M4 Support

Where the ‘smart money’ thinks precious metals are headed

Posted October 4, 2011 at 1:41 am

The sharp drops in precious metals prices have seen a big reduction in commercial net short positions on COMEX for gold – and particularly for silver – showing where the smart money thinks precious metals prices are headed.

by Lawrence Williams

Some encouragement for the beleaguered silver investor may come from the latest CFTC figures on COMEX commercial net short positions for the precious metal.  

The figures as at Tuesday 27th September showed silver net short positions plunged to the lowest level since November 2008 – the point where the silver price started its runup from a little over $10 to almost $50 achieved at end April this year.  

Silver has since fallen back, at one time to around $26 but is currently, at the time of writing, a little over $30.80 an ounce.

Gene Arensberg’s Got Gold report has published an extremely interesting graphic plotting the COMEX commercial net short positions against the silver price which is reproduced [continue}…

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Is gold’s bubble going to burst soon?

Posted September 22, 2011 at 11:42 pm

by Charles Sizemore

World stock markets are down this morning on renewed worries of a Greek default.   Adding fuel to the fire, President Obama’s proposal to levy a new tax on millionaires—dubbed the “Buffett Rule” after being suggested by billionaire superinvestor Warren Buffett—has drawn a sharp rebuke from Congressional Republicans and threatens to unleash more political instability on a crisis-weary public. 

And U.S. homebuilders, citing the effects of never-ending foreclosures, are even more despondent than feared according to the National Association of Home Builders survey released this morning.

With the finance world appearing to teeter on the edge of disaster, one might expect that standby crisis hedge—gold—to rise.

Yet a funny thing happened this morning.  The price of gold actually fell sharply.

The spot price of gold has continued to drift lower after surging to new all-time highs above $1,900.  As this article is being written, the price has fallen to $1,783 and appears to have lost all momentum.

Gold’s recent weakness comes even as competing crisis hedges have lost their luster.  The Swiss National Bank took a sledgehammer to the Swiss franc two weeks ago, pledging to lower its value against the euro.  The tactic worked, sending the franc down nearly 10%. U.S. Treasuries—considered by many to be the ultimate safe haven for their liquidity—now yield far too little to be attractive for most investors.  The 10-Year note yields a miniscule 1.95%.

Gold’s recent action should be deeply disturbing to gold bugs or to [continue]…

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The biggest energy breakthrough since fire

Posted September 12, 2011 at 3:57 am

by William Pentland

For the past several months, a friend of mine has been telling me about the potentially game-changing implications of an obscure (at least to me) metal named Thorium after the Norse god of thunder, Thor.

It seems he is not the only person who believes thorium, a naturally-occurring, slightly radioactive metal discovered in 1828 by the Swedish chemist Jons Jakob Berzelius, could provide the world with an ultra-safe, ultra-cheap source of nuclear power.

Last week, scores of thorium boosters gathered in the United Kingdom to launch a new advocacy organizing, the Weinberg Foundation, which plans to push the promise of thorium nuclear energy into the mainstream political discussion of clean energy and climate change.

The message they’re sending is that thorium is the anti-dote to the world’s most pressing energy and environmental challenges.

So what is the b-f-d about thorium? [continue]…

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A top new safe haven currency

Posted September 12, 2011 at 3:45 am

by Josiane Kremer

Norway’s krone will gain further as investors “desperate” for protection against a deepening European debt crisis turn to one of the few haven markets that isn’t overvalued, said Deutsche Bank AG, the world’s biggest currency trader.

The krone rose more than any other major currency against the franc on Sept. 6, when the Swiss National Bank said it will defend a target of 1.2 against the euro with “utmost determination.” As Swiss efforts to shut the door on franc appreciation force investors to turn elsewhere, the krone will be one of the currencies to fill the vacuum, said Henrik Gullberg, a London-based strategist at Deutsche Bank.

“There is a desperate need for safe havens and the krone is an obvious candidate,” Gullberg said in a phone interview yesterday. “The krone is not significantly overvalued, which is another thing that is attractive.”

The currency has lured investors drawn to Norway’s 10.5 percent budget surplus of gross domestic product last year, the biggest of all AAA rated sovereigns. Norway boasts Europe’s lowest unemployment rate and has been shielded from the worst of the global economic crisis thanks to its oil output.

Income from the energy industry is stored in the country’s $540 billion oil fund, helping support the world’s lowest risk of default, as measured by credit default swaps.

The central bank today warned it would [continue]…

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Ten reasons for investors to look on bright side

Posted September 6, 2011 at 3:23 am

by Brett Arends

Maybe everything is about to fall apart. Maybe the Dow Jones Industrial Average is heading back to 6,000. Maybe those of us who survived Hurricane Irene — which brought a devastating, er, breeze and light drizzle to central Boston — should be piling up the sandbags and setting up the shutters for the real hurricane about to come out of our financial system.

After all, all the problems remain. Europe is bust and so are we, economically and politically. The system is a house of cards. Equities remain expensive by some measures. We may well be heading into another recession — assuming, for the sake of argument, that we ever really left the last one.

In Washington and Brussels, political attempts to fix the various crises look about as ordered as this.

But everyone is already so bearish. And you get nowhere in this game agreeing with the consensus.

So while my head is still deeply skeptical, my heart wants to see the silver linings to all these clouds [continue]…

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4 Factors That Will Drive a 2nd Half Rally

Posted September 2, 2011 at 1:04 am

by Matt Nesto

It will likely be years before those in the Northeast experience an earthquake and a hurricane in the same the week again (which is fine by me as my home is still dark).

By the same logic, it will likely be many years before we experience another 2-week pop in the stock market comparable to what we’re experiencing now. In fact, stocks are on track for the best 2-week gain on the S&P 500 since July 24, 2009, when the benchmark index was striving to close above the key psychological level of 1000 again.

Whether or not a floor or support has been set at 1100 remains to be seen. But for now, the next proving ground is to the upside 1250, which is already sending signals that it’s not in the mood to be messed. Just look at today’s instantaneous 1% rally on stronger-than-expected ISM Manufacturing data, which had the staying power of ice cream in the sun. The jobs number tomorrow will face similar challenges if it comes in with upside surprise.

Yet somehow, something is going to bust us through that level and carry the S&P 500 back to 1350, according to Doug Cote, Chief Market Strategist at ING.

“We think the 2nd half is going to be stronger,” this former hedge fund manager says, predicting that four key factors will lead an economic growth recovery and market rally.

Cote says “corporate earnings, manufacturing, consumers that are in better shape then commonly believed, and emerging markets” will allow his 2.5 – 3.5% second-half growth outlook to become reality.

He’s also counting on President Obama (and Congress) to [continue]….

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Why are Investors Dumping Active Mutual Funds for ETFs?

Posted July 14, 2011 at 2:06 am

by Tom Lydon

Some of the most celebrated mutual-fund firms and managers during the go-go 1990s in stocks have been felled by the credit crisis as investors grow increasingly disillusioned with most active managers’ failure to beat their benchmarks after fees and taxes.
 
For example, some of the worst performers in the first half of 2011 in large-cap diversified funds included high-profile names such as Bruce Berkowitz, Ken Heebner and Bill Miller. [Vaunted Stock Pickers See Funds Lag Market]
 
Bill Miller’s Legg Mason Value Trust recently look a loss of more than $500 million on Eastman Kodak (NYSE: EK) shares — a losing position it had held for years, according to reports. [Investors Miffed with Underperforming Funds Migrate to ETFs.]
 
This week, Janus (NYSE: JNS) shares have been under pressure on [continue]…
 

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“I would not be surprised if stocks double or tripled in the next 5 years.”

Posted July 11, 2011 at 3:55 am

by Moses Kim

It seemed like only a week ago when permabears were predicting the appearance of a new bear market that would take out the lows of 2009. The variables all seemed to be there: Greek debt crisis, inflation from higher commodity prices, and worsening economic data in the U.S. Most economic observers believe these kind of variables lead to lower stock prices. As you can clearly see, this is not the case.

There will be a lot of buying pressure in stocks due to: 1) the flight to liquidity, and 2) the attempt to hedge against inflation. As long as bond yields remain incredibly low, stocks are a viable investment option, even for retiring Boomers who have been brainwashed into believing there is some magic bond to stock ratio you must follow as you age.

Such rubbish!

Every era is different: sometimes you have good leaders, sometimes bad leaders; sometimes you are on a gold standard, sometimes you are not; sometimes taxes are low, sometimes they are high. You must use your common sense or risk losing all your retirement savings.

I have consistently said that there won’t be another stock market crash along the lines of what we saw in 2008.

The positive correlation between [continue]…

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Sovereign Debt to Drive Gold Prices

Posted July 7, 2011 at 1:36 am

Massive sovereign debt issues will drive gold prices through 2011-12 making gold and gold miners a strong buy Shayne Heffernan said today.

The sovereign debt challenge, now the top priority for many advanced economies to tackle, is broader than in the euro area, said Christine Lagarde, the newly- appointed managing director of the International Monetary Fund ( IMF) on Wednesday.

“The issue is broader than in euro zone,” Lagarde said at her first press conference as the new head of the 187-member international financial institution, citing that the debt crisis in Europe, particular in Greece is “immediate” and “pressing”.

Moody’s warned that Lisbon could not meet the reform requirements of its first 78-billion-euro (112 billion U.S. dollars) IMF-European Union bailout and would need a second rescue package.

Meanwhile, Greek fiscal condition remains in danger. The European Union and the IMF are in intensive talks about the rescue plan.

Ireland, the other euro zone country to have received a bailout, said on Tuesday it may have to make additional spending cuts next year to meet deficit reduction targets in its 85 billion euro bailout plan due to economic slowdown.

These European countries’ fiscal deterioration could come to test the IMF’s commitment to eurozone stability.

“Those issues can not wait,” said Largarde. “A lot should be done by economy players.”

In the most recent International Monetary Fund projections, Italy’s headline debt will reach 120 per cent of national output this year, and then decline only slightly to 118 per cent by the end of 2016.

Italian bonds last week yielded about 4.9 per cent, with the spread over German bonds widening to about two full percentage points (in contrast, the Greek-German spread is now about 13 percentage points). Further increases in interest rates could push the forecasts for Italy’s debt toward Greek levels.

Italy, though, has close to 2 trillion euros in debt outstanding. It’s inconceivable that Germany or the IMF could provide a rescue to protect its creditors. Such a package would have to involve loans and guarantees of at least 500 billion, and possibly 1 trillion, euros to impress the markets. This would be a significant fraction of Germany’s gross domestic product of about 2.5 trillion euros. With a debt-to-GDP ratio of about 80 per cent, Germany’s ability to take on new debt is limited.

She noted that debt issue is a wide challenge for many other advanced economies, including the United States, which is also at the risk of default if the country could not lift its borrowing limit in time.

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

 

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Investment professionals have a new pitch: The sky could soon be falling.

Posted June 30, 2011 at 11:34 pm

by Azam Ahmed

Investment professionals have a new pitch: The sky could soon be falling.

While Greece took a step back from the brink on Wednesday, the possibility of a default remains a fear. Europe’s debt crisis, as well as natural disasters and political uprisings, are prompting investors both big and small to seek out investments that promise to protect their portfolios in the event of economic Armageddon.

Worried that Greece could go belly up? So-called black swan funds — named for rare and unexpected events — offer a way to profit in the event of a market collapse. Think a slowdown in the United States or China could set off a global economic crisis? New exchange-traded funds are popping up to help pad investor confidence.

Since the financial crisis, many investors have prospered from a rebound in the markets. But recent events have led some to brace for the worst.

“Clients are suddenly realizing the world isn’t as rosy as it’s been,” said Ahmed Fattouh, a hedge fund executive. “It makes a lot of sense to have these tail protections on.”

That is, protections against what Wall Street calls “tail risk” — a disaster that is estimated to have less than half a percent chance of happening.

Investors learned about tail risk the hard way. For decades, diversification – spreading holdings across stocks, bonds and other investments – was promoted as the way to protect investments from market crashes. But the financial crisis proved that seemingly unrelated assets could fall in unison.

As a result, an increasing number of investors now want protection for financial end times….

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