Tuesday, October 23, 2012

Change in spread management by bullion banks will send gold prices to $3,500-12,400 says Jim Sinclair

‘Mr. Gold’ of the 1970s, Jim Sinclair, the one-time adviser to the Hunt Brothers who cornered the silver market then is flagging up an imminent change in the way the bullion banks manage their spreads, something he feels is inevitable from his own long experience of the business.

In his latest missive, Mr. Sinclair explains: ‘You must note how central banks are either buying or protecting their gold reserve positions now. This is total about face two years ago. There is another change coming which is a replacement monetary system and the need for some asset on central bank’s balance sheets to have positive value, especially in the USA. Soon all that is required is a change in spread management by the gold banks and you will have whatever price the gold banks want from $3,500 to $12,400.’  (more)

"Dr. Doom" Marc Faber: The U.S. is moving closer to a full-blown revolution

The United States and other industrialized nations are on track to a "colossal mess" due to their inability to pay down their growing debt burdens, said Marc Faber, author of the Gloom, Boom & Doom report.

In the United States alone, tax breaks are scheduled to expire at the end of this year at the very same time automatic cuts to government spending kick in, a combination known as a fiscal cliff that could send the country into a recession next year if left unchecked by Congress, according to calculations from the nonpartisan Congressional Budget Office.

Congress could strike a deal to avert the country away from disaster next year, but should a deal fail to seriously lower long-term debt burdens and narrow gaping fiscal deficits, disaster will strike.

"History kind of repeats itself. In democracies, you start with good intentions and then power becomes polarized among a few people. And eventually you have either huge changes in a peaceful fashion through reforms or usually through revolutions...

Read full article…

The Great Depression in Ten Pictures

jessescrossroadscafe.blogspot.com / By Jesse / October 22, 2012
I may provide some commentary for these charts later, but for now I wanted to gather them in one place for your viewing pleasure.
Some of them are from my previous blog site, when I was considering some of the policy decisions and data from the first Great Depression in the US. This study was from 1999 to 2001. It was fully fleshed out in my mind by Bernanke’s (in)famous essay of 2002, The Fed Has a Printing Press. That pretty much cleared the air for me on the future investment path for gold.
Although I do not list it here, you may also be interesting in the posting, Why the Feds Seized the Gold in 1933. The purpose was to devalue the dollar AND to use the proceeds to recapitalize the banks that were remaining after the FDR bank holiday.
Since the US is not on a gold standard now, the Fed has no need for the gold. It can expand its balance sheet with a few keyclicks, as long as that is their policy decision. Any wide scale confiscation of private property at this point would be purely gratuitous and rather unlikely, recent hysteria not-withstanding.


This Fast-Food Giant's Chart Projects Double-Digit Returns

Which Western food brand is most dominant in China? It's not Coca-Cola (NYSE: KO) or Pepsi (NYSE: PEP). It's fried chicken sold by KFC.

KFC, operated by the multi-national fast-food company, Yum! Brands (NYSE: YUM), is a force to be reckoned with in China. In fact, YUM currently is the country's leading retail developer. Of YUM's 38,000 restaurants, nearly 15% are in that nation. And more than half the company's total operating profit and more than 40% of total sales come from China.

Having established a strong beachhead in China, the fast-food empire -- which also operates Pizza Hut and Taco Bell -- has embarked on its next big conquest: India. India is the world's second most populous country, after China. According to the World Bank, its economy is expected to grow 6% in the coming year.

Currently, there are about 500 Yum-branded restaurants in India. About 100 of these were opened in 2011. By 2015, Yum plans to invest $100 million to start at least 1,000 total restaurants in that nation. Over the past three quarters, sales in India have been in the strong double digits. Yet, Indian sales still account for less than 1% of the company's total global revenue. These figures point to huge growth potential.

Shareholders seem pleased by the strong growth outlook.
YUM Chart
For the past two and a half years, the stock has been on a major uptrend. During this time, shares have has risen more than 132%, from the February 2010 low of $30.92, to current levels near $71. (more)

This Trade Could Make You 39% in the Next Two Days : FB

Less than six months ago, traders were hoping for a chance to buy Facebook (NASDAQ: FB) the day the stock began trading. Some traders entered market orders to buy and paid $45 a share. Since then, FB has been in a long downtrend and buyers who got in during early trading have losses of 50% or more if they are still holding the stock. Those positions could be just one of several bearish factors weighing on the stock price when earnings are announced this week.

The biggest indicator of bad news could be Google (NASDAQ: GOOG), which may have offered a preview of what FB will have to say after the close on Tuesday. One analyst summarized Google's disappointing quarter by noting that, "Google, the biggest seller of search-based advertising, hasn't yet translated to mobile devices the success it's had with desktop advertising. Ads generated on smartphones can cost about 40% less than those on traditional computers and about 25%t less than on tablets."

Mobile users were one of the problems that FB noted last quarter. The company reported in recent SEC filings that growth in mobile use has been rising sharply. Almost 20% of Facebook users only access the social networking site from mobile devices, a trend that could have a significant, and negative, impact on FB as mobile use grows.

With concerns about its business model growing, it is not surprising that the trend in FB's stock price has been down.
FB Chart
A potential double-top has formed in the stock with resistance from the top coinciding with resistance from the downside gap formed in July, near the time of the company's first earnings release. This quarter could see a similar pattern if earnings or revenue disappoint, or if the company doesn't offer comments indicating that the future will be brighter.  (more)

Brown & Brown, Inc. (NYSE: BRO)

Brown & Brown, Inc., a diversified insurance agency, engages in the marketing and sale of insurance products and services in the United States. Its Retail division provides insurance products and services to commercial, public and quasi-public entity, professional, and individual customers. This division offers property insurance relating to physical damage to property, and resultant interruption of business or extra expense caused by fire, windstorm, or other perils; casualty insurance relating to legal liabilities, workers compensation, and commercial and private passenger automobile coverage. The company's National Programs division offers professional liability and related package insurance products for dentists, lawyers, accountants, optometrists, opticians, insurance agents, financial service representatives, benefit administrators, real estate brokers, real estate title agents, and escrow agents. The company's Wholesale Brokerage division markets and sells excess and surplus commercial insurance products and services to retail insurance agencies. Its Services division offers insurance-related services, including third-party claims administration and comprehensive medical utilization management services for the workers compensation and various liability arenas.

Please take a look at the 1-year chart of BRO (Brown & Brown, Inc.) below with my added notations:

1-year chart of BRO (Brown & Brown, Inc.)

BRO had been moving higher from November until the beginning of July. Since May, the stock has created a very important support level at $25 (red), which was also a key resistance prior to May. That $25 level is the "neckline" support for BRO's head and shoulders (H&S) pattern. Above the "neckline" you will notice the H&S pattern itself (navy). Confirmation of the H&S would occur if the stock broke below its $25 "neckline". If BRO breaks that level, the stock should move lower from there.

Keep in mind that simple is usually better. Had I never pointed out this H&S pattern, one would still think this stock is moving lower simply if it broke below the $25 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $25 level.

Market Outlook: Lesser-Known Volatility Index Points to More Downside

Stock prices fell after Google (NASDAQ: GOOG) disappointed investors. That news may prove to be the exact moment when a market decline began. Time will tell whether this is simply a dip in an uptrend that should be bought, the start of an overdue market correction, or the beginning of a bear market. For now, I'm looking for at least a correction.

Earnings Weaker Across the Board
Google was only one of the market leaders that failed to meet the expectations of analysts. Among the other companies to miss revenue or earnings forecasts were Microsoft (NASDAQ: MSFT), General Electric (NYSE: GE), Chipotle Mexican Grill (NYSE: CMG) and McDonald's (NYSE: MCD). S&P reports that 115 of the companies in the S&P 500 index have reported earnings for the third quarter and 30% have missed estimates. This is up slightly from the second quarter when only 25% of companies missed estimates.

All of the news hitting the markets led to a volatile week that ended about where it started for traders owning SPDR S&P 500 (NYSE: SPY), which closed up 0.35%. PowerShares QQQ (NASDAQ: QQQ), an ETF that tracks the 100 largest Nasdaq stocks, fell 1.49% for the week, but dropped 3.49% in the day and a half after the news on GOOG broke.
GOOG vs QQQ Chart
Despite the relatively large sell-off late in the week, there is no sign of panic in the market, at least when looking at the CBOE Volatility Index (VIX). The fear index is still trading near a relatively low level. Price bottoms usually aren't seen until VIX rises.  (more)