Saturday, May 26, 2012

Five trading lessons from the latest "Market Wizards"

Jack Schwager wrote the original Market Wizards books, two of the must read, seminal books for investors and traders.

His latest is Hedge Fund Market Wizards — it is a behind-the-scenes look at the world of hedge funds, from 15 traders who've consistently outperformed.

Schwager explores the differences between great traders and everyone else who thinks they can trade. Rare insights into the trading philosophy and methods employed by some of the most profitable individuals in the hedge fund business.

Mike Covel interviews Schwager, and its very interesting... (more)

The Outlook for Gold

The Outlook for Gold

click here to read in pdf

C2C:AM With George Noory *Financial Crisis Special*

Buy Gold Today

I don’t often make market calls or indicate when to buy or sell, but…if you have been waiting to buy gold, or have a dollar-cost averaging strategy in play, today served up a very compelling buy signal for gold.

For years, I tracked and traded the gold futures market very closely, and over time I discovered that charts alone were insufficient to provide a useful trading edge; I had to incorporate another set of market indicators, which I’ll get to below.

First a chart of gold:


By this view, gold has been tracing out a series of pennants, and each time, it busted out to make new highs. Where the prior pennants were relatively modest affairs, this most recent one is far larger and far longer lasting than any of the prior ones. Perhaps that’s because gold got ahead of itself back in 2011 and had to work off all of that exuberance, or perhaps someone drew a firmer line in the sand and said "no more."

The implication is that breaking up and out of a bigger flag implies a bigger run. Of course, gold could break down from here, but with everything going on in Europe and the likelihood of QE X, and maybe even a crash landing or two in Asia, the odds of that seem rather remote.

As a final point about the above chart, notice the intense support for gold that exists between 1500 and 1550. With gold currently trading right at 1550 (as of this writing), there’s quite a bit of price support not too far below.

Over time, I learned that charts such as these were helpful, but if I wanted to trade gold on a short or intermediate term basis, I had to be nimble. An indispensible tool in trading gold was tracking shares of gold mining stocks. I quickly learned that the price of gold shares would move up or down in advance of gold or silver moving in price.

We can speculate all we want about why that might be. Perhaps the big hedge funds that are capable of moving the prices of gold would make their first move in the gold shares, or perhaps there’s some other form of inside information about imminent gold sales/purchases that gets telegraphed to the major traders of mining stocks, but the signal of mining shares moving against the current of the price of gold was not to be ignored.

I would often have positions in gold and/or silver open, and then rapidly dump them if the gold mining shares suddenly moved against my positions, meaning if I was long gold and the mining shares suddenly started selling off, I would sell out my gold positions. I learned over time that it was much more profitable to sell first and ask questions later.


Tobacco Stocks: Smoke ‘Em If You Got ‘Em :PM, MO, NSRGY, VGR

Plenty of judgment can be passed on the habit of tobacco consumption and the reality is the habit has been proven to be toxic to one's health. Fortunately, one does not have to smoke to reap the rewards of tobacco stocks. Tobacco stocks are really the epitome of "sin stocks," though the infamy their products have gained for being so unhealthy is arguably unfair compared to the likes of McDonald's (NYSE: MCD) and Coca-Cola (NYSE: KO). Both of those companies hawk products that can lead to myriad serious health problems and both firms and their nearest rivals have certainly contributed to a serious obesity epidemic in the U.S. that costs the country billions of dollars in lost productivity every year. Still, tobacco stocks are seen as far more evil than hamburger or soda companies.

Well, tobacco stocks aren't evil for investors and an investor doesn't need to engage in the habit to profit from it. Think about tobacco stocks this way: Let someone else enjoy the habit while you enjoy your dividends and capital appreciation.

Philip Morris International (NYSE: PM):

Philip Morris International is the international version of the former Philip Morris. Altria (NYSE: MO) is the firm that's more focused on domestic tobacco markets. The returns offered by both stocks in 2012 are almost identical, but long-term investors, of which the tobacco sector attracts many, might want to consider PM over MO.

The reason for that is simple and it involves one key fundamental. PM's international exposure will be an important driver of growth in the coming years. Smoking is vilified here in the U.S., but in other countries, particularly fast-growing emerging markets, smoking is seen as a glamorous status symbol. (more)

Does Patriot’s Meltdown Signal ‘Blood in the Streets’ for Coal?

The trouble for coal stocks has gone from bad to worse following reports that Patriot Coal (NYSE:PCX) might be struggling to stave off bankruptcy. Although Patriot is a smaller player in the industry — with a market cap that now sits below $250 million — this latest episode has weighed heavily on investors’ already shaken confidence in the downtrodden coal sector.

Nevertheless, sentiment has weakened so much in the wake of this news that coal stocks might finally be nearing a bottom.

Why Has Patriot Melted Down?

Shares of PCX — one of the many companies victimized as soft demand for coal has led to severe price deterioration for the commodity — already were on the ropes prior to last week. Then on Monday, May 14, the company reported a surprisingly poor outlook after the bell, citing weak international demand and a possible default by a key customer. The stock fell 18% the next day, then proceeded to slide another 16.5% to close out the week.

Matters grew even worse on Tuesday when rumors that Patriot was preparing to file bankruptcy caused its shares to trade down to an intraday panic low of $1.36, versus $5.83 at the beginning of the month. The stock subsequently recovered on news that it was in talks to secure new financing, but PCX still closed Wednesday with a year-to-date loss of more than 68%. (more)

Poverty Increasing Among Retirees

Growing numbers of older Americans are spending their retirement years in poverty, according to a recent Employee Benefit Research Institute study. The proportion of older people living below the poverty line has been growing steadily since 2005, and many of those people are falling into poverty as they age and spend down their savings.

Poverty rates for people ages 65 to 74 climbed from 7.9 percent in 2005 to 9.4 percent in 2009, according to the EBRI analysis of University of Michigan health and retirement study data. For older retirees ages 75 to 84, there was an even steeper increase, from 7.6 percent to 10.7 percent over the same time period. But it's the oldest retirees who are the most likely to live in poverty: 14.6 percent did so in 2009.

Many older Americans are falling into poverty as they age. In 2009, the most recent year included in the study, 6 percent of those age 85 older were new entrants in poverty, up from 4.6 percent in 2005. And while 3.3 percent of people ages 75 to 84 fell newly into poverty in 2005, that number increased to 5.6 percent by 2009. (more)

Google Trends Shows Why The Status Quo "Powers That Be" Should Be Scared. Very Scared

The volume of searches for the phrase 'Bank Run' has just hit an all-time high - higher now than even during the peak of the Lehman Brothers 'moment'. While English dominates the language choices, the Europeans (Dutch, Germans, and French) are extremely 'interested' as are the Chinese...but it appears the Singaporeans are running the most scared (as we noted here) is perhaps not surprising, followed by the Irish and the Americans - with Germany a disappointing 10th - perhaps they really do not care as much as everyone's bluff-calling hopes. It seems the fears of real 'bank runs' are becoming virtually 'viral' - not a good sign for the stability of the fictional-reserve-banking-dependent status quo. (more)

LISTEN NOW – Calls for $3,000 Gold for the First Time Ever, Miners, Int’l Markets and More – Sean Boyd

from KingWorldNews:

Sean Boyd: President, Chief Executive Officer and a director of Agnico-Eagle – Mr. Boyd has been with the 6.5 billion Agnico-Eagle since 1985. Prior to his appointment as Chief Executive Officer in 1998, Mr. Boyd served as Vice-President and Chief Financial Officer from 1996 to 1998, Treasurer and Chief Financial Officer from 1990 to 1996 and Comptroller from 1985 to 1990. Prior to joining Agnico-Eagle in 1985, he was a staff accountant with Clarkson Gordon (Ernst & Young). Mr. Boyd is a graduate of the University of Toronto (B.Comm.).

Listen Now @