World Of Wallstreet

This Week's Economic Calendar...

Ok, below is Yahoo's economic calendar for this week. Three things:

(a) Is anything important missing? Is there other / better sources of Calendar data to follow? The big hitters I see this week are auto sales (Tues), FOMC notes (Wed), Unemployment (Fri).

(b) Here's my view what's important and on how to trade the general markets:

Tues - expect a general market pop (with gold going with it) on better than expected auto sales. So, go long the general market at the close on Monday and hold for FOMC minutes on Web.

Wed -  factory orders are "better than expected".

Wed  -  FOMC meeting minutes reveals FED thinks economy has bottomed. Stocks rise thru the close. Exit at the

close.  NOTE: If stocks are not up Tuesday and Wed, the jig is up on the "better than expected" meme and look out below.

Fri - Unemployment is bad, stocks initially tank but have a nice interventional run (Plunge Protection Team) at the close to end up for the week on a positive note. NOTE: If stocks are down for the week, the jig is up and look out below.  

(c) Here's how to trade gold based on the interventionals.

Tues - gold rises with the general market. Enter long at the close on Monday, exit at the close on Tuesday.

Wed - gold is down a little. Can't have it up when the FED speaks. Enter at the close.

Thurs - Not much happening, gold recovers some, exit at 1:30PM or $960 whichever comes first.

Fri - Gold gets clobbered after unemployment comes out (power that be can't let it look good when the general economy is bad), buy at the bottom around 10:30 PM. Go short late Thursday night (before going to bed) and exit Friday at 11:00AM.

What do you think?

 

MontyHigh, www.worldofwallstreet.us

Aug 31	9:45 AM	Chicago PMI	Aug	50.0	48.1	48.0	43.4	-
Sep 1	10:00 AM	Construction Spending	Jul	-	-0.3%	-0.2%	0.3%	-
Sep 1	10:00 AM	ISM Index	Aug	-	49.7	50.2	48.9	-
Sep 1	2:00 PM	Auto Sales	Aug	-	NA	NA	4.2M	-
Sep 1	2:00 PM	Truck Sales	Aug	-	NA	NA	4.2M	-
Sep 2	8:15 AM	ADP Employment Change	-	-	-255K	-246K	-371K	-
Sep 2	8:30 AM	Productivity-Rev.	Q2	-	6.1%	6.1%	6.4%	-
Sep 2	10:00 AM	Factory Orders	Jul	-	1.5%	1.5%	0.4%	-
Sep 2	10:30 AM	Crude Inventories	08/28	-	NA	NA	+128K	-
Sep 2	2:00 PM	FOMC Minutes	Aug. 12	-	-	-	-	-
Sep 3	8:30 AM	Initial Claims	08/29	-	550K	570K	570K	-
Sep 3	10:00 AM	ISM Services	Aug	-	48.7	48.0	46.4	-
Sep 4	8:30 AM	Average Workweek	Aug	-	33.1	33.1	33.1	-
Sep 4	8:30 AM	Hourly Earnings	Aug	-	0.0%	0.1%	0.2%	-
Sep 4	8:30 AM	Nonfarm Payrolls	Aug	-	-265K	-225K	-247K	-
Sep 4	8:30 AM	Unemployment Rate	Aug	-	9.5%	9.5%	9.4%	-

Data Point: Insider Trading and Investor Sentiment Signaling U.S. Stock Market Top

I admire Charle's Bideman's TrimTabs investing book and subscribed to his service until it was bought out by Goldman Sachs (with whom I want nothing to do and of whom I am highly suspicious. His basic story is that there is a small set of key leading indicators which point to the direction the market is taking. One of his key leading indicators is Income Tax revenues. Another is Insider Buying / Insider Selling. I think this data point (which I consider to be a fundamental data point and rather bearish) to be of note:

"Insider Selling in August Soars to 30.6 Times Insider Buying, Highest Level Since TrimTabs Began Tracking in 2004. NYSE Short Interest Plunges 10.3%, While Margin Debt Spikes 5.9% SAUSALITO, Calif., Aug. 28 /PRNewswire/ -- TrimTabs Investment Research reported that selling by corporate insiders in August has surged to $6.1 billion, the highest amount since May 2008. The ratio of insider selling to insider buying hit 30.6, the highest level since TrimTabs began tracking the data in 2004. "The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon," said Charles Biderman, CEO of TrimTabs." There is more material of value in the story that can be found here. MontyHigh, www.worldofwallstreet.us

Looking At S&P 500 Charts

This post may not be of great value to you dear reader, but I'm trying hard to get my general market /macro-economic call right. I'm really wrestling with the divergence between the fundamentals and the technicals (price action). The fundamentals remain quite bearish, at least for the USA, from my perspective. The technicals have been quite the opposite. This posting looks at the technicals, focusing on the representative S&P 500.

Here's the monthly chart.

The monthly shows a perfect V-shaped recovery right up and through the first fibonacci. The last time the MACD actually crossed over (as its about to do here), the rally continued for years. Seems quite bullish.

Here's a view of the situation since the pre-crisis high.

 

Beyond the fact that the S&P is nicely above the 50 day and 200 day moving averages, having cleared the first fibnacci with he RSI being strong but not strongly over-bought is something interesting about volume: There was very little buying or selling between the 1st and last fibonacci numbers (see green rectangle). This means that there are very few shares waiting to be sold "if only I can back to break even". This means there is little resistance (selling ready to happen) for the S&P all the way into the 1200s. The current surge could easily keep going another 20%. On the other hand, there is quite a bit of volume immediately below the current level. All of these buyers have made a profit and, psychologically, they really, really don't want to lose it. A 5 to 10% down-turn could turning into panic selling. The psychology is such that I kind of expect a big move either way. 

This last chart looks at the situation since the March bottom.

This charts reveals indications of a potential bearish reversal:

1. A clear bearish-rising wedge chart pattern. This is an indication that price momentum is waning. A close under the lower trend line (which is pretty close to the 50 day moving average) would indicate a reversal.
2. A bearish divergence in the MAC indicator. This also indicates waning momentum.
3. A bearish divergence in the RSI indicator also indicating waning momentum.

I don't see anything special in the volume other than the usual summertime volume drop.

So, where am I now?:

1. The fundamentals look bad and look like the S&P stocks are clearly overvalued and due for a drop. The lack of a strong recovery should start penetrating market psychology affecting price sometime this fall.
2. The technicals for the general market look pretty darn strong but with a hint of a reversal in the short-term charts.
3. I'm long in very volatile Junior producing gold mining stocks that have been quite strong although they got hammered worse than the general market in last year's crash. Still, seasonally the next 6 months are quite good for gold and gold mining stocks. I don't want to take profit on these yet.
4. I'm short the S&P 500 quite primarily as a hedge for the Junior producing gold mining stocks, but also based my bearish fundamental outlook.

So, what to do? I'm planning on staying put, but removing the hedges if the S&P 500 gets another upside burst that takes out the rising wedge trend line.

What are you doing and what are you watching? Do you see a similar divergence between fundamentals and technicals. How do you resolve that kind of a conflict? Leave me a comment.

MontyHigh, www.worldofwallstreet.us

Best Of The Boards: "The Really Good News..."

"The really good news is that Mother Theresa is no deader today than she was yesterday, which, of course, means she’s doing better than expected."

From a comment on a www.ritholtz.com post about today's GDP number.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 32%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "New jobless claims and total benefit rolls drop... The number of newly laid-off workers filing claims for jobless benefits dropped last week, and the number of people remaining on the rolls also fell, evidence that layoffs have eased."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 453,936 in the week ending Aug. 22, a decrease of 4,049 from the previous week. There were 345,127 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20090827yoy).

Here's my uneducated interpretation - Things remain bad with initial jobless claims still way over the roughly 330K value which historically has represented a bottoming of the economy and stock market.

The AP spin is worse than usual by focusing on the noise (.5% drop in initial claims) rather than the fact that jobs continue to be lost much faster than the economy could possibly be replacing them. 5 of the last 8 "seasonally adjusted" numbers were better than this week's and yet they make it sound like this was a good week!

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Commerce Department New Home Sales Down 9%, Median Price Down 11%

Here's my quick look at today's Commerce Department New Home Sales:

• Associated Press Headline And Lead: "July new US home sales up 9.6 percent... New U.S. home sales surged 9.6 percent in July, rising for the fourth straight month and beating expectations as the housing market marches steadily back from its historic downturn." 
• Department Of Commerce News Release: click here.
• Key Numbers: New Houses Sold Unadjusted: 39,000, Year Ago: 43,000, Year Over Year %: -9.3. Median Price Unadjusted: $210,100, Year Ago: $237,300, Year Over Year %: -3.36.
• Last Month's Numbers: New House Sold YoY=-20%, Median Price Yoy=-12%

Here's my uneducated (also not not spun by guys trying to make you a sucker) interpretation - Well, there's two things we want to know from these numbers:

(a) Are Prices Still Falling - or have they bottomed and turned-up allowing consumers to feel more confident about spending? Prices are down 11.5% year-over-year. Last year, unadjusted new home sales began falling in August and kept falling until February. So, I think the numbers that come out in a month will be crucial to understanding what's really going on.

(b) Is The New Housing Sector Contracting? - well new home sales revenue (average price * number of units) is down 19%. So, this part of the economy still seems to be contracting. Unadjusted prices have been bouncing in a 5% range since Aug 8. This means that you'd expect to see the year-over-year price drop to begin to shrink next month if the new housing market has really bottomed.

I think the housing market is a big illiquid market that trends heavily, so I'll stick with year-over-year numbers for now. I think next month's numbers will be especially telling.

MontyHigh, www.worldofwallstreet.us

Northbeach2000: The Importance of "Triple Whammy" Resource Stocks

Many here are disappointed that Gold hasn't yet broken through $1,000 again.  Many here are disappointed that CL is no longer trading with a triple digit handle.  Many here view spot NG trading under $3/mcf as totally unbelievable.  I agree with all of that.

 

But what I think many here lose sight of (or never saw in the first place) is a viable, long term, investment strategy when it comes to resource stocks.  Sometimes it is awfully tough to see the forest clearly with all those trees (and other market noise) in the way.

 

To solidify my own thinking on this subject, I've decided to write down the rules that I try to follow when investing in resource stocks.  These rules, as far as I'm concerned, cover any resource company that is constantly faced with the challenge of replacing reserves/resources to offset production.  As a result, the rules remain the same whether we're talking about Upstream Energy, Base Metals, or Precious Metals.

 

Following the concept of KISS (keep it simple, stupid) and realizing that having a long term strategy in this market environment is a bit of an oxymoron, I've listed the rules that I follow below:

 

(1)  Identify a resource that is in a long term, secular price uptrend.  This step is absolutely critical.  If you get this one wrong, the chance for outsized capital gains profits becomes quite limited even if you get everything else right.

 

(2)  Concentrate Investments in small to mid cap resource companies that are already in production or are about to start.  The most important determinates regarding which companies to invest in should always be the quality and trust worthiness of management (as the first and most important consideration) followed by the quality of the resource base.  Once past this, then consider the soundness of their business model (i.e. how do they plan to grow production and reserves over time?  At what cost? With what capital structure?).

 

(3)  Always buy at least a few stocks in any resource sector that you favor.  Never put all of your money on just one pony.

 

(4)  Use technical analysis (TA) to determine pps entry and exit points.  Fundamental Analysis (FA) may be of utmost importance in determining the quality of a company, how it's valued relative to its peers (and the market in general), but the fact is that it will give you absolutely no insight into when to buy it or (just as importantly) when to sell it  (whether it's time to cut and run, or to book profits) 

 

So let's get back to the importance (and potential rewards) of investing in triple whammy resource stocks as opposed to those that just keep muddling along. 

 

Whammy 1 - You invest in a stock where the commodity it produces keeps going from the lower left to the upper right of the price chart (with many bumps along the way).  Your stock goes up in pps (along with the muddlers)

 

Whammy 2 - You invest in a stock that is continually increasing production (and reserves) over time (ON A PER SHARE BASIS) at a reasonably low cost  (as opposed to the muddlers who just keep treading water).  Your stock goes up further since this stock is increasing its EPS and CF based on larger unit production and increasing unit profit margin (i.e. difference between cost of production and market price of commodity) while the muddlers just keep treading water.

 

Whammy 3 - When you originally bought this stock, it was a small to mid cap producer.  Over time, it becomes a larger company based on increasing production and reserves.  This, combined with the fact that it has outperformed its peer group "muddlers", will result in a higher market valuation (whether measured in multiples of EPS or CF).

 

I've owned several triple whammy stocks over the past 6+ years.  CNQ, COS.un, AUY, and Wheaton River Minerals (now part of Goldcorp) all come to mind.  They were all bought during 2003 - 2004 and liquidated since.  Only AUY remains, but as a rebuy - all of the original shares were sold during 2006.  

 

The best risk/reward opportunities that I see for triple whammy resource stock gains over the next couple of years are in the PM sector.  Why?  Simple - Go back to my investing Rule 1.  With all that's going on, I just don't see the POG retreating from its secular bull trend - even though it may be bumpy over the intermediate term.  Now go to investing Rule 2 - I would suggest to all that the growth profiles of the PM stocks that I own are all superior to their counterparts in the other resource sectors (i.e. AGI double production by 2012, JAG same story, GRS looking real good, SLW doubling within 4-5 years, AUY not as good but not bad)  

 

[FWIW, I like CL 2nd best followed by King Copper.  As for  NA NG, I have absolutely no interest in playing in that game until they shoot all of the Aubrey McClendon look a likes who operate in that sector.]

 

In any event, those are my triple whammy investment rules, and I hope that you find them helpful - whether they lead you to the same conclusions that I've come to or not.  Bottom line - everyone needs investment rules.  If you don't like mine then please make up your own (and then follow them).

 

But that's JMO.  We all bet our own money and take our own chances. 

 

Disclosure - 60% of my portfolio is currently in PMs - GRS, CEF, JAG, AGI (TSE), SLW, AUY

Unadjusted Year Over Year: Census Department Durable Goods Manufacturers New Orders Down 20%

Here's the summary for today's Census Department monthly Durable Goods Orders and Shipments report:

• Associated Press Headline And Lead: "U.S. durable goods orders surge in July... New orders for long-lasting U.S. manufactured goods rose more than expected in July, posting their biggest gain in two years, according to a government report on Wednesday that offered more evidence a modest economic recovery was probably starting to take shape."
• Labor Department News Release: click here. 
• Key Numbers: Census Dept Durable Goods Manufacturers New Orders Not Seasonally Adjusted: $155,655,000,000 Year Ago: $195,431,000,000, Year Over Year -20.35%. Census Dept Durable Goods Manufacturers Shipments Not Seasonally Adjusted: $163,971,000,000, Year Ago: $199,721,000,000, Year Over Year -18.35%.
• Last Months Numbers: Orders=-24.97%, Shipments=-19.76%
• My Spreadsheet (click Download 20090826yoy)

Here's my uneducated interpretation - The seasonal adjustments for the last two months are huge with new orders growing by 5% in one month seasonally adjusted, while they shrunk by 9% without seasonal adjustments. That's a 14% adjustment for one month! Despite the spin, unadjusted new orders remain down hard year over year and, perhaps as importantly, new orders remain less than current shipments with a orders to shipments ratio of 95%. There is no significant change in the orders to shipment ratio since I started keeping detailed records in April 2009. How can the economy have sustained growth when orders are consistently smaller than shipments? At this point, I'll go with the unadjusted year-over-year numbers and unadjusted orders to shipments ratios. Looking at these numbers, I still think the US economy is contracting.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Four Bad Bear Markets, Etc.

Here's a couple of charts I've seen around. Here's the source http://www.dshort.com/articles/2009/bear-bottoming-process.html which I just added to my RSS reader (if you don't do RSS, leave me a comment and I'll try to put up a quick, getting started guide. Its very valuable).

Now, I remain bearish (and certainly don't consider now to be a good time to switch to bullish), but these charts overall leave me the impression that the recovery has begun.

Here's the question I see posed (with various answers). What is this financial crisis like?

• Like the 1873 and 1929 credit collapses - Bob Hoye, to whom I've paid a rather hefty subscription, holds this view and, at this point, its my best guess.
• The Tech Crash was like the 1929 crash and the financial crisis is a continuation - George Ure (www.urbansurvival.com) holds that position. 
• Like Japan's "Lost Decade" - here this many places.
• Like the 70's stagflation - here this many places.

Leave me a comment regarding what you think the "financial crisis" is like and whether that question is actually helpful.

And then, enjoy the charts and root around www.dshort.com for more.

MontyHigh, www.worldofwallstreet.us

P.S., Since these charts are "linked" in, they should update whenever the Dshort people update their charts. You could bookmark this page and revisit it at a later time for an updated view.

MontyHigh, www.worldofwallstreet.us

Big Picture On Gold

Here's (click here) an excellent gold chart and commentary. I put the chart here, but recommend reading the accompanying commentary (again, click here). 

Nice post. I'm waxing a little philosophical on gold today. Here's my thoughts on big picture what's happening. Ithink there's a good chance:
(a) The Global economy has bottomed. That the rest of the world has finally "diverged" from the USA and can grow without it.
(b) The USA economy is still in real trouble and the amount of government debt being created makes the dollar's position risky (whether it collapses or not).
(c) Gold will benefit from a flight from safety from the USA's dollar.
(d) Other commodities might be a more profitable place to be, but I'm more sure my little gold miners will be printing lots money (generating big profits) than any other other investment avenue I know of. I'm more sure that gold has a price floor below it that my miners can make money on than any other resource. Put the other way, I'm not as confident that copper, oil, natural gas, silver, etc. can keep their extraction companies grossly profitable the way gold can for my little energy companies.

So, that's where my money is (with a pretty big short the USA stock market position in S&P futures. Those futures are back underwater at this point).

MontyHigh, www.worldofwallstreet.us

Best Of The Boards: Cold July In The USA, Warm Globally

Ok, I'm a global warming sceptic, but I want the truth and I'm more eager to see data that contradicts my view than which confirms it. The link below is to a message board post in a thread on Sunspots and possible global cooling. I had been presuming that the absence of Sunspots and an obviously cooler than usual Maryland (USA) summer meant that the recent cooling trend was accelerating. The data in the post says otherwise.

http://www.investorvillage.com/smbd.asp?mb=4288&mn=35523&pt=msg&mid=7777063

I consider this on-topic as it does affect investing as various commodity-based investing do depend on climate (natural gas consumption, agriculture, etc.).

MontyHigh, www.worldofwallstreet.us

Indian Rupee Price Of Gold 1 Year Chart

Most of the gold world is focused on the US dollar gold chart and the magic $1000/oz level.

Here's the gold chart that I think is most important at this point: the price of gold in Indian Rupees. This price chart is very important because Indians buy actual, non-paper, physical gold and are very price sensitive. They don't want to over pay for it. They are not "momentum" players; they are buy the dip buyers.
 
As you can see, looking at the price from Sep 08 thru the end of Mar 09, the price of gold in Rupees experienced considerable volatility. Since then it has been in an ever tightening trading range with higher highs and steady resistance at the 46000 level. Its been within a 4 to 5%  trading range since the end of Mar 2009.

That's probably a narrower trading range than just about anything else on the planet during that period.

The rising, flat-top, triangle formation in the above chart is a bullish continuation where the probability is that the price will continue its rising trend.

I expect you'll see a big move in the price of gold in US dollars take place when a breakout takes place in the rupee price of gold. The Indian, buy-the-dips approach to gold buying provides support for gold, but does not provide the impetus for an upside breakout. Only something fundamentally important can push the price of gold beyond the point where Indian buying falls off, in this case, 46000 rupees /oz.

Something important will be happening, when the price of gold moves outside of the chart's trading range.

Indian buying is seasonal and seasonally the buying picks up right around this time of the year. There's a good chance that the break out will come soon. The triangle formation indicates that something should happen within the next month.

This chart is yet another bullish data point for the price of gold. There are others which are outside of the scope of this post.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 32%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "U.S. jobless claims unexpectedly rise... The number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week, a government report showed on Thursday, fanning worries of an anemic recovery from the worst recession in 70 years."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 454,216 in the week ending Aug. 15, a decrease of 28,406 from the previous week. There were 343,169 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20090813yoy).

Here's my uneducated interpretation - Things remain bad with initial jobless claims still way over the roughly 330K value which historically has represented a bottoming of the economy and stock market. I think, based on this data, the outlook is for continued economic contraction and increasing unemployment.

As far as AP spin is concerned, I see the usual unsupported assumption that a recover is inevitable (and has already started).

 

Judge for yourself. Are initial jobless claims anywhere close to pre-crisis levels or are they still above the tech crash peak?

MontyHigh, www.worldofwallstreet.com

Unadjusted Year Over Year: Commerce Department Building Permits Down 37% And Housing Starts Down 36%

Here's the summary for the Commerce Department's New Residential Construction for May 2009:

• Associated Press Headline And Lead: "US home construction falls 1 percent, misses views... Construction of new U.S. homes dipped slightly last month, missing expectations, in a sign that the building industry's recovery from the housing bust is likely to be bumpy and gradual." 
• Department Of Commerce News Release: click here.
• Key Numbers: New Privately-Owned Housing Units Authorized in Permit-Issuing Places Not Seasonally Adjusted, July 2009=54,300, July 2008=85,900. New Privately-Owned Housing Units Started Not Seasonally Adjusted: July 2009=55,600, July 2008=86,700.
• Last Month's Unadjusted Year-Over-Year Numbers: Permits Down 47% And Housing Starts Down 43%

Here's my uneducated (also not not spun by guys trying to make you a sucker) interpretation: Oops there goes another green shoot. House construction is still falling hard year-over-year.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Producer Price Index Down 6.8%

Here's the summary for the Labor Department's producer price report for July 2009:

• Associated Press Headline And Lead: "Wholesale prices drop more than expected in July... Wholesale prices dropped sharply in July, and over the past 12 months fell by the largest amount in more than six decades of record-keeping." 
• Labor Department News Release: click here. 
• Key Numbers: Monthly Change In Finished Good From 12 Months Ago (unadj.) = -6.8%, Unadjusted Index = 17.6.
• My Spreadsheet (click Download 20090818yoy)

Here's my uneducated interpretation - At this point, wholesale price deflation is accelerating. This may change as we move into Q4 where commodity prices crashed. FWIW, gold is up roughly 20% year over year, so holding gold would put you up roughly 24% in terms of wholesale price purchasing power over the last year. You would be down 25% if you had held the S&P 500 instead. 

As far as AP spin goes, I think they were pretty fair on this one. I guess this stat has a low enough profile that no effort is spent spinning it.

MontyHigh, www.worldofwallstreet.us

Pretty Useful Charts: Indian Price Of Gold [Gold Price In Rupees]

The price of gold in Rupees is pretty important because Indian buying represents support for the price of gold. The really useful thing to know is the separation between the Indian price of gold vs Indian legal import price of gold. The only source I've found for this is the very valuable Midas column at, LeMetropoleCafe, the subscription website.

Googling around I found this web site (http://www.goldprice.org) with Rupee graphs.

Here's a couple of useful ones from that site:

1 Year - As of 5/30/2009, gold is trading at the top of a range in rupees. Indian's like to buy when the price seems low, so we can't expect much support from Indian buying right now.

www.kitco.com provides a 24 Hour gold Rupee gold chart. As you can see, its pretty small. My best guess after watching it a bit is that it does not update the USD / Rupee conversion price in real time. Not so useful.

I've been watching, up until recently, the standard USD gold chart (provided further below) and have found that when the price of gold starts consistently rising overnight (while Indian trading dominates) that Indian buying has kicked in and the price of gold has found support. This Indian trading period seems to start around the Hong-Kong open and ends when gold opens in London. This also seems to be a tradeable pattern. I expect I'll be paying more attention to the Indian 24-hour gold chart now that I've found it. 

The following is Yahoo's Indian Rupee vs the dollar 5-day chart. When this graph goes up, the Rupee falls in value and Indians are less eager to buy gold. Comparing the percentage moves in this chart to the one that follows provides a way of guesstimating whether the Indians will be buying on any given night.

The graphs in this page are linked to the automatically updating originals. Revisiting this page (and doing a page reload) should give you up to date prices.

Hope you find this useful. I'll be adding this page to my browser's "favorites" aka bookmark lists.

Leave me a comment if you have something useful to add.

I'm not planning on doing much tonight as the price of gold is down roughly 1.3% while the Rupee is also down something like 1.3%. There's no reason to think, for tonight, that Indians will find gold to be much of a bargain.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: NY Times Graphic Via Ritholtz.com

First chart I've seen that points to a global economic recovery. I'm still bearish on a USA economic recovery, but I'll grant you that if the global economy turns positive it will help turn the USA economy positive. And I'm always looking for data points that are counter to my outlook.

MontyHigh, www.worldofwallstreet.us

Here's the link to Ritholtz's post: http://www.ritholtz.com/blog/2009/08/world-trade-bottoms/

 

MontyHigh: What I'm Doing And Thinking Now

This post summarizes my macro outlook, how I'm currently invested and my thoughts on investing and blogging.

The following graph pretty much summarizes how I'm invested and what my macro outlook is (Au=Gold, Ag=Silver):

I'm pretty bearish on the outlook for the US economy and stock market. The stock market valuation just makes no sense at all and I expect a pretty big downturn this fall when the a dramatic economic recover fails to appear.

I'm actually fairly bullish about precious metals themselves on seasonalities and fundamentals. We are now moving out of the summer doldrums and into the bullish fall thru March season. The fundamentals are also bullish: zero interest rate, lots of fear about other forms of investing, potential dollar weakness, etc.

I'm more bullish about my Jr gold producers as I think they are in position to "print money" providing prices stay reasonably high. I continue to value these stocks at $800 gold and $13 silver for 2010 which I consider to be pretty conservative. I continue to approach investing as a value investor looking for stocks which are undervalued and which can expect to make considerable money given reasonably constant current conditions and where I hold a bullish macro view of the company's underlying fundamentals.

I have no edge or special insight into how China is going to do, going forward, and I believe this is the key to general resource investing (oil, base metals, etc.). There's enough uncertainty that I'm staying away.

One noteworthy thing in the graph, for me, is the use of S&P 500 futures and futures options. These allow me to short the general market as a hedge against its falling impacting my Jr stocks. I may increase this short position going forward if it really looks like stocks are going to turn-down hard. When I say I'm short US stocks 23% that I am taking the full value of the futures contract or what the put option gives me the option to sell (e.g. 50 times the roughly $1000 S&P index value). It does not mean the amount of money currently tied up to hold the position (cost of the put option or margin value to support the futures contracts). The use of futures and futures options allows me to use just a little "up-front" money to get a big % of my portfolio short.

I've been spending more time on getting my Macro view right (I hope) and less time actually doing what is probably of most value to you dear reader: Fundamental analysis of Jr resource stocks. The following graph shows what I'm holding now. I'm actually shifting around my Jr resource stock investments right now, trying to reduce oversized positions. Last year when the general stock market took the big hit, my Jr gold producers got hit even harder. If that starts happening this year I'm going to bail on most of them. I'd like to get the sizes of almost all my positions to the point where I can get out in a single day without driving the stock price down more than 5% more than its price when I started selling.

As far as investing goes, I've been getting more satisfaction from my engineering / advanced research day-job than in investing, although I'm still enjoying the investing. I'm probably putting about 30 hours a week into investing. I've given up on the half-baked, never taken really seriously idea of ever being some kind of investing guru. This blog is now about providing some useful information to you dear reader and keeping my own investing thoughts straight. Its also about calling them as I see them (except when I am entering or leaving illiquid stocks where silence is golden) and not trying to spin anyone.

The following graph shows how my investing portfolio has done year to date. This does not adjust for the affects of some smallish deposits and withdrawls. I'm doing pretty well, but obviously would have done much better if I'd caught the base metal or oily energy moves off their lows. I was just too uncertain about the U.S. economy to be confident about resource prices recovering the way they did. 

Another thing to note about the above graph is the volatility. 5% swings on a single day are not uncommon. That's pretty breath taking and its probably more than most should try to take on.

The following graph shows why you don't want to invest like me. That's quite a plunge from my 07 top to my 08 bottom. I don't ever want that to happen again. Its not quite as bad as it looks because I have a paid-off house and the net present value of my day-job significantly exceeds my account sizes.

I believe I've learned a lot the last 3 years and won't have the same kind of big downturn you see from my summer 2007 highs. I plan on using technical analysis to "stop me out" of any serious wrong macro calls. This may keep be from ever having the kind of run-up I had from late 2006 to mid-2007.

Overall, I can tell that I've made a tonne of progress in my investing skills since I started getting serious in 2003 and even since I started this blog in April 2007. My fundamental analysis of individual resource stocks has stepped up quite a bit. My understanding the precious sector has grown much deeper. I've gone from no use of technical analysis to having technical analysis genuinely add value to my investing.

One other thing, I've realized I don't really enjoy short-term trading. I am not actively pursuing it any more even though my overnight paper calls on gold futures show some promise of generating 50 or 100K of profits a year.

Hope you find this update and retrospective of some use,

MontyHigh, www.worldofwallstreet.us

P.S., leave me a comment about what you are thinking and doing and where you are making progress in your investing.

Unadjusted Year Over Year: Consumer Price Index Down -2.1%

Today we cover the Commerce Department's retail sales figures for March 2009:

• Associated Press Headline And Lead: "Consumer prices flat in July as energy retreats... Consumer prices were flat in July as energy costs retreated following a big surge in June." 
• Labor Department News Release: click here. 
• Key Numbers: -1.28% Unadjusted 12-months ended May 2009. The unadjusted index is at 215.351. July 2008 was 219.964 from its initial news release.
• Last Month: -1.4%
• My Spreadsheet (click here)

Here's my uneducated (also not not spun by guys trying to make you a sucker) interpretation - price deflation is still picking up steam from a year-over-year perspective. To my mind, the interesting question is what happens in Q4 09 when the year over year commodity prices stop falling (assuming no fall crash)? Year-over-year crude oil is still down 36%. That changes in the next couple of months (assuming no crude oil price crash). That's when we'll know what's really up short term with the inflation vs deflation debate. Will price deflation ease up and go into price inflation or not? That is the question.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: USA Retail Sales Down 7.9%

Here's the year over year summary of the Commerce Department's retail sales figures for June 2009:

• Associated Press Spin: "Retail sales unexpectedly dip 0.1 percent in July... Retail sales outside of autos turned in a disappointing performance in July, underscoring concerns about the timing and durability of a recovery from the worst recession since World War II." 
• Commerce Department News Release: click here. 
• Key Numbers: Commerce Department Retail And Food Services Sales Unadjusted July 2009: $350,681,000,000 vs July 2008: $385,909,000,000. Last month unadjusted year over year was down 7.8%
• My Spreadsheet (click hereDownload 20090813yoy)

Here's my uneducated interpretation - Unadjusted Year Over Year sales are falling steadily. The economy is still contracting and the bottom is not yet in.  

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 28%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "New jobless claims rise unexpectedly to 558K... The number of newly laid-off U.S. workers filing claims for unemployment benefits rose unexpectedly last week, while the tally of continuing claims fell."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 479,824 in the week ending Aug. 8, an increase of 13,129 from the previous week. There were 373,858 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20090813yoy).

Here's my uneducated interpretation - Things turned worse as unadjusted jobless claims jumped higher at a time when last year they dropped. This resulted in the Unadjusted Year Over Year rate jumping to 28% (brown with yellow triangles). The key number, in my view, is unadjusted initial jobless claims (dark blue diamonds). It moved further away from the roughly 330K value which historically has represented a bottoming of the economy and stock market. I think, based on this data, the outlook is for continued economic contraction and increasing unemployment.

MontyHigh, www.worldofwallstreet.com

Hussman's Market Outlook

http://www.hussmanfunds.com/wmc/wmc090810.htm

Here's his summary: "If we knew that this was a standard economic downturn, we might conclude that the recent improvements are durable. However, nothing convinces us that this is a standard economic downturn."

Pretty much matches mine, but I'm not hedging against the possibility of a big move up from here the way he is. 

The above has a nice section about what happens after crashes (see graph below). Here's his summary:

"When markets crashes are coupled with changes in the fundamentals that supported the preceding bubble – as we observed in the post-1929 market, the gold market of the 1980's, and the post-1990 Japanese market, and currently observe in the deflation of the recent debt bubble – they typically do not recover quickly. Indeed, the hallmark of these post-crash markets is the very extended sideways adjustment that they experience, generally for many years."

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 21%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

• Associated Press Headline And Lead: "New jobless claims drop more than expected... The number of newly-laid off workers seeking unemployment insurance fell last week, the government said Thursday, fresh evidence that layoffs are easing."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 463,062 in the week ending Aug. 1, a decrease of 48,296 from the previous week. There were 382,792 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20090806yoy).

Here's my uneducated interpretation - Year over year, unadjusted initial jobless claims are clearly still rising hard (+21%), but not nearly as hard as they were back in may (+74%). So, you could say that the economy is not shedding jobs as fast as it was. For me what counts is whether the economic contraction is decelerating, but rather whether it is still contracting. At 463K, the unadjusted number is still way over the roughly 332K value for end of July 2001 when the previous recession was officially ending and the 338K value in 2002 when the stock market bottomed (see last week's report). I think the outlook is for continued economic contraction and increasing unemployment based on this data. 

Here's a chart of the initial jobless claims since I started gathering them. The diamond dark blue line is the one that I think is key. Its not as high as it was, but its still way over the economy bottoming value. 

MontyHigh, www.worldofwallstreet.com