World Of Wallstreet

Unadjusted Year Over Year: Labor Department Initial Jobless Fall 22.3%

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

• Associated Press Headline And Lead: "Jobless claims fall unexpectedly as layoffs ease... The number of newly laid-off workers filing claims for unemployment benefits dropped unexpectedly last week, a sign the job market is healing as the economy slowly recovers."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 557,155 in the week ending Dec. 26, a decrease of 8,088 from the previous week. There were 717,000 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091231yoy).

Here's my uneducated interpretation - No change from last week. I'm still expecting unemployment to peak around June 2010 with unemployment staying in the high nines and tens for 2010. From this one data series, it appears that the economy is recovering.

MontyHigh, www.worldofwallstreet.us

Best Of The Blogs, But Off Topic: Stiglitz On 6 Hard Lessons And A Blog Comment Response

I thought this was pretty rich, although off-topic (its about what "we should do to change things", not what "we should do to trade what we cannot change"). Here (click here from Ritholtz.Com) is Nobel Prize winning economist Joe Stiglitiz's 6 hard lessons:
"

1. Markets are not self-correcting, and without adequate regulation, they are prone to excess.

2. There are many reasons for market failures. Too-big-to-fail financial institutions had perverse incentives: Privatized gains, socialized losses. .

3. When information is imperfect, markets often do not work well – and information imperfections are central in finance.

4. Keynesian policies do work. Countries, like Australia, that implemented large, well-designed stimulus programs early emerged from the crisis faster

5. There is more to monetary policy than just fighting inflation. Excessive focus on inflation meant that some central banks ignored what was happening to their financial markets. The costs of mild inflation are miniscule compared to the costs imposed on economies when central banks allow asset bubbles to grow unchecked.

6. Not all innovation leads to a more efficient and productive economy – let alone a better society. Private incentives matter, and if they are not properly aligned, the result can be excessive risk taking, excessively shortsighted behavior, and distorted innovation."

Sound pretty reasonable, right? Here's a commenter's response:

"Hume Says:
December 31st, 2009 at 9:42 am

Let’s try something different and equally plausible:

1. Governments are not self-correcting, and without adequate limitations, they are prone to giant mistakes.

2. There are many reasons for government failures. Too-fat politicians had perverse incentives: Privatized gains, socialized losses, no accountability.

3. When information is imperfect or too demanding to follow, governments do not work well – and information imperfections are central in politics.

4. Countries, like Australia, that have commodities depended economies emerged from the crisis faster.

5. There is more to monetary policy than just fighting unemployment and external shocks. Excessive focus on unemployment and external shocks meant that some central banks ignored what was happening to their financial markets due to excessive monetary easing. Short term gains from such policy are miniscule compared to the costs imposed on economies when central banks cause asset bubbles to grow.

6. Not all regulation leads to a more efficient and productive economy – let alone a better society. Private incentives matter, and if they are distorted by badly written and implemented regulation, the result can be muted growth, structural imbalance in the economy, and distorted innovation."

Pretty on-target in my view, but "off-topic" because the US political situation is pretty desparately corrupted with no signs of reform anywhere.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Census Department Durable Goods Manufacturers New Orders Down 6%

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

• Associated Press Headline And Lead: "Jobless claims, goods orders signal modest rebound... A fitful economic recovery is drawing strength from a stabilizing job market and signs that manufacturing will contribute to the rebound."
• Labor Department News Release: click here. 
• Key Numbers: Census Dept Durable Goods Manufacturers New Orders Not Seasonally Adjusted: $158,670,000,000, Year Ago: $168,735,000, -5.96%. Census Dept Durable Goods Manufacturers Shipments Not Seasonally Adjusted: $170,632,000,000, Year Ago: $181,533,000,000, -6%
• My Spreadsheet (click Download 20091224yoy)

Here's my uneducated interpretation - Less bad, but still bad with the orders lower than shipment with no improvement. This is bearish report for the economy, although durable goods are a lagging indicator.

MontyHigh, www.worldofwallstreet.us

 

Unadjusted Year Over Year: Labor Department Initial Jobless Fall 21.9%

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

• Associated Press Headline And Lead: "Jobless claims, goods orders signal modest rebound... A fitful economic recovery is drawing strength from a stabilizing job market and signs that manufacturing will contribute to the rebound."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 561,902 in the week ending Dec. 19, an increase of 6,492 from the previous week. There were 719,615 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091224yoy).

Here's my uneducated interpretation - Year-over-year, unadjusted initial jobless claims had a great week (-21.9%), but one that does not change my forecast for unemployment peaking. Based on the recession over recession graph (below) and the previous recession's unemployment graphs (see further below) I'm still expecting unemployment to peak around June 2010 with unemployment staying in the high nines and tens for 2010. From this one data series, it appears that the economy is recovering.

 

MontyHigh, www.worldofwallstreet.us

Relative Importance Of Stock Picking Vs Being Right About Resource Prices

This chart shows the performance of gold itself (GLD) and my top holdings since the recent top in gold on 12/2/2009. I'm showing all my top holdings so as not to self-aggrandize any supposed great stock picking.

As you can see, only one of the above stocks has been positive, Gold Resource Corp (GORO.OB), even though it suffered a dilution during the period and is failing to get its mine going in 2009 as it "targeted". I believe that this is because Hochschild (mid-tier silver producer and investor in GORO.OB) is anxious to up its investment (because it deems it to be quite a good investment) and is thus supporting the price. 

What I see in the other stocks is that, even with my best stock picking, they have fallen roughly 50% more than gold itself (15% vs 10%). I take this to mean that even with my best stock picking, stocks fall significantly harder than gold and basically no amount of stock picking expertise can be expected to produce profits while the price of gold is falling.

In contrast, the same stocks during the dramatic bull run (from 9/1/2009 to 12/2/2009) are up around 50% compared to roughly 25% for gold itself. I take this to mean that my own stock picking (the best I can do) gives better leverage to gold during upswings (and smaller losses on downswings) and the overall leverage is some where around 2 to 1 on upswings.

I guess it means that being right on the price of gold (or any resource) is of foremost importance, while picking among stocks for a given resource adds leverage and value. Stock picking is good, but is not worth as much as being right about the basic resource. Is that how you see it?

Your mileage may vary. Hope this is useful and not self-aggrandizing. It is not meant to be.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Fall 11.83%

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

• Associated Press Headline And Lead: "Jobless-aid claims rise, but 4-week average falls... The number of newly laid-off workers filing claims for unemployment benefits unexpectedly rose last week as the recovery of the nation's battered labor market proceeds in fits and starts."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 555,344 in the week ending Dec. 12, a decrease of 107,393 from the previous week. There were 629,867 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091217yoy).

Here's my uneducated interpretation - Initial jobless claims have been better, year-over-year, for 6 consecutive weeks. No real change from the last couple of weeks. Based on the recession over recession graph (below) and the previous recession's unemployment graphs (see further below) I'm still expecting unemployment to peak around June 2010 with unemployment staying in the high nines and tens for 2010.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Dorsch On Interest Rates

Here's (click here) a nice piece about what's coming up for USA interest rates.

Starts out with a great Buffet quote, which I'll repeat here because its so juicy: "As the old saying goes, what the wise man does at the beginning, fools do in the end... It’s like Cinderella at the ball. You know that at midnight everything’s going to turn back to pumpkins and mice. But you look around and say, one more dance, and so does everyone else. Everyone thinks they’ll get out at midnight. The party does get more fun, dance partners get prettier, - one more glass of champagne. And besides, there are no clocks on the wall. And then suddenly, the clock strikes 12, - and everything turns back to pumpkins and mice". Its that whiff of fear (which I pick up from that quote) that is one of the things that makes the investing game so fascinating.

The basic idea in the piece is that interest rates may go up sooner than most expect, perhaps at the end of Q2 2010. Dorsch expects that interest rates won't rise til then because: "Since 1954, the Fed has raised rates only after unemployment has peaked." That little nugget was worth the time spent reading the piece.

Here's a little bit about how fair and open the USA's "free markets" are. The plan for keeping inflation in check is to rig the markets for commodities (thereby cheating the commodity producing nations of the world [mostly much poorer than the USA] out of a fair price): "Instead, the Fed is calling upon Congress and the CFTC to rein in energy and commodity prices, especially crude oil, by limiting how many futures contracts hedge funds, investment banks and other speculators can control in 2010."

He ends up by saying that Volcker is calling for interest hikes sooner: "If you wait, it’s too late" and inflation is upon you. But, since when has anybody actually done what Volcker has called for (especially in an election year where the ruling party is in real danger of losing control of the house of representatives)?

So, Dorsch seems to suggest they will wait too late and raise rates too slowly: "If history is a guide to the future, the gold market has been able to climb sharply higher, alongside a rising fed funds rate. The Fed’s last rate hiking cycle, - starting in June 2004, - and beginning with the fed funds rate at 1%, wasn’t able to cap gold’s powerful advance thru May 2006, until the fed funds rate was lifted to 5.25-percent. Thus, for two-years, gold rose 40%, alongside a 425-basis point increase in the fed funds rate, since the Fed was lingering far behind the inflation curve."

The piece is nicely decorated with Dorsch's dual-Y-axis graphs that allow the correlation between seemingly unrelated time series to be visually assessed. Here's an example:

Pretty cool, huh? I'm going to have to learn how to make those graphs myself.

MontyHigh, www.worldofwallstreet.us

What If Copper Buyers Aren't Insane?

Inca Kola New's Otto Rock keeps ranting about LME copper inventory levels (click here): "The LME copper inventory level is not an elephant in the room. It's 470,800 elephants in the rooms."

This has been going on for months. Its long past time for saying that the market is wrong and that copper should not be priced above 3$/lb (and rising) and its time figure out what the market is saying.

Seems to me that there are two possibilities here:

• Copper buyers are insane given that copper, at current prices, is obviously in over supply and they are going to get murdered as soon as reality sets in.
• Something else is going on besides just the supply and demand of copper. Something having to do with what copper is priced in, U.S. dollars.

Here's what I think is going on:

• The ballooning copper inventories means supply exceeds demand. But the copper price (in US dollars) keeps rising. 
• To my mind this means that the supply of dollars is exceeding demand faster than the supply of copper is exceeding demand.
• Now, 400,000 tonnes of copper at 6,000$/tonne is 2.4 B$. This means folks with real money think its better to have at least part of their money in copper, even though it is obviously in oversupply, than in dollars. Its a big vote of no-confidence in the dollar. That's how I see it and am placing my bets accordingly (in the anti-dollar, that is gold, leveraged by owning Jr producing gold miners). 

Now, I could be wrong and the guys buying copper at current prices are flat out wrong and this is a case of gross stupidity. That could certainly be the case, given the same kind of stupidity that we've seen with real-estate recently (and worthless Internet bubble stocks a year ago). If that's the case at some point the price of copper will collapse. If I see that I'll go short on copper big time, but until then I'm thinking that something very bad is happening with the US dollar that will come out of hiding sometime not too far in the future.

MontyHigh, www.worldofwallstreet.us

A New Thought On Inflation Vs Deflation Debate And Gold

Here (click here) is the best piece I've read lately about the fundamentals of gold investing. Its buy some guys (and an organization) I've never heard of before: QBamco, Lee Quaintance and Paul Broadsky.

Here's a quote that says a lot about the inflation vs deflation debate and the price of gold:

"gold anticipates contracting total bank credit (continued debt deflation), which requires further monetary inflation to be administered by central banks."

Pretty profound. I recommend reading the whole thing.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Niall Ferguson - American / Chinese Marriage On The Rocks

Nial Ferguson tells the USA debt story quite well (click here), but then gets diverted to talking about Geopolitics. I've been trying to figure this guy out. Is he a mainstream shill? It seems he is not. Well worth giving 20 minutes to.

As I keep wrestling with the "USA doomed by debt" scenario, I see something that doesn't add up.

You hear about the huge USA debt:

• Government debt of 12.5 trillion dollars.
• Private debt of 300+% of GDP which is around 40 trillion dollars.
• Unfunded government liabilities (Medicare and Social Security) around 50 trillion dollars (or is it 70 trillion)?

You get a total of roughly 100 trillion dollars.

Then you hear about China being the USA's biggest holder of debt and it being a humongously, outrageously large 800 billion dollars (or sometimes its 2 trillion dollars). In any case, its something like 2% of the total debt.

So, here's what doesn't add up. Why is China so important if its only got 2% of the debt?

Help me out with this. Is it because the USA is leveraged 50 to 1 and a 2% hit causes the whole thing to collapse (like the equivalent too-big-to-fail banks)?

MontyHigh, www.worldofwallstrreet.us

Russian Central Bank Buys 30 Tonnes Of Gold... All We Need Is Brazil To Join The Party

and we'll have a complete BRIC.

I'm surprised this didn't make a bigger splash on the message boards and gold comentators. It seems pretty important.

The story (which has been out for a day or two) is available here and many other places.

It means that, in the biggest economic downturn ever since the world changed (WWII), three of the four biggest, fastest growing economies (Russia, India and China) all still have excess cash and are using it to buy gold.

 

I think that says a lot. 

 

The extra cash means that economic leadership is definitely shifting and that these three are outside of the claws of the banksters. The buying gold when times are tight probably means accelerated gold buying should times get flush and a multi-buyer price support under gold.

 

Seems pretty important to gold investors.

 

MontyHigh, www.worldofwallstreet.us

Best Of The Podcasts: Puplava Interview's Mangen On Oil

I've got to give a lot of credit to Jim Puplava, one of the peak-oil, energy permabulls.

The energy segment in this week's news hour (click here or here, beginning 34 minutes in for about 10 minutes) features an interview with a genuine oil expert who discusses the current inventory situation (which is pretty dismal for crude oil and its products [gasoline, diesel, distallates]). He said that in terms of days of use, that crude oil is in the 99th percentile. This means that historically 99 percent of the time there has been less crude oil inventory that there is currently. It means that demand in the USA has fallen hard (there was one data point that indicated it was down 20% year over year for at least one week recently). Pretty darn bearish for oil. 

I give Puplava a lot of credit for having a guy on whose short term call is so much the opposite of Puplava's long time outlook. Gives Puplava a lot of credibility, in my view.

Puplava's entire program this week had zero bullish material on energy (as best I can tell) while he was touting gold all the way thru. 

I was thinking about reentering with oil back down into the 60s, but I think I'll just stand aside as long as the inventory is building.

MontyHigh, www.worldofwallstreet.us

Are You Tired Of Being A Sucker? CNN Money On The Price Of Oil

http://money.cnn.com/2009/12/03/news/economy/cheap_oil/index.htm

 

This is a perfect example of how you can't trust the conclusions reached by any article from the mainstream press.

This post is all about demand, spun to arrive at falling demand. It says demand has been falling in the USA (without highlighting the biggest economic downturn in 70 years). It claims (without any evidence to back it up) that China can't keep growing like it has and even if it does its energy intensity will fall (reducing the amount of oil needed per Yuan of GDP). 

The only point they make about supply is probably flat out wrong: That $70/bbl is plenty enough to bring on new supply. 

It says nothing about the built-in automatic decline of existing producing fields of something like 4 to 6% /year and the fact that its been something like 30 years since as much oil was discovered as was consumed.

This complete lack of balance means their conclusions are worthless. Yes, you can pick a few data points out from a piece like this to help with your own evaluation, but you can't trust their conclusions.

Now, I don't have a dog to fight in the price of oil debate as I don't own any energy stocks, but I point this out because its a case where I have enough expertise to know when they are trying to sucker me.

How many other topics that the mainstream press deals with:

• Global Warming
• How To Deal With The Financial Crisis
• What's Going On Politically
• What's Going On With These Stupid Wars

am I similarly trying to be suckered on where I don't have enough expertise to see it?

Its a real question: Where can you get expert opinion and analysis that isn't trying to sucker you and how can you tell when the opinion's conclusions have value?

 

MontyHigh, www.worldofwallstreet.us

Best Of The PodCasts: Eric King Interview John Williams (Shadowstats.Com)

Here's the scariest bit of doom and gloom I've heard in a long time (click here or here). The scary part is that it appears to be backed up by very strong evidence and reasoning.

The outline of the story is familiar, its the simple application of baldly stated facts that make it compelling:

(a) The US economy is really recovering. It can only genuinely grow if the nations income is growing and the average US person's income (even adjusted for the government's rigged statistics) hasn't grown since the 70s.

(b) The US government's financial situation is much worse than generally understood. This shows up when you use ordinary GAAP-type accounting (the kind required of business that includes pensions, in this case Social Security and Medicare). The US government is losing over 5 Trillion $ / year with GAAP accounting. Even if the US government was to tax 100% of individual income it would not cover this 5 Trillion $ / year gap.

(c) Adjusting Social Security and Medicare downward is politically impossible.

(d) The US government and Federal Reserve will deal with this situation by printing money.

(e) As soon as foreigners stop buying US bonds the Federal Reserve will take over. This will be a currency event that results in hyperinflation.

(f) The currency event and hyperinflation will happen sometime in the next five years as soon as 2010 [not a lot of evidence to back up the timing of the event]. 

I'm hoping there's some error in item (b) above and that the facts, as stated by Williams, are not correct. Can you help me by pointing out what those errors are?

These guys in general for decades and Williams for years have been talking hyperinflation but we haven't seen it yet. Is it really different this time?

If not, have you gotten to the point of taking action to protect yourself and those you are responsible for from what seems to be coming reasonably soon? If so, please provide some thoughts and links on what you are doing.

So far the only thing I've done is to invest heavily in the Canadian stock market (thru a US broker) rather than the US stock market. Is Canada facing the same financial situation as the US? I think not, thanks to their single-payer health system, but I really don't know.

MontyHigh, www.worldofwallstreet.us

Unadjusted Year Over Year: Labor Department Initial Jobless Fall 14%

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

• Associated Press Headline And Lead: "New jobless claims fall unexpectedly to 457K... The tally of newly laid-off workers seeking unemployment benefits fell unexpectedly for the fifth straight week, a hopeful sign that the job market is slowly improving."
• Labor Department News Release: click here. 
• Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 460,989 in the week ending Nov. 28, a decrease of 78,263 from the previous week. There were 535,730 initial claims in the comparable week in 2008."
• My Spreadsheet (click Download 20091203yoy).

Here's my uneducated interpretation - No real change from last week. The recession over recession graph (below) is trending downward, but we are still 75,000 initial jobless claims a week higher in 2009 than we were in 2002 (see graph below). At the current trend 2010 jobless claims should match 2003 jobless claims around the beginning June of 2010. Unemployment for the Internet Bubble recession peaked in Q2 2003. So, I'm forecasting (along with the herd) a peak in unemployment around June 2010. By the way, looking at 2003 below, I see that employment only went up by 1/2 a percent from the end of 2002 to the peak, so I'm forecasting unemployment staying in the 10s for 2010.

 

The unemployment rate peaked in the previous recession in June of 2003 (at a measly 6.3%) (see Bureau Of Labor Statistics graph below). 

This is pretty crude, but at least it has a couple of graphs to back it up. I'd really like to be bearish, but the initial jobless claims data doesn't support it.

MontyHigh, www.worldofwallstreet.us

For Conspiracy Theory Fans: Chelsea Clinton Engaged to Goldman Sachs Man

"Chelsea Clinton Engaged to Goldman Sachs Man

Chelsea Clinton Engaged to Goldman Sachs Man

Bill and Hillary Clinton's daughter Chelsea is engaged to Goldman Sachs man Marc Mezvinsky.

Between 2007 and 2008, he donated $4,800 to Hillary's presidential campaign.

He seems to be climbing the corporate ladder rapidly at Goldman. In 2007, on his political contribution form he listed himself as "Associate", then "trader" and then just "Goldman Sachs". Marrying Chelsea should help his ascent, it's just the kind of "God's work" Lloyd Blankfein likes to see.

 

http://www.economicpolicyjournal.com/2009/11/chelsea-clinton-engaged-to-goldman.html"

Yet another data point pointing to the existence of an elite that is ruling the USA for their own benefit. I was quite a sucker when I was a Bush supporter, wasn't I?

MontyHigh, www.worldofwallstreet.us

When To Exit Gold Mining Stocks? Look To Dr. Copper

Here's a response to the

www.investorvillage.com Precious Metals Stock Picking Year-To-Date Results

post that I got from someone I respect:

"TIME TO EXIT... I remember being part of a board where everyone's picks were up 100, 200, 400% on the year, and everyone's picks had another double or three left in them...where every hot junior miner with a prospect was going to be a "sure thing" double. 

 

It was a great time...to be selling, and locking away the bubble gains. 

 

This time its different? "

He's referring to the fantastic run we had in base metal mining stocks in the first half of 2007. I was there, became a rich man and went back to middle-class by not exiting at the right time.

Here's a pair of my unedited responses:

First Response: "'This time its different?'

 

No, its probably the same scenario, but there's no telling where the top is. I'm going to use TA to get me out in time this time. 

 

Last time I held even after the commodities turned. That won't happen again. But, just as Nickel went from $6 to $14 it kept on going to $22. So, gold could easily keep cruising for quite some time. There's no fever like gold fever.

 

The best of the gold miners have the same valuations as breakwater [zinc miner that seemed really undervalue and then tripled], etc. at the start. As long as the price of gold holds up they are undervalued."

Here's The Second Response: "Also looking to Dr. Copper

Here's another thought on timing the gold stock exit.

 

Copper right now is operating as a monetary metal. This is crazy, but it keeps going up (along with gold) even though the LME warehouses are brimming and you get these stories of Chinese pig farmers warehousing it in their barns as a speculation. People are obviously warehousing copper as a safe-haven and/or inflation/currency hedge.

 

Just about every copper miner in the world can print money at $3.20 copper. Its going to be a lot easier to crank up the supply of copper than it is to crank up the supply of gold, so I suspect copper will run out of momentum and turn down before gold does. When copper turns down it will be time to look very closely at gold."

So, what signals do you expect you'll use to determine when to exit the gold stock trade? I'm serious. How will you know when the jig is up? Things can't go "crazy good" like we've seen over that last month  forever.

MontyHigh, www.worldofwallstreet.us

Off Topic? No Wonder The USA Is In Deep, Deep Trouble

http://yearinreview.yahoo.com/2009/top10#top10searches

Look at the trivial stuff America is thinking about.

No wonder the banksters are getting away with destroying the USA economy for their personal profit. This explains why there is not going to be any serious reform in the USA.

 

"Every country gets the government it deserves... good and hard.", Mr. James Dines

MontyHigh, www.worldofwallstreet.us