NYSE Margin Debt Storms Back To All Time Highs

A month ago we explained why ordinary margin debt (such as that tracked by the NYSE) is largely irrelevant as it completely ignores the leverage of the largest investor class (aside from the Primary Dealers who use Fed reserves as collateral against which to purchase equity index futures), namely hedge funds and whose leverage blows out ordinary retail investors out of the water. Nonetheless, NYSE margin debt is still useful as an indicator of prevailing retail and less than sophisticated investor leverage, and thus euphoria, in the market.
It is from this perspective that we observe how after dropping modestly from all time highs hit in February, NYSE margin debt has recouped virtually all its losses and is now essentially back to all time highs. And as a parallel to that, investor net worth, defined as total Free Credit Cash and Credit Balances in Margin accounts less Margin Debt, has once again dropped to all time lows.

And while it may represent a mere subset of overall market leverage, it is perhaps worth rereading Deutsche Bank's warning on the topic from a year ago, in which the German bank, embroiled in the latest financial reporting credibility scandal, hopes that "not all margin calls come at one in case of a sell-off."
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Andrew Maguire: Hundreds Of Tons Of Gold Bought By East In 14 Days

from King World News

London metals trader Andrew Maguire told King World news that hundreds of tons of physical gold was bought by Eastern nations in just the last 14 days. Below is what London metals trader Andrew Maguire had to say in Part II of a series of interviews that has now been released on KWN.
Eric King: “Andrew, I know there were large sovereign bidders in this market near the $1,300 level. By taking gold through that level, how much gold was lost to the cartel (of Western central banks)?”
Maguire: “When you look at the billions of dollars of instantaneous sales, you see a $2.5 billion sale, you see a billion dollar sale. You are talking hundreds of tons of paper gold being sold….
Continue Reading at KingWorldNews.com…

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This Week in Money with Guests: Martin Armstrong, Ross Clark – July 26, 2014

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5 Beaten-Down Bargain Stocks: KGC, DNN, DML, K, NG

Are you worried about today’s lofty equity valuations? You should try combing through the market’s discount bin.
Stocks trading under $5 per share can be a great source of investment ideas. Just like your department store bargain rack, many securities are only put here because they’re out of season.
For those of us who don’t mind being out of step with Bay Street’s latest fashion, these stocks are sometimes outright steals. After combing through the discount bin myself, here are five companies that have been unfairly marked down.

1. Spartan Energy
Spartan Energy (TSX: SPE) is the fastest-growing junior in the Canadian oil patch. Since the company is only spending 80% of cash flow, management still has plenty of room to accelerate that expansion further through acquisitions. Although investors are starting to discover this company, it’s still a relatively unknown name on Bay Street. I don’t expect that situation to last for long.

2. Denison Mines
Denison Mines (TSX: DML)(NYSEMKT: DML) has been completely abandoned by the investment community due to low uranium prices. However, the industry is beginning to consolidate and a small player like Denison would make an attractive acquisition target. Even if no buyout occurs, the company still has a great asset portfolio and huge exploration potential.

3. Kinross Gold
Kinross Gold (TSX: K)(NYSE: KGC) has been hammered by falling metal prices and reckless spending like the rest of the gold mining industry. However, there are some signs of a turnaround at the struggling company. Its new CEO has suspended the company’s dividend, halted unprofitable mines, and slashed spending. With operating costs coming down, Kinross Gold’s shares could start to rally even without higher gold prices.

4. Novagold Resources
Novagold Resources (TSX: NG)(NYSEMKT: NG) has also struggled thanks to soft metal prices and higher costs. However, most the the company’s largest asset writedowns are behind it and tough cost-cutting measures are returning it back to profitability. In recent months a number of notable hedge fund managers have built large positions in this stock, including John Paulson, David Iben, and Seth Klarman. The smart money clearly sees lots of upside potential.

5. Sherritt International
Sherritt International (TSX: S) has struggled in recent quarters due to problems at its Cuban and Indonesian operations. This has left the stock trading at a fraction of book value. Given that most of these problems have already been priced in, any good news could send shares sharply higher.
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Two Buy Signals in Crude Oil

To help us analyze this chart of light, sweet crude oil, let’s use two momentum indicators:

• The MACD (Moving Average Convergence Divergence) indicator


• The RSI (Relative Strength Index – not to be confused with “relative strength”).

The main portion of the chart shows the price action of light, sweet crude oil.
Just below the price action portion of the chart is the MACD indicator.
In this chart, the “MACD line” is green and the “signal line” is red. The signal line is the moving average of the MACD line, which is why it’s a bit slower to move.
There are two main requirements for a true MACD “Buy” signal. First, the MACD line must cross from below to above the signal line. Second, this must happen below the zero line (which is the midpoint of the indicator). “Buy” signals given when a price chart is in a downtrend are unreliable.
I pointed out some MACD “Buy” signals with the blue lines in the chart. The MACD just gave us a “Buy” signal on Wednesday.
At the bottom we have the RSI. When the RSI crosses above the 30 line, it’s a “Buy” signal. I drew green arrows from every legitimate RSI “Buy” signal to show where the price of light, sweet crude oil was at the time.
Notice I said “legitimate” RSI “Buy” signal. In relation to the MACD “Buy” signals, RSI “Buy” signals that are given when a price chart is in a downtrend are unreliable entry points for bullish positions. They become legitimate when the RSI makes a higher low that matches the lower lows in the price chart (a “positive divergence”). An example of this is the RSI “Buy” signal seen in November 2013.
Notice how the RSI gave us a “Buy” signal just over a week ago.
No indicator has a perfect track record. But these two momentum indicators are telling us light, sweet crude could be making a profitable move.
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