Bubble”

Tulips1I had the chance recently to reconnect with John Rubino, CFA Institute contributor, blog publisher, and author of a number of financial books.

It was a particularly interesting conversation, as John has written a number of prophetic books warning of growing asset bubbles, and currently produces editorial research for CFA designated fund managers worldwide. As the subject of discussion, was a recent piece published by John, entitled,Inflation is Raging – If You Know Where to Look“. 

In discussing his research on global markets, John notes that frightening asset bubbles are developing all over the world, and as a case in point, “Bitcoin…was about a dollar per Bitcoin a couple of years ago. Now it’s $1000…A painting by Francis Bacon called ‘Three Studies of Lucian Freud’ [just] sold for $142 million, which was the highest price ever paid for a painting at an auction….[A] diamond [just] sold for $83 million which is the highest price ever paid at auction for a diamond, and trophy real estate in Manhattan, London, Singapore and Hong Kong have all blown through previous records…So there are asset bubbles [occurring] all over the world.”

There is one final hard asset group which has yet to move into euphoric pricing John noted, and, “If you drew up a chart of all the hard asset investment options for the average member of the 1%…they would look at that chart and say, ‘OK, well my penthouse has doubled. My paintings are way up. My jewelry is way up. Well, look at gold and silver. It’s actually down. Let’s move some money in that direction.That’s the last good deal that’s out there on the list of things that are not fiat currency.’”

The fact that precious metals have yet to move into a bubble-phase according to John, “Implies that gold and silver are being really aggressively manipulated at this point and the reasoning for that makes complete sense—the central banks of the world need to depress gold and silver because those are forms of money which compete with the dollar and the euro in the end. When they go up, they make those currencies look bad.”

As a consequence of the ‘monetary truth-telling’ aspect of gold, “The central banks of the world…as part of the process of greatly expanding government debt, and financing that debt with newly created currency…have to use some of that currency to push down the value of gold and silver and they’re doing it,” John added, “So at some point in the not too distant future, this game has to end and when it does…the market [will] decide where gold and silver should be…[and] they will just snap right back into [price] alignment with art and jewels and high end real estate…or we’ll see a [supply] default on one of the major metals exchanges…”

As a final comment to investors, John noted that if confidence, “[Is] shaken in one major currency, it will be shaken in all of them…Once [the people] figure it out the game is over…[and we’ll] have to go back to some form of sound money. That’s really the end result of all of this—is that we will go back to gold and silver…something that cannot be inflated away [and] cannot be created in infinite quantities by central banks.”

This was a powerful interview, conducted with an author and researcher who’s work is mainly reserved exclusively for asset managers worldwide. It is required listening for serious investors and market students.

To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to your desktop:

>>Interview with John Rubino (MP3)

To learn more about John Rubino and to follow his regular work visit:DollarCollapse.com

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Thanks,
Tekoa Da Silva
Bull Market Thinking


Hackers have stolen usernames and passwords for nearly two million accounts at Facebook, Google, Twitter, Yahoo and others, according to a report released this week.

The massive data breach was a result of keylogging software maliciously installed on an untold number of computers around the world, researchers at cybersecurity firmTrustwave said. The virus was capturing log-in credentials for key websites over the past month and sending those usernames and passwords to a server controlled by the hackers.

….more HERE

“Another massive nail in the dollar’s coffin”

imagesOn the other side of the world today, a couple of gentlemen that few people have ever heard of signed an agreement that has massive consequences for the global financial system. 

It was a Memorandum of Understanding signed by representatives of the Singapore Exchange and Hong Kong Exchange. Their aim– to combine their forces in rolling out more financial products denominated in Chinese renminbi. 

This is huge. 

Hong Kong and Singapore are THE two dominant financial centers in Asia. For years they’ve been locked in competition with one another, much like New York and London. So their public partnership is a very big deal… indicative of the clear objective they have in front of them. 

Bottom line– finance executives in Asia see the writing on the wall. They can see that the dollar is in a period of terminal decline, and it’s clear that the Chinese renminbi is going to take tremendous market share away from the dollar. They want a big piece of the action. 

The renminbi has already surpassed the euro to become the #2 most-used currency in the world when it comes to trade settlement, according to a report released yesterday by the Society of Worldwide Interbank Financial Telecommunication (SWIFT). 

Right now the renminbi has about an 8.6% share of the global market for trade settlement. Granted, the dollar has the lion’s share of trade settlement at more than 80%. 

But just look at how quickly the renminbi has grown; in January 2012, its share of the global market was just 1.9%. So it’s grown by nearly a factor of 5x in less than two years. 

With today’s agreement between Hong Kong’s and Singapore’s financial exchanges, that growth will likely accelerate. 

As we’ve discussed before, the dollar is in a unique position simply because it is the world’s dominant reserve currency. 

This means that when a rice distributor in Vietnam does business with a Brazilian merchant, they’ll close the deal by trading US dollars with each other… even though neither nation actually uses the dollar. 

It’s been this way since World War II, simply because there has been such a long tradition of trust in the United States, and a steady supply of dollars throughout the world. 

But this confidence is fading rapidly as merchants and banks around the world have been seeking alternatives, primarily the Chinese renminbi. 

As the dollar’s market share in international trade decreases, it will mean the end of US financial privilege. No longer will the US be able to print money without repercussions. 

And as so many other nations have learned the hard way, when you print money with wanton abandon and indebt your nation to the hilt, there are severe consequences to pay. 

Today’s move between Hong Kong and Singapore gives us a glimpse into this future. 

We’ll soon see more financial products– oil, gold, Fortune 500 corporate bonds, etc. denominated in renminbi and traded in Asia. 

And as trade in these renminbi products grows, the dollar will be closer and closer to its reckoning day. 

Years from now when this has played out, it’s going to seem so obvious. 

Just like the post-Lehman crash in 2008, people will scratch their heads and wonder– ‘why didn’t I see that coming? Why didn’t I recognize that it was a bad idea to loan millions of dollars to unemployed / dead people?’ 

Duh. Same thing. People will look back in the future and wonder why they didn’t see the dollar collapse coming… why they didn’t recognize that it was a bad idea for the greatest debtor nation in the history of the world to simultaneously control the global reserve currency… 

The warning signs are all in front of us. And today’s agreement between Hong Kong and Singapore is one of the strongest signs yet.

 

 

Until tomorrow, 
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Simon Black 
Senior Editor, SovereignMan.com