Monday, May 7, 2012

LISTEN NOW: Gold, Miners, What I’m doing with My Money and More – Pierre Lassonde

from KingWorldNews:
Pierre Lassonde: Chairman of Franco-Nevada – He is one of the living legends in the mining and resource world with over 35 years of experience. Pierre is the current Chairman of Franco-Nevada and Co-Founded Franco-Nevada Mining Corporation with Seymour Schulich in 1982 and over a 20 year period, provided shareholders with a 36% annualized rate of return. He was able to build up and successfully merge Franco Nevada into Newmont Mining in what was essentially a depression in the mining sector. It was the worst of times, but somehow in the midst of those horrific industry conditions Pierre and everyone associated with him thrived. Pierre then became President of Newmont Mining Corporation from 2002 to 2006.
Listen Now @

Mish Shedlock on the Rise of Money Metals, the Fall of the West … and Why Credit Matters

from The Daily Bell:

The Daily Bell is pleased to present this exclusive interview with Mish Shedlock (left).
Introduction: Mike “Mish” Shedlock blogs at Mish’s Global Economic Trend Analysis, for which he has won awards from the New York Times, Time Magazine, Bloomberg, CNBC and Strategist News. Mish is a contributing “professor” blogger at the economic and financial education site Minyanville and offers podcasts every Thursday on HoweStreet. He’s a registered investment advisor representative for SitkaPacific. He says that unlike many free-market “Austrians,” he emphasizes credit impacts and deflationary trends within larger business-cycle manifestations. When not writing about economics, Mike enjoys photography; 80 of his photos have become magazine and book covers.
Daily Bell: Give us some background.
Mish Shedlock: My background is actually in computer programming and engineering. I worked for banks for 20 years primarily as a computer analyst working on the technical end of applications. I was an assistant vice president for Harris Bank for most of that time. AVP was as high a position as technicians could get. When Bank of Montreal bought out Harris, I left to become a consultant.
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The Dollar and Manipulation Control the Market

Over the weekend I had an interesting conversation with a local trader. We typically meet a few times a year to share our market outlooks, new trading tools and techniques, and usually finish our session off in a debate about the US market manipulation and how to trade around it.
Talking about market manipulation always opens up a can of worms and sparks some interesting theories… And while everyone has their own views and opinion on this subject I thought I would briefly share the main points I pulled from our conversation.
I did talk about the dollar index last week, but the recent price action unfolding today is important so I’m going to recap on it again.

My Weekend Conversation Key Thoughts:
Point form thoughts supporting Lower Equity prices and a Higher Dollar:
-          Dollar index looks ready for a major rally (high dollar means lower stocks)
-          SP500 may have just formed a double top
-          SP500 closed strongly below the 20 day moving average
-          First week of May for the past two years have been intermediate market tops
Points supporting Higher Equity prices and a Lower Dollar:
-          Countries around the globe are trying to keep their currency value low including the United States.
-          Presidential cycle strongly favors higher stocks prices which means the dollar should not rally until Nov.
What do all these points mean? Let’s take a look at the dollar charts below…

4 Hour Dollar Index Chart:
This chart time frame allows us to see all intraday price action while being able to zoom out several months for patterns along with key support and resistance levels.
As you can see over the past few months the dollar has been consolidating sideways. Within this consolidation it has formed two bullish falling wedges with the most recent one breakout last week right on queue.
Using this 24 hour futures dollar index chart we can see where things are trading through the weekend. On Friday the dollar index closed around the 79.50 level. As you can see the dollar has surged Sunday night by more than half a penny breaking through its down trend line.
The next few weeks will continue to be exciting ones as strong moves in the dollar will create wild movements in stocks and commodities.

Long Term Weekly Dollar Index Chart:
If you zoom WAY OUT using the weekly chart this shows you the two major areas where the dollar index is likely to reach come November. Also with these levels are my SP500 price points which are simply numbers I pulled from the charts using basic analysis. I say this because I’m not into long term forecasting but rather shorter term price movements. A lot can change between now and then.
So, if the dollar index rallies to the 86 – 88 level then I would expect the SP500 to be trading back down at the 1000 level. If this takes place, the Fed will likely issue QE3 to jam the dollar back down and boost equities.
The flip side of the coin is that the dollar rolls over here and gets pulled down. This will boost stock prices in favor for the president’s election. After that the dollar would likely rally which in turn would put a major top in the stock market, kick starting a bear market.

The big question…
Do you short the market in anticipation of rising dollar and falling stock prices? OR do you buck the trend and stick with the theory of a lower dollar value and presidential cycle?
The charts above clearly show how we are entering a major tipping point for the market and the next couple months are likely going to provide some big price swings for stocks, commodities and currencies.

Chris Vermeulen

Peter Schiff : It's Going To Get Ugly Here

The new jobs numbers are out and the unemployment rate fell to 8.1 percent. According to the US Bureau of Labor Statistics, in April 115,000 non-farm jobs were added, but at the same time 342,000 people left the labor force. In February the unemployment rate was 8.3 percent. At this rate will the US ever climb out of the jobs crisis? Peter Schiff, president of Euro Pacific Capital, joins us to take a closer look at the numbers.

This Technically Weak Cell Phone Company Should Make a Good Short

During the past several months, I've successfully trader the market from the long side.  I've focused on consumer staple stocks -- typically defensive, dividend-oriented plays. My strategy has worked well.

My last 11 closed trades have all been profitable. These 11 trades gained a total of 126.8% or 11.53% on average. Two trades topped 18% returns: McDoanld's (NYSE: MCD) and Family Dollar Stores (NYSE: FDO).

However, recent developments in the S&P 500 have put me on my guard. The uptrend line drawn off the early October 1074.77 bottom was broken in early April. Since that time the index has bobbed above and below its 50-day moving average now at 1386. I'm beginning to suspect that this year may lend truth to the saying "sell in May and go away."

In this issue of Trade of the Week I've looked for fundamentally weak stocks that show technical vulnerability with the intention of shorting. This is my first short recommendation in almost two years: since August 2010 to be exact.

The short candidate is wireless supply-chain provider, Brightpoint (Nasdaq: CELL).

The international electronics wholesaler offers logistics services to cell phone companies like inventory management, customized cell phone kits, credit services and activation services, as well as webhosting and cell phone accessory distribution.

Despite strength in the cell phone market -- global handset sales topped $14.4 billion in the fourth-quarter of 2011 -- not every company in this space is making a fortune from the cell phone explosion.

Apple's (Nasdaq: AAPL) and Samsung's cell-phone divisions, for example, are highly profitable. Other major cell phone manufacturers, including Research In Motion (Nasdaq: RIMM), Nokia (NYSE: NOK), Sony (NYSE: SON) and show decelerating earnings or in some cases outright losses.

Since Brightpoint has distribution agreements with some of these big companies including Research in Motion and Nokia, it is negatively affected by their fortunes. Its latest earnings report on March 2012  came in 23% below analyst's expectations.

Not surprisingly, Brightpoint's stock is down over 50% from its early 2012 high and shows the potential for further technical weakness.
The stock appeared like it could bullishly emerge out of what would have been a year-long basing pattern (see dotted semi-circular marking on the chart) in early January 2012. However, The base failed, and starting in early January of 2012 after peaking at $12.05 the shares started sinking.

Since that time the stock has tumbled, forming a steep, accelerated downtrend line.

In mid-February, the long-term uptrend line that had been forming off the stock's August 2010 $5.85 low was broken.

In late April, shares took another hit as the stock sank below important support near $7. This level should now act as resistance.

The stock is currently testing support marked by the August 2010 two-year low at $5.85. If this support level is breached, the stock could continue to fall, since no historical support will be present.

The weak technical picture is backed by uncertain fundamentals.

In late April, the supply chain provider reported disappointing first-quarter results.

Although first-quarter revenue rose 22.9% from the year-earlier period, to $1.37 billion, earnings per share fell 19% to $0.09, from $0.11 per share in the comparable year-ago quarter. Management attributed the drop to strong competition in the wireless industry.

For the upcoming second-quarter, the outlook remains unfavorable. Although revenue is projected to increase 11.4% from the year-ago period, to $1.40 billion, analysts estimate earnings will drop to $0.22 per share, from $0.23 in the comparable year-ago period. This estimate is down from $0.26 just 3 months ago.

For the full 2012 year, analysts expect revenue will increase 9.1% to $5.7 billion. However, , the company expects full-year 2012 earnings to be in the range of $0.98-$1.04, down from between 3% and 8% from $1.07 in full-year 2011.

In addition to a weak earnings outlook, Brightpoint is highly leveraged. The company has amassed $297 million in long term debt, and $1.21 billion in total debt. That number compares to $291 million in total equity -- that means the debt to equity ratio is a heady 4.1 times.

Given that the wireless provider has a questionable fundamental outlook and shows continued technical vulnerability, I plan to short the stock.

Risks to consider: Shares have already suffered substantial downward pressure. Some traders may view the stock as a bargain and could therefore drive shares higher in the short-term. However, given the company's weakening earnings traders should have little reason to move the stock higher in a sustained way.

Brightpoint's shares have bounced off $5.85 support. A bout of short covering could move the shares higher in the short-term. Before entering a position, I will wait until shares breach $5.85 support.

My sell-on-stop order is at $5.79. This means if shares do not hit or go below $5.79, I will not enter the trade. My target is $4.70 where the shares found some buying interest in 2009. My stop-loss is $6.65 where the steep downtrend line from the January 2012 peak would be broken. The risk to reward ratio is approximately 1.26:1.

Chart of the Day - Anheuser-Busch InBev (BUD)

The "Chart of the Day" is Anheuser-Busch InBev (BUD), which showed up on Thursday's Barchart "All-Time High" and "Gap Up" lists. AB InBev on Thursday posted a new all-time high of $75.07 and closed up 1.93%. TrendSpotter has been Long since April 18 at $73.86. In recent news on the stock, AB InBev on April 30 reported Q1 EPS of $1.05, above the consensus of 91 cents. Morgan Stanley on April 12 named AB InBev as a long Research Tactical Idea. Stifel Nicolaus on April 3 named AB InBev to its Stifel Select List, reiterated its Buy rating and the $80 price target. Anheuser-Busch InBev, with a market cap of $117 billion, is a leading world marketer of alcohol-based beverages.


US Weekly Economic Calendar

time (et) report period Actual forecast previous
3 pm Consumer credit March -- $8.7 bln
7:30 am NFIB small business index April -- 92.5
10 am Job openings March -- 3.5 mln
10 am Wholesale inventories March -- 0.9%
8:30 am Weekly jobless claims 5-5 370,000 365,000 
8:30 am Trade deficit March
-$50.0 bln -$46 bln
8:30 am Import price index April -0.1% 1.3%
2 pm Federal budget April -- -$40 bln
FRIDAY, May 11
8:30 am Producer price index April
-0.1% 0.0%
8:30 am Core PPI April
0.2% 0.3%
9:55 am UMich consumer sentiment index May 75.9 76.4