Monday, June 11, 2012

Bonds are the biggest bubble in history says Marc Faber

Marc Faber, the publisher of the Gloom, Boom & Doom report, speaks with Bloomberg’s Sara Eisen about European stocks, a US treasury bubble, gold and a coming worldwide recession.

He contrasts the low yields on US bond with companies that offer dividends of five to seven per cent, although that said stocks are just entering a bear market and so are not a buy just yet. Gold is heading back up and gold mining shares are very inexpensive.

3M Co. (NYSE: MMM)

3M Company is a diversified technology company with presence in the industrial and transportation; health care; consumer and office; safety, security and protection services; display and graphics, and electro and communications businesses. 3M operates in six business segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics, and Electro and Communications. 3M products are sold through distribution channels, including directly to users and through wholesalers, retailers, jobbers, distributors and dealers in a number of countries worldwide.

To review 3M's stock, please take a look at the 1-year chart of MMM (3M Company) below with my added notations:

From the start of the year until May, MMM had been consolidating within a sideways, Rectangle pattern. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For MMM, the Rectangle pattern formed a $90 resistance (blue) and an $85 support area (navy), which was also a brief resistance in January. As you can see, half way thru May MMM broke below the support and has been struggling to get back above $85 and stay there.

The Tale of the Tape: MMM has broken down from an $85 to $90 Rectangle pattern, but has pushed slightly back above $85. A long trade could be entered on a pullback to $85 or on a breakout above $90. A short trade could be made on a rally up to $90 or on a break back below $85.


from Silver Doctors:

The Doc sat down with Sprott Asset Management’s Eric Sprott this weekend to discuss the European debt contagion, the latest gold and silver massacre, the massive rush into physical metals, and his outlook on gold and silver for the rest of 2012 and beyond.

This is a portion of Eric’s thoughts regarding Thursday’s smash in the metals and the crisis in Spain coming to a head.

When asked whether Thursday’s gold and silver raid coinciding with Bernanke’s testimony to Congress felt like Deja-Vu to the Leap Day Massacre Eric responded:

It might be that the silver cartels have changed their MO. The MO used to be that whenever the jobs number came out they’d go to work, which let them take a shot at the markets once a month.
The last jobs report backfired, and of course the jobs reports have been so poor. I think the key thing for the cartel is to time it, and to know when to do it. Three or four guys acting together can have a bigger impact if you all know exactly what second we’re going to do something.

Read More @

Dividend vs. Treasury Yields

by Econom­pic Data

The div­i­dend yield of the S&P 500 is above that of the ten year Trea­sury for the first time since the finan­cial cri­sis. Before that we have to go all the way back to the 1950's to find a time when this was the case.

The kicker... stock div­i­dends have only made up about 45% of total S&P com­pos­ite stock returns over the past 100 years, while Trea­sury bond coupon pay­ments have made up north of 96% of Trea­sury bonds returns over that same period (see below). What this means for an investor is unless you think div­i­dends will be cut and/or cap­i­tal appre­ci­a­tion will be neg­a­tive (i.e. cor­po­rate Amer­ica will shrink in terms of nom­i­nal value), stocks are poised to out­per­form.

My take... stocks appear to be very cheap rel­a­tive to bonds for investors with a long-term invest­ment hori­zon, while near term investors need to be care­ful as we seem to be in a world that is likely to have binary out­comes (i.e. either a boom or an absolute collapse).

The remain­ing 55% of S&P stock returns have been in the form of cap­i­tal appre­ci­a­tion, which has become increas­ingly impor­tant since the 1950's (see above), as cor­po­ra­tions rein­vested earn­ings back into their busi­nesses / bought back shares (vs pay­ing out div­i­dends), while investors eval­u­ated the rel­a­tive mer­its of equi­ties rel­a­tive to bonds (see the much tighter rela­tion­ship to bonds, which ratch­eted up P/E multiples).


There have been a lot of articles written by the gold bugs on how much the HUI and GOLD STOCKS have been manipulated compared to the price of gold.
Not much has been discussed about silver. I took Pan American Silver (PAAS) and did a quick chart and study. Some interesting trends are also taking place in silver stocks.

If we look at the chart below, we can see that there has been two significant sell-offs in PAAS:


The Trend Trader For Trading On Monday, June 11, 2012




Trend Reading
S&P 500 - Sep ESU21322.00+ 0.921308.531300.17Bullish
Dow Jones - Sep YMU212503+ 0.781236412298Bullish
Nasdaq - Sep NQU22557.00+ 1.052535.612513.33Bullish
Russell - Sep TFU2766.80+ 1.31759.43753.80Bullish
US T-Bond - Sep ZBU2148-21+ 0.13149-00149-25Bearish
US T-Note - Sep TYU2133-16+ 0.05133-17133-27Bearish
US Dollar Index - Sep DXU283.002+ 0.6682.82982.959Bullish
Australian Dollar - Sep ADU20.9820− 0.410.98120.9761Bullish
British Pound - Sep BPU21.5452− 0.601.54761.5455Bearish
Canadian Dollar - Sep CDU20.9697− 0.420.96980.9674Neutral
EuroFX - Sep ECU21.2517− 0.761.25501.2518Bearish
Japanese Yen - Sep JYU21.2599+ 0.291.26191.2663Bearish
Swiss Franc - Sep SFU21.0439− 0.731.04661.0440Bearish
Feeder Cattle - Aug FCQ2159.375+ 0.17158.828158.733Bullish
Live Cattle - Aug LCQ2120.825+ 0.33119.997120.175Bullish
Lean Hogs - Aug LHQ292.450+ 0.4691.92591.867Bullish
Corn - Jul CN2598^0+ 0.67590^0587^0Bullish
Wheat - Jul WN2630^2− 1.79630^0629^0Bullish
Soybeans - Jul SN21426^2− 0.121405^01399^0Bullish
Soybean Meal - Jul SMN2429.8+ 1.01420.5419.5Bullish
Soybean Oil - Jul BON249.46− 1.8549.5949.22Neutral
Crude Oil - Jul CLN284.10− 0.8584.6084.11Bearish
Heating Oil - Jul HON22.6721+ 0.192.66602.6500Bullish
Natural Gas - Jul NGN22.299+ 1.102.3482.339Bearish
Gold - Aug GCQ21591.4+ 0.211603.71596.7Bearish
Silver - Jul SIN228.471− 0.2028.81828.749Bearish
Copper - Jul HGN23.2850− 2.543.34493.3178Bearish
Orange Juice - Jul OJN2113.65− 1.69115.28113.93Bearish
Sugar - Jul SBN219.98+ 1.1119.8419.76Bullish
Cocoa - Sep CCU22185− 1.0421902148Neutral
Coffee - Sep KCU2157.40− 0.63158.24158.33Bearish
Cotton - Jul CTN272.90− 1.3471.5271.29Bullish