Saturday, May 4, 2013

Which is a Better Inflation Hedge, Gold or Houses?

Here is something I never would have guessed at, via Dave Wilson of Bloomberg: If you want to be hedged against the risk of a pickup in inflation, you would be better off buying houses than gold.
That’s according to Michael Hartnett, chief investment strategist at Merrill Lynch. His chart (above) shows the U.S. house-price index and the price of Gold since 1995.
According to Bloomberg, “Home prices rose 6% through the end of last year from their low in the second quarter of 2011. Q1 reading is due May 23. Prices in 20 of the largest U.S. cities increased 0.4 percent through the first two months of this year, according to the Standard & Poor’s/Case-Shiller index.”
As houses became more expensive, gold got cheaper. Its off as much as 31% from its September 2011 peak of $1,923.70 an ounce.

Houses Surpass Gold for Hedging U.S. Inflation
David Wilson
Bloomberg May 3 2013
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James Dines Follows His Prediction of a Commodity Crash with Another One the Mainstream Media Is Ignoring

James Dines When the metals markets tumbled in mid-April, The Gold Report reached out to "the original investor bug" and author of The Dines Letter, James Dines, for perspective. He predicted a crash in commodity prices two years ago based on his analysis of a weak Chinese economy. Next, he says, will be a bond market bust once interest rates start to climb. This will lead to "a stampede to get out of bonds like a herd of elephants attempting to exit through a revolving door." How can investors protect themselves? That is Dinesism #38.

The Gold Report: What does it mean that leading stock market averages have been in Uptrends, while commodities markets are in Downtrends?
James Dines: Our "Sell" signal on China's economy in The Dines Letter (TDL) of Sept. 16, 2011, is still stubbornly resisted by the mainstream press, which instead persists in calling for 7.5% growth by China Since we perceive China as a barometer for the commodities markets, it followed that there would be a decline in raw-materials prices. (more)

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WTI’s Narrowing Discount Masks Oversupplied Crude Oil Market, Brent Headed To $90

We take a look at the latest developments in the oil market, including charts of all the major inventory categories.

The Department of Energy reported this morning that in the week ending April 26, U.S. crude oil inventories increased by 6.7 million barrels, gasoline inventories decreased by 1.8 million barrels, distillate inventories increased by 0.5 million barrels and total petroleum inventories increased by 12.4 million barrels.

Crude oil prices plunged after the release of the latest inventory figures. One bright spot in the report was the sharp decrease in stockpiles at Cushing, Okla., and the broader Midwest. That spurred the WTI-Brent spread to a fresh 16-month low near $9. As Cushing stocks decline further in the coming months, the spread is expected to narrow further to $5.  (more)
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3 Simple Investment Strategies That Deliver Long-Term Riches

In trying to make their money work harder for them, investors often fall for questionable investment strategies that promise to help you get rich quick but usually deliver huge losses. But the smartest ways to reach your money goals don't require you to deal with arcane, hard-to-understand financial products. By following these three simple investment strategies, you can get the long-term results you want without the risk you'll find with more aggressive and dubious alternatives.
1. Dollar-cost averaging.
Few investors have huge pots of money to invest all at once, but most people are able to set aside at least a modest amount of money every month. Dollar-cost averaging involves taking that money and investing it in a mix of low-cost index mutual funds or ETFs. The exact mix depends on your tolerance for risk, your time horizon, and the amount you have to save, but by putting aside the same amount month in and month out, you'll build a habit of saving and investing. (more)

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Stock Preparing for Pullback, Buy Bad News, Sell the Good

The SP500 remains in a strong uptrend, but the index has posted a sizable gains for 2013 thus far so it’s only logical that a pullback within this bull market takes place sooner than later.
With May now upon us and historically prices fall more times than not I feel a 3-4 weeks correction is on the verge of starting. This Friday we just had very strong economic numbers confirming the economy is recovering. This news has sent stocks sharply higher as shorts cover their positions and investors who are not yet long get into position to profit from higher prices. But the herd psychology and their trades are typically incorrect as they invest based on fear and greed. The old saying is buy on negative news and sell on positive news will typically get you on the correct side of the market more times than not if used with price, volume and cycles.

The Technical Traders – SP500 Index Weekly Chart

If we look at the price of the SP500 we need it to breakdown below the recent pivot low before I become bearish.
Volume which is not shown on this chart is below average as price moves higher and this is a bearish sign also.
Looking at a basic cycle using the stochastics indicator we can see that the current cycle is starting to turn down. Cycles tend to lead price during an uptrend so we could still have stocks move higher for another week or so but be aware that when price starts to drop its likely a market top. But until then you must respect the uptrend. Stocks can remain overbought and toppy looking for months… so done be gambling and trying to pick a top until we see breakdown start.

SP500 Stocks Trading Above 200 Moving Average – The Technical Traders View

Stocks trading above the 200 day moving average is a great indicator for helping spot broad market underlying strength/weakness. It does lag the market but is still very powerful. The chart below shows this info and my thinking of what is likely to unfold sooner than later though price may still rise for several days yet.
I also use a similar chart for timing swing trades and market tops which are based on stocks trading above the 20 day moving average. This chart is not shown here but is now trading at a level which generally triggers selling/market top.

Stock Market and SP500 Trading and Investing Conclusion:

In short, I am still bullish on the market as I focus on trading with the trend. I do not pick market tops and I do not pick market bottoms. Knowing that stocks make their biggest moves at the end of their uptrend and at the end of a down trend it’s only common sense that risk is extremely high if you are betting against the current trend.
The best thing to do is wait for a technical breakdown and reversal which puts the odds more in your favor with much less risk and typically a clear line in the sand to exit the position if you are incorrect.
The last major stock market top which formed in September of last year had a series of strong news and strong price action persuading the herd to buy stocks.  Instead it was the last impulse wave up just before a strong correction took place. That is much like what we see now with the economic news.

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Chart of the Day - Walt Disney (DIS)

The Chart of the Day is Walt Disney (DIS).  The stock was right near the top of the New High List when I sorted it for frequency.  The stock has 100% Barchart technical buy signals and a Trend Spotter buy signal.  It is recommended as buy or hold by 24 Wall Street analysts.

The Company is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Studio Entertainment, Theme Parks and Resorts, Consumer Products and Internet and Direct Marketing.

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Junior mining stocks see record insider buying

Those looking for even more evidence that corporate executives are smelling bargains in the junior mining sector should consider this: Insider buying on the TMX Venture exchange is near a record high.
INK Research’s Venture indicator is at 715 per cent today, just 20 percentage points below its record peak of 735 per cent set on Oct. 27, 2008. That means there are more than seven stocks listed on the exchange with insider buying for every one seeing selling. It also marks a steep increase since early March, when the indicator was near 400 per cent. (more)

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Australia Manufacturing Collapses as Commodity Supercycle Stalls; Labor and Unions Wrecked Australia / By Mike “Mish” Shedlock / Thursday, May 02, 2013 4:26 PM
Australia fundamentals deteriorate rapidly as evidenced by a collapse in the PMI Manufacturing Index in April.
 Key Findings
  • Manufacturing activity contracted significantly in April as conditions weakened amid a strong Australian dollar, intense import competition, high energy costs and weak local confidence.
  • The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) fell 7.7 points to 36.7 on a seasonally adjusted basis. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease.)
  • This is the lowest level the Australian PMI® has recorded since May 2009, with many of the key sub-indexes also dropping to levels not seen since 2009. The three-month moving average in April fell to 42.2 points from 43.4 points in March.
  • Contractions in activity were recorded in seven out of the eight manufacturing sub-sectors. Significant contractions were recorded in food, beverage & tobacco products; printing & recorded media; non-metallic mineral products; metal products; and machinery & equipment.
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Former US Treasury Official – Today’s Jobs Report A Total Farce / May 3, 2013
Today a former US Treasury Official told King World News that today’s jobs report is a total farce, and any hint that there is an economic recovery is a lie.  Dr. Paul Craig Roberts also warned, “the country is being increasingly deceived by disinformation.”  Below is what Dr. Roberts had to say in part I of this extraordinary and exclusive series of written interviews that will be released today.
Eric King:  “We just had the employment report come out, Dr. Roberts, your thoughts there?”
Dr. Roberts:  “Well, it’s not believable, Eric.  They claim 185,000 new private service jobs.  They are showing jobs in retail trade.  Of course the statistics show that retail sales are falling, so why are they having more employment?
They show a tremendous number of jobs in professional and business services, 73,000 (new jobs).  This is not believable either.  They also have 38,000 jobs in waitresses and bartenders.  Now, for an economy that’s not going anywhere, you won’t have people hiring in retail trade and general merchandise stores where a lot of that employment is alleged to be.

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