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  • Bernanke Sets Gold Free For Now [View article]
    Sprott seemingly forgets that the total gold supply extant in the world amounts to about 170,000 tons. The numbers he is quoting are a drop in the ocean. Gold cannot be analyzed as though it were an industrial commodity like oil or copper. Neither central bank or Chinese buying or variations in the mine supply really matter to its price. The main price driver is the reservation demand of existing gold holders.
    Feb 27, 2013. 07:48 PM | 1 Like Like |Link to Comment
  • Stunning Bond Collapse Will Be Gold's Gain [View article]
    I would add that the futures curve in gold actually looks increasingly bullish as well. What I mean is that nearby delivery months have recently a tendency to go into slight backwardation (February has been in backwardation for the past three weeks or so) and further out months have very little contango. This happened also shortly before the most recent $270 rally from the low 1500ds to just below $1800. To give credit where it's due, this is something Keith Weiner, one of the authors at my blog has pointed out to me. Since I have seen this signal working a few times already - usually when it coincides with a fairly neutral/bullish set-up in the commitments of traders report - I think it is worth keeping an eye on.
    Feb 5, 2013. 08:59 PM | Likes Like |Link to Comment
  • Apple: 7 Reasons Shorts Can't Sleep At Night [View article]
    Current configuration:
    short interest ratio of 1, which is very low, but it has actually been even lower at times over the past two years (i.e., it takes one day's worth of average trading volume to cover all outstanding shorts).
    Put/call open interest ratio: 0.67 (67 puts outstanding for every 100 calls), which is actually lower than 90% of all readings over the past 52 weeks.
    Wall Street ratings: 32 'strong buys', 4 'buys', 2 'holds, zero 'sells' (this is dangerous, as it can lead to downgrades, see today's downgrade by Nomura, which helped drag the stock over 3% lower, breaking the $500 support level in the process).
    So the fact of the matter is that only very few people are actually betting on AAPL going down - they are vastly outnumbered by the longs, in both the stock and its options. And yet, the stock has clearly entered a strong downtrend.
    Having said that, the hurdle it must now climb on occasion of the earnings report is no longer as high as it once was, due to lowered expectations. So the earnings release could produce a bounce based on that consideration and the fact that it looks 'oversold'. Nevertheless, if I were long the stock (discl.: I have no position in it at all, neither long nor short), all these data points would worry me , because they indicate extremely stubborn bullishness in the face of very negative price action.
    Jan 15, 2013. 06:41 PM | 1 Like Like |Link to Comment
  • Nokia Vs. Research In Motion: Only One Will Survive [View article]
    In fact, capitalism is the only rational economic system. Socialism is literally 'impossible', as a socialist economy cannot engage in economic calculation. Economic calculation requires a price system, but when the means of production are collectivized, there no longer are prices. The only reason why the socialist COMECON survived for so long is that its planners were able to observe prices in the capitalist West, which enabled them to engage in rudimentary calculation. They were so to speak 'socialist islands in the capitalist sea', a bit like the Federal Reserve actually...
    However, had socialism been adopted globally, as e.g. the Fourth International had planned, then the division of labor and with it the entire economy would have broken down into small autarkic units within a few years, living from hand to mouth, scraping along close to the subsistence level. We would definitely NOT have conversations about 'smart phones'. :)
    Jan 15, 2013. 06:17 PM | Likes Like |Link to Comment
  • Gold Market Turns To China For Support [View article]
    Simply eye-balling the chart, it seems there is zero correlation between Chinese gold imports and the gold price. In fact, they almost appear to be a contrary indicator. However, I'm inclined to believe that they simply don't indicate anything. In London alone, some 2500 tons of gold change hands every three to four days if memory serves, and the total size of the investable stock of gold is probably close to 80,000-90,000 tons (depending partly on how one classifies certain types of 'close to bullion' jewelry). Why would imports of 90 tons over a whole month matter? It's a drop in the ocean. In fact, there is a widespread misconception as to how gold prices are formed. Due to the large stock, reservation demand is by far the biggest demand component, and this cannot be measured (one can only make qualitative statements about it based on other factors, such as real interest rates, inflation expectations, money supply growth, etc. etc.).
    Jan 14, 2013. 08:13 PM | 1 Like Like |Link to Comment
  • Don't Believe The Hype In Gold [View article]
    GDP is probably one of the most useless and misleading statistics ever invented. It ignores all intermediate stages of the capital structure, which alone represent investment spending amounting to nearly $11 trillion per year. If one looks at the gross domestic output accounts, it turns out that the biggest sector of the US economy is actually manufacturing, and consumption is far smaller than the 'GDP' insinuates (the consumer is only about 35% of all spending in the economy, not 70%). Otoh, GDP includes government spending as though it contributed to 'growth' - when in reality, the government only consumes and has to take every red cent it spends from someone in the private sector (whether by taxation, borrowing or money printing). Moreover, 'real GDP' is vastly distorted by hedonic indexing, which has e.g. magically transformed all 'real' spending on IT products and software into multiples of nominal spending, an error that is cumulative over time. Anyone who claims that GDP is a sensible statistic has never really looked at it in detail.
    Most economic statistics put out by the government have only one rationale: they are used as a justification for government meddling in the economy.
    Jan 10, 2013. 04:59 PM | 3 Likes Like |Link to Comment
  • Sense And Nonsense About Climate Change. What Do Investors Need To Know? [View article]
    In 1975 the 'scientific consensus' was that global cooling would soon reach catastrophic proportions and that 'something must be done immediately', or we would all starve to death shortly. Among the proposals was nutty stuff like covering the Arctic and Antarctic with black soot so the ice would no longer reflect sunlight.
    Like man scarcity and fear promotions, the AGW theory itself is largely a psychological or social mood phenomenon. There is actually no debate that the world's climate has been in a warming trend for a good while. The debate is over its causes, and whether human activity is to blame. Since warming and cooling cycles have occurred in the past well before there was an industrial civilization, we seem to be witnessing a natural cycle. Moreover, civilization and life itself depend on a warm climate. Woe betide us if the cycle were to turn into a cooling cycle again, as will inevitably happen. Then we will have a real problem. Warming on the other hand should be welcomed.
    Jan 10, 2013. 04:44 PM | 8 Likes Like |Link to Comment
  • Don't Believe The Hype In Gold [View article]
    I would add to the foregoing debate that the so-called 'general price level' actually cannot be measured. The always changing purchasing power of money of course exists, but that does not mean it can be measured. For measurement one needs a constant, and no such constant exists, as the purchasing power of money is influenced by both the supply of and demand for money and the supply of goods and services - all of which fluctuate. This is why it makes more sense to refer to inflation as the increase in the money supply. It has an effect on prices, but an eventual increase in the level of all or most prices is only one of them and not necessarily the most pernicious one. We can however make a number of apodictic qualitative statements:
    1. absent the increase in the money supply, prices would have been lower than they are (we just don't know by how much)
    2. relative prices in the economy will be distorted by increases in the money supply as money is not neutral, but enters the economy at discrete points. This is ultimately the cause for capital malinvestment, as the distorted price structure makes economic activities seemingly profitable that would not be assessed as such had the price revolution not occurred. Thus, an increase in the money supply leads to capital consumption.
    3. the fact that money is not neutral also implies that increases in the money supply redistribute wealth to the early from the later receivers of the newly created money. We do not all benefit from increases in the money supply - only a small minority does.
    Jan 7, 2013. 06:59 PM | 3 Likes Like |Link to Comment
  • You Should Sell Hewlett-Packard [View article]
    Funny, I have the exact opposite experience. My HPQ printers all soon failed, while the Canon I finally bought instead keeps going like the energizer bunny.
    Dec 31, 2012. 04:13 PM | Likes Like |Link to Comment
  • Paul Krugman Is Right [View article]
    Thanks for saving me the effort, I was about to chime in with the same point. :)
    Nov 19, 2012. 06:24 PM | 3 Likes Like |Link to Comment
  • The Stock Market Rebound Is Coming [View article]
    You would, after they have been bearish all the way up? At least Rosenberg has been, don't know about Bernstein. Bob Janjuah, another prominent bear, also recently talked about 'one more leg up'. This is something one often sees. The market turns down, and well-known committed bears suddenly become afraid that it could make a fool of them again. And so their opinion changes at just the wrong moment, when they would finally be proven right. Mind, there is no guarantee that this is the case here. I am merely sharing an observation, as I have seen this happen frequently in the past. It may well prove to be relevant again this time.
    Nov 15, 2012. 04:49 PM | 4 Likes Like |Link to Comment
  • The Stock Market Rebound Is Coming [View article]
    There is always a rebound at some point after a big sell-off. The problem is though that complacency continues to be rife in this market. Positioning indicators are still showing that the bears have failed to jump on the train this time, the very first time this has happened in a big sell-off since the 2009 low. That says to me that this decline is qualitatively different.
    It also started right after the net speculative long position in stock index futures (dollar-weighted, all indexes combined) had reached an all time high - i.e., after futures traders sentiment had become more bullish than at any other top in history since stock index futures began to trade. Meanwhile, the net cash position of mutual funds is only 40 basis points above an all time low. Yes, a rebound will eventually come, but it will probably fail to make a new high and very likely will present an excellent selling opportunity (of course this will have to be appraised as it happens).
    Nov 15, 2012. 04:39 PM | 3 Likes Like |Link to Comment
  • Investors Don't Understand Apple's Math - A Mistake [View article]
    AAPL has one of the lowest short interest ratios in the tech sector. It has risen a bit lately, but still remains extremely low. Prior to the recent price swoon the short position was so minuscule compared to trading volume and the float you had to squint to see it. It is however held by well over 250 hedge funds as a long position - the stock with by far the biggest hedge fund participation.
    The options market is indeed important. In the short term, option positioning can magnify trends in the underlying. That is however not only true for AAPL, but for all stocks with active options. And it is quite natural that a stock that has trended up for a long time and has such a huge following will have an active options market.
    Nov 15, 2012. 03:01 PM | Likes Like |Link to Comment
  • Investors Don't Understand Apple's Math - A Mistake [View article]
    'Apple's complicated math' - try analyzing an earnings report of a big bank then :) By the time you have arrived at footnote 637, you have a beard longer than Methusela's.
    Nov 15, 2012. 02:54 PM | Likes Like |Link to Comment
  • Stocks And Euro-Dollar Futures Positioning [View article]
    Please note,McClellan's article is already over a year old. I have only linked to it to introduce readers to the concept. The chart that is relevant TODAY is the one in this article. And that implies a high in late November (i.e., there should be one more move higher) and a tumble lasting into October 2013.
    Nov 8, 2012. 02:16 PM | Likes Like |Link to Comment