Wednesday, April 6, 2011

Marc Faber Expose on

I know a lot of readers here are fans of Marc Faber, but even if one is not, there are very few who can entertain like this man while offering his market views. While tagged as "doom and gloom" I generally find much of what he says very realistic - especially in the near and intermediate term. In the long run, we're all dead. If you are a fan, there is a quite lengthy expose on the man's career on which I found to be an interesting read. Unfortunately there is no video specific to the piece- much like Hugh Hendry, a story on this guy without an accompanying video is just a shame.

Click here for full story. Some snippets:

  • The thing about predictions is that if you make enough of them, eventually they’ll start to come true. Being a good enough prognosticator to hold the investor community’s attention most of the time is an entirely different matter. That’s what economist and market forecaster Marc Faber has clearly become. But even he isn’t perfect. His best prediction of all time, he says, was also the worst investment call he’s ever made. “That was the prediction that the tech bubble would burst,” which he made in 1998. “But it came two years too early.”
  • Identifying market lows is much easier than calling market highs, Faber believes.Bubbles always seem to blow up further than expected. “I have always underestimated the madness of the investment community,” he says.
  • In terms of timing, his best bet was to recommend selling stocks a week before the 1987 crash. But even that had more than an element of luck. “It was a coincidence that it happened a week later,” he admits.
  • Still, it’s those kinds of calls that have made Faber a favorite board member, panelist and prognosticator. Subscriptions to his monthly “Gloom, Boom & Doom Report” run as high as $1,500 per year, or $300 for an abbreviated market commentary.
  • “He sometimes gets it wrong,” Hong Kong-based writer Nury Vittachi notes, “but one doesn’t mind someone getting it wrong as long as they have taken a stance. It’s the people that don’t take a risk who don’t get any respect.”
  • His outspoken nature, and deep knowledge of the history of financial markets, have made him a popular speaker. TV anchor Bernie Lo, who has interviewed him since the early 1990s, says he is one of the most anticipated guests, generating a flood of emails and inquiries ahead of any appearance.
  • Faber is one of the few Asia-based experts who command worldwide attention. He ranks along with investment gurus Mark Mobius and Jim Rogers in terms of the attention his predictions get, Lo says, noting it’s standing-room-only to hear his addresses at investment conferences. “People love him,” Lo says. “He is entertainment and historical perspective, all in one package.”
  • Given a hectic travel schedule, Faber spends only a week out of every month at home, and three weeks on the road.
This is a hilarious outtake from the article:
  • The same kind of logic applied to his run on Wall Street, which began in 1970 at the firm White Weld & Co. with a role summarizing economic research to send to overseas offices, in the pre-Internet days. He got to know future U.S. Federal Reserve Chairman Alan Greenspan, who gave a briefing to the firm every two weeks. “At the end I was the only person attending because all he did was summarize the Wall Street Journal of the previous day,” Faber says.

Latest views:
  • Faber predicts now that the financial system will ultimately break down, and even forecasts that the current fad of printing money in the West will lead to World War III. In the meantime, own stocks, real estate and commodities, not bonds and cash, he recommends.
  • Among his favorite current calls: invest in natural gas, now very cheap, and Japanese stocks. Beware the U.S. stock market, particularly small- and mid-cap stocks. Gradually buy gold. Real estate is a bargain, though not in China and Hong Kong. Emerging markets are likely to continue to correct, and the U.S. dollar should gain.

Fastest-Growing U.S.-Listed International Stocks

Ranking | Company (Ticker) | Long-Term Growth | Country/Region
1 Silver Standard Resources Inc. (USA) (NASDAQ:SSRI) 570.0% Canada
2 China Ming Yang Wind Power Group Ltd (NYSE:MY) 218.1% China
3 Aurizon Mines Ltd.(USA) (AMEX:AZK) 201.0% Canada
4 Northgate Minerals Corporation (USA) (AMEX:NXG) 135.0% Canada
5 Lloyds TSB Group plc (ADR) (NYSE:LYG) 129.7% United Kingdom
6 Allot Communications Ltd. (NASDAQ:ALLT) 127.0% Israel
7 New Gold Inc. (USA) (AMEX:NGD) 112.0% Canada
8 Autoliv Inc.(ADR) (NYSE:ALV) 102.0% Sweden
9 MakeMyTrip Limited (NASDAQ:MMYT) 100.0% India
10 Korea Electric Power Corporation (ADR) (NYSE:KEP) 99.9% South Korea
11 Endeavour Silver Corp. (CAN) (NYSE:EXK) 78.0% Canada
12 Harmony Gold Mining Co. (ADR) (NYSE:HMY) 78.0% South Africa
13 E Commerce China Dangdang Inc (NYSE:DANG) 70.3% China
14 CTC Media, Inc. (NASDAQ:CTCM) 69.0% Russia
15 Aixtron AG (ADR) (NASDAQ:AIXG) 67.5% Germany
16 Golar LNG Limited (USA) (NASDAQ:GLNG) 65.0% Bermuda
17 Kyocera Corporation (ADR) (NYSE:KYO) 63.7% Japan
18 Silver Wheaton Corp. (USA) (NYSE:SLW) 61.0% Canada
19, Inc. (ADR) (NASDAQ:BIDU) 59.1% China
20 Yongye International, Inc. (NASDAQ:YONG) 59.0% China
21 Cemex SAB de CV (ADR) (NYSE:CX) 56.3% Mexico
22 Panasonic Corporation (ADR) (NYSE:PC) 55.6% Japan
23 Dr. Reddy's Laboratories Limited (ADR) (NYSE:RDY) 55.0% India
24 Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) 53.5% Jersey
25 Toyota Motor Corporation (ADR) (NYSE:TM) 50.0% Japan

Saudi Arabia Goes M.A.D.: Saudi Oil Minister Says Crude To Hit $300 If Turmoil Spreads To Saudi

The strategy of Mutual Assured Destruction has worked so well in the "developed" world (thank you Hank Paulson, Tim Jeethner, Clearinghouse Association et al), it is time to see it in application in the "developing." In an attempt to preempt US doubts about intervening (on the proper side) in the case of escalations in Saudi Arabia (and with the possibility of Yemen becoming a potential Al Qaeda hotbed rising by the hour, this is non-trivial) the former Saudi oil minister Sheikh Zaki Yamani told Reuters on Tuesday that "Oil prices could leap to $200 to $300 a barrel if Saudi Arabia is hit by serious political unrest." We are confident he was merely talking in a very, very hypothetical scenario. After all why scaremonger in a world in which everything is under control?

From Reuters:

"If something happens in Saudi Arabia it will go to $200 to $300," he said.

"I don't expect this for the time being, but who would have expected Tunisia?" he added.

Asked whether the United States was likely to succeed in cutting its dependence on Saudi oil, he said: "From the 1950s, American presidents have been saying this."

U.S. President Barack Obama last week proposed to cut oil imports by a third over 10 years.

Than again with math Ph.D.'s continuing to (front) run US stock markets, and unable to make the mathematical leap between $108 oil and a 4% full year GDP forecast by Goldman (soon to be cut to 1.5%), we are confident $300 oil will have no material impact on stocks, until such time as the Globex hikes margin requirements on the ES which will be the catalyst for the next market crash.

What the NYSE New Highs Are Saying About the Stock Market Rally

Today, we are reporting on the raw data for the daily NYSE New Highs. On this chart, a minimum of 100 is a very important level in a rally, and 150+ is what I want to see. 50 is neutral, and less than 50 is historically Negative.

(Reference information: This chart is only 1 of the 9 "Underlying Market Condition" charts that are posted everydayalong with our market signal models and charts. From those charts, an Underlying Market Condition matrix is posted that shows the daily number of Negative, Neutral, and Positive readings.)

So, what does this chart look like after the close on Friday?

On Friday, the NYSE New Highs came in at a high reading of 373. That was strong enough to prompt the question of "whether or not the New Highs were starting new trending rise pattern?".

So, what's the answer? If Friday's level can sustain itself, this could be the start of a new trending rise which would mean that the Bull market's rally will continue for weeks. This would be true if all 9 Underlying Market Conditions shown in our matrix remain net positive.

(We would like to, but we don't post the daily matrix of Underlying Stock Market Conditions on this free site in fairness to our paid subscribers. Thank you for your understanding.)

By Marty Chenard

Chris Berry: Lithium to Elevate Equities and Investor Mood

The Energy Report: You propose that development of lithium-ion batteries for electric vehicles (EVs) will drive increasing demand for lithium. But even assuming these new batteries, ultimately, have storage capacity of three, four or five times that of conventional nickel-metal hydride batteries (NiMH), they still have to be charged with power that comes from a source like coal, hydro, solar, wind, nuclear or whatever. My question is how do EVs alleviate the drain on resources? What's the benefit?

Chris Berry: You know that's a great question because it's one that a lot of people struggle with, me included. People say that with electric vehicles you're just trading dependence on oil for a dependence on coal or other dirty fuels to power your car. I don't see one form of energy winning over all others.

I think coal and nuclear will probably lead the way in powering electric vehicles and providing electricity in the coming decades. But there's definitely going to be a role for renewables, such as solar, to play in places like Phoenix, Arizona and hydropower in the northwestern United States, for example. One thing to remember is that, as the rise of the middle class in Asia continues, there certainly will be increased auto demand coming out of these countries, which means increased fossil fuel demand. This gets us back to your question, the net benefit of using EVs is resource sustainability and finding the right balance of baseload power sources. You can charge a battery from many different power sources; and, as battery technology continues to advance, so too will the power sources. But there likely won't be a singular winner.

TER: Does your investment theory assume that higher oil prices will spur development of lithium-ion (Li-Ion) battery technology?

CB: I think that's one of the keys but I'm not sure what the tipping point is; for instance, I don't know if it's $150 or $200/barrel. Higher oil prices are already filtering down to higher gasoline prices at the pump. As gas prices continue to rise, people start getting a little antsy and that filters up to politicians who can spur research and development (R&D) through increased funding on the Federal level. I just hope it's not a matter of too little too late, as development of Li-Ion battery technology is a global competition involving multiple countries throughout the world.

TER: What's being done now to advance lithium-ion battery technology?

CB: There's a global competition unfolding right now to own the next-generation battery technology. Four countries are the real players here. South Korea and Japan are producing Li-Ion batteries currently, while the United States and China are playing catch-up. The competition is focused on finding a battery chemistry around which you can build an entire industry. If you own the intellectual property, you can own the supply chain, which creates manufacturing jobs—something we've lost in this country over the past decades.

Currently, China is investing more in battery technology than any country—to the tune of hundreds of millions of dollars—even more if you consider its entire cleantech spending budget. In 2010, China invested $34 billion in cleantech research of which battery technology is a part. In the mid-1980s, the country created what it called the "863 Program," which still exists today under the Five-Year Plans it uses as a guide for economic policy. The 12th Five-Year Plan, by the way, which was just released is thought to be the "greenest" in China's history. That could say something about Chinese leadership's priorities. The 863 Program has a mandate to develop high-tech and cleantech industries; so, if you want to know what China is spending R&D dollars on and where it is focusing, looking at this data is a good start.

In the U.S., President Obama helped spur development of lithium-ion battery technology with the American Reinvestment and Recovery Act of 2009. To establish a battery-manufacturing base, $2.4 billion in grants was earmarked. The Argonne National Laboratory is also at the forefront of the research to find that next-generation breakthrough. Billions of dollars in grants have also gone to the private sector in the U.S. I've called this a 'Manhattan Project' or 'Cold War' because, really, we are trying to outspend and out-innovate foreign competitors to own this intellectual property. That's the name of the game going forward.

TER: As an investor, do you have a preferred type of lithium ore? Hard rock, brine or clay? Which is best?

CB: I'm not sure if one is better than the others; I think each deposit has its own pluses and minuses. Typically, brines are the cheapest from a cost-per-ton standpoint but it can take up to 18 months to produce the lithium. On the other hand, hard rock producers can adjust to a spike in lithium demand more quickly because they can increase the rate at which they mine the ore. But they have a higher—arguably the highest—production cost among any of these ore sources. Clay is right in the middle.

TER: Which lithium producers do you prefer?

CB: The four major lithium producers are working with the highest grade of known resources currently. On the hard rock side, Talison Lithium Ltd. (TSX:TLH) has its Greenbushes operation near Perth, Australia. It has 3.5%–4.5% lithium oxide, which is extremely high for hard rock deposits and is, in fact, the highest-grade lithium produced in the world today. That gives the company a distinct production economics advantage. Talison is an interesting story because it's the only pure-play lithium producer listed on an exchange globally. It came public through a reverse takeover of a small junior called Salares Lithium in Chile. As I mentioned, Talison is producing the highest-grade lithium in the world and because of that, it is supplying 75% of China's lithium needs—nobody else comes close.

On the brine side, the same can be said with Sociedad Quimica y Minera de Chile SA (NYSE:SQM; SN:SQM) in Chile. It produces lithium from the Salar de Atacama, an extremely high-grade brine lake. I know it can be controversial, but I prefer hard rock production due to the ability to scale to both size and demand more quickly.

TER: Talison's market cap is just under $500 million. That really sounds low considering it's the only public pure-play lithium company. From what I understand, it supplies one-third of the world's current lithium market. So what am I missing here, Chris?

CB: It's still a new story, relatively unknown. It has been public only for five or six months now, and I think the market may not understand the pure-play aspect of this company, which is extremely powerful. The other three major lithium producers globally are SQM, FMC Lithium Corporation (NYSE:FMC) and a specialty company Chemetall (Pty) Ltd., which is a division of Rockwood Holdings, Inc. (NYSE:ROC). All three of these companies trade on the New York Stock Exchange between roughly $50 and $80 per share but are known for the specialty chemical aspects of their businesses. SQM is a great example. It is a huge potash producer with lithium produced as a byproduct. Lithium accounts for just 8% of SQM's total yearly revenue and yet the company's one of the largest lithium producers in the world, even though the company views it as a byproduct.

So, the point with Talison is that it's the only one that owns this pure-play production space, has the highest-grade lithium in the world and is still in its public company infancy. As Talison continues to increase capacity and supply high-grade lithium to China (predominately), more and more people are going to find out about this. There's also additional exploration upside at the Salares 7 brines in Chile that it acquired in the reverse takeover of Salares Lithium. I think the stock is really undervalued given the stranglehold Talison has on the lithium space.

TER: Does Talison own its entire supply chain?

CB: Not currently. The company supplies two types of concentrates—one is a technical grade and the other a chemical grade. The technical grade is used in glass and ceramics, which account for 30% of global lithium demand. The chemical grade is what TLH sends to China for conversion into lithium carbonate for batteries. Talison has begun a scoping study to evaluate the possibility of building its own lithium carbonate plant.

TER: How much can Talison increase margins by owning a lithium carbonate processing plant?

CB: It's hard to say without knowing the capital costs. If the company can build and operate the plant with expenses of less than $2,800/ton to produce lithium carbonate (which sells on the open market for around $5,000/ton now), it could see some really healthy margins.

TER: So, at this point, Talison is more of a growth story than a value story?

CB: I think it's a growth story, but there is unrealized value here. The fact that Talison's customers are dependent on it for the quality of lithium the company produces, and also that Talison is not only selling 100% of what it produces but working to double production capacity, should only cement its place as a globally dominant lithium producer.

TER: I note that TLH has pulled back by almost one-third over the past three months. Was there any particular tipping point, or was this a technical issue? (Others also pulled back during that time.)

CB: With respect to Talison, I think it's likely a technical issue. The lithium space, in general, has had a few hiccups lately. Some interesting companies are still out there, however. One example is Western Lithium USA Corp. (TSX:WLC; OTCQX:WLCDF), a lithium clay explorer based in Nevada. It has a very large resource called Kings Valley in Nevada where it has produced battery-grade lithium in pilot tests as recently as late last year. That provides a high degree of confidence regarding any metallurgy issues.

The company is working on a prefeasibility study (PFS) this year and continuing to drill and increase the size of the resource. The good thing about lithium is that, unlike rare earths, the United States is not 100% dependent on lithium imports. There's plenty of lithium out there in stable geopolitical locales and Western Lithium's Nevada deposit is an example.

The questions are: What's the cost of production? What's the grade? Western Lithium has said it will be able to produce at just under $2,000/ton, which is slightly more expensive than the brines but a heck of a lot cheaper than the hard rock guys. This company is planning to be in production by 2014. It's doing all the right things to position itself to achieve this; so, Western Lithium has a great chance.

Another interesting early stage play is Rock Tech Lithium, Inc. (TSX.V:RCK; OTCPK:RCKTF; Fkft:RJIA), which is focused on hard rock lithium and rare metal deposits in Canada. The company has a historical resource that it's working to bring into NI 43-101 compliance by this summer. The location of the deposits and a wealth of historic drill data are two reasons this stock interests me. The whole lithium space has been under pressure recently as have many lithium juniors, but I think it's been a market overreaction more than anything specific.

One possible cause of the recent depressed stock prices could be that Galaxy Resources Ltd. (ASX:GXY) was planning on doing a $250M IPO in Hong Kong to increase its footprint in the lithium space but delayed it due to market conditions. I think that may have hurt the price of many of the lithium juniors more than any other reason.

TER: Do you expect Galaxy to proceed with its IPO this year?

CB: My understanding is that the company shelved it because market conditions weren't optimal. If things change, it may, but that's really a question that company management would be better suited to answer. I know Galaxy recently achieved production out of its Ravensthorpe deposit in Western Australia, which is a positive sign; so, perhaps the IPO can wait, as the company is now generating cash from the sale of its product. Galaxy also has done a joint venture (JV) with Lithium One Inc. (TSX.V:LI), which is another interesting company in that it has attracted the attention of not only a lithium producer (Galaxy), but also Korea Resource Corporation (KORES), GS Caltex Corp. and LG Chem Ltd. (KSE:051910; KSE:051915; OTC:LGCEY)—one of the largest battery manufacturers in the world.

TER: Considering the mindset of North American investors, is there something they're not seeing here? Because we're going to drive big vehicles, so perhaps we don't see the potential in these EVs?

CB: That raises a good point. I think there are certain psychological drawbacks to electric vehicles in this country today, and one of those is "range anxiety." It's the underlying question, 'If I get a Nissan Leaf and the battery dies after 75 miles, what do I do?' 'What do I do if I have to drive 300 miles?' That's why I think plug-in hybrids—those that have a small gas tank and an electric battery—are going to be more popular in the U.S., at least initially. I'm not sure if the size of the vehicle is as important an issue as finding the right battery chemistry that discharges more slowly and recharges more quickly than do current EV batteries.

TER: What about the concept of battery exchanges along the way where you might drive 75–100 miles and exchange that battery for a charged one?

CB: Absolutely. An Israeli company called Better Place is attempting to address this issue. What you mentioned in your question is essentially Founder Shai Agassi's business model. You drive and when the battery gets close to running out, you go to a depot and exchange it for a new one. Additionally, the company is working to set up a charging infrastructure and make its battery-switching technology and charging stations standard across different vehicle models.

You also raised an interesting point about infrastructure and battery-charging infrastructure in this country. I think this whole EV phenomenon is going to take place much faster in Asia, where the company's building its infrastructure from the ground up. In the U.S., there's a chicken and the egg problem. I'm generalizing here, but nobody wants to buy an electric car until they know there are ample charging stations and better battery chemistry in place. But governments and private industries aren't likely to spend, time, money and other resources building charging stations until they're confident there's enough EV demand out there. Ultimately, this is a multidecade phenomenon. Infrastructure buildouts are happening in places like Israel and Asia but, going forward, the real winners in this industry will own the entire electric vehicle supply chain—from raw material sourcing to battery manufacture to charging infrastructure. The race is on.

TER: Chris, I've enjoyed meeting you very much. This has been a tremendous pleasure for me.

CB: Me, too. Thank you.

Junior Gold Miners ETF in Bullish Coiling Formation

All of the action in the Market Vectors Junior Gold Miners ETF (GDXJ) since the March 7 high at 41.00 exhibits a series of higher lows juxtaposed against lower highs. In other words, the pattern is a contracting consolidation or coil formation.

As long as the very near-term series of higher lows remains intact by prices remaining above 38.60 on any weakness, the integrity of the pattern will remain intact and continue to put upward pressure on key resistance at 39.80-40.20.

A hurdle of 40.20 should trigger upside continuation that revisits 41.00 quickly. Conversely, a break below 38.60 should trigger a retest of the prior key pivot low at 37.69.

By Mike Paulenoff

Guess Whose Market Is A) Crushing Everyone Else's B) Cheap As Heck C) A Great Play On High Oil

We've touched on this a few times, but Citigroup's Andrew Howell is back banging the drum on the dirt-cheap Russian stock market.

You might not have noticed, but Russian stocks have been spanking all of the emerging markets over the past several months.


Image: Citi

Of course, the country's oil exposure has a lot to do with it:


Image: Citi

And despite the great returns, it's still cheap:

Energy stocks represent nearly 60% of MSCI Russia's market cap, versus just 15% in EM overall. To make Russia's PE more comparable to EM, we have created a new Russia "sector neutral" PE that assumes that Russia's sector weights are the same as in the EM index. Given that the energy sector PEs are so much lower than in other sectors, this increases Russia's overall multiple from 6.9x to 8.7x. Not as cheap as it was, but still a considerable discount to EM's PE at 10.6x.


Trina Solar (TSL) – Best of The Bunch

Trina Solar (TSL) and most of the solar companies have had a hard time gaining traction recently. With the cost of oil approaching $108 a barrel and the flap over nuclear energy, it would seem that this is a sector that could benefit.

Just a yesterday, Saudi Arabia announced their commitment to a $100 billion project focused on solar and alternative energy solutions.

Recent news:

Saudi Arabia, which holds one-fifth of global oil reserves, aims to pursue renewable energy and nuclear power to help reduce by half the crude and natural gas it burns now to generate electricity.

The country expects domestic power demand to triple over the next two decades and wants to develop a more sustainable mixture of energy sources, Khalid Al Sulaiman, vice president for renewable energy at King Abdullah City for Atomic and Renewable Energy, said at a conference in Riyadh today. King Abdullah City is the agency in charge of developing green energy.

“Saudi Arabia’s demand for petroleum products — demand for energy — is rising at a high and very alarming rate,” Al Sulaiman said in a speech at the Saudi Solar Forum. “Population growth and robust economic development and many reasons drive that demand.” The country currently gets almost all of its energy from fossil fuels, he said.

Below is our take on the stock. Fundamentals are strong and earnings keep on coming in. The main reason that the shares are stuck in a sideways pattern is the concern over the majority of earnings coming from Europe. That may have been true, but we see that will become more diversified as other countries add alternative energy requirements to their budgets.

Trina Solar (TSL)

Gasoline Prices and Sales: What They Tell Us About the Economy

What is the relationship between retail gasoline prices and the volume of gasoline sales? The first chart below shows the monthly data for U.S. Prime Supplier Sales Volumes, courtesy of the Depart of Energy's Energy Information Administration (EIA). The numbers are updated monthly with about a two month lag. The numbers are highly volatile and have a distinct seasonality, so I've added a 12-month moving average (MA) to facilitate our analysis.

The next chart includes an overlay of monthly retail gasoline prices, all grades and formulations. The retail prices are updated weekly, so the price series is the more current of the two.

As we would expect, the rapid rise in gasoline prices in 2008 was accompanied by a significant drop in sales volume. With the official end of the recession in June 2009, sales reversed direction ... slightly. But the 12-month MA of volume for the latest month (January 2011) is still about 10.3% below the pre-recession level. The dramatic rise in gasoline prices since last September has yet to be seen in sales volumes because of the 2-month lag. But the average of daily sales for January 2011 was the lowest January number in a decade.

The next chart adjusts the 12-month MA of sales volume for population growth based on the monthly Civilian Non-Institutional Population data from the Bureau of Labor Statistics, via the St. Louis (FRED repository. What we see here is that gasoline sales volume, on a per-capita basis, peaked in September 2009. In fact, our per-capita consumption of gasoline is slightly lower than it was at the end of the Great Recession.

What does this analysis suggest about the state of the economy? From an official standpoint, the Great Recession ended 22 months ago. But if we want confirmation that the economy is in recovery, gasoline sales is the wrong place to look.

Chart of the Day: S&P 500 P/E Ratio

April 5th 2011 Stock Market Recap with Gold Breakout

The market continues to trend sideways, a bullish act considering the move we have seen the last few weeks. Instead of working off overbought readings by selling off, we are working off these readings by moving horizontally. Add this to the markets continued ability to ignore any remotely negative economic news, and bulls have the best of both worlds.

Also, I have found it interesting how I am becoming, should I say, less surprised, when the market moves up on less than average volume. In a traditional market environment the last two weeks would be a huge flag that a reversal is inevitable. Not in today’s market though. Atleast the distribution day counts are still worth noting…

For those that care about weighting within indexes, check out the WSJ’s breakdown of the NASDAQ 100′s new weighting. In a nutshell, Apple is the sour flavor.

And for gold bulls, today was a beautiful day. Gold broke to fresh all-time highs, which means GLD had a great session. Analysis below. For me, I find individual gold stocks tough to play due to their unpredictable price swings. Personally, I stick to the 1x ETFs like GLD and GDX (gold miners ETF). For those investors who want to get more “in the action” though, consider UGL (2x Gold Bull), GG, EXK, IAG, GOLD, ABX, and EGO.

Stay frosty.

Trend Table
TrendNasdaqS&P 500Russell 2000

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

Roubini is predicting a hard landing for China's Economy after 2013

Nouriel Roubini sent out a note regarding China's growth.

I’m writing on the heels of two trips to China during which I met with senior policy makers, bank executives and academics, just as the government launched its 12th Five-Year Plan, intended to rebalance the long-term growth model. My meetings deepened my own impression and RGE’s long-standing house view of a potentially destabilizing contradiction between short- and medium-term economic performance: The economy is overheating here and now, but I’m convinced that in the medium term China’s overinvestment will prove deflationary both domestically and globally.

Once increasing fixed investment becomes impossible—most likely after 2013—China is poised for a sharp slowdown. Continuing down the investment-led growth path will exacerbate the visible glut of capacity in manufacturing, real estate and infrastructure. I think this dichotomy between the high-growth/inflation pressures of the next couple of years and growth hitting a brick wall in the second half of the quinquennium is far more important than the current focus on a “soft landing” amid double-digit growth. A number of local scholars close to policy circles agree that this is the biggest challenge of the next few years, as we’ve been saying for months.

Despite policy rhetoric about raising the consumption share in GDP, the path of least resistance is the status quo. The details of the new plan reveal continued reliance on investment, including public housing, to support growth, rather than a tax overhaul, substantial fiscal transfers, liberalization of the household registration system or an easing of financial repression.
No country can be productive enough to take 50% of GDP and reinvest it into new capital stock without eventually facing massive overcapacity and a staggering nonperforming loan problem. Most likely after 2013 [NBF Note : So this would be 2014 or 2015], China will suffer a hard landing. China needs to save less, reduce fixed investment, cut net exports as a share of GDP and boost consumption as a share of GDP.

Several Chinese policies have led to a massive transfer of income from politically weak households to the politically powerful corporates: a weak currency makes imports expensive, low interest rates on deposits and low lending rates for corporates and developers amount to a tax on savings and labor repression has caused wages to grow much less than productivity.

To ease this repression of household income, China would need a more rapid appreciation of the exchange rate, a liberalization of interest rates and a much sharper increase in wage growth. More importantly, China would need to privatize its state-owned enterprises so that their profits become income for households and/or massively tax SOEs’ profits and then transfer those fiscal resources to the household sector.

Michael Pettis at China Financial Markets thinks China's economy has already begun a slowdown. However Pettis does not think it will be a hard landing.