Wednesday, December 5, 2012

Canadian debt and the prospects for an upcoming banking crisis.

by Redmond Weissenberger, Mises:
The propaganda you hear about the Canadian banking sector is just that – propaganda. Canadian banks are as leveraged up as there international counterparts – if not more: in fact Canadian banks have no reserve requirement whatsoeverzeroOf course you needn’t worry about your deposits in the event of a banking crisis, deposits of up to $100 000 insured by the Canadian Deposit Insurance Corporation. The CDIC doesn’t hold enough cash on hand to actually pay out the potential claims, but it does have the Bank of Canada ready to print the money up out of thin air to make you whole – with your own money. How do we know that the BoC would pony up the fiat currency? We come to the dirty little secret of Canadian Banking – the big five were bailed out just like every other bank in the world. The report in question was prepared by a left wing think tank, so we can question their motives, but the reality is that Canadian bank sector is subject to the same problems of fractional reserve banking as the rest of the western banking system.
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VIX Rising But Still No Worries (Yet)

by Dan Norcini
Trader Dan Norcini

The Volatility Index or VIX, is a useful index for measuring investor/trader sentiment in regards to the broader stock market’s health. It reflects option premiums and is therefore a decent way of peering into the thinking of those who write the things and what they are expecting/fearing in the immediate future. As with any market index, it has its shortcomings but all in all, it is remains a good gauge of sentiment.
While the following chart is not scientific it is helpful in understanding the impact of the Federal Reserve’s monetary strategies over the past few years. I prefer to look at this chart as a demonstration of official monetary sector meddling into the affairs of capitalism/free markets.
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Bill Gross: Investment Outlook (December 2012)

Strawberry Fields – Forever?
by William H. Gross, PIMCO

Well, I guess that settles it: you didn’t build that after all. Or maybe you did, but not all of it. Or maybe like the convoluted John Lennon above “you think you know a yes, but it’s all wrong. That is you think you disagree.” Whatever. Rather than an economic mandate, November’s election was more of social commentary on the Republicans’ habit of living with eyes closed. Their positions on what Conan O’Brien labeled “female body parts” – immigration, gay rights and student loans – proved to be big losers, and they will have to amend rather than defend those views if they expect to compete in 2016. I suspect they will. Political parties are living social organisms that mutate in order to survive. We will see straight talking Chris Christie or Hispanic flavored Marco Rubio leading the Republican charge four years from now versus a reenergized Hillary Clinton. It should be quite a show with a “No Country for Old (White) Men” caste to it.

But whoever succeeds President Obama, the next four years will likely face structural economic headwinds that will frustrate the American public. “Happy days are here again” was the refrain of FDR in the Depression, but the theme song from 2012 and beyond may more closely resemble Strawberry Fields Forever, as Lennon laments “It’s getting hard to be someone but it all works out.” Why is it so hard to be someone these days, to pay for college, get a good-paying job and retire comfortably? That really was the economic question of the 2012 election towards which very few specifics were applied from either side. “There’s a better life out there for us,” Governor Romney bellowed to a crowd of thousands in Des Moines, Iowa just days before the election, but in truth he never told us how we were going to achieve it or, importantly, why we weren’t realizing it in the first place. The president’s political mantra of “Forward” was even more vague.  (more)

InterMune, Inc. (NASDAQ: ITMN)

InterMune, Inc., a biotechnology company, engages in the research, development, and commercialization of therapies in pulmonology and orphan fibrotic diseases. The company focuses on therapies for the treatment of idiopathic pulmonary fibrosis (IPF), a progressive and fatal lung disease. It markets Pirfenidone, an orally active small molecule drug for the treatment of adults with mild to moderate IPF under the Esbriet name in the European Union. The company's Pirfenidone is also in Phase III clinical trials for the treatment of IPF in the United States. In addition, it offers Pirfenidone under the Pirespa trade name for the treatment of IPF in Japan; Pirfenex trade name in India; and Shanghai Genomics in China. InterMune, Inc. was founded in 1998 and is headquartered in Brisbane, California.

To review InterMune's stock, please take a look at the 1-year chart of ITMN (InterMune, Inc.) below with my added notations:
1-year chart of ITMN (InterMune, Inc.)
After selling off from March until August, ITMN has tried to form a base while consolidating within a rectangle during the most recent (2) months. 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 ITMN, the rectangle pattern has formed a $10 resistance (navy), which was also a prior support level, and an $8 support (red).

Has AAPL Completed its Recovery Rally? : AAPL

Apple Inc. (AAPL) followed a bearish technical script, plunging in the aftermath of yesterday’s marginal new recovery high at 594.59, which now looks like a bull trap high that concluded the recovery rally from 505.75 to 594.59.
If that proves to be the case, then AAPL has just started its trek low towards a revisit and retest of support at 530 at a minimum, and possibly to new intermediate-term corrective lows beneath 500.00.

The Coming Derivatives Panic That Will Destroy Global Financial Markets

from The Economic Collapse Blog
When financial markets in the United States crash, so does the U.S. economy. Just remember what happened back in 2008. The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest. Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic. Sadly, most Americans don’t even understand what derivatives are. Unlike stocks and bonds, a derivative is not an investment in anything real. Rather, a derivative is a legal bet on the future value or performance of something else. Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default. Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine. This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years. For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout? It was because of derivatives. Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe. But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets. The largest casino in the history of the world is going to go “bust” and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.
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Peter Grandich – Time To Pack Up And Go On Vacation Till Next Year

from FinancialSurvivalNet
Peter Grandich was on with us, giving his last interview of 2012. We both agree that the year is for all intents and purposes over. The institutional traders have locked in their profit and therefore their bonuses and what happens from hereon in is really just noise and completely irrelevant. Don’t be surprised to see Da Boyz get in one last smack down for good measure. This is what happens when markets stop serving their price discovery function and start serving primarily political purposes. And it could very well continue until after the inauguration. Appearances, after all, must be maintained at all costs.
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Chart of the Day - J.M. Smucker (SJM)

The "Chart of the Day" is J.M. Smucker (SJM), which showed up on Monday's Barchart "All-Time High" list. Smucker on Monday posted a new all-time high of $89.39 and closed +0.31%. TrendSpotter just turned long again last Thursday at $87.62. In recent news on the stock, Smucker on Nov 16 reported fiscal Q2 EPS ex-items of $1.45, which was in line with market expectations. J.M. Smucker, with a market cap of $10 billion, is the leading marketer of jams, jellies, preserves, and other fruit spreads in the U.S. They are also the leader in dessert toppings, natural peanut butter, and health and natural foods juice products, and market a wide variety of other specialty products throughout the U.S. and in many foreign countries.