Friday, April 5, 2013

The Chart That Will Crash The Market / By Karl Denninger / April 3, 2013, 09:14
The screeching coming from CNBS and elsewhere this morning is amusing.
There’s only one chart that matters, and it will, when recognized, blow up the stock market — sending it down 50% or more.
It’s this one:
That’s it.  And the ADP report this morning is showing the pathway to recognition, as construction has stalled and the destruction of job creation in small and mid-sized businesses exposed to Obamacare will finish it off.
I continue to maintain that we’re in a time very similar to 2007, when the facts were on the table.  Banks paying dividends with money they didn’t have.  Hedge funds that blow.  Bubbles in crazy places, then housing, this time in subprime car lending, student loans and even Bitcon.
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Cytec Industries Inc (NYSE: CYT)

Cytec Industries Inc., a specialty chemicals and materials company, focuses on developing, manufacturing, and selling value-added products for aerospace and industrial materials, mining, and plastic industries worldwide. It operates in four segments: The Engineered Materials segment offers aerospace-qualified prepregs, resin infusion systems, structural/surfacing adhesives, and ablatives, as well as industrial-grade prepregs and structural/surfacing adhesives high performance carbon fibers. The Umeco segment offers high performance composites structural materials/solutions; and process materials/solutions, such as vacuum bagging, release films, and sealant tapes. The In Process Separation segment provides mining chemicals, including flotation promoters, collectors, frothers, dispersants and depressants, solvent extractants, flocculants, filter and dewatering aids, antiscalants, and defoamers. The Additive Technologies segment offers polymer additives, such as ultraviolet light stabilizers and absorbers, and high performance antioxidants and antistatic agents; specialty additives consisting of surfactants, specialty monomers, resin amines, and PTZ phenothiazine; and formulated resins.
To analyze the company's stock for potential trading opportunities, please take a look at the 1-year chart of CYT (Cytec Industries, Inc.) below with my added notations:
1-year chart of CYT (Cytec Industries, Inc.) CYT has had a nice run since it's June low of $55. In August the stock broke above the $65 resistance that had been stalling the stock and then created a $70 resistance (blue) from there. After breaking above that resistance in January, the $70 level became support as expected and $75 became the new level of resistance (red). Now that CYT has taken another step higher by breaking above $75, one might expect that level to now become support just as the previous level of $70 did.
The Tale of the Tape: CYT has broken above $75. A long position could be entered at the $75 support with a stop placed below the level of entry. A short play could be made on a break below $75 with an expectation of a fall back down to $70.

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Pension Funds Can Be Reduced in Bankruptcy

by Martin Armstrong
Armstrong Economics

One of the important developments is the Stockton, California bankruptcy. The jurisdiction for bankruptcy is federal court, not state. This is rather significant and the law is really clear, there are no exceptions among creditors under bankruptcy. A federal judge earlier this week gave the green light to Stockton, Calif. to restructure under bankruptcy protection and that applied to the state pension funds.
Perhaps nobody wants to really address this issue openly, but it is the pension funds that are destroying state and local governments who cannot simply print money as can the Feds. As one state employee retires, they are replaced and that means the cost of government goes exponential. We are looking at the cost of state and local governments doubling over the next 10 years and that is simply not sustainable. This is HIGHLY deflationary because they increase taxes and have no means to expand the monetary system. Thus, all the arguments of those selling the hyperinflation scenarios are omitting the impact at the state and local governments that will be deflationary.
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We could be on the verge of a big buy signal in another super-cheap gold stock

The conference call transcript provides a good amount of color and makes the information on this chart easier to grasp. But the short of it is this: management is confident that the annual ounces of gold production will increase from something in the neighborhood of 45,000 in 2012 to nearly 100,000 within the next five years (2017). AND, the cost to produce each ounce is expected to fall from $1,000 to $800.

I think a company that can double its mining output and cut costs of production at the same time might make some money, no?  (more)
This post will take a quick look at Claude Resources Inc (CGR) which very recently posted its 2012 results and provided a substantial amount of very favorable information in their conference call last Thursday, March 28, 2013...

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Doug Casey: All Banks Are Bankrupt

by Louis James, Casey Research:
L: Doug, there is considerable disagreement over the significance of the Cyprus crisis. A lot of people are saying that it’s just a flash in the pan; Cyprus is a small country, far off, and doesn’t really matter. Other people are saying it’s very significant. The European Central Bank took unprecedented steps. What do you think?
Doug: I think this could be the spark that ignites the keg of dynamite under the current financial system. All banks, all around the world, are bankrupt, and have been for years. That’s because all the world’s banks run on a fractional reserve basis.
L: I know what you mean, but we should spell that out: by law and backed with government guarantees, banks only have to keep a tiny fraction of the money people deposit on hand. They lend out the vast bulk of it, and in even in good times, they could not return all depositors’ money at once, since loans cannot be called in instantaneously, and most would be defaulted on if they were. In bad times, the charade is even more hollow, since many loans that banks are currently owed will never ever get paid.
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Nikkei Soars, Japanese Bond Yields Collapse On BoJ Front-Running / By Tyler Durden /
If there is one thing the Fed taught the world’s investors it was to front-run them aggressively; and whether by unintended consequence or total and utter lack of belief that despite a ‘promise’ to do ‘whatever it takes’ to stoke 2% inflation the BoJ are utterly unable to allow rates to rise since the cost of interest skyrockets and blows out any last hope of recovery, interest rates are collapsing. Japan’s benchmark 10Y (that is ten years!!) yield just plunged from 55bps (pre-BoJ yesterday) to 34bps now. That is a yield, not a spread. Nothing to see here, move along. Of course, not to be outdone, Japanese stocks (Nikkei 225) are now up 6.75% from pre-BoJ (3% today) trading at 13,000 – its highest since September 2008 (Lehman).
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Pimco’s Gross: Here’s What We’re Buying Now

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