Stocks & Equities

Who Is ‘Better Than Buffett’ and ‘Richer Than Soros’?

Posted by Nicholas Vardy: The Global Guru

on Tuesday, 22 October 2013 22:23

Warren Buffett has a seemingly unassailable reputation as the world’s #1 investor.

Yet, even as Buffett has outperformed the S&P 500 over the past decade, the “Oracle of Omaha” has stressed that Berkshire Hathaway’s sheer size limits his ability to generate the eye-popping investment returns of his early days.

UnknownBy managing a much smaller amount of money, Wall Street legend Carl Icahn doesn’t have that problem.

Thanks to big bets on Netflix and vitamin maker Herbalife, Forbes magazine listed Icahn as one of the 40 Highest-Earning hedge fund managers in February 2013.

A month later, Icahn crept into the top 20 of the Forbes 400 and today he is the wealthiest man on Wall Street with an estimated net worth of $20 billion.

That made Carl Icahn richer than hedge-fund icon George Soros.

So Who is Carl Icahn?

While Buffett plays up his “white hat” avuncular, “awe shucks” Midwestern image, Carl Icahn wears the “black hat” among U.S. investment titans.

The Queens, N.Y., native had an unlikely start, earning a degree in philosophy at Princeton University and attending medical school at New York University before dropping out after two years. Icahn began his career on Wall Street in 1961 when his uncle got him a job as an options broker. In 1968, he formed Icahn & Co., a securities firm that focused on risk arbitrage and options trading. Icahn began doing small-time buyouts of individual companies in 1978.

By the 1980s, Icahn had developed a reputation as a ruthless “corporate raider.” He made a fortune for himself by launching hostile bids for company’s ranging from TWA to Uniroyal, Texaco and RJR Nabisco.

The World’s Top Activist Investor

With their names splashed regularly across headlines, activist investors have always been among the highest-profile investors around. But no one has a higher profile than Carl Icahn, whose name has become synonymous with titanic corporate battles for as long as most Wall Street veterans can remember.

Specifically, Icahn takes minority stakes in public companies and typically pushes for new management or the restructuring of the companies. In just the last 24 months, Icahn has taken positions in and then launched campaigns against 15 companies.

Icahn has had a particularly busy 2013, losing a high-profile battle to Michael Dell in his bid to buy the PC-maker. On August 13, 2013, Icahn announced via Twitter a stake in Apple. Apple shares surged 9% in the week after his tweet. Just recently, Icahn took to Twitter again to announce his latest investment, a 61.6 million share stake in Talisman Energy. He also announced he would seek a seat on the board of the company. The stock, which had been having a lousy 2013, jumped immediately.

Icahn’s Investment Philosophy

Despite his reputation as a corporate raider, Icahn describes his investment philosophy as value-oriented, “Graham & Dodd investing with a kick.” But unlike Buffett, Icahn’s philosophy is to get in and get out for a quick buck through a big stock buyback, asset spinoffs, or ousting the CEO — to help pop the stock.

Icahn looks for companies where the value of their assets far exceeds the total value of their shares, or market cap. He focuses on “hard assets” like real estate, oil reserves and timberland that are relatively easy to value and resell. With the notable exception of Apple (AAPL), he avoids high-tech companies that have to reinvent themselves each year.

Icahn thinks of himself a contrarian to the bone. He loves to buy at the worst possible moment, when prospects are darkest and no one agrees with him. As Icahn put it, “When you conclude something is really cheap, you’ve got to be willing to load up.” He also advises not to automatically believe what the market is telling you about value. “If you know you’re right, you have to stick to your guns,” Icahn said.

Icahn has a remarkable knack for picking the right targets and generates most of the ideas in his firm by scribbling on a yellow pad. With his fearsome reputation, as soon as a company attracts Carl Icahn’s attention, investors are almost certain to make money starting the day Icahn buys the shares. After that, it’s all about squeezing management to augment the inevitable gains.

With both Icahn and corporate America awash in cash, Icahn has said: “We’re at the top our game. There’s never been a better time to do what we do.”

Icahn: ‘Showing You the Money’

Icahn has expressed frustration in the past that his investment prowess does not get the recognition that Warren Buffett does. He has a point. From 1968 through 2011, Icahn grew the initial $100,000 he invested in his Wall Street firm at a 31% annual rate. Over the same period, the book value of Buffett’s Berkshire Hathaway grew by 20%.

That superior performance, however, came at the price of greater volatility. Icahn returned an annualized 24.53% over the past ten years, according to Morningstar. Buffett’sBerkshire Hathaway (BRK-B) rose by a mere 8.68% percentage annually over the same period. But Icahn’s investors had to endure a 79% share-price decline in 2008, compared with 31.8% drop for Buffett.

I recently revealed how you invest alongside Carl Icahn in the most recent issue of my monthly investment newsletter, The Alpha Investor Letter.

Icahn is having one of his best years ever in 2013, with this recommendation up 93.56% through Oct. 21.

By way of comparison, Berkshire Hathaway (BRK-B) is up only 30.31% year to date.

The bottom line?

If you are willing to endure the greater volatility for greater returns, investing alongside Icahn could be one of the best investment decisions you ever make.

To read my e-letter from last week’s Eagle Daily Investor, please click here. I also invite you to comment about my column in the space provided below my Eagle Daily Investorcommentary.

Sincerely,

nicholas-vardy-signature
Nicholas Vardy, CFA
Editor, The Global Guru

Subscribe to my Newsletter and Trading Services.
Follow me on Twitter.
Check out my Blog.

Crude Oil and Its Connection with the U.S. Dollar

Posted by Nadia Simmons: Sunshine Profits

on Tuesday, 22 October 2013 18:48

The recent months have been tough for the U.S. currency. Since July the greenback has lost 6% and dropped to a new eight-month low on Friday. Investors avoided the dollar, firstly after the Fed opted against cutting its stimulus in September and then as the budget spat in Washington pushed the country close to a default. Despite this decline, yesterday, the dollar pulled back from an eight-month low as investors awaited delayed U.S. jobs data.

Many investors think that the Fed will delay trimming its $85 billion-a-month bond-buying program until the economic impact of this month’s partial U.S. government shutdown becomes clearer. The Fed’s taper decision will ultimately be tied to the economic data. Therefore, this week all eyes will be on the crucial nonfarm payrolls report. The report was originally scheduled for release on Oct. 4, but because of the government shutdown, it will be released today. Analysts polled by Reuters expect payrolls to have increased by 180,000 in September, with the jobless rate steady at 7.3 percent. Therefore, a reading anywhere in the 160,000 to 190,000 range would probably be fairly neutral with respect to near-term U.S. dollar direction. Any signs of weakness may reinforce expectations that the Fed would hold off from scaling back its stimulus this year, pressuring the greenback. However, if it is a strong number it would suggest that the shutdown may have had only a limited impact and any strength in the jobs data could be used as an excuse to buy the dollar.

Taking the above into account, investors are probably wondering whether this report can have a positive impact on the greenback or not. When we take a look at the chart, we see that the dollar dropped to its new eight-month low in the previous week. What’s interesting, at almost the same time we saw a new October low in crude oil.

This relationship between the U.S. dollar and light crude has encouraged us to examine their connection in the short term. However, before we focus on this issue, let’s take a look at the long- and the medium-term crude oil chart to see if there’s anything on the horizon that could drive the price of light crude higher or lower in the near future. Let’s start with a look at the monthly chart of light crude (charts courtesy by http://stockcharts.com).

simmons october222013 1

On the above chart we see that crude oil dropped below the long-term declining support/resistance line based on the September 2012 and March 2013 highs (the upper black line). However, the breakdown below this line is not confirmed at the moment. Please note that despite this downward move, crude oil still remains above the long-term declining resistance line based on the July 2008 and May 2011 highs (bold red line).

From this perspective, the picture remains bullish.

Now, let’s zoom in on our picture of the oil market and see the weekly chart.

simmons october222013 2

Looking at the above chart, we see that the price of crude oil declined once again in the previous week and dropped below the October low. In this way, light crude slipped to a new monthly low of $100.03 and closed last week at its lowest level since June. Yesterday, we saw further deterioration and the price dropped below the psychological barrier of $ 100 and hit its new monthly low of $99.41 per barrel.

In spite of this drop, from this point of view, the situation is mixed, because light crude reached the important medium-term support.

As you can see on the weekly chart, crude oil reached the September 2012 top (in terms of intraday highs) in the previous week. Yesterday, light crude extended declines and almost reached the September 2012 top in terms of weekly closing prices. This support level may encourage oil bulls to act and if this happens, we will likely see a pullback to around $104. However, if this zone is broken, the next target level for the sellers will be close to $97, where the 50-week moving average intersects with the previously-broken neck level of the reverse head and shoulders formation.

Before we summarize our today’s essay, we have decided to examine the relationship between crude oil and the U.S. currency in the short term. At the beginning of the month crude oil prices were supported by a weaker U.S. dollar as commodities priced in the dollar became less expensive for holders of other currencies. Did this relationship remain in place in the following days? Let’s take a closer look at the chart below.

simmons october222013 3

On the above chart we see that at the beginning of the month the dollar was under selling pressure as a U.S. government shutdown began. These circumstances resulted in a downward move, which took the U.S. currency to its lowest level since February. At the same time, crude oil rose to its monthly high of $104.38, which confirmed a strong relationship between them. However, it seems that in the following days this negative correlation waned. Although there were several days in which a stronger dollar triggered lower prices of crude oil, we almost immediately saw an invalidation of this tendency. Additionally, on Thursday, the dollar and crude oil dropped together. In case of crude oil, we saw a new monthly low. What’s interesting, on the following day we also saw a new October low for the U.S. dollar.

Looking at the above chart, we see that a weaker U.S. dollar hasn’t always been so bullish for crude oil. Please note that a big part of the June-July rally in light crude coincided with higher values of the dollar. We saw similar price action in both cases in mid-June, in August, and then again at the beginning of September. It seems that in this period of time, a stronger dollar pushed light crude higher, not lower. What’s interesting, when the U.S. currency declined it usually triggered corrective moves in light crude in the following days. It was clearly visible at the beginning of September. Please note that the whole September-October decline in the dollar didn’t result in a rally in crude oil. Therefore, we can conclude that although there are short periods of time when the price of light crude is supported by a weaker dollar, overall, they have been positively correlated in the recent months. If this relationship remains in place and we see a rebound in the greenback, we will likely see a pullback in crude oil in the following days as well.

Summing up, although crude oil dropped below the psychological barrier of $ 100, we saw it reach the September 2012 top, which is a medium-term support level. What’s interesting, the USD Index dropped below the 80 level and also reached the medium-term support line. Therefore, it seems that further declines in both cases are quite limited.

Thank you.

 

Nadia Simmons

Sunshine Profits‘ Crude Oil Expert

Oil Investment Updates

Oil Trading Alerts

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons 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, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

iPad Deflection!

Posted by Mark Jasayko, CFA, Portfolio Manager

on Tuesday, 22 October 2013 17:49

McIver Wealth Management Consulting Group / Richardson GMP Limited
Apple’s Shares vs Apple’s 30-Bond Since May 3, 2013

I doubt that Apple is introducing the latest version of the iPad today to deflect other issues, but it probably helps that people are focusing on the product launch and not the performance of the 30-year bonds issued by the Company back in May!

I was reading Institutional Investor magazine last night and a story had mentioned that the bonds were down 17% since being issued to massive fanfare in May. Investors couldn’t get enough of the bonds as they perceived the puny-sized coupon of 3.85% in a Zero-Rate Fed World to be sufficient to compensate for the risks of holding the bond for the next three decades.

(Apple’s common shares have had a good month recently and are now up 15% since the bonds were issue in May)

To be fair, it is was subsequent decision of Ben Bernanke to utter the word “Taper” which broadsided the bond market, including the bonds of Apple Inc, and had nothing to do with the management of Apple itself.

However, the whole episode points to the risks of blindly buying an investment simply because of a high-profile corporate name and because of a relatively low interest rate environment. Apple can’t do much about the fact that the bull market in bonds which began in 1980 finally came to an end in the summer of 2012. A generation worth of tailwinds has now shifted to mild headwinds.

I wonder if the features of the new iPad are enough to ease the nuisance of being down 17% on a bond position in six months? Well, at least the holders of the Apple 30-year will be getting their first semi-annual coupon payment on November 4th at the whopping coupon rate 1.925%.

Neither Apple Inc. shares nor the Apple Inc. 30-year bond are held in the McIver-Jasayko Model Portfolios. Comments about these investments are not intended as advice and do not constitute a recommendation to buy, sell, or hold.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.

Bad News is Good News Again

Posted by Mark Jasayko, CFA, Portfolio Manager

on Tuesday, 22 October 2013 16:51

McIver Wealth Management Consulting Group / Richardson GMP Limited
US Non-farm Payroll – Monthly Job Creation Totals – last 6 years
US Labor Force Participation Rate – last 6 years

The U.S. Bureau of Labor Statistics September Non-farm Payroll Report missed expectations as only 148,000 net new jobs were created in the U.S. compared to 180,000 which was anticipated by economists.

The fact that both U.S. job growth and economic growth is sluggish is old news by now. However, it is interesting to compare this against the narrative earlier in the year which suggested that the U.S. was beginning to accelerate out of its doldrums. The fact that we still hovering around “stall speed” speaks to how eager the investment industry is to embrace hope before increased growth in the recovery is actually confirmed.

However, with this miss, the Fed Chairman Nominee Janet Yellen has another reason to maintain the current rate of money-printing via Quantitative Easing (QE). We are almost back to where we started before the implementation of QE3 in September of last year when the market was cheering poor economic statistics in that they would increase chances for stimulus which would bolster investment prices.

There is a growing and a nagging issue for Dr. Yellen though. The employment numbers of the last few years when contrasted against the mind-boggling magnitude of QE clearly question the efficacy of the policy. And, the September Non-farm Payroll report reaffirms that problem. Not only is job creation still below what we would normally expect in a garden-variety economic recovery, but the participation rate is still at Jimmy Carter Administration levels as it remained stuck at 63.2% from August to September.

So, is bad news good news? To the extent it prolongs QE and maintains a floor under equity prices it is. Beyond that, in the longer-term bad news is … bad news.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.

Michael Interviews David Bensimon

Posted by Michael Campbell & David Bensimon

on Tuesday, 22 October 2013 16:44

So where did I go for answers? When Michael Campbell asked that question a person he immediately thought of going to was David Bensimon as during an interview in October 2012 David forecast an immediate top for Gold at $1800 and sizable 20% drop to reach $1440 in mid-February. Gold did reverse right at $1800 and fell more than 10% over those 4-5 months. David then stated in his quarterly report to clients that the remaining distance from $1600 to $1440 was coming very soon with a possible extension to $1280, and Gold promptly collapsed all the way to 1320 in April. Back in October David also projected Silver to fall a dramatic 40% to $21 when most others were bullish. It took a bit longer than his February date, but Silver fulfilled his price target in April. [PolarView Special Report on Gold , April 2013]

So here is Michael interviewing David for his most recent thoughts on markets and what the outlook holds for the next few months and years

Michael Campbell: Let’s just start very quickly here with all their shenanigans thats been going on in Washington, obviously the world was watching it, but to me it was a lot of much ado about nothing. How does that factor in to your kind of analysis, or do you just say its not important?

David Bensimon:  No, fundamentals are always important. Remember the analogy I gave of the fundamentals telling us whether we’re going north to south and the technical can tell us where the intersections are. So certainly the shut down and the debt ceiling issue were both important and I will spend a moment on both of those.
 
The shutdown did have a moderate negative affect but not to a large scale and not long-lasting. It does have I think, a small silver lining in that it helped wake people up to the fact that a lot of what government does is not necessarily really useful stuff, but on the other hand there are a few things that Governments do that do have a useful and beneficial effect for society at large. The real story was as you know, the Debt Ceiling. There are three short points I’d like to make about that.
 
The first is it was astonishing to me throughout this whole summer week period of the Debate that they totally missed the most crucial issue. They were focused on a single tree rather than the forest as a whole. That is the decision on whether to raise the limit, or the the necessity of raising the limit, was really not the key point. All of the fear-mongering about what happens if you Default or don’t Default and the necessity of raising the limit misses the point that the key was to review spending so that you’re not at this limit. I’ll give a simple analogy that everybody can understand: You have a credit card that has a credit line and you go out and spend and indulge yourself buying whatever you want using up the whole limit. you don’t normally go back to the bank and demand they raise the limit because I want to keep on spending. You don’t get to raise your limit because you want to spend even more, the current solution is that you go out and cut your spending or generate more income. 
 
Governments do have several ways to generate more income, they can either raise taxes or take a bigger slice of the existing pie (with a lot of evidence around the world that doing that actually shrinks the pie), or they can hope to grow the pie and get a naturally larger piece of it. This brings us to the second point which is that the administration in particular made a lot of hype about the default and how even being late to pay some bill was going to Default everything. That was really overblown, and the reality is that Default, from a a very a strict point of view, only applies in the case of formal financial obligations like Treasury Bills and Treasury Bonds in relation to the interest or the principal that would be due on a certain date. If you don’t pay that well then sure you have defaulted on those formal obligations. But all of the discretionary domestic spending, which usually amounts to a promise to give some gift to someone who thinks they’re entitled to it,  includes commercial purchases, or regular invoices for things that Government needs and Government salaries. Sure, those are obligations but being late in a payment is not the same as being default on a Bond. 
 
The most important point really going forward is the third point. That is that the total amount of interest that is payable at the moment on the 16 Trillion dollars in debt by the US federal government amounts to about a 400 Billion Dollars a year. That is about 2 1/2 % effective average interest cost on that existing debt. Of course that covers the whole spectrum from practically 0% at the short end which rolls over very frequently and higher interest rates at the longer end in which has been outstanding for some time and doesn’t roll over quite as frequently. Or on average it is about 2 1/2% amounting to about  $400 Billion.
 
Now that $400 Billion is about 1/10th of total spending. So they’re their sending out about $4 Trillion Dollars a year and only taking in about $3-31/2 Trillion, so there their interest is about 1/10 of the total. The problem is not right now, and this is why  I wrote in my most recent report at the beginning of October, I actually wrote that I did not expect there to be any default and that I did expect that they would kick the can down the road by finding a solution to raising the limit because its too early yet. The US government for all of its problems is not actually at a crisis point in terms of ability to pay what they owe. That there was no danger yet of having an involuntary crisis of a real default. That’s not to say that is not going to happen, and I do think that by the time we reach 2017 – 2022,  which is really only 4-8 years down the road, what you are going to find is that if interest rates move up to an average cost of 5%, which is still below historical levels, and outstanding debt rises to about 20 plus Trillion you’re going to find that 5% of 20 Trillion is a Trillion dollars a year in interest. At that point it is no longer going to be Guns or Butter, it will be neither Guns or Butter as everything gets sidetracked to pay that interest. 
 
Eventually it crosses a threshold where it triggers a runaway effect of just a inflating that amount of Debt, inflating that amount of interest and the Dollar collapses.  Eventually there will be a real crisis but we’re not at that point right now. We’re still in a normal phase, it was dealt with, they’ve kicked the can down the road so we can focus on the markets themselves. We can focus on normal life but in a somewhat later part of the decade we will have to deal with the real crisis. 
 
MC: David you’ve let into my next question, you were the first analyst talking about the revival of the commodity sector. I’m talking about in the late 90s you talked about a prosperity driven bull market in commodities, obviously correct. Now we have virtually all commodities, just a few exceptions, in significant downtrend moves. If you look at their charts they are clearly going downstairs. Bottom line is the commodity bull market over?
 
DB: The short answer is no, and I think that over the past year particularly we’ve seen Gold adhere to a rhythm extraordinarily well. The reason that that’s important is that we can identify where we are in that rhythm and how that will play out based on the confidence that it is adhering to a particular pattern. I stood in Vancouver in one of your events, I think The Evening With Mike Campbell in October 2012, at a time when the market was incredibly bullish about Gold. We were bumping up to $1800, everybody was lifting their horizon to $2000 plus looking for a new highs, and I stood there and I said no,  $1800 was going to be the top and it was going to fall 20 % over the next 4 to 5 months with an initial target of $1440.
 
The market in fact did reverse directly at $1800, and fell about 15 %, but didn’t quite reach the price level by the end of that time period. In that next report when we were at $1500 still, I said that in that particular case in the structure that was evolving price was more important than time.  Its not always the case but in that case it was, and that we had another 20 % to fall from $1500 to the secondary level at $1280 on the 14th of June. A few weeks later when we gave the next presentation at your Gold Summit I said that the downtrend was intact, the targets were intact that we would very likely reach $1280 on schedule in June. Sure enough the market did tag the $1280 level on the 21st of June for a total of about 30 % down from the $1800 level, a 500 hundred dollar drop in Gold. 
 
Screen Shot 2013-10-23 at 5.55.13 AM
 
Over the next few days it stretched a little bit lower reaching $1180 on the 28th June, a date which everybody’s familiar with. But whats important is right on the day when we reached $1180 I did the calculations, because you always have to reassess whenever you reach new intersections, or new levels or new developments, I did the calculations and I discovered that $1180 on precisely 28th of June was at an important and very significant juncture of support. So I issued a new a Special Report on Gold, the first in a new series, which said that it could potentially be the bottom of the market, or at the very least it would be a base that would give us a very strong recovery. Even if later we had to come back to test it. 
 
At that point, at the end of June, it was a very sure a high confidence point that it was going to rally, that it was going to jump at least $150 to $1330. A couple of weeks later it extended up to $1350 with the next timing window on the 26th of July. The market in fact reached $1350 precisely on the 23rd of July and then fell back halfway. 
 
Now at that stage, precisely on the 23rd of July, we again reassessed the market and I wrote in a new report that the market was in a no man’s land. So I gave several scenarios, that if market was triggered by certain movements above a level, or movements below a certain level that would invoke a scenario in that direction. Specifically I said that if it went above that $1350 – 1360 area it would move all the way up to 1440 on the next timing window of 30th of August. 
 
It’s important to note that timing windows are independent of polarity, that means from a pure timing perspective 30th of August could have been a high or it could have been a low depending on which way it was trending, but if it happened to be going up in it would turn out to be high. The forecast was it would reach $1440 on the 30th of August and we got pretty darn close with $1433 on the 28th of August, a few dollars shy and a couple of days early.
 
The next report, again to help your audience understand where we are in the rhythm, I identified the fact that from that high at $1433 the market had to consolidate within – between upper and lower bounds. $1430 being the upper edge, and $1300 being the lower edge with the center of that zone being $1365 as it tried to decide whether the bottom at $1180 in June was the real bottom or whether it needed to make a lower low. In fact the market did immediately plunge right back to $1300 and  even poked a little bit below before bouncing up to where we are here at around $1320 or so.
The most recent report that I’ve done on on Gold was part of the Quarterly Series at the beginning of October so many people asked me about Gold and Silver that I a extracted those sections into their own separate Reports unique to each market. The conclusion that I drew is that the structure of the market, having gone up in its very clear ABC pattern, the bottom line on Gold from this point forward is I am now very Bearish. The point is that so long as the market is below that midline at $1365 you have to treat it from a bearish perspective. If the market were above 1365 you would have to treat it from a bullish perspective, but you can really only confirm those very large a eventual movements once you break free of the triggers. So in the down by case its below $1300. In the upside case its $1430, but I am Bearish, and even more so for Silver. 
 
Now you might remember when I stood there last year when I said that Silver was going to drop 40% from $35 to $21, I can distinctly remember the audible gasp from the audience when I said 40%. But the fact is that silver is a volatile market, the scale of movement going up over the decade was 1150 % and there were several cases along that way when you went down by 40% or more and even since the 2011 we’ve had several instances of a 40 % drop. 
 
So it’s really not I out of the ordinary scope for movement in a market like silver, the point though is that from the recent high at $25 I do think that there is the risk of another 40% drop. In fact even a little bit more to a particularly strong juncture of support during this fourth quarter, on a particular date at a particular time. Although I have to save something for the clients, I will give a hint to your audience, as I know that some like to play with the numbers, Silver has been adhering to a really nice Lucas rhythm. Now Lucas is that that series of numbers, 4, 7, 11, 18 etc. that are similar to Fibonacci numbers, but is those key numbers, 4, 7, 11, 18 which helped me find the magnitude of movements in Silver and that will give you a hint on where it’s going. That said, although I’m bearish near-term for these two months on Gold and Silver,  I’m still very bullish for the following several years to new record highs on both those markets. 
 
Of course in order to look at the details of what kind of price we can look for, for each step along the way going up we need to first turn the corner. Of course in order to turn the corner we have to first reach the termination point. We need to be cognizant of the risks of going down for the next couple months but we can have some degree of confidence that they are going to turn the corner and go up for several years. 
 
MC:  David this is going to be a nightmare for you, can you give me the one-minute on Oil?
DB: Oil had a had a great recovery between 2008 and 2011 from $32 up to $115. Since then it has been moving sideways, down and up and down and up, essentially moving across a channel. The key about that channel, about any channel, is that the market can reach it by falling either fast and deep or slow and shallow. You have to look for the key price levels from where that channel will cross. In the case of Oil the normal 3/8, 1/2 and 5/8  retracements  would have been $64, $74 and $84. Well we got $64 originally, then we got to $74 in the first slide down in 2011. But that channel has now moved above those levels and that leaves one window, one important window of opp  ortunity to tag $84 in December of this year as the channel crosses that level. 
In my report from the beginning October was that we would fall 20 % from $104 to $84, we’ve started that move down to a $100, I think that’s going to continue over the next couple of months.
MC: Where are we in the Stock Market’s?
DB: You might remember just the day before we did your Gold Summit, the S&P 500 had reached a then record high of 1687 and I did a special report that called for a 130 points collapse from that 1690 to 1560 and that is exactly what happened over the next couple of weeks. A continuation of that scenario was for the market over the next several months to move in a contracting triangle. In a subsequent report I highlighted that if the market moved above 1680 it would negate that consolidation zone and instead invoke a somewhat more bullish scenario that had a first level of resistance at 1730. The market did in fact reach precisely 1730 on the 19th of September, and in the latest report the current scenario is that I favor the Stock Market moving higher. Again because I didn’t expect any real problem with the defaulting and that it would move higher until late October. In fact what we have seen between Gold and the S&P lately has been a very inverse relationship. That’s not the case all the time throughout history but for recent months we’ve seen some inverted behavior. When Gold goes up the S&P goes down, when Gold goes down the S&P goes up. At the moment the preening windows at the end of October and somewhat later, these are a representing tiny Windows that are joint timing windows in opposite ways for the S&P and Gold. So in the same way then I’m expecting intermediate lows for gold I’m expecting intermediate highs for for the S&P.  But once we reach the levels of resistance that are somewhat higher than where we are over the next couple months, I do expect that the market will consolidate and pull back from there. That said I am very confident that we’re going to be 2014-15 & 2016 very bullish for stock markets globally and I and at that point we re-synchronize Gold and the S&P so that they are able to move up together. At the moment we are still in this transition phase and they will be moving in opposite directions.
 
MC:  I always enjoy reading what David is writing, it is so thorough and unique. On the radio and even in person it’s hard to to do justice to the depth to the methodology that David is using but he’s done a wonderful job summarizing what he sees going forward. If you want more from David just go to PolarPacific.com.