Friday, March 30, 2012

BRICS to change world economy

“The BRICS countries’ leaders are preparing for their annual meeting. These countries make up 42 percent of the world’s population and a quarter of its landmass. They are also responsible for 20 percent of the Global GDP and
own a whopping 75 percent of the foreign reserve worldwide. In these tough
times for world economics these countries are trying to find a solution for the situation. RT’s Priya Sridhar gives us a sneak peak of the summit from India.”

Martin Armstrong on the Sovereign Debt Crisis

The Hera Research Newsletter is pleased to present a fascinating interview with Martin A. Armstrong, founder and former Head of Princeton Economics, Ltd. In the 1980s, Princeton Economics became the leading multinational corporate advisor with offices in Paris, London, Tokyo, Hong Kong and Sydney and in 1983 Armstrong was named by the Wall Street Journal as the highest paid advisor in the world.

As a top currency analyst and frequent contributor to academic journals, Armstrong’s views on financial markets remain in high demand. Armstrong was requested by the Presidential Task Force (Brady Commission) investigating the 1987 U.S. stock market crash and, in 1997, Armstrong was invited to advise the People’s Bank of China during the Asian Currency Crisis.

Based on a study of historical gold prices and financial panics, Armstrong developed a cyclical theory of commodity prices, which lead to the pi-cycle economic confidence model (ECM), used to make long term forecasts. Using the ECM, Armstrong predicted both the high-water mark of the Nikkei in 1989, months ahead of time, and the July 20, 1998 high in the U.S. equities market, as well as a major top in financial markets on February 27, 2007. The ECM was called “The Secret Cycle” by the New Yorker Magazine and Justin Fox wrote in Time Magazine that Armstrong’s model “made several eerily on-the-mark calls using a formula based on the mathematical constant pi.” (Pg 30; Nov. 30, 2009).

Hera Research Newsletter (HRN): Thank you for joining us today. Considering the Federal Reserve swap lines and the European Central Bank’s (ECB) Long Term Refinancing Operation (LTRO), what’s the outlook for the Euro? (more)

Harry Dent : The Great Crash Ahead

March 28, 2012 : GoldSeek Radio's Chris Waltzek interviews interviews Economic Forecaster , Ny Times Best Selling Author and demographic expert, Harry S. Dent, Jr. This encompassing discussion touches on the chances for a global recovery, inflation, deflation, asset prices and Harry's prediction from a demographic standpoint of the stock market. Harry also makes a specific prescription for surviving the coming crash and even thriving through it.He also shares his predictions as to where the U.S. economy is headed in the next year.Harry Dent predicts the next crash. Understand how the European Debt crisis will hit the American, Chinese and global economies.

Eric Sprott - Mainstream Bashes Gold, But New Highs Coming

Today billionaire Eric Sprott told King World News the central planners are desperately trying to convince the masses that everything is okay. Sprott, who is Chairman of Sprott Asset Management, also said the mainstream media continues to bash gold. But first, he had this to say about the global economy: “I think it’s safe to say we’ve hit that ‘Minsky moment’ where the productive capacity of the country is not capable of paying off the debt. All we’re trying to do is push it down the road so maybe there is some luck and these economies will come to life.” (more)

Investing 101: The 4 Most Common Psychological Traps

It's been said of life that we are our own worst enemies, for the mindless decisions we make, as well as our frequent inability to learn from them. Nowhere is this more evident than on Wall Street, where this enemy from within has a way of making us too confident, too timid, too impulsive, and too staid - sometimes even all at once.

And so, for this installment of Investing 101, we highlight four key areas where your head can be the biggest obstacle to success as we tackle some dos and don'ts of market psychology.

Anchored in the Past

Oh how easy it is to pick winners with the benefit of hindsight. And yet, one of the biggest blunders investors make is the tendency to make decisions in the rear-view mirror instead of the through the windshield.

"There's always some big recent event that everyone anchors themselves on," says Russell Pearlman, sr. markets editor at SmartMoney magazine in the attached video. "These days everyone is anchored on all the bad stuff that happened in 2008."

Even though that particular fear, or any other fear may be valid, Pearlman says it has caused countless investors to either sit on the sidelines or seek the theoretical safety of Treasuries.

He's certainly not advising investors be cavalier about risk, but he is pointing out the pitfalls of paralysis, saying "what happened in 2008 should not be the be-all, end-all rationale for making an investment or not making an investment."

Confirmation Bias

This trait can be observed both on and off Wall Street and is perhaps the most pervasive mistake we make. As Pearlman says, "this is a behavior that all of us exhibit."

So what exactly is confirmation bias?

"This is seeking out information that confirms what you already know or want to believe," Pearlman says. Apple (AAPL) is a good example, given its meteoric rise and fervently loyal fan base. A mere mention of something critical about the i-Giant is almost certain to trigger an avalanche of counter-attack, rather than evoke a thoughtful debate. This mindset is dangerous and will ultimately hurt you.

The Thrill of the New

Perhaps it is our ever shrinking attention spans or simply the result of a growing stable of incredibly cool gadgets, but Pearlman sees danger in our infatuation with new stuff.

"Everyone loves new things," he says, "but that can work against you too."

The example he uses here is McDonalds (MCD), an unbelievably successful company and stock, that happens to also be in the old business of making hamburgers. The advice here is to be open to all ideas, not just ones tied to new things.

Overvaluing Experts

Our last mental trap that can trip you up is, in a way, a shout out to ourselves. At a time when more information from more places moves faster than ever, Pearlman says it is imperative that investors take some ownership in the decision-making process.

"We assume experts know everything," he says, "often in fields that they're not expert in."

This is in no way a slight to all authority or legitimate expertise, but rather a cautionary caveat to stay involved.

MU Shines on a Weak Day for Technology

Micron Technology (NASDAQ:MU) – This company is a maker of semiconductor devices, primarily DRAM, Nandi Flash memory, and other mobile computing products.

Credit Suisse analysts have an “outperform” on shares of MU, emphasizing the company’s continued execution of its strategy to diversify and upgrade its product line. Its 12-month target for MU is $12.

On Feb. 27, the stock jumped nearly 8% following the bankruptcy of a key rival, and creating a bullish “continuation gap.” Technically, MU has had high accumulation since the beginning of the year, it executed a golden cross (long-term buy signal), and recently flashed a stochastic buy signal.

Yesterday, the stock advanced while many other tech stocks declined. The technical target matches the fundamental target at $12.

Trade of the Day – Micron Technology (NASDAQ:MU)

Oil Declines as France Says Reserve Release More Likely

Oil declined as France said governments are moving closer to an agreement on a release of barrels from emergency stockpiles to curb price gains and U.S. equities declined.

Futures dropped as much as 1.2 percent after French Prime Minister Francois Fillon said the prospects of an accord between the U.S. and Europe on tapping strategic reserves are good. Equities opened lower on Standard & Poor’s statement that Greece may have to restructure its debt again and as concern grew about China’s economy.

“There are worries about the release of Strategic Petroleum Reserves putting some downward pressure on the market,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York.

Crude oil for May delivery dropped $1.08, or 1 percent, to $104.33 a barrel at 10:12 a.m. on the New York Mercantile Exchange. Prices are up 5.6 percent this year and set for a second quarterly gain.

Brent oil for May settlement decreased 75 cents to $123.41 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $19.08 to the West Texas grade. The gap was $18.75 yesterday, the widest based on closing prices in two weeks.

No ‘Miracles’

Consumers can “reasonably expect” a reserve release, Fillon said told France Inter Radio today. He said not to expect any “miracles” in reducing oil prices.

Yesterday, Industry Minister Eric Besson said the U.S. government had proposed a release, and Budget Minister Valerie Pecresse said France was waiting for a report from the International Energy Agency before making a decision.

The IEA, the energy adviser to 28 countries, coordinated the sale of 60 million barrels of crude and refined products last year after supplies from Libya were disrupted.

U.S. President Barack Obama and U.K. Prime Minister David Cameron discussed the move earlier this month. France will use its oil reserve only in coordination with other countries, Finance Minister Francois Baroin said on Europe 1 radio.

The Obama administration hasn’t made a decision and no specific action has been proposed, Josh Earnest, deputy White House press secretary. The option “remains on the table,” he said yesterday.

Oil has gained this year on speculation Western sanctions aimed at halting Iran’s nuclear program will disrupt Middle East shipments. Negotiations on the nuclear program will resume next month, the Persian Gulf nation’s foreign minister said.

U.S. crude oil stockpiles rose 7.1 million barrels in the week ended March 23 to 353.4 million, the highest level since Aug. 26, the Energy Department report showed. Gasoline inventories fell 3.54 million barrels to 223.4 million.

Is This Market Topping Out?

Stocks fell again Wednesday, for their worst day in three weeks. And the commodities markets had a very bad day, with gold, copper, and the energy complex falling throughout the day. The blame was placed on fears of a slowdown in global growth and a disappointing durable goods report.

In the afternoon, stocks rallied, taking back almost half of the losses, and the Dow Jones Industrial Average closed at 13,126, off 72 points, the S&P 500 fell 7 to 1,406, and the Nasdaq lost 15 points, falling to 3,105. Volume on the Big Board totaled 816 million shares while the Nasdaq traded 474 million. Decliners outpaced advancers by about 1.75-to-1 on both exchanges.

Analysts are always prone to blame a pullback on some tangible piece of news, like the durable goods report. But the report was disappointing only in the sense that it didn’t quite measure up to expectations. Analysts were looking for 2.9% growth and they got 2.2%, but that was up from a sharp drop in January.

The real reason for the decline was a technical one. After one of the stock market’s best starts ever, it is overbought and due for a consolidation.

The RSIs of the major indices are, with the exception of the Dow, in the high zone of the indicator. The S&P 500 is at 62, down from 69 just two days ago (70 is considered very overbought), and the Nasdaq is at 70, down from 75.66.

Dow Chart
Click to Enlarge
Russell 2000 Chart
Click to Enlarge

Trade of the Day Chart Key

But interestingly, the Russell 2000, a small-cap index, is only at 55.82, and the Dow is at 55.37. And so indices at opposite poles of investment quality are undervalued while the S&P 500 and Nasdaq are overvalued in terms of RSI.

The explanation is that the technology stocks have been leading the charge, bolstered by an overweighted Apple (NASDAQ:AAPL), which ran from $411 on Jan. 3 to $617 yesterday.

After such a run, it is ordinary for those stocks pulled along by Apple’s success to take a breather. Some market mavens are prematurely (I think) saying that the big run is over and that the remainder of the year will be spent sideways to down.

But most markets don’t end big bull runs with just one sector like technology blowing off the top. In fact, the normal pattern is for rotation to take each sector to its highest point and then blow off with a final rush for the small caps, like the stocks that make up the Russell 2000.

An avalanche of new issues is also characteristic of an impending top. Lately much has been made of a few new offerings that have done well like the debut of Annies, which rose 64% yesterday.

But these new IPOs are nothing compared to what usually accompanies a market top. And the big ones, like Facebook (rumored to come in late May), Bertelsmann (Europe’s largest media company), and Brazil’s Banco BTG Pactual are all coming within several months. Bloomberg estimates that there is about $28 billion in IPOs waiting to go public.

After the IPO and small caps hit their highs, there will be plenty of time to exit the market, say in the month of May. Hmm, sound familiar?

Chart of the Day - PNC Financial (PNC)

The "Chart of the Day" is PNC Financial (PNC), which showed up on Wednesday's Barchart "52-Week High" list. PNC Financial on Wednesday posted a new 13-month high of $64.79 and closed up 2.52%. TrendSpotter has been Long since March 15 at $63.00. In recent news on the stock, the Federal Reserve on March 13 accepted PNC's capital plan and did not object to PNC's plan to increase its dividend and adopt a modest share repurchase program. Raymond James on March 26 downgraded PNC Financial to Outperform from Strong Buy, but left intact the price target of $70, due to valuation and a lack of near-term catalysts. PNC Bank, with a market cap of $34 billion, is one of the nation's largest diversified financial services organizations, providing regional banking, corporate banking, real estate finance, asset-based lending, wealth management, asset management and global fund services.