Wednesday, October 20, 2010


Today in Commodities: King Dollar

Crude looks to close almost $4 off its intra-day high dragging prices back near $80/barrel on the December contract. Today’s low and mild support is seen at the 38.2% Fibonacci retracement level at $79.85. Next support is seen at $78.50 followed by $77.25. We’re expecting prices to trade down and have advised light short futures exposure in December and January $5 bear put spreads. Even with Crude and the distillates losing 4-5% today natural gas managed to keep its ugly head above water. Could a bottom be in the making?

Indices as of this post are off 1-1.25% Most of you know we’ve been calling for a correction…could this be day one. Some clients remain short via November and December put options thinking selling could intensify in the coming sessions. The 50 day MA gave way in cocoa today with prices off by 1.50%. We’re expecting another 2-4% lower from here. Cotton was lower by 2.74%, aggressive traders could start gaining bearish exposure again. Coffee posted a four week high gaining nearly 3% today. Hold off on shorts for a few days to see if the August highs are challenged. Lumber rolled over and appears like prices may re-visit the trend line that has held since the summer lows; that would drag January back near $230. Clients have NO exposure. (more)

China Halts Rare Mineral Exports To US And Europe, Prices Set To Surge

The latest escalation in the binary version of modern warfare (i.e., that fought with a Bloomberg instead a stealth fighter), comes from China, which the NYT reports has just halted shipment of rare minerals to the US: "China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted shipments of some of those same materials to the United States and Europe, three industry officials said on Tuesday." As we disclosed a few weeks ago, prepare for an explosion in various rare metal prices...

More from the NYT:

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further ratchet up already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese officials are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities. They said Chinese customs officials imposed the broader shipment restrictions Monday morning, hours after a top Chinese official had summoned international news media Sunday night to denounceUnited States trade actions. (more)

Why It's Time to Sell Apple

It’s time to sell Apple (AAPL). There are probably not that many people who will tell you that right now, if any really. However, that is a large part of my rationale for selling it. First, I should be very clear up front that I love Apple as a company, a stock, a retailer, and the manufacturer of the best consumer electronics on the market. I will argue any day that Apple is the best run company on the face of the planet and the performance in its stock over the past two years reflects that. If you read my article Ultra Bull: A Case For The Succession Of Apple back in February of 2009, it would be obvious how deep my passion for this company runs. You would also be up close to 250% over the last two years because I recommended buying the stock at a closing price of $90.25 on February 24th. You would be up considerably more than that if you invested in the LEAP strategies I recommended. However, all good things must come to an least temporarily. Lately the enthusiasm and bullishness surrounding Apple has reached a fever pitch. The company has crushed analyst estimates for the last 17 straight quarters. I can’t say for sure, but that must be some kind of record. Everyone expects Apple to deliver another blowout quarter simply because they have such a reliable track record. The consensus estimate is for Apple to report $4.08 per share for Q4, an increase of 124% over the previous year. Contrary to popular belief, though, I think the expectations are simply too high going into this earnings report. The abysmal performance in the bank stocks last week coupled with comments from a few key analysts convinced me to close all of my Apple positions after one hell of a ride. (more)

27 Signs That The Standard Of Living For America’s Middle Class Is Dropping Like A Rock

If you still have a job and you can put food on the table and you still have a warm house to come home to, then you should consider yourself to be very fortunate. The truth is that every single month hundreds of thousands more Americans fall out of the middle class and into poverty. The statistics that you are about to read are incredibly sobering. Household incomes are down from coast to coast.

Enrollment in government anti-poverty programs sets new records month after month after month. Home ownership is down, personal bankruptcies are way up and there are not nearly enough jobs to go around. Meanwhile, the price of basics such as food and health care continue to skyrocket. Don't be fooled by a rising stock market or by record bonuses on Wall Street. The U.S. economy is not getting better. After World War II, the great American economic machine built the largest and most vigorous middle class in the history of the world, but now America's middle class is disintegrating at a blinding pace.

Most of those who write about the plight of the American middle class believe that things can be turned around and that the middle class will eventually be stronger than it ever has been. But unfortunately, that is just not the case. As a society, we have lived far, far beyond our means for decades. Now the bills are coming due and none of our leaders seem to know what to do.

Meanwhile, the U.S. economy is being rapidly assimilated into the emerging one world economy. Middle class American workers now find themselves in direct competition for jobs with the cheapest labor on the other side of the globe. Of course many multinational corporations have taken advantage of this by moving factories and jobs to countries like China where blue collar workers make about a dollar an hour. This has helped raise the standard of living for workers in those nations by a nominal amount, but it has been absolutely devastating for the standard of living of America's middle class. (more)

China surprises with first rate rise since 2007

BEIJING (Reuters) - China's central bank surprised on Tuesday with its first increase of interest rates in nearly three years, a move that reflects concern about resurgent asset prices and could mark the start of a more aggressive phase of monetary tightening in the world's fastest-growing major economy.

The People's Bank of China said it was raising benchmark rates by 25 basis points, taking one-year deposit rates to 2.5 percent and one-year lending rates to 5.56 percent.

If there was ever any doubt about China's role in driving the stuttering global economic recovery, the impact was felt by markets across the board. Oil and gold prices tumbled, stocks turned negative in Europe and the dollar jumped.

"The interest rate rise is entirely outside of market expectations," said Zhu Jiangfang, chief economist at CITIC Securities in Beijing.

"The recent rise in headline inflation has put the real rate into negative territory. And I think that's why the central bank needs to raise interest rates in such a hasty way," he said. (more)

Silver Shipments From China, Biggest Exporter, May Plunge by 40% This Year

Silver exports from China, the world’s largest, may drop about 40 percent this year as domestic demand from industry and investors climbs, according to Beijing Antaike Information Development Co.

Shipments may decline from about 3,500 metric tons in 2009, said Feng Juncong, chief analyst at the state-owned Antaike, without providing a specific forecast. Customs data show exports plunged almost 60 percent to 970 tons in the first eight months. Cancellation of an export rebate in 2008 is also hurting shipments, she said.

Reduced exports may bolster prices that are trading near a 30-year high on speculation that governments worldwide will take further steps to stimulate their economies, weakening currencies and increasing demand for assets that are a store of value. China, the third-largest producer after Peru and Mexico, revoked export rebates in August 2008 to curb use of natural resources. (more)

The Next Collapse is in Long Term Treasuries

Peter Grandich,

This week, the Long Term Treasury Bond ETF (TLT) showed a massive breakdown of long term support and the 50 day moving average. Selling is very enthusiastic as investors are cautious over the Fed’s commitments and exiting strategies from purchasing long term debt. This chart shows demand is considerably weakening. Investors who are looking for options to protect themselves from a decline in U.S. debt and a rise in interest rates should use (TBT) which is the inverse ETF of TLT, meaning that it will go up as long term yields move higher. Already emerging markets are protecting themselves from a decline in treasuries by diversifying away from U.S. debt and into natural resources, which I believe will continue throughout 2011. Investors are concerned about decreased purchases from The Fed and higher interest rates. This could continue to put pressure on the housing market, where mortgage rates are tightly linked to the yields on long term government debt.

Jay Taylor: Turning Hard Times Into Good Times

click here for audio

US STOCKS-Wall St drops as mortgage worries hit banks

(Reuters) - U.S. stocks posted their biggest loss in two months on Tuesday on fears banks might be on the hook for billions of dollars in souring mortgage bonds.

The afternoon selloff hit investors already reeling from an unexpected credit tightening by China and disappointing financial results from Apple (AAPL.O) and IBM (IBM.N).

The biggest scare came on news that Bank of America (BAC.N) and possibly others may be forced to take back billions of dollars in mortgages that should not have been bundled into bonds.

The broad selloff came on high volume in a pattern similar to last week's when fears over banks surfaced.

"It's reminding investors of what was the main impetus for the horrific selloff we had a few years ago," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago. "If you were recently struck by lightning, you are a little skittish when there is a thunderstorm."

Bank of America shares fell 4.4 percent to $11.80, their lowest close since June 2009, after a Bloomberg report, citing people familiar with the matter, said investors PIMCO and BlackRock, along with the New York Federal Reserve Bank, were seeking to force the lender to repurchase $47 billion in mortgage bonds. (more)

Gerald Celente - Gold Forcast & Crash Of 2010 on 15th October 2010