Some eclectic Thanks giving Day reads to express your gratitude:
• Five economic trends to be thankful for (Washington Post) • Be Thankful for blog posts like this one: The facts of investing life (Monevator) • Joe Weisenthal is really thankful for Bill McBride of Calculated Risk (Business Insider) • Be thankful you understand Why Technical Analysis Matters (All Star Charts) • Refinancing? Be thankful for this: Fed Still Trying to Push Down Rates (WSJ) • Be thankful Jack Welch is Retired! Jack Welch Is An Even Bigger Dick Than You Previously Believed (BusinessWeek) • Be thankful for Lord Skidelsky and Carry On: Inequality is Killing Capitalism (Project Syndicate) • BE THANKFUL YOU DONT OWN ANY HP: Marc Andreessen was biggest proponent for Autonomy acquisition on HP’s board members (Breaking Views) • I’m thankful for NSFW: Marco Rubio’s Rap Preferences: A Lyrical Analysis (NSFW Corp) • Be thankful you live during a time when technology rocks: Software That Shows What Your Shiny New iPad Can Do (NYT)
• Birinyi: Sixth Myths About the Stock Market (MarketBeat) • 10 things stores won’t say about Black Friday (MarketWatch) see also Bionic Mannequins Spy on Shoppers to Boost Luxury Sales (Bloomberg) • HP’s Accounting Claims Are Seen as Cover for Bad Deals (Bloomberg) see also H-P Says It Was Duped, Takes $8.8 Billion Charge (WSJ) • The Making Of A Great Contraction With A Liquidity Trap and A Jobless Recovery (The National Bureau of Economic Research) • Wall Street Kept Winning on Mortgages Upending Homeowners (Bloomberg) see also Mortgage Settlement Monitor “Progress” Report Gooses Numbers to Hide Lack of Real Relief to Homeowners (Naked Capitalism) • Apple and the Desire for Control (Bits) • Todays WTF Headline: Republican-Heavy Counties Eat Up Most Food-Stamp Growth (Bloomberg) see also The Confederacy of Takers (Washington Post) • You Can’t Say That on the Internet (NYT) • Modern wheat a “perfect, chronic poison,” doctor says (CBS News) • After Obama, Christie Wants a G.O.P. Hug (NYT) see also Conservative Republicans fight back after Romney loss (Washington Post)
Wow, this is a rather surprising data point: “From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.”
It is even more surprising when you consider its source is the usually conservative Investors’ Business Daily! Here is a longer excerpt:
Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.
In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.
If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn’t risk backfiring. That’s why the best way to address the fiscal cliff likely is to postpone it.
Earlier this year, Goldman Sachs’ Peter Oppenheimer said that compared to bonds, US stocks were the cheapest in 50 years.
If Peter is correct, that could be good news for your gold stocks, because there is an ongoing correlation between the Dow and most gold equities.
Unfortunately, Goldman also believes that the fiscal cliff situation could drive stock markets 8% lower by year-end.
You are looking at the daily chart for the Dow, and you can see that it made a small top in mid-September. It has declined about 8% from the high.
Gold stocks are more volatile than the Dow. GDX declined about 18%, during the period in which the Dow fell 8%. There is a lot of symmetry between these two charts.
If the Dow is set to fall another 8% from the lows of last week, GDX could fall another 18% from its recent lows. That would put GDX at about $37, and below the May-July lows.
Some of the largest gold companies are already trading near their summer lows, which is somewhat alarming.
If you own a home, it is wise to purchase home insurance. If you own gold stocks, carrying some cash and short positions is a form of insurance. That’s the daily chart of DUST, which is effectively a triple-leveraged bet against GDX. The performance is calculated on a daily basis. I’m a buyer, moderately, in the $28 and $22 areas.
What would happen to gold stocks, if Goldman Sachs is correct about the Dow falling another 8%, and then they called for an even harder fall, instead of a rally?
The situation could get quite ugly. A small position in DUST may help gold stocks investors to professionally manage fiscal cliff fear.
Gold recently sold off along with the other so-called “risk on” markets, but it bottomed quickly. The daily chart shows a nice head and shoulders bottom pattern in play.
The daily gold chart looks superb. The H & S pattern sits near the demand line of a beautiful rising channel.
HSR (horizontal support & resistance) at $1758 is the initial upside target, and then $1800. A “price pop” to the $1825 price zone could be a game changer for gold stocks.
Silver looks even better than gold. Yesterday’s price action was important, because it took silver above the neckline of a head and shoulders bottom.
At this point in time, gold has yet to rise above its neckline, so silver is clearly the leader.
Silver seems eager to race to $35.50, and if gold can rise above $1800, that could catapult silver into the $40 range.
There’s more good news. Ben Bernanke makes a speech in New York today, and he may give more hints about ramping up QE3. Currently, QE3 is being “diluted”, because the Fed is selling short term Treasuries.
There are rumours that the Fed may cut back on that practice, or even halt it, before the end of the year. If “Big Ben” speaks boldly about ending the dilution of QE3, gold and silver could spike higher, very quickly.
Most investors in the gold community like speculative resource stocks. If you are looking for action, my favourite play right now is the “Global X Gold Explorers” fund.
At about $8 a share, the GLDX ETF is something that is probably priced “just right”, for action-oriented investors. In contrast, GDXJ is trading at about $22.
It’s a lot easier to look down from $8, than it is from $22. Aggressive investors should considering accumulating GLDX on every 25 cent decline, inside the highlighted $7-$9.75 “price box”.
I like both GDXJ and GLDX, but there’s no question that GLDX is a lot easier to handle, emotionally.
A move above $1800 in gold could be the catalyst that takes GLDX above $10. From there, the target would be $13, which is about 50% higher than today’s price!
The love for gold has been reignited in India, according to the World Gold Council (WGC) in its Gold Demand Trends for the third quarter of 2012. India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounceback in demand due to improved sentiment during the festival season.
Compared to the third quarter of last year, Indian gold jewelry demand grew by 7 percent while gold bar and coin demand rose 12 percent. Total consumer demand was 223 tons, compared to 205 tons this time last year. The second largest market was Greater China, which consumed 185 tons in the third quarter of 2012. This was less than the 201 tons consumed in the third quarter of last year.
Together these markets in the east made up 55 percent of the world’s jewelry and investment demand, according to the WGC.
Although India experienced a setback earlier this year when gold shops boycotted a proposed tax on the yellow metal, imports recovered by July “as inventory levels were bolstered (aided by a well-timed dip in the local price) and the market adjusted to the customs duty,” says the WGC.
The third quarter has historically been a strong seasonal time for the Love Trade to come alive in the east. Monsoon rains and the festival season in the fall are generally associated with the buying and giving of gold. Still, for the year, don’t expect the Love Trade in India to be as strong as it was in 2011, as gold demand remains subdued with the ongoing weakness of the rupee.