Would be interesting to determine a good entry point.
Thursday, November 17, 2011
Gold Continues To Follow AUD
Would be interesting to determine a good entry point.
Wednesday, November 16, 2011
Gold
Before the markets opened today, I wrote that I am long gold with a very tight stop. Once the markets opened, the stop was triggered and I went out of gold. I believe in the long term higher price of gold. From the following chart you will note that gold is in a rising channel.
However it is now near the upper limit of the channel and even if gold were to correct another $ 90- $100, it will still be in a bull market. I am waiting for a better entry point. I think gold is safer place to be vis-à-vis equity.
For now gold is mirroring euro.
In other word, it is moving opposite of US$. But a time may come, when gold and US$ will move in tandem. That will happen when investors flee euro and look for a safe heaven.
“Euroxiety” has taken centre stage and the Fitch comment at the end of the trading session spooked the markets. But Fitch did not say anything new, which we were not aware of. Markets are anxious and the yields of Italy, Spain keep rising. Tomorrow is another big day for bond selling by France and Spain. Everyone would be waiting to see what the yield is. ECB would have to pump in more money tomorrow. How long and how far they will go, is the question.
In such a scenario, hedge funds and mutual funds would first sell their portfolio that are profitable and will hold on to the “not so good” part of the portfolio. So we see Paulson & co , the largest holder of GLD selling its GLD shares and holding on to BAC shares.
The situation is rather scary and the 1st priority is not to lose money.
For now, Cash is King.
PS.
Going through correlation between various currencies and gold, I found that gold has a better correlation with AUD, even better than Euro.
Gold has now gone down further and has taken out the channel support. If it breaks $1745, the next level is 1675. lets watch AUD carefully.
PS.
Going through correlation between various currencies and gold, I found that gold has a better correlation with AUD, even better than Euro.
Stop Loss Triggered
Stop loss has been triggered on gold.
I am now out of gold.
Will wait for a lower entry.
I am now out of gold.
Will wait for a lower entry.
Which Way Wednesday?
I was travelling for better part of last two months and now back in Toronto. I spent considerable amount of time in Western India, Northern India and Eastern India. I got a chance to meet people from different walks of life and got a glimpse of the mindset and thinking of the people of India. India is important in the global business, just as China was twenty years back. I plan to write about my analysis in the coming days as I recover from jet lag.
Back in North America, nothing much has changed since my last post. I am long gold with a very tight stop. If gold closes below $1765, I will get out. If we get past November without triggering the stop loss, then it would be OK to hold long gold. I am avoiding silver altogether. Europe continues to lurch from one crisis to another. I had written months back (When it was not in fashion) that the pink elephant in the room is Italy. And now the markets have found out how much vulnerable Italy is. I wrote that we will get a rally once “Bunga Bunga” goes out. We did get a rally but it was short-lived. Now super-Mario will form a government and most likely we shall see little calm in the next few weeks.
I had written in last June / July that I expect two Euro. And reading the various comments coming out of Germany, it now seems that the Germans are seriously working on that. They will not put their necks on the chopping block for their profligate southern neighbours. The EFSF remains a joke and team Merkozy is engaged in the policy of buying time without spending too much money. Now everybody realizes that the French banks are in deep soup with the sovereign debts of the PIIGS countries and France, the core of Eurozone, is in spotlight. With so much trouble in Euroland, one would expect the Euro to disappear but the markets can remain irrational longer than we can imagine. So I expect Euro to hang around some more time, may be till the end of 1st quarter , 2012. After that things may start to unravel quickly.
Something interesting happened last week in the Forex market. GS came out with a recommendation to buy Euro. Their stop loss was 1.35 and limit was 1.40. Normally I tell my clients to do the opposite of what GS advices. In this case, I was expecting GS to sell Euro above 1.35. Surprisingly or may be not, Euro sold off and 1.35 limit was triggered. Now may be they are buying Euro and it will go up again. If Euro closes below 1.3440, it will probably be a sell signal.
Back to Equity, I expect the market to grind up slowly till December. Already it is in positive territory for the year, marginally so. We will continue to see massive sell off one day and gap-up open the next day. These are the typical signs of the top and both bulls and bears will get burnt. Yesterday’s late rally was as silly as it gets and so today might be a red day. My advice is to stay out of equities altogether and if one has not gone out already, one should use the next high to unload. I am short Apple again with a very tight stop and otherwise I am just watching the madness of the market from the sideline.
Be very careful out there.
Tuesday, November 15, 2011
OWS: Gimme, Gimme
Occupy Wall Street is not about a political argument really. It is simply the idea that some folks are entitled and others are not. The protestors are "demanding" various things that they claim are theirs by right -- mostly they want things other people have worked hard to obtain.
Instead of putting their shoulder to the wheel and working to accomplish things in life, the protestors want others -- the rich, they say -- to fund them. College graduates after four years of fun frequenting the local bar scene on government (taxpayer) loan funding, now, with sociology degree in hand, want high paying jobs for which they have no qualifications.
None of this is really about politics. This is merely the anthem of the entitlement -- give me what others have because I am me and I am entitled. Not much else going on.
People with real responsibilities do not have time for this. They are busy out working hard either at their job or they are working hard looking for a job. Only the entitled need to do neither. Hopefully, the "entitled" are not 99 percent, but a much smaller percentage of our society.
Eventually as more and more people join the "entitled," you arrive at the situation Europe finds itself in. Everyone wants free this and free that. Unfortunately, there aren't enough "rich" people or naive bondholders to permit this situation to go on indefinitely.
Instead of putting their shoulder to the wheel and working to accomplish things in life, the protestors want others -- the rich, they say -- to fund them. College graduates after four years of fun frequenting the local bar scene on government (taxpayer) loan funding, now, with sociology degree in hand, want high paying jobs for which they have no qualifications.
None of this is really about politics. This is merely the anthem of the entitlement -- give me what others have because I am me and I am entitled. Not much else going on.
People with real responsibilities do not have time for this. They are busy out working hard either at their job or they are working hard looking for a job. Only the entitled need to do neither. Hopefully, the "entitled" are not 99 percent, but a much smaller percentage of our society.
Eventually as more and more people join the "entitled," you arrive at the situation Europe finds itself in. Everyone wants free this and free that. Unfortunately, there aren't enough "rich" people or naive bondholders to permit this situation to go on indefinitely.
Monday, November 14, 2011
When you have no move, do nothing...
"...You have no move, Mr. Thompson. You do nothing.".
Reflecting on Nucky Thompson's compromised position in the most recent episode of Boardwalk Empire, Arnold Rothstein (played by Michael Stuhlbarg) tells the embattled Atlantic City treasurer/gangster to simply wait and plan for a time when there is a move to be made.
Rothstein elaborates:
"I've made my living, Mr. Thompson, in large part as a gambler. Some days I make 20 bets. Some days I make none.
...There are weeks, sometimes months in fact, when I make no bets at all because there simply is no play. So I wait, plan, marshal my resources and when I finally see an opportunity and there is a bet to make, I bet it all.".
Leaving aside the near-certainty of fixed bets and the part about "betting it all", doesn't this sound like the strategy of a good speculator? When there is no clear move to be made, you must simply wait and do nothing until the real move (the true opportunity) presents itself.
Then, having protected your capital and your wits, you may step in and seize the opportunity.
What About the US?
With Europe heading for massive defaults and economic contraction, what is the future for the US?
Weakness in Europe will not be a plus, but more fundamental problems await the US. Our debt situation is worse than the situation currently plaguing the Eurozone. Yes, our situation is worse.
The various "states" of Europe have unsustainable levels of debt, just as most of the larger states in the US have unsustainable levels of debt (Illinois, California, New York, New Jersey, etc.). But Europe does not have a federal debt problem. The Eurozone does not issue it's own debt. The US does. So, the US has sovereign debt at two levels -- the federal level and the state level, while the Eurozone has sovereign debt only at the "state" level.
No amount of cuts and tax increases will have any impact whatever on the dynamics of US debt. Thus, the current discussion about the Supercommittee is largely irrelevant. (Democrats have pretty much admitted that by listing as $ 1 Trillion in cuts the cuts from "not fighting future undeclared wars!)"
The problem of US federal debt is an entitlement problem and has an easy solution -- a very easy solution, an almost trivial solution. Moving the age of eligibility out a few years for both social security and medicare is the one and only solution that will have any impact whatsoever on our national debt problems (and scaling back medicaid). Nothing else really moves the (long term) needle at all.
As for the states, the states' problem is a problem of the benefits or "entitlements" that they provide for their public employees. Moving the age of "eligibility" out and substantially reducing the benefits for those not currently retired is the only way of moving the needle for the problems of the states (and municipalities). Nothing else really matters at all.
All the talk about tax increases and reducing (discretionary) spending is largely beside the point. Whatever virtues or vices there may be in altering the tax system and reducing the levels of discretionary spending, such tinkering does not make any difference at all in the long run debt dynamics of the US.
The numbers are the numbers.
Weakness in Europe will not be a plus, but more fundamental problems await the US. Our debt situation is worse than the situation currently plaguing the Eurozone. Yes, our situation is worse.
The various "states" of Europe have unsustainable levels of debt, just as most of the larger states in the US have unsustainable levels of debt (Illinois, California, New York, New Jersey, etc.). But Europe does not have a federal debt problem. The Eurozone does not issue it's own debt. The US does. So, the US has sovereign debt at two levels -- the federal level and the state level, while the Eurozone has sovereign debt only at the "state" level.
No amount of cuts and tax increases will have any impact whatever on the dynamics of US debt. Thus, the current discussion about the Supercommittee is largely irrelevant. (Democrats have pretty much admitted that by listing as $ 1 Trillion in cuts the cuts from "not fighting future undeclared wars!)"
The problem of US federal debt is an entitlement problem and has an easy solution -- a very easy solution, an almost trivial solution. Moving the age of eligibility out a few years for both social security and medicare is the one and only solution that will have any impact whatsoever on our national debt problems (and scaling back medicaid). Nothing else really moves the (long term) needle at all.
As for the states, the states' problem is a problem of the benefits or "entitlements" that they provide for their public employees. Moving the age of "eligibility" out and substantially reducing the benefits for those not currently retired is the only way of moving the needle for the problems of the states (and municipalities). Nothing else really matters at all.
All the talk about tax increases and reducing (discretionary) spending is largely beside the point. Whatever virtues or vices there may be in altering the tax system and reducing the levels of discretionary spending, such tinkering does not make any difference at all in the long run debt dynamics of the US.
The numbers are the numbers.
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