Wednesday, May 15, 2013

Don Coxe: Buying Gold May Have Downside Risk, “But The Upside Is Going To Be Enormous”

Legendary investor Don Coxe, Chairman of Coxe Advisors LLP, and former advisor to the $540 billion BMO Financial Group, issued a powerful new commentary entitled, “Money Makes the World Go Round”
In this updated piece, Don spoke to the staggering growth of the U.S. monetary base, indicating that when monetary velocity regains its speed, a “nightmare scenario” could unfold, with gold to money supply ratios exploding from levels, “so far [below] any all-time lows, so as to [defy] the description.”
Here is a highlighted segment taken from Don’s 30 min. commentary:

“What Ben Bernanke explained in a series of lectures last year, was the core of his strategy; A dramatic expansion of the U.S. monetary base, which shocked conservative republicans and…contributing to the big rally in gold. In his view, he had to do it to prevent a new depression. And he did that. But then he stayed with it, and his objective was to raise the value of the price of assets—he never mentioned gold of course. And he succeeded in the stock market, probably beyond his dreams.”
“At some stage there will be a transmission mechanism to move money from the fed’s monetary base, which is exploding at [a] 40% rate, and it will work it’s way into the money supply growth. Now that has to happen through what’s called a multiplier effect in the banking system, where banks create money by granting loans. That of course has not happened up until now, but there are signs that it’s emerging. And that is the big reason why the U.S. economy is doing better than most of the other big economies, because there is growth in lending in the U.S. banking system.”
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Nasdaq-100 Breaks 3000, First Time Since 2000

Up 195% from the Nov 2008 lows, the Nasdaq-100 has now broken back above the magical 3000 level. A level first seen in Nov 1999 (back then it took 4 more weeks to hit 4000). How long until CNBC adds a countdown timer to the Nasdaq all-time high?

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Is Lumber The New Baltic Dry?

Lumber is limit down once again. It has been falling now for two months in a very 'non-housing-recovery'-like manner. Of course, when Lumber prices are rising, everything is bullish and it merely serves to confirm the exuberance and bias to optimism that we should all have. However, just like the Baltic Dry Index, when it's falling it is a bullish sign that the market is over-supplied in anticipation of good things to come. With Lumber's two-month lead over stocks signaling the equity market may well be a little ahead of itself, it seems the supply-demand balance is off in the construction materials business (which one is off - supply or demand) but have no fear, just as with the Baltic Dry, it will come back if we just keep hoping. Or did the actions of a central-bank inspire confidence once again in the 'wrong' industry and spark another mal-investment boom?

The Baltic Dry - now meaningless (if we build it, they will come... at some point, we promise, Bernanke said!!)...

as a leading Lumber futures price is now ignored by 'market' reality too...

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ITT Educational Services, Inc. (NYSE: ESI)

ITT Educational Services, Inc. provides postsecondary degree programs in the United States. It offers master, bachelor, associate, and career oriented education programs in various fields, such as information technology, electronics technology, drafting and design, business, criminal justice, and nursing and health sciences. The company's information technology programs include communications, network administration, network technology, software development, systems technology, and technical support; and electronics technology programs comprise communications, computer technology, electronics product design and fabrication, industrial electronics, instrumentation, and telecommunications. Its drafting and design programs consist of architectural and construction drafting, civil drafting, computer aided drafting, electrical and electronics drafting, interior design, landscape architecture, mechanical drafting, and multimedia communications; business programs comprise accounting, business administration, financial services, manufacturing, marketing and advertising, and sales; and criminal justice programs include corrections, cyber security, investigations, and security and policing. The company's health sciences programs comprise health information technology and nursing.
Please take a look at the 1-year chart of ESI (ITT Educational Services, Inc.) below with my added notations:
1-year chart of ESI (ITT Educational Services, Inc.) ESI peaked last July at $65 and lost more than 80% of its value from there. The stock seems to be forming a base over the last (6) months all the while hitting a very important level of resistance at $20 (red). No matter what the market has or has not done since December, ESI has not been able to break through that area of resistance. If the stock can finally move above $20, higher prices for the stock should follow.
The Tale of the Tape: ESI has a key level of resistance at $20. A long trade could be entered on a break through that level. However, if you are bearish on the stock, a short trade could be made on any rallies up to $20.
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The Dow Is at a Record High, but Institutions Are Selling

The shares of Apple Inc. (NASDAQ/AAPL) have been on a steady climb since plummeting to $385.10 on April 19; but my sense is that the buying has largely been driven by retail investors and not from where it counts with the institutional money, based on my stock analysis.
Insiders and the institutional money are not as supportive of Apple, according to my stock analysis. Over the last six months, insiders have sold Apple in 10 transactions totaling 127,896 shares, while there was only one insider buy of 1,780 shares, according to information by Thomson Financial.
Institutional buying, which I believe is the key to stocks due to their knowledge on the companies, is also refraining from buying Apple, even at the much lower price. My stock analysis indicates that institutions have unloaded 27.8 million shares of Apple with institutional investors’ ownership declining 4.5% on a quarter-to-quarter basis, according to Thomson Financial. Some of the biggest sellers include Capital World Investors (-56.3% in Apple stock), Wellington Management (-48.9%), HSBC Holdings (-62.6%), and BlackRock Advisors LLC (-48.2%). My stock analysis notes that this selling suggests a lack of confidence in the company, even with Apple shares plummeting down more than 40% since the company’s high point.
Based on the lack of buying by the insiders and institutions, I would still be wary of buying Apple at this point. In my view, Apple is more of a trading opportunity than a buy-and-hold.
The reality is that following where the professional money is flowing gives us another tool to evaluate the stock market and get a sense of what is happening.
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Is Crude Oil Ready For A Breakout And Would It Help Gold?

by Przemyslaw Radomski
Gold Seek

Jim Rogers recently said in an interview to Morningstar, that he is not disturbed by the recent tumble in gold prices.
“Gold had gone up 12 years in a row, without a down year, which is extremely unusual in any asset. Equally important, gold has only had one 30% correction in 12 years. Again, that is extremely unusual. Most things correct 30-40% every year or two. So the action in gold has been very unique and gold needed a correction. The main thing that caused it, as far as I am concerned, was that the market was ready. It needed it and it is good for gold to have a proper correction,” said Rogers. We agree. At the same time we would like to point out that this has no implications on the short term.
How does he see the future for gold?
Continue Reading at…

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Railroad Industry Stock Outlook - May 2013: UNP NSC KSU CSX CP CNI

Consistent with the current macroeconomic trends, railroads started the year on a mixed note. Going by the rail traffic report for the first quarter 2013, growth in automotive and petroleum products’ shipments was steady while coal and grain shipments continued to cast a shadow over the rail freight industry.

According to the Association of American Railroads’ (AAR) rail traffic report, cumulative performance of the North American railroads (including U.S., Canadian and Mexican railroads) have fallen 1.5% year over year in the first quarter of the year. The biggest contributor to this decline was grain, which dropped 11%. Coal volumes followed closely, falling around 7%.

Going by the quarterly performance of the class 1 railroad, we see continued lower volumes from most of these carriers. One of the largest class 1 railroads in North America -- Union Pacific Corp. ( UNP - Analyst Report ) -- registered first quarter volume decline of 2% year over year. Another major railroad CSX Corp. ( CSX - Analyst Report ) also reported a similar level of decline in its volumes. Going forward, Canadian counterpart, Canadian Pacific Railway Ltd. ( CP - Analyst Report ) also experienced lackluster growth trend with flat volume growth on a year-over-year basis. (more)

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