Wednesday, August 12, 2009

Jay Taylor: Turning Hard Times Into Good Times

Now Playing:Will Silver Outperform Gold?

Gold-as-money advocates are often painted by establishment propagandists as “crazed, eccentric, weirdo worshipers of a barbaric relic.” But if gold bugs are thought of as crazed, silver bugs tout their faith in their favorite precious metals with even more religious and emotional fervor. But if there is one “silver bug” who is level-headed and analyzes silver markets with a rational scientific approach, it is David Morgan. With a background as an engineer, David applies reason to analyzing the precious metals markets. He is partial to silver and believes silver will in the end out-perform gold. David also has some well founded Austrian economic views about where the American economy is headed. He and your host have had many spirited discussions on one of the major issues of our day, namely how will the pathology of our Keynesian-poisoned economy come to its end, whether via a deep freeze of depression or the fires of a Zimbabwe like hyper inflation? David will explain. (click here for audio)

Five Times Out of Five, Stocks Collapsed After Doing This…

Stocks are overbought.

And by overbought, I mean WAY overbought.

The relative strength index (RSI) is a metric used to measure the velocity and momentum of a given investment by comparing its upward and downward moves from close-to-close. If an investment is moving up strongly, its RSI is higher. Similarly, if an RSI is low, it means the investment is performing weakly.

Historically, RSI's of 70 or higher mean an investment is overbought while an RSI of 30 means an investment is oversold. In these situations the market is primed for a "revert to the mean" trade, meaning you could see a quick correction or turnaround rally as the market snaps back to a more reasonably RSI.

Well, have a look at the NASDAQ today.

As you can see, the NASDAQ recently hit an RSI of 75. This is the highest reading we've seen in nearly two years. In fact, the last time the NASDAQ had an RSI of 75 was October 10, 2007, right before stocks entered their first major leg down in the Financial Crisis, losing 55% in six months. (more)

When All Else Fails, Agri-Food Investment Will Be There

Sometime people do learn from history, though the number that intentionally do so are few. Perhaps one of the largest groups of people that seem to lack the ability to learn from history is composed of economists. The facts that they choose to intentionally ignore are near mind boggling. Two asset bubbles, technology and housing, were claimed to be non existent, until they collapsed. Now, that same group of myopic number crunchers believes that economic growth in Western economies is about to reignite. Is some skepticism appropriate?

Now again, in the aftermath of the Federal Reserve doubling its assets, we wonder if deja vu is not recurring. With Chairman Bernanke running for reappointment in January as Chairman, the Federal Reserved has launched Cash-For-Clunkers III, the monetization of the Obama Regime's massive deficit. With the Obama Regime in failing and fading mode, can any good come out of all this monetization. Easy money twice created asset bubbles that burst, so the Federal Reserve will try it again. Little wonder Chinese government condemns U.S. economic policy, and ignores the advice given by U.S. economists. (more)

BNN speaks to Mike Newton, portfolio manager, Blackmont Capital.

click here to watch video

Pickens: I Am Long Oil, $85 By Next Year

Oil man turned wind power fan T. Boone Pickens sees the price of a barrel of oil rising slightly to $75 by the end of this year and $85 next year.

"I'm long oil," said Pickens in an interview on the sidelines of U.S. Senate Majority Leader and Nevada Democrat Harry Reid's National Clean Energy Summit, a meeting of industry leaders and policy makers.

Pickens has written a blueprint for U.S. energy policy, called the Pickens Plan, that focuses on converting heavy vehicles like big long-distance trucks, to natural gas.

Pickens, traditional environmentalists and those fearing U.S. dependence on foreign oil sources have argued that the nation should focus its efforts on alternative energy, like wind. As the economy has soured, potential jobs for building new energy infrastructure has taken a leading role in debates for changing the economy away from oil. (more)

Rogoff: U.S. May Face Second Recession

The United States faces a prolonged period of sluggish growth and perhaps another recession in the next five years, Harvard University economist Kenneth Rogoff said on Tuesday.

The U.S. recession that began in December 2007 is close to an end, and economic growth will hover near a sluggish 2 percent for the next five to seven years, he said.

"We're going to be Japan-light," he said in an interview, referring to Japan's years of sub-par growth after its financial crisis of the 1990s. "We won't have a lost decade, but we will face some of the same challenges."

Rogoff, a former International Monetary Fund chief economist and an expert on banking crises, said the United States faces a 50-50 chance of a second recession in the next five years. (more)

China encourages Silver Bullion for investment

How do you say bubble in Mandarin?

Agora Financial

Chinese property sales are up over 60% so far this year, the nation’s National Bureau of Statistics proclaimed yesterday. That puts the housing bubble here to shame. We’ve heard a bunch of nosebleed data points come outta there in the last few weeks… check these out:

  • New loan issuance has tripled in the first half of 2009, to $1.1 trillion. That’s more than half of the entire Chinese GDP over the same period.
  • 95% of those loans went to state-owned enterprises or provincial entities
  • The Shanghai Composite is up 79% year to date, the best major market performance in the world
  • Stocks on the Shanghai Composite trade for 35.4 times earnings, double that of the MSCI Emerging Markets index
  • M2 money supply rose over 28.5% in the first half of the year
  • The seven largest bond sales in the world this year were domestic transactions in China.

Damn near everything is up dramatically in China in 2009… except exports. Strangely, we don’t hear a lot of concern that the backbone of their economy has contracted 23% since this time last year.

“The Chinese government realizes,” adds Dan Amoss, “that its stimulus spending and pressure on banks to expand lending is inflating a massive bubble in the Chinese stock and property markets. The problem with unsustainable economy activity is, of course, that it must eventually end.

“But for now, the Chinese have much more room to borrow and inflate than the United States (which has spent the last few decades doing so). Eventually, the market will cut them off. The end will not be pretty, and at some point in the future, shorting Chinese stocks may be one of the best short-selling opportunities in history.

“In the meantime, it makes no sense to bet against China. The Communist government has proven very efficient at stealing the resources of its people (via inflation and taxation) and channeling them into whatever infrastructure project they deem necessary.

“This process could end next week or next year.”