Today 40 year veteran, Robert Fitzwilson, wrote the following piece
exclusively for King World News. Fitzwilson, who is founder of The
Portola Group, put together a fascinating piece which covers which
covers, “… which (asset) class performed the task of wealth preservation
that we all hope to achieve in these chaotic and potentially
catastrophic markets.” “Our last report dealt with the characteristics of a bubble as seen through a technology stock, Cisco, and the sentiment surrounding the choice of that asset. We thought it would be even more interesting to revisit the issue across a broad array of asset classes during the period from 1978 to 1980.
That period seemed to be the culminating phase for the various factors that shaped the late 1960s through the beginning of the 1980s. The table below shows the totals returns for these asset classes both before-and-after-inflation.
Robert Fitzwilson continues @ KingWorldNews.com
Luxury Yacht Down: What Happens When Central-Craning Goes Horribly Wrong
As Bernanke and Draghi carefully try to centrally-plan
navigate us mere mortals through this dismal period of market and
economic reality, we thought this clip was a perfect analogy for the
'heavy-lifting' job they are doing... and the likely outcome.Did Slaying The Knight 'X1000 Algo' Kill The Equity Markets?
Year-to-date, before the decimation that the Knight x1000 Algo wreaked upon the market, volumes had trended lower YoY but had not cratered. As the charts below suggest - in somewhat stunning technicolor - that since the Knight-algo was put-to-death, NYSE volumes have coincidentally plunged by 40%! Today's run-rate with an hour to go was the lowest of the year. For those that hang on the consideration that this is due to high-priced stocks and USD-volumes are stable - err, wrong answer - futures volumes cracked in half also (and that is a stable USD volume); The summer doldrums explains it - err, wrong answer - we are 20 percentage points below a normal summer-drop-off. The simple fact of the matter is, with retail suddenly the smart-money and exiting stage left (unable to trade this ridiculous market), it seems that losing one market-maker algo has almost halved trading volumes; what happens if GETCO ever goes down?
Ring The Bell: Treasury Debt Now Over $16 Trillion - A Modest Proposal
*Behind every small business, there’s a story worth knowing. All the
corner shops in our towns and cities, the restaurants, cleaners, gyms, hair
salons, hardware stores – these didn’t come out of nowhere. A lot of heart
goes into each one. And if small businesspeople say they made it on their
own, all they are saying is that nobody else worked seven days a week in
their place. Nobody showed up in their place to open the door at five in
the morning. Nobody did their thinking, and worrying, and sweating for
them. After all that work, and in a bad economy, it sure doesn’t help t... more »
Commodities: Until The Supply Comes We Are Not Going To Have An End To The Bull Market
All these guys are delaying or suspending or cancelling new supply which is
bullish. Until the supply comes we're not going to have an end to the bull
market and, certainly in agriculture, my goodness, inventories are near
historic lows, we have serious shortages of everything in agriculture
developing, including farmers. - *in Mineweb*
Related ETFs: PowerShares DB Agriculture Fund (DBA), United States Oil Fund
LP ETF (USO), iPath Dow Jones-UBS Cotton Subindex Total Return ETN (BAL),
ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (RJA),
SPDR Gold Trust ETF (GLD)... more »
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Money will seek refuge in many things during the Great debt crisis. Gold as
five star safe haven* will become increasingly popular destination.
Portable Durable Divisible Fungible A store of Value * Also known as money.
Hi Eric Always enjoy your offerings. Money in France leaving... It always
amazes me that those that make these decisions don't actually realize that.
Similarly in...
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A Lot Of Investors Do Not Trust The System Anymore
A lot of investors are in equities, in bonds, in gold and in real estate
for the simple reason they do not trust the system anymore. - *in Bloomberg
*
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
U.S. states' debt tops $4 trillion-report
How long before heavily indebted U.S. States try to implement their own version of the tax the rich? Headline: U.S. states' debt tops $4 trillion-report Aug 28 (Reuters) - America's 50 state governments owe $4.19 trillion, including outstanding bonds, unfunded pension commitments and budget gaps, according to a new report. At $617.6 billion, California had by far the biggest... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
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I'm PayPal Verified"Don't Count Your Hahnchen": 40% Chance German Court Does Not Ratify ESM
"Don't underestimate how close the Court verdict is"
is the warning that Morgan Stanley's European Research group sends out
in a note today. In their view, there is a non-negligible risk that
the German Constitutional Court will voice concerns about the ESM and,
potentially, also the fiscal compact on September 12. Given that the
EFSF is still in operation, given that the Court views the scope of the
German constitution as being exploited already, and given its record of
voicing concerns about European integration, MS sees a 40% chance that the Court bans Germany from ratifying the ESM treaty
(with major repercussions for financial markets), at least for now, and
while their base case is for ratification of both treaties, they
believe the market is not priced appropriately for the downside tail-risk of a possible 'no' verdict (and the asymmetric scenarios below).ECB's Asmussen 'Double-Speak' Confuses Algos But Rajoy Gets The Message
"Fix it Yourself" or "We've got Your Back"; "Crisis not done in three years" or "Euro is not in crisis";"Market is pricing in Breakup of Euro" or "Portugal Yields Back at Pre-Bailout Levels" Is it any wonder that EURUSD just blipped up 10 pips, on ECB Executive member Asmussen's confusing diatribe, and fell back now stranded like an upside down beetle. Of course, the key factor in the non-crisis is that
- *ASMUSSEN SAYS SPECULATION OF EURO AREA EXITS HINDERS ECB POLICY
- *ASMUSSEN SAYS STATES MUST SEEK EFSF HELP BEFORE ECB HELPS
- *ASMUSSEN SAYS THERE HAS TO BE CONDITIONALITY
Birinyi's 160% Annualized Performance Expectations For 2013
The high-pitched happy Hungarian is back - and this time he is serious. Laszlo Birinyi, the guru of gurus, who (back in January 2011 - as we noted here)
forecast the S&P 500 to be at 2854 by September 2013, now sees the
S&P 500 at 1500 by year-end (which looks mysteriously like yet
another of his famous ruler-applications). What is fascinating about
this oh-so-valuable prediction is that it implies Birinyi
believes 2013 is the year of all years - a 90% rally in the first 9
months according to the newsletter-peddler - or a 160% annualized return. Trade accordingly.On Switzerland And The Mafia
A few weeks ago, western governments' war on productive people took an interesting twist when US immigration authorities detained two teenage children of an asset manager based here in Switzerland.
The kids were traveling through the United States by themselves to
visit extended family, and they were interrogated for six hours about
their father's business and whereabouts. During the six-hour ordeal,
the children were not allowed to contact family members who were
waiting for them, nor any sort of attorney or advisor. This 'guilty
until proven innocent' approach is the same sort of special treatment
reserved for suspected terrorists. The only difference is that you
don't end up in Guantanamo. Free societies do not treat people this way. Hell, most criminal networks don't even treat people this way. And while
it may raise a few bucks in the short run, in the long run it's
counterproductive. People adapt. They create underground, cash-based
economies. They leave. Foreign investors stay away.The End Of ECB Rate Cuts Or Draghi Against Weidmann To Be Continued...
Even in the unlikely case of a fiscal union, the conflict “Draghi against Weidmann”, between the ECB and the Bundesbank will continue for years.
The ECB mandate and many european inflation figures do not allow for
excessive ECB rate cuts or for state financing via the printing press,
but Draghi wants to help his struggling home country.Is Cashin Cashin' In On Obama?
The Chairman of the fermentation committee, Art Cashin, usually keeps a very apolitical, sober (metaphorically speaking at least) and cool head on, as all veteran traders should. Which is why we were quite stunned to notice that even the NYSE floor veteran may have finally crossed the Rubicon in his political observations. And if Art feels this way, one wonders just how the other Wall Street players, whose voices have far less need to be moderate, really feel...Spanish Bonds Slump Most In A Month As Europe Turns Red
The fulcrum security is bleeding; 10Y Spanish government bond spreads jumped 19bps today, the largest gain in almost a month, and are trading back above 525bps over Bunds (the worst in over three weeks). Even the front-end of the Spanish and Italian bond curves lost ground today - as the game of chicken between Rajoy and Draghi continues - with the ridiculous brinksmanship highlighting the entirely dysfunctional dis-union that really exists behind the scenes. European equity markets drifted lower all day, slammed lower after the US opened (with Germany's DAX underperforming - thanks to weak Autos - no surprise there for us), but bounced a little into the European close. EURUSD slumped 70 pips from its post-US-open intraday highs today - ending at 1.2500. Europe's VIX jumped back above 28% (from 21% just 10 days ago) - its highest in a month. Credit widened on the day, financials underperformed, and notably credit did not jump into the close like stocks did.
The U.S. Drought Is Hitting Harder Than Most Realize
This
is an important update on the U.S. drought of 2012, the combined
record-setting July land temperatures, and their impact on food prices,
water availability, energy, and even U.S. GDP. Even though the
mainstream media seems to have lost some interest in the drought, we
should keep it front and center in our minds, as it has already led to sharply higher grain prices, increased gasoline costs (via the pass-through of higher ethanol costs), impeded oil and gas drilling activity in some areas (due to a lack of water), caused the shutdown of a few operating electricity plants, temporarily reduced red meat prices (but will also make them climb sharply later) as cattle are dumped in response to feed- and pasture-management concerns, and blocked and/or reduced shipping on the Mississippi River. All this and there's also a strong chance that today's drought will negatively impact next year's Winter wheat harvest, unless a lot of rain starts falling soon.More Bad News Imminent: August US Auto Production Set To Plunge By Most In 16 Months
Over
the past several months, many pundits were scratching their heads at
the peculiar patterns in summer hiring and layoff trends, which threw
all NFP, claims, and JOLTs forecasts in a loop making a mockery of even
the best forecasters. The reality is that there was a very specific
reason for this abnormal seasonal pattern: numerous car plants worked
throughout the summer, avoiding traditional temporary shutdowns and
furloughs, in an attempt to provide an optical boost to the
Union-endorsed administration. And as always happens (see Cash for
Clunkers), every attempt to pull demand or supply from the future to the
present results in an eventual collapse in either of these two. Sure
enough, with June and July reaping the benefits of advance demand,
August is set be an absolutely abysmal month for US auto assemblies and
for Industrial Production. Because as Stone McCarthy calculates, based
on projections provided by Wards Autos, the U.S. motor vehicle
assembly rate for August is projected to decline by 8% to a 10.1
million annualized rate after rising by 4.4% in July. This would be the biggest monthly percentage decline in the assembly rate in about a year and a half, since April 2011's 9.5% drop.Negative Euro Headlines Are Back Sending EURUSD And Its Derivative, S&P500 To Day's Lows
As the Dow crosses 13000 and S&P crosses 1400 - the wrong way - the noise from Europe is picking up:*IMF SAYS IMPLEMENTING MEASURES A `MAJOR CHALLENGE' FOR GREECE
*IMF: No Request From Spain For IMF Financial Help
*SLOVAK PREMIER FICO SEES 5O% CHANCE OF EURO AREA BREAKUP
Bah, what does the Slovak premier know: it is not like he is a member of the Eurozone. Oh wait...
EURUSD has fallen 50pips from its intraday highs; Spain 10Y (+19bps to 525bps) is at 3-week wides.
Record EUR 'Longs' Suggest Caution Into Next Week
Last week we discussed in detail the shifts in regimes and positioning in the FX markets - most notably relative to the EUR. CitiFX is out with a note today that extends our concern as their proprietary CitiFX Positioning Indicator shows a rise from a record short in EUR in mid-July to a record long by last week. The EUR buying has been broad based and not just concentrated against the USD, with investors covering short exposure on pairs such as EURAUD and EURCAD. The shift in positioning came as peripheral spreads tightened and US yields fell, implying that it was kick-started by the surge in expectations for Fed and ECB easing. With equity markets roughly steady in recent days and data flow still relatively weak, this leaves the impression that the continued shift in FX positioning has been more about momentum than improvement in sentiment. This suggests that FX markets may be pricing in a higher degree of confidence on easing (or signs thereof) at the Jackson Hole conference and later ECB meeting. Given that absolute positioning for EUR is now long, this sets a high bar for policymakers to exceed and suggests risks are skewed in favor of a reversal on disappointment with Chairman Bernanke and President Draghi.
Gold Option Traders Most Bullish Since Bottom In October 2008
A new and important bullish indicator for the gold market is that gold calls are at highs not seen since the October 2008 low as option traders go long gold in the belief that it will go higher. It suggests that option traders believe that U.S. Federal Reserve Chairman Ben Bernanke will hint at or announce additional money printing and monetary easing at the Jackson Hole, Wyoming, symposium. Alternatively, it suggests that they are bullish on gold due to the risks posed to the dollar and the risk of inflation taking off. The ratio of outstanding calls to buy the SPDR Gold Trust versus puts to sell jumped to 2.69 to 1 on August 24th and reached 2.76 earlier this month, the highest level since October 2008, according to data compiled by Bloomberg. Ownership of calls is up 26% since the July 20th options expiry. Ten of the most owned actively owned ETF option contracts are bullish. Option traders are regarded as savvier and tend to be more sophisticated then the more speculative futures traders.Even 'The Rich' Aren't Buying This Rally
Despite the near multi-year record highs in stock indices, which have typically correlated tick-for-tick with the-wealthy-people's view of the world, today's Bloomberg Consumer Comfort index sub-data has a rather nasty surprise in its tail. Those earning over $100k, the highest bracket interviewed in their survey, saw their 'comfort' plunge to its lowest of the year - massively diverging from the incessant rise in equity markets (and its supposed 'wealth effect' transmission channel). This is the largest 4-week plunge in almost two-years.
More European Dis-Union: Finland Rejects Pooled Funds Required For 'Banking Union'
While ever so politically correct in their response and positive about the need to protect an ailing banking system, the Finns have said 'ei' - which means 'no' - to the pooling of funds.Posturing? maybe. Negotiating? perhaps. An unequivocal show of support for the kind of progress we all hoped was being made in Europe - not a single bit.Finland considers that the proposed directive is called for but does not support any national funding arrangements would be required to borrow funds for national funding arrangements in other member countries.
The Unintended 'Chronic' Consequence Of ECB Bond Buying
We
destroyed the myth that the LTRO would not in fact stigmatize bank
balance sheets when it was first introduced as the encumbrance was
evident from the start - though took the market a while to comprehend
and reprice (exuberant on the new-found liquidity optics). The
expectations that the ECB will embark on a new scheme of sovereign debt
purchases, implicitly funding governments - no matter how many times
they tell us that it is to ensure transmission mechanisms flow, have
three objectives or rationales, according to Goldman's Huw Pill: Easing private financing conditions through monetary expansion, Financing governments, and/or Reactivating private markets. However, there is one glaring unintended consequence of this 'aid' - the risk
exists that well-intentioned sovereign debt purchases result in
perverse incentives and a perpetuation of chronic fiscal and structural
problems (much as Bernanke's band-aids have eased the fiscal
pressure on our own government and led us further down the rabbit hole).
The lack of political legitimacy and blunting of incentives
for more fundamental consolidation and reform to take place can only
turn the acute pain of the moment in Spain into a truly chronic problem
for Europe as a whole - be careful what you wish for.
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