Tuesday, February 5, 2013

Europe Plunges By Most In Six Months

from Zero Hedge:
We warned last week that European markets were beginning to show signs of cracking. European stocks had surged on to new highs while credit markets had decidedly not joined the liquidity-fueled exuberance. Sure enough a few days later and Europe in general is weak, but Italy and Spain are under significant pressure. The last four days have seen the biggest plunge in over six months with the IBEX (Spain -5.7%) and Italy’s MIB -6.7%. At the same time, Europe’s seemingly invincible OMT-promise-protected sovereign bond market has started to underwhelm. Italian bond spreads are 32bps wider and Spain 28bps wider – the biggest increase in risk in two months. Europe’s VIX has surged from 14.5% to almost 19% today in the last 4 days and even Greek government bonds are losing their luster, -6.5% in the last few days. Whether this is exacerbated by European leaders jawboning the strength of the EUR down, or simply we hit the limit on reality amid Italian bank fraud, Spanish political fraud, referenda votes, and macro- and micro- fundamentals snapping; this is the worst performance in Europe in six months. It would seem that if the tail-risks in Europe are starting to re-appear then at least one of the legs of global equity exuberance is starting to break.
Read More @ Zero Hedge.com

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Own Physical Gold & Silver As Currency Wars Will Destroy Our Money

The general macro economic outlook of Andy Hoffman is based on the expectation we will see “more of the same,” including more money printing, weaker economies, higher unemployment, social unrest … and importantly weaker currencies. With the Dow Jones index almost at all-time highs (14,009 closing price on February 1st) and the VIX indicator close to all time lows (12.90 on February 1st), weakness is not reflected in equity prices.
Markets are not real; they no longer exist. Every market is manipulated to levels we have never seen before. Governments have always been buying bonds. Now they admit that they are buying stocks as well; they use the exchange stabilization fund to manipulate currencies. They have so thoroughly taken over the market that they have literally destroyed volatility. That is why the metals are the safest place to be.
This is clearly an artificial situation and cannot go on forever. These conditions have continued for much longer than expected. Andy Hoffman can hardly believe the slow motion pace at which conditions are deteriorating, saying “this will continue until it stops.” Case in point is the debt situation which went from arithmetic to parabolic growth. Somewhere it will stop; the point is nobody knows when and how exactly. The first signs of higher interest rates are there in the US and Japan, with the 10 year Treasury yield moving to 2% very recently. Governments will react with even more monetary easing (QE). Japan has just announced QE11.
Similarly, for gold and silver, the key question is for how long paper gold and silver (in the form of futures and ETF’s) can control the price. It will be possible until physical demand will take over. Nobody knows how long exactly when it will happen and what the (final) trigger will be. However, one thing is clear: the longer this game goes on, the stronger the reaction afterwards. (more)

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These 3 Micro-Cap Stocks Could Double in 2013: CPST, ABHD, DSCI

With the market moving ever higher, investors are "moving out on the risk curve." This means the positive price action is beginning to spread to more speculative stocks -- small- and micro-caps.

Indeed, investors can score stunning gains in the micro-cap arena -- if they pick the right stocks.

Of course, whenever you focus upon stocks with significant potential upside, it's wise to keep your enthusiasm in check. The "swing-for-the-fences" approach can be quite rewarding, but it also brings increased risk of an occasional flameout. That's why a basket approach is best. But by owning several speculative plays, with each comprising less than 5% of your portfolio, you may be richly rewarded.

Here are three micro-cap stocks that could generate significant gains in the year ahead.

1. Capstone Turbine (Nasdaq: CPST)
Roughly a decade ago, this company was expected to revolutionize the power-generation industry. Its micro-turbines held the promise of providing off-the-grid power back up for many factories. They were also seen as a potential savior for remote villages in countries like India, where electricity was still scarce or even nonexisiting.   

Capstone's shares briefly moved above $80 in late 2000, but after a decade of operating losses, shares now trade below $1. In fact, the company generated positive gross margins for just the first time in its history in fiscal (March) 2012.

Yet gross margins are finally starting to move up meaningfully, hitting 9% in the company's fiscal second quarter ended September. When fiscal third-quarter results are released on Monday, Feb. 11, gross margins should reach double-digits for the first time. Analysts at JMP Securities expect gross margins to rise to 13% in the company's current fiscal fourth quarter. (more)

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John Embry – Silver Market Is Nearing A Commercial Signal Failure

kingworldnews.com / February 4, 2013
Today John Embry told King World News that the silver market is getting very close to a commercial signal failure.  Embry, who is Chief Investment Strategist at Sprott Asset Management, also spoke about global stock markets, gold, mining shares, and the global economy.  Here is what Embry had to say in this exclusive interview:  “It appears that Europe is unraveling once again.  I was really irritated with the level of enthusiasm that had developed in Europe because of the bond purchase program, which caused the interest rate picture to improve.”
John Embry continues:
“I didn’t believe that the lowering of interest rates had one iota of reality with regards to what was going to happen on the ground with the economy.  Now that the fraud in Spain has been revealed, spreads are starting to widen again and the European stock markets are getting kicked around.
I think the reality is that Europe will face a tough road going forward….

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The Cantillion Effect: Why Government Handouts & Paper Fututures Markets Eliminate Real Price Discovery

from Silver Doctors:
As free or low priced money floods any economic system it skews the value of the FIAT and the goods paid for by this funny money.
The government pays out $1,000,000,000,000 (trillion) in transfer payments a year. This is big money that has no effort, sweat or value recognition embedded in it. It’s free money.
Similarly, in gold & silver, price discovery has been blown all to pieces because of another free money crowd, the paper traders.
If we use 1913 as a base line, the year the Fed was formed, there’s is a lot to be said about commodity prices.  Nearly everything we use or consume is up by a factor of 20 to 1 or greater in the last 100 years.    We live in that price paradigm.  But precious metals don’t follow any of the standard pricing models of the last 100 years.   Prior to 1913, there was little inflation.  Wages did not grow a great deal.  One could run their life without worrying too much about inflation.  Gold and silver were the coin of the realm.  Today, everything is upside down.
Read More @ SilverDoctors.com

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Gasoline costs take biggest share of household income in three decades

Trips to the gasoline pump in 2012 and 2008 took their biggest share of U.S. household income in several decades, according to the federal Energy Information Administration (EIA).

The Energy Department’s statistical arm reported Monday that the average household spent $2,912 for gasoline in 2012, which makes up almost 4 percent of pre-tax income, tying 2008 for the highest percentage in roughly 30 years.

Pump prices took center stage in White House races in 2008 and 2012, but gasoline expenditures as a share of household income remain lower they did than the early 1980s, when they were above 5 percent.

Prices last year were elevated enough to push the share of household spending to the highest level in decades even though overall gasoline consumption has been declining for years.

“Efficiency gains have accelerated in recent years, such that total U.S. gasoline consumption fell in 2011 to 134.2 billion gallons, its lowest level since 2001. However, at the same time, EIA's average city retail gasoline price rose 26.1 percent in 2011, and another 3.3 percent in 2012, when it reached $3.70 per gallon. The effect of the higher prices in 2011 and 2012 outweighed the effect of reduced consumption,” EIA reports.

“As a result, expenditures increased to a record annual average of $2,655 per household in 2011, rising to an estimated $2,912 in 2012. The 26.1 percent yearly increase in 2011 was six times greater than the 3.4 percent rise in nominal household income. Additionally, the 3.3 percent estimated gasoline price rise in 2012 outpaced the 2.9 percent estimated increase in income,” the agency said.

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Why 79 is the Key Number for Gold

When it comes to gold, there are two numbers every investor is watching: 1,800 and 1,500.

Gold has been fluctuating between those two prices for more than a year. Once the price breaks out of that range, we’re likely so see a lot of momentum in the direction of the breakout.

In other words, if gold breaks above $1,800, it could move much higher very quickly. And if it breaks below $1,500, it could move much lower in a matter of days.

That’s why most gold analysts consider $1,500 and $1,800 key numbers to watch.
But there’s one number that may be even more important: 79!

You can see that number in the chart of the dollar index below. It shows a head and shoulders pattern, just like I predicted back in November.

As I mentioned in that article, this is a bearish pattern for the dollar. If the index closes below $79, we’ll be able to confirm the pattern. This will increase the chances the dollar will move much lower.

Potential Head and Shoulders in Dollar Index is Good News for Gold

This is good news for gold, which you can see at the top of the chart. Gold and the dollar tend to move in opposite directions. As you can see, when the dollar index dropped from 88 to 74 in 2010-2011, gold rallied from $1,200 to $1,800.
So if the dollar completes this head and shoulders pattern, it will increase the chances gold will break to the upside of its trading range.
That’s why 79 is the key number to watch for gold. If the dollar index breaks below that level, it’s very likely gold will rally.

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