Wednesday, May 9, 2012

How you can know "beyond a shadow of a doubt" that Treasurys are in a bubble

What are the classic signs of an asset bubble? People piling into an asset class to such an extent that it becomes unprofitable to do so.
Treasury bonds are so overbought that they are now producing negative real yields (yield minus inflation):

That’s right, after taking into account inflation, many investors in treasuries are standing over a drain and pouring their money down it. 
And so America’s creditors are now getting slapped quite heavily in the mouth by the Fed’s easy money inflationist policies.  (more)

Jim Sinclair: Gold Price Has Bottomed

from Silver Doctors:
The legendary Jim Sinclair opines on today’s vicious sell-offs in gold and silver, stating that Alf Fields is correct that the gold price has bottomed in this reaction.
Sinclair states that “there is a global stock market sell off today which is totally unacceptable as it pertains to the US market in an election year. Liquidity floats all boats and all boats are screaming for that liquidity today.”
From Jim Sinclair: “Today has been interesting in a perverse way. I have heard from every gold short who knows my name. I have heard from every weak gold holder that knows my name yelling for help. This time I cannot answer all the incoming communications. Nobody could.”
Read More @

Why Gold Stocks Suck

“Gold stocks suck,” said fellow newsletter writer Eric Coffin in a presentation at the recent Cambridge House Investment Conference in Calgary. I could not agree more.
Let’s review the fundamentals to understand why his words ring true.
Most micro-cap resource stocks were immersed and have stayed underwater since a sector-wide high in early March 2011. The Toronto Venture Exchange Index, which serves as a good proxy, is down 43% from that period of time. Weakness in the resource sector has occurred despite record or near-record prices for most commodities in 2011 and continuing high prices into the second quarter of 2012.
Reasons for the decline in junior exploration and mining stocks are many:
• The Japan earthquake and tsunami in mid-March 2011 resulted in a significant downturn of the world’s third largest economy and substantial damage not only to the uranium industry but to the entire resource sector. Some mining operations have been substantially affected by delays in delivery of heavy equipment from Japanese manufacturers.
• Private placements in Q4 2010 and Q1 2011 became free-trading and began hitting the market four months before the summer doldrums started. Professional investors and speculators
essentially front-ran the old adage, “Sell in May and go away.”  (more)

Turning Hard Times into Good Times

5/8/2012: Are We Entering a Cyclical Bear Market for Gold?

RIG has been in a channel down since March

Transocean (NYSE:RIG) — On Aug. 4, 2011, with the stock at $54, the Trade of the Day identified a breakdown in RIG’s chart and recommended selling with a target in the mid-$40s.
RIG hit that area in October, and then proceeded to form a bottom. But the rally ran into trouble in March at $58 and has been in a channel down ever since. Last week, it failed to penetrate its 50-day moving average, and on Thursday, fell under its 200-day moving average.
Sell RIG at the market or use bearish option strategies. The downside target is $38 to $40.
Trade of the Day – Transocean (NYSE:RIG)

Chart of the Day - Chubb Corp. (CB)

The "Chart of the Day" is Chubb Corp. (CB), which showed up on Monday's Barchart "All Time High" list. Chubb on Monday posted a new all-time high of $74.40 and closed +1.21%. TrendSpotter has been Long since April 2 at $69.80. In recent news on the stock, Bernstein on May 1 upgraded Chubb to Market Perform from Underperform and raised the target to $71 from $58, citing improving industry pricing and valuation. Chubb on April 19 reported Q1 EPS of $1.70 versus the consensus of $1.52. Evercore on April 17 downgraded Chubb to Equal Weight from Overweight on valuation and slower industry growth. Chubb Corp, with a market cap of $20 billion, is principally engaged in the property and casualty insurance business.


One of the cheapest places in the world to buy agricultural land…

Long-time readers know that I’m unabashedly bullish on agriculture. The supply and demand fundamentals for food speak for themselves, but let’s briefly review:
On the demand side:
1) World population isn’t getting any smaller for now. Even some of the most Malthusian models show a continued rise in global population for the next few decades until peak resources and economic conditions begin to thin the herd. In the meantime, demand for basic sustenance will continue to rise.
2) More importantly, millions of people in the developing world are being lifted from poverty into the middle class. More wealth means demand for more Calories. Not only does this increase general food demand, but often specific demand for things like beef which require far greater resources to produce.
On the supply side:
1) While industrial farming techniques and genetic modification have dramatically increased productive yield, cultivated land is on the decline. The UN Food and Agriculture Organization estimates that, over the last several decades, cultivated land per capita has declined by 43% worldwide.  (more)

Speculators Return To Build Bullish Positions In Most Precious, Base Metals Markets - CFTC

(Kitco News) - Speculators returned to building their bullish exposure to most precious and base metals futures and options contracts as prices rose toward the end of April, according to U.S. government data released Friday.

Speculators added to bullish positions in gold, copper, platinum and palladium in both the legacy and disaggregated weekly commitment of traders reports released by the U.S. Commodity Futures Trading Commission for the week ended May 1. In silver, however, speculators continued to whittle away slightly at their net-long position.

A rise in prices across the board aided the speculators move; however, after the timeframe ended, prices retreated into the end of the week, meaning any fresh long positions put on became losing hands.

For the week covered by this CFTC report, Comex June gold futures rose $18.60 to close at $1,662.40 an ounce on May 1. July silver gained 46.1 cents to $31.276 an ounce and Nymex July platinum rose $24.20 to $1,572.30. Nymex June palladium rose $15.25 to $681.05 an ounce, and Comex July copper gained 16.25 cents to $3.8435 per pound.  (more)