Monday, April 9, 2012

MWW broke dramatically from six-month rectangle and is holding above 200-day moving average

Monster Worldwide (NYSE:MWW) — This online employment solutions company, which provides a network of websites connecting employers with employees, fell from about $25 in January 2011 to under $7 in October, and has been losing market share even though labor markets have begun to recover.

But a recent announcement of an intention to raise shareholder value and hiring Key Partners and Merrill Lynch to “help it review strategic alternatives” puts teeth into the announcement. Credit Suisse says that there are several possible moves that MWW could make, including a sale of a territory or a strategic partnership.

Earnings are expected to improve from a gain of 40 cents in 2012 to 50 cents in 2013.

Technically the stock broke dramatically from a six-month rectangle in late February, jumped through its 50-day and 200-day moving averages, and is holding above the latter.

Clearly, something is going on with MWW, and speculators may want to accumulate shares now.

Trade of the Day – Monster Worldwide (NYSE:MWW)

Embry: Gartman Inept, CNBC Wrong, Gold Demand off the Hook

from KingWorldNews:

With tremendous volatility in gold and silver, and oil holding well above the $103 level, King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry told KWN that bullion dealers are telling him phones are ring off the hook and demand is incredible. But first, here is what Embry had to say about recent events and what is happening in the gold market: “I think perhaps the most bullish thing I saw yesterday was that Dennis Gartman has pronounced the end of the gold bull market as a result of the Fed’s actions. Nothing could be further from the truth. Given Dennis’s unbelievably inept record at calling the gold price, in both directions, I regard this event as wildly bullish.

John Embry continues @

Gold Bugs Index In 4 Time Views

Prognosis: More Selling On The Way

Gold and silver took another beating today and all my chart views point to more weakness. Maybe the $400 level will provide some respite from the selling but I wouldn’t bank on it. When gold bugs start dumping their metals it normally gets a whole lot uglier before it gets better.

Here’s what Karen has to say about the Astrology for Gold:

From the standpoint of the astrology the metals will most likely move up from here but there is something about the miners that is different. Hades (represents miners) is moving into the 0 degree of Cancer on 4/17 and will conjoin the Fed Pluto and oppose the Fed Sun. This is the signature of a tug of war and there is a war brewing with the miners and the bankers. Paper money vs gold and silver, with the miners holding the cards since they can withhold supply and cause prices to move higher. The banks are the printers of money and are doing unscrupulous short selling of certain miners, very vicious and better to stay out of the cross hairs.

Total global debt is now over $190 trillion and more than three times global GDP

The biggest market in the world is the European Union and debt problems are still rippling through the global markets. It is apparent with the financial crisis that the global markets are tied together by large banks and interconnected trade. A problem in the largest market should be unsettling and the unemployment rate in the European Union is now at a 15 year high. The global debt problem was never really solved but papered over with extensions and banking trickery. The US has dealt with much of the debt issues by suspending major accounting rules and stuffing bad loans into the Federal Reserve like a Christmas stocking. The European Union is facing some challenges ahead and all eyes will be watching given the impact of contagion impacts. Greece was only a tiny sliver of the debt issues compared to the major debt restructuring that will be necessary for a large economy like Spain.

Unemployment in the European Union rising to higher levels

The European Union is facing a very problematic recession. The unemployment rate continues to climb:

eu unemployment rate

The unemployment rate now stands at 10.8 percent. Countries like Spain have an astounding 23.6 percent headline unemployment rate. The young in Spain are facing an unemployment rate above 50 percent which is stunning for a developed market economy. These kinds of structural issues cannot be peppered over with more debt. The issues facing the global markets are based on peak debt situations. Central banks like the Fed and the ECB are dealing with the crisis as if it were based on short-term liquidity issues. Like someone asking you for rent in the middle of the month when your paycheck will not come in until the end of the month. In this case, you know the income is forthcoming and will cover the requested payment. That is not what is impacting the global economy today.

Peak debt has been reached in many cases and when it hits markets are forced to deleverage and price discovery unfortunately is a necessary and painful process. To think that the European issues will stay isolated is unrealistic. If we take a look at our biggest trading partners we will find some familiar names:

top us export markets

Three of our top ten trading partners are in Europe. Not only is this the case, China’s two largest markets for selling goods are the US and Europe. If you look above, China is also a major trade partner with the US. If the crisis deepens further in Europe the rippling impact will be felt throughout the world just like when the crisis caught momentum in 2007.

Total global debt continues to grow

In 2002 total global debt was above $80 trillion. In 2010 that figure more than doubled to over $190 trillion. Looking at the below chart is stunning given that GDP is unlikely to support this amount of global debt:

total global debt

Source: Business Insider

Today the global debt to GDP ratio is over 300 percent. You will notice that as the crisis hit in 2007 GDP actually fell but total debt kept going up. Even as GDP recovered global debt continued to expand. It is hard to moderate the appetite of central banks seeking to transfer toxic assets from banking associates and removing any opportunity for real price discovery. Much of the price discovery is being shouldered by the citizens of each of these countries. The financial sector especially with the too big to fail has been sheltered at all costs.

Yet peak debt is hitting hard across the global markets even here in the US where our total debt just seems to keep going up and up. We are likely to reach another debt ceiling limit in 2012. We are already seeing that massive amounts of debt have a limit on what they can do for an economy and we are already seeing inflation on the cost of daily goods that Americans buy. Those that don’t bother shopping might say inflation is not bad but the average American with a $25,000 paycheck is feeling the pinch more and more each day.

Just look at our own government debt:

government debt

If we look at our own debt, it has gone from roughly $6 trillion in 2000 to a stunning $15.2 trillion. At some point people will collectively begin waking up and realize none of this debt will be paid back. Not exactly a pleasant realization.

Exactly Why This Time IS Different And the Fed Will Be Powerless to Stop What’s Coming

The following is an excerpt from my latest issue of Private Wealth Advisory. In it I lay out precisely why the coming Crisis in Europe will be THE Crisis I’ve been forecasting for the last 24 months.

Over the last two years, I’ve been caught into believing a Crash was coming several times. In some ways I was right: we got sizable corrections of 15+%. But we never got the REAL CRASH I thought we would because the Fed stepped in.

So what makes this time different?

Several items:

1) The Crisis coming from Europe will be far, far larger in scope than anything the Fed has dealt with before.

2) The Fed is now politically toxic and cannot engage in aggressive monetary policy without experiencing severe political backlash (this is an election year).

3) The Fed’s resources are spent to the point that the only thing the Fed could do would be to announce an ENORMOUS monetary program which would cause a Crisis in of itself.

Let me walk through each of these one at a time.

Regarding #1, we have several facts that we need to remember. They are:

1) According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans… the real leverage levels are likely much, much higher.) These are a Lehman Brothers leverage levels.

2) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

3) The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

4) Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)

So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

And all of this is occurring in a region of 17 different countries none of which have a great history of getting along… at a time when old political tensions are rapidly heating up.

As bad as the above points may be, they don’t even come close to describing the REAL situation in Europe. Case in point, regarding leverage levels, PIMCO’s Co-CIO Mohammad El-Erian (one of the most connected insiders in the financial elite) recently noted that French banks (not Greece or Spain) currently have 1-1.5% capital relative to their assets, putting them at leverage levels of nearly 100-to-1.

And that’s France we’re talking about: one of the alleged key backstops for the EU as a whole.

To be clear, the Fed, indeed, Global Central Banks in general, have never had to deal with a problem the size of the coming EU’s Banking Crisis. There are already signs that bank runs are in progress in the PIIGS and now spreading to France (see El-Erian’s comments in the article above).

I want to stress all of these facts because I am often labeled as being just “doom and gloom” all the time. But I am not in fact doom and gloom. I am a realist. And EU is a colossal mess beyond the scope of anyone’s imagination. The World’s Central Banks cannot possibly hope to contain it. They literally have one of two choices:

1) Monetize everything (hyperinflation)

2) Allow the defaults and collapse to happen (mega-deflation)

If they opt for #1, Germany will leave the Euro. End of story. They’ve experienced what comes from rampant monetization before (Weimar) So even the initial impact of a massive coordinated effort to monetize debt would be rendered moot as the Euro currency would enter a free-fall, forcing the US dollar sharply higher which in turn would trigger a 2008 type event at the minimum.

Moreover, we need to consider that the Fed is now so politically toxic that Ben Bernanke is literally going on the campaign trail to attempt to convince the American people that the Fed is an honest and helpful organization. Put another way, there is NO CHANCE the Fed can announce a large-scale monetary policy unless a massive Crisis hits and stocks fall at least 15%.

Finally, regarding my third point… if the Fed were to announce a new policy it would have to be MASSIVE, as in more than $2 trillion in scope. Remember, the $600 billion spent during QE 2 barely bought three months of improved economic data in the US and that was a pre-emptive move by the Fed (the system wasn’t collapsing at the time).

So given that the Fed will only be able to announce a large scale program in reaction to a Crisis, whatever it did announce would have to be ENORMOUS, a kind of shock and awe, attempt to rein in the markets.

Moreover, it would literally be THE LAST QE the Fed could hope to ever announce as political outrage from the ensuing Dollar collapse and inflationary pressures would likely see the open riots and/or the Fed dismantled (this has happened twice before in the US’s history).

In simple terms, the Fed’s hands are tied until a huge Crisis hits. And then, if the Fed acts it’s going to have to go “all in” with a massive program. If it does, we will still experience a Crisis, as the Dollar would collapse pushing inflation through the roof as well as interest rates (which in turn would destroy the banks as well as the US economy).

In simple terms, this time around, when Europe goes down (and it will) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are already leveraged to the hilt having spent virtually all of their dry powder propping up the markets for the last four years.

Again, this time it is different. I realize most people believe the Fed can just hit “print” and solve everything, but they’re wrong. The last time the Fed hit “print” food prices hit records and revolutions began spreading in emerging markets. If the Fed does it again, especially in a more aggressive manner as it would have to, we would indeed enter a dark period in the world and the capital markets.

Country GDP
European Union $16 trillion
United States of America $14.5 trillion
China $5.8 trillion
Japan $5.4 trillion
European Central Bank $3.8 trillion
Germany $3.2 trillion
US Federal Reserve $2.8 trillion
France $2.5 trillion
United Kingdom $2.2 trillion

Banking System Total Assets Total Assets Relative to GDP Total Assets Relative to Central Bank Balance Sheet
Europe $46 trillion 287% 1,210%
US $12 trillion 82% 428%

Again, this is not Doom and Gloom, this is reality.

India’s Jewellers End Gold Strike As Government Caves On Excise Duty: Pent Up Gold Demand To Be Unleashed

A month ago, after causing a spike in cotton prices following the imposition of an export ban, India promptly overturned said surprising move following a surge in protest from not only various trade local groups, but more importantly China, whose already razor thin margins would become negative if input costs soared even further. The whole process lasted about 72 hours from beginning to end. Days after, desperate to fund ongoing budget shortfalls, the government shifted its attention to price controls in a market it knew China would absolutely not mind to having the price kept artificially low – gold. What happened then was an announcement by the government to impose to levy an excise duty on unbranded jewelry. The response was swift – a countrywide strike among India’s jewellers who all went dark, crippling demand from one of the traditionally strongest gold markets in the world. And all this happening at a time when the wedding season is at its peak, with Akshaya Tritiya, one of the biggest gold buying festivals later in the month, making the period crucial for jewellers. As of hours ago, the Indian finance ministry has caved, and while it took three days to end the cotton export ban, it took three weeks to end the excise duty proposal, India’s Finance Minister Pranab Mukherjee said that the government would consider scrapping a budget proposal to levy an excise duty on unbranded jewellery. The result will be three weeks of pent up demand for precious metals being unleashed suddenly, likely pushing spot gold far higher, to where it would be had this latest artificial price control never been established.


US Weekly Economic Calendar

time (et) report period Actual forecast previous
MONDAY, April 9
None scheduled
TUESDAY, April 10
7:30 a.m. NFIB small-business sentiment March
-- 94.3
10 a.m. Wholesale trade Feb. -- 0.4%
10 a.m. Job openings Feb. -- 3.46 mln
wednesday, April 11
8:30 a.m. Import prices March 0.8% 0.4%
2 p.m. Beige Book
2 p.m. Federal budget March -$188 bln
thursday, April 12
8:30 a.m. Weekly jobless claims 4/7 357,000 357,000
8:30 a.m. Producer prices March 0.1% 0.4%
8:30 a.m. Core PPI March 0.2% 0.2%
8:30 a.m. Trade balance Feb. -$51 bln -$52.6 bln
friday, April 13
8:30 a.m. Consumer prices March 0.2% 0.4%
8:30 a.m. Core CPI March 0.2% 0.1%
9:55 a.m. UMich consumer sentiment April 76.6 76.2