Goatmug Blog - Financial Perspectives from the Mountain Top

Subsidies

noreply@blogger.com (Goatmug) — Wed, 19 Nov 2014 14:51:00 +0000

WHERE NEXT? (SECTOR ROTATION MODEL CHECKUP)

noreply@blogger.com (Goatmug) — Thu, 03 Jul 2014 04:37:00 +0000

SECTORS & CYCLES
I've advocated for some time that some of the best ways to deploy capital is to pay attention to where you are in the economic environment (expansion/contraction) and weigh where you think you are in the market cycle (bull/bear). the Market Sector Model highlights areas that tend to do well during those corresponding periods or phases in the cycle. Frankly, this approach has been pretty successful over the course of many years of investing. I like this approach, and it keeps me constantly evaluating my positions and where we are heading.

The question becomes, where are we now. Personally, I feel as though we are right new the middle of the graphic which would suggest that we've gone through a raging bull market, scaled the walls of worry furiously, and reached IPO nirvana which to me signals a market top. Bonds have been acting weird and energy stocks have been bought with a vengeance.

THE DETAILS -
(Graphics below from marketscalpel.com)

I found this neat little summary that I didn't ever see before which simply restates the original model above. In a way, I like this graphic even better as it is cleaner, but doesn't overlay the market (bull/bear) phases though.

This version that draws out sectors in energy, healthcare and consumer goods should be performing well and this seems to correspond pretty well with what we've seen in actual trading in the last 5 to 6 months.

I find that this graphic is even cooler as you can drill down into very specific details of each category. Here's a breakdown of the Consumer Goods, Healthcare, and Energy.

Consumer Goods - Food & Beverage & Tobacco
Healthcare - Medical Equipment & Supplies and Pharmaceuticals
Energy - Oil & Gas and Coal

Coal has been destroyed in the last year or so due to our Presidential war on coal. As crazy as it may seem, it may be time to consider coal plays like Peabody (BTU). It is an ugly chart, but the upside reward might be worth a smallish play.

IS THE PARTY OVER?
No, I don't think we are through and on to the next phase of Utilities and Telecoms, but that doesn't mean that you don't look at them and you don't start preparing. In fact, we've commented that utilities have simply been the best performer for the year. Other market participants may be front running this or simply assume that we are indeed farther along in the cycle than I do.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.com/

WORLD CUP OF CHARTS

noreply@blogger.com (Goatmug) — Tue, 01 Jul 2014 18:18:00 +0000

The US tries to keep hope alive, very much like this market. Utilities, munis, corporate bonds, and treasuries have all been big winners so far through 6 months. The SP500 is up around 5% and the Dow is up around 2%. All in all, not much has happened, but a slow grind higher in the midst of a world ripping itself apart due to our leadership deficit in so many places. Its a good thing the US soccer team has a great coach and so do we as Janet Yellen stands at the helm, guiding us ever so gently in a ZIRP environment.

Here's just a few charts I look at daily. Near the end I've highlights stocks I've watched, bought, missed, or feel like there may be opportunities in soon.

XLU - Why not utilities? Utilities must be signaling that rising interest rates are pretty much a myth and will never happen.

XLU:SPY

IMPORTANT CHARTS
APA - Energy Sector has had an awesome run, is this starting to tire?

ARCP - Looks constructive now.

COP - Overbought? Each of those recent peaks in RSI have resulted in short term pullbacks. Traders may want to exit and buy again on any weakness

EWY - Emerging Markets finally coming back?

FB - A run into earnings.... exit a day or two before they announce?

FCX - Who knows what the cost of production is/was for gold and silver, but as gold hit $1250, the destruction of gold, silver, metals, and miners suddenly stopped. FCX has had a nice run since hitting $30 with a unexplained pop today taking it above $37.

IXN - This etf has been a long-time powerful winner. Short term looks a bit overbought.

JBLU - Finally breaking out. Look at the RSI at the top showing overbought.

JOY
There is some risk here of a reversal and fall to mid 50's.

KMI - Nice run. Is there still momentum to move higher?

KRE - US Regional banks are certainly nicer than European banks. It looks like there is room to go 5% higher at least.

SLW - Momentum is here. The 14 Week MA crossed over the 40 Week. This is a significant longer term signal suggesting continued upward pricing.

VTR - We need a bounce here. VTR is extremely tied to longer term bond yields. The 4% dividend yield is nice.

OTHER ITEMS - FOR CONSIDERATION

AAPL - APPLE - Probably goes to $100. Probably should wait on this one as risk/reward set up isn't great.

DUK -DUKE ENERGY - Utilities are all the rage. A possible breakout as the higher-highs and higher lows just keep coming.

GDXJ - JUNIOR GOLD MINERS
Will the evil gold cartels and traders allow gold to continue to rise? COT report shows large increase in commercial shorts, probably doesn't bode well for gold, unless some geo-political shock comes to light.... we haven't had any of those lately have we?

GILD - GILEAD - Hard to buy here, but this should be a strong earnings report and the rebound has been impressive.

GMT - GATX CORP - Railcar leasing seems simple enough.

GOOGL - GOOGLE - Same risk / reward trade off as AAPL, however I think GOOGL is better than AAPL.

INTC - INTEL - Strong breakout. INTC seems to have its swagger back. Any pullback can be bought.

HAL - HALIBURTON - Energy anyone? Too late to buy here.

MSFT - MICROSOFT - Remember when we could have bought at $26 on its way to $30. I think this is a hold and not a buy.

OXY - OCCIDENTAL PETROLEUM - Wait for a pullback and confirm price action. This has run a long, long way.

O - REALTY INCOME - The leader in long-term triple net leases. I like the action here and has a nice dividend.

PPLT - PHYSICAL PLATINUM - Very nice.

SCCO - SOUTHERN COPPER - Nice chart, would have like to buy on the bounce. Is housing going to slow?

Stocks have run quite a bit. I like Realty Income, Gilead, and GATX Corp, and possible AAPL with an eye toward earnings. Otherwise, energy has been unstopple, it just seems hard to buy now.

GOATMUG

WHAT COMES NEXT? (BID & MACRO VIEW)

noreply@blogger.com (Goatmug) — Thu, 20 Feb 2014 03:15:00 +0000

Without any commentary..... what do you think comes next?

GOATMUG

THINKING OF BITCOIN? THE DEVIL'S CURRENCY

noreply@blogger.com (Goatmug) — Wed, 12 Feb 2014 19:22:00 +0000

Just in case you were thinking about buying some bitcoins, perhaps it is the father of lies and temptation who is the source of your wandering thoughts.....

Bitcoin seems to be under attack from governments, hackers, and the corporate-types as Apple un-approved the bitcoin app this week as well. Could AAPL or GOOG be ready to enter with their own crypto-currency like a Googlecoin? We all know that corporations and government are tied pretty closely, could a special request have come from .gov to shut down apple user access to bitcoin? We probably won't know, but it hasn't been a good week for bitcoin as it suffered a flash crash. I hadn't owned any, but on the crash, I picked up my first .5 BTC just for grins. I'm still in the money but the screen shot of the Bitstamp Exchange is a little scary.

FYI, Obamacare's enrollment is about to come to an end (unless the deadline is changed) and I'll be back to posting with regularity. Sorry for the absence, just can't handle the volume and maintain the posts.

GOATMUG

CHART-NADO (SECTOR MODEL RECAP)

noreply@blogger.com (Goatmug) — Mon, 09 Sep 2013 04:54:00 +0000

Several key things have been in play for months and I believe they will continue to be the leaders in this environment. We'll update a few familiar charts, but also make sure to highlight the themes that will be the beneficiaries of the same sector rotation model we've based our analysis on for several years.

Let's dive in.

In my estimation we are now in the left middle 1/3 of this graph in that we have witnessed this crazy 4 year rally in stock markets, but just to throw a wrinkle at you, we have kind of limped along in the economic recovery marked with massive repression of interest rates causing some delayed impact within the normal rotation.

My thought is still that Technology, Industrials, Basic Industry, and even Energy are the key winners now and in the short to medium term. However because of distortions related to interest rates, finance too will benefit from net interest margin spread growth, and they should continue to benefit. (I'll hedge my bets here and suggest that regional banks and insurance companies will win, while large money center banks may lose as they are heavily dependent on mortgage activity for some of the success.)

I'll just post the charts with little comment.

COP

KMF

XLE

MRK

PFE

IXN

SOCL

PNC

FITB

XLF

FCX

CAT

XLI

EWC

EEM:SPX

EEM

Emerging markets seemed to have bottomed relative to the SPX and may be the area to watch in terms of "better than" performance.

SUMMARY

We've had a correction and despite all of the crazy geo-political issues, there are simply strong looking charts and reasons to watch for a good bounce. Technology, Financials (especially regionals), Industrials, and yes, even cyclicals and emerging markets are the place to invest. Many of the charts are at support so further weakness would take a prudent investor out of their positions. This is a good time to re-evaluate all positions, commit to firm stops, or widen them out if you are willing to handle a bit more volatility to ensure you maintain positions.

WILD CARDS AND GEOPOLITICS

The wild card in the context of investing right now is determining a winning strategy in the midst of amateur hour at the White House. The President is way over his head in the foreign policy arena and his adversaries (foreign and domestic political and national rivals) are circling like sharks. His mis-steps related to Syria are serious and his weakness here has emboldened challenges from Assad, Iran, Russia, and China. The correct thing to do for the President now is to simply state we don't know who used chemical weapons and then suggest that we'll wait for more evidence. Meanwhile he should continue to arm and support the terrorist rebels and engage Assad to the point in which they begin to win. At that time, our strategy should be to withdraw arms and support till they are weakened. This approach assures no winner arises and continues to draw the evil black eyes of Iran, China, and Russia to this little spot of dirt in the Middle East.

Our President must learn that there is no winning in winning and there is no losing if you support and are friends with the meanest and worst strong man as long as he wins and you are committed to giving him indefinite monetary support forever (where are you Mubarak, Obama didn't mean it!). We've had our Utopian experiments by both Bushes and President Obama. Clearly the people in this region do not have the same value system and cannot appreciate the same type of democratic approach our country actually used a long time ago. In addition, we cannot pick winners and losers in the region as most of the time the new guy is a lot worse than the old guy.

My point here is simply that Obama probably won't take my sage advice and I'm sure his arrogance will be more of a guide in his approach to use a "sterile" volley of tomahawk missiles to soothe his wounded pride. An attack will result in increased oil and gas prices, refiner losses, gold and silver gains, and an uncontrollable situation. Keep an eye on it!

GOATMUG

MELTDOWN?

noreply@blogger.com (Goatmug) — Tue, 20 Aug 2013 03:53:00 +0000

Today's 70 point drop in the Dow drop the index down to the low 15,000 area, a full 600 points off the highs of recent months. Overall, things look really interesting in a bad way as 10 year bond yields are flashing higher, quickly and the stock market isn't exactly reacting well. Remember, it isn't the actual 10 year bond rate that is concerning as it is still freaking low at 2.88%! What is concerning is the speed in which it moved to the 2.88%.

Look at the HUGE move since May!

Here's the 30 Year -

WARNING SIGNS
What we really need to be watching is the equity and bond market interaction given their independent moves. For example, if stocks continue to slide, but yields in long bonds arrest their slide (yields go down instead of up and prices of bonds go up), then it will signal a level in which bond buyers feel they are compensated for their risk AND this could mean a big exodus from equities. Think about this for a moment, even with equity weakness, traders, fund managers, and retail guys have asked themselves...."If I get out of equities, where can I go, bonds suck, so I might as well buy dividend paying stocks". BUT, if we get to a level where managers and traders rationalize that bond yields are decent enough to be a safe haven to potentially miss out on some equity movement, the markets are in trouble as stocks have pretty much been the only game in town for almost 6 months.

Having said that, if both equity markets and bonds go down too, you better hope you locked in gains when they were easy as I think everyone but Joe 6 Pack has been identifying exits and ensuring they aren't the last out the door. Remember, Mom and Pop probably just entered this market fully in the last six months, it is probably time to let them have it.

MELTDOWN?
Emerging markets are struggling now and India is certainly in a total meltdown.

The Dow certainly looks like it could drop a minimum of 200 to 300 points here to get back to the lower support at 15,750.

And, speaking of meltdowns, I am no tree hugger, but I'm simply awed by the silence of the commie media when it comes to the potential threats of something that is going on right off the left coast. I am concerned about this as I'm looking to schedule a trip to Hawaii next summer. If any readers have some guidance for what to do and where to go, please share them via email or in the comments.

Some light hearted stuff for Monday night.....
Professor Christopher Busby speaks with the RT on the anniversary of the Chernobyl nuclear accident to discuss the ongoing Japanese nightmare in Fukushima. Like most important and real happenings in our country and in the world, you almost have to go to a foreign source for news to get a decent perspective on reality. In the US media we'll discover that Beyonce got booed and that everyone needs medical marijuana or each boy and girl deserves to make a choice of what sex they are for that day, but we'll never hear anything meaningful about our constitutional rights being whisked away or the absolute destruction that is occurring in the Pacific Ocean right now.

Word is that the damming of the area and continuous pumping of water into the fuel holding areas has caused the underlying ground and sediment to subside. Millions if not trillions of gallons of contaminated water are leaking into the ocean which is a nutshell, isn't good.

Have a great week, and you'd better figure out where the nearest exit is....

GOATMUG

FINAL CHART ROUND UP - BANKS, DIV PAYERS, AND TECH

noreply@blogger.com (Goatmug) — Tue, 13 Aug 2013 20:55:00 +0000

This is the final slug of charts that I examine almost daily. These have been the safety and defensive names that have provided such great performance over the last 3 or 4 years. Recently, several of these "safe-trades" have been beat up as some memory of valuation and risk management must have taken hold for a brief month or two. I'm not sure if reality or sanity will continue to persist, but if it does, the utility space along with some consumer staples should be ones to sell.

XLF

While XLF (big banks) looks a smidge weaker in the last month, it is still higher than 3 months ago. In the last 10 months, XLF seems to get down to the mid-line of the rising channel and simply stair-step higher. The recent headwinds seem to be nothing more than an opportunity to see XLF move to $20 where it should be a good place to add.

KRE

KRE does look nice and very similar to XLF. The price action seems to be in uncharted territory here, I do think that like XLF we could see a slight pullback where it should be a buy. I actually like the regional banks much more than the larger money-center banks as they are not dependent on the mortgage business.

FITB

Hum. The risk manager in me looks at this chart and thinks that the $19.75 level could be more than just a little resistance for FITB. If you haven't sold already, a thrust higher may be the opportunity to get out before a fall.

PNC

PNC has logged an impressive run and was swiftly knocked back as it tried to exceed $78.00. The $76 seems to be good support. Below that, $72 may be the next place the stock tries to defend.

MRK

$47 seems like a nice place to put a stop on MRK if you are a trader and don't want to give up big gains. If you are looking for a longer term investment the perspective simply could be that it is still within a huge rising channel and a bounce off the lower line could bring great things. I'm willing to be patient with this one, but am still wary of a potential double top here.

PFE

Pfizer too looks to have fallen a bit, but isn't over bought and looks actually to be building a very nice base to move higher. I'm sticking with this one.

XLU

Call it sector rotation, call it a valuation move, call it higher interest rates. No matter what you call it, XLU has been a fantastic longer term play for me, yet I punted it. While one could argue that in a risk-off fall, XLU will outpace other sectors in relative terms, I think the upward momentum baton that XLU has carried has been passed on to the financials, energy, and industrials (perhaps even cyclicals!).

PFF

PFF is one of those preferred stock etfs that looks to capitalize on rising interest rates. Unfortunately the mixed-bag of holdings in PFF cause it to be subject to significant risk as it holds Reits and other financial firms that may suffer if interest rates rise quickly. I think PFF may be a punt in favor of cyclicals we've discussed in other posts.

XLP

Does this thing ever go down? It's funny that even though we are not in a recession, typical recession favored type investments are simply kicking ass. The general playbook in a recession is to buy utilities, healthcare, defense, and consumer staples. Well somehow no one ever got the memo that we are not still in a recession as XLP continues to fire higher. Just as a matter of good financial and portfolio management you've got to sell XLP, even though it may go higher.

IXN

I really started looking at IXN and buying it about six months ago. I actually really liked the chart of MSFT, but didn't want to just buy that name. IXN looks really, really nice here even though MSFT doesn't. Here is another view of the same chart. Let me know your thoughts as this is actually one of my favorites.

SOCL

Alright, don't laugh at this one. This is the social media etf. This is actually one of the few pure-play social media internet efts out there, and better ones in my opinion (if you don't mind some of the garbage in it!). I first came to know SOCL when they announced that they would actually add the FB IPO to their etf, which made me want to short the heck out of them. (Yes, I still think FB is a zero despite its recent big move). Despite my thoughts on FB, SOCL contains other social media firms I actually respect like LNKD and YELP that actually have a usable and money making function. It does contain loser stocks like Groupon too, so it isn't without its flaws. Anyway, I put this up to highlight just how fired up these types of investments have been and remind you to party like it's 1999!

I hope you've enjoyed the round up. Let me know if you have questions and if you think I should begin looking at some other good set ups.

GOATMUG

CYCLICALS CHART ROUND UP

noreply@blogger.com (Goatmug) — Mon, 12 Aug 2013 02:51:00 +0000

Until the last week or so, you might have thought that gold, silver, and every metal on earth was worthless. Chinese real data, or fake data was released and gave the shiny stuff and cyclical stuff a life saving does of drugs to perhaps stave off death for a month or two. All intra-market analysis I do suggests that we are at extremes in terms of how far the US markets have gone relative to other markets. It frankly may just be a cycle of cyclicals and emerging markets coming up a bit to bring things in line. Here we go!

$GOLD

$1340 looks to be the magic number. If I'd have to guess, I think we'll see a bit more upward momentum and then a slam down here for gold once again. $1180 looks like support to keep loading up the truck for the zombie apocalypse.

$SILVER

Dare the shiny silver one get back into the channel of death? Maybe. If silver can climb just a bit further it has the possibility to go as high as $26, however if my hunch is correct, silver will fail and fall to the high $17 range.

$COPPER

China's latest doctored reports last week seems to be the saving grace for all cyclicals and copper. JJC may be a nice option for the speculator looking to ride copper's recovery to $3.80.

FCX

I'd feel a bit more comfortable with a pound on the table buy for FCX if it were able to power convincingly over $32. If it does, $39.00 is back in play. Go long with a good surge higher.

DD

Nice breakout here for Dupont. It's hard to buy more here and with any overall market weakness, it is probably time to finally harvest nice gains.

XLI

Wish I'd bought this rather than watching for literally the last 2 years. There is probably room for this to come down to the $39 area, which at that point would be just another opportunity to buy the dip, until proven otherwise.

CAT

CAT has been the victim of a terrible global growth story. It has still managed to fight back from the scary free-fall in the summer of 2012 and December of that year. For all its scratching and clawing to stay above the $80 level it just seems as though a break lower is inevitable.

EEM

EEM, the emerging market ETF looked like someone was going to put it out of its misery once and for all. The bounce off of $35 was very nice and I fully expect to see an attack on the upper boundary of $42. Will it succeed in going higher? If it does, it is game on for all emerging markets and we'll see massive out-performance of them relative to domestic equity markets.

EEM:SPX

Inter-market analysis of emerging markets (EEM) to the S&P500 is shown here. Since 2011, emerging markets have been under-performing significantly and we've gotten to the point where there HAS to be some reversion to the mean where emerging markets actually post some gains on a relative basis against the US markets. There really has only been two other times since 2007 that the EEM:SPX relationship has been this low, and in both instances, emerging markets posted monster gains. Please note, this does not mean that the US markets will go down, it simply means that emerging markets could really outshine and US markets could be seen as fully valued while shoppers choose the potential up and coming asset class.

IDX

As much as I've been a fan of Indonesia for years, the recent beat down of IDX has been heart-breaking and wallet destroying. There is not option here, if you are a supporter of IDX, it must hold a close over $27 this week; otherwise it is a sell or a short candidate down to $24.

EWM

$15 is a potential destination for EWM the Malaysian etf. I would look for pretty strong lower support and if it does not bounce, it too is a sell.

EWS

Support for EWS is at $13.25. A move below this level brings the lower channel into play, almost a full dollar lower.

EWC

EWC (Canada) just looks to be locked in a battle between levels of support. I think this is a very nice range to trade, however the area where EWC sits now is simply in no-man's land. Wait for a move lower to $26 or a break higher to short at $29.

EWA

As China goes, EWA goes. If we see good news from the Asian tiger, EWA will resume its ascent.

EWJ

While not an emerging market, Japan certainly trades like it is. Abe is showing the Fed its future, and while the threat of unlimited stimulus shocked the market for a time, we are finding that reality always comes back to bite you. Sell Japan and anything not nailed down in Japan. Toyota (TM) has had the mother of all moves, I think it is a fine time to sell.

GOATMUG

ENERGY CHART ROUNDUP

noreply@blogger.com (Goatmug) — Sat, 10 Aug 2013 19:29:00 +0000

I wanted to post copies of many of the charts I examine on a daily basis. I found that there are just too many to post in one entry, so I'll blast them all out over the course of the next couple of days. We'll look at other cyclical names, dividend payers, banks, and health insurers. Simply drop by goatmug.com later this weekend. We'll start with energy as it has been quite interesting of late. If inflation and global growth is muted, why do we still have $105 oil? Let's jump in.

XLE

Recent weakness is displayed in the last week, but up, up and away seems to be the overall trend. The overhead resistance level is at $84.50, but this certainly could continue with this week's negative direction and go lower to the high $70's.

$NAT GAS

If $3.25 doesn't hold, it is bombs away to $2.75

$WTIC

There's a bunch going on in this chart, but if oil gets above $107 area, we could be talking about $150's. We'll need some type of event in the Middle East.....lucky for us, the Middle East is calm and there are never any situations that boil over and cause tensions that impact the rest of the world.

UGA

Gas looks weak and supply data suggests that UGA will go lower.

COP

Um, just fantastic. With nice gains on the books and nat gas looking weak there might be a reason to sell with overall market weakness. The aim would simply to reload and buy more on a pullback in the $58 area.

PSX

The COP-cousin just doesn't have the same mo-jo as it's close relative. Higher oil prices and lower gasoline prices will hurt this guy and this is why the stock looks poor.

OXY

This has been one of my favorite charts to watch over the last 4 or 5 years. Weakness here is seen in the chart and we could see a pretty significant plunge to the high 70's or lower.

APA

Short. I've hated this one for a long time, it seems like it won't be long till it rejoins its old channel much lower.

KMF

This is a MLP type investment closed end fund. It is still within its upward channel and we may have an opportunity to see it test the lower limit. If it bounces, buy.

CHK

Despite my many posts citing my dislike for CHK, the shedding of Aubrey McClendon seems to have been a very good thing for the stock.

SRV

My guess is that you'd call this a diamond pattern if I drew it correctly. I'd have to guess that it ends up to $8.80. This is another version of a closed-end fund for MLPs, but is more leveraged and has a poorer management from what I can tell.

Oil and gas have often times adhered to the sell in May and go away saying. That would not have served you well here in the energy sector this year, but could August be the time to get out of dodge? I believe we'll see lower prices in the equities and perhaps oil my go higher if the Middle East tensions do not abate.

GOATMUG

TAPERING.....RIGHT!

noreply@blogger.com (Goatmug) — Thu, 18 Jul 2013 20:18:00 +0000

I have been very busy tending to so many things I have not had much time to post. I plan on doing a chart bonanza in the next couple of days since we have just finished a very good quarter with some drama thanks to Uncle Ben Bernanke and his pals at the Fed. To think they could even hint at tapering! What a joke.

Ben's tapering threat certainly didn't get received well, but he came back and simply suggested that he was kidding! I think the tapering talk was really forced on him and will be again as the bond market's rates are rising, and we all know that Ben can only do so much. In fact, we've discussed often how the Fed actually follows the market, I'm guessing this is some of the same.

Speaking of the Fed, let's go back in time and examine just how things were back in the 1920's leading up to the crash of 1929. It may be instructive and entertaining. I've wanted to comment on all the best of Americana given the court rulings of the Supremes and also the case involving a hooded teenager, but alas, I have no time to comment on things that are simply a distraction from investing and trying to figure out what next weakness in the economy will reveal itself. Enjoy the video and look for more posts in the days to come.

GOATMUG

YOUR INNER-MOST THOUGHTS BETRAY YOU

noreply@blogger.com (Goatmug) — Mon, 10 Jun 2013 20:26:00 +0000

ORWELLIAN THEATER IS BACK
Back in July of 2011 I posted a copy of George Orwell's movie 1984. I went back and looked at the article and discovered that I added because our Congress was providing entertain debate about the debt ceiling and the administration was full of double speak and threats about the future. With the revelations of our lack of privacy and the confirmation by Edward Snowden of all of the statements made by William Binney, in "The Program", I feel like it is probably time to give readers another shot at the brilliance of Orwell and his uncanny ability to see where things were going 60 years into the future.

I will leave you with these thoughts and questions from the movie.

Ignorance is strength!

The party gives them exactly what they want.

How do you know what exists?

I encourage you to watch it. How Orwell would have ever imagined the things he did when writing it is amazing. I am awed by the idea of the screen in every home and building monitoring every action. It is very much like today as your Xbox with Kinect "hears" what you say, your phone reports your every location, your emails contain every thought, and each search is recorded to provide a profile of your innermost desires and thoughts.

GOATMUG

SHADES OF THE TRUTH

noreply@blogger.com (Goatmug) — Mon, 10 Jun 2013 15:12:00 +0000

IS THIS THE TRUTH?
You are in great hands with Representative Hank Johnson leading the questioning of the NSA Director on domestic surveillance. It will be interesting to see how the remarks made in this hearing measure up with the facts that are now confirmed in the NSA leak probe.

Oddly, when all things are fleshed out, we'll find that the NSA Director Kieth Alexander probably was telling the truth in some sort of convoluted lawyerish way where the definition of technical capability and "intercepting" was somehow different than what the normal human being understands it to be. It is clear though in watching the video that Alexander was parsing his words and trying to stick with a specific script and even changing Hank Johnson's questions to fit his narrative.

BRAVE WITH CONSEQUENCES
The young idealist, Edward Snowden did a very brave thing by coming forward with actual documents that provide proof that the NSA does perform many of the things that Hank Johnson asked about in the forum. Unfortunately for Edward Snowden, he will be pursued not as a whistle-blower, but as a spy and the full force of the government will be used to imprison him.

I think that many young men and women have discovered that President Obama offered them a great hope of Utopian principles but sold them a load of rubbish instead. This new generation is idealistic and powerfully motivated by the greater good and fairness and emotion. All of these are wonderful, but they leave them open to being manipulated. I guess all of society is like that. Snowden describes the let down when he realized that Obama accelerated the programs that the Bush government created after 9/11.
Read The Guardian article here -
NSA LEAKER REVEALED

I actually had pulled the following story and new video for publishing back in February of 2013, but somehow got distracted and busy, or frankly just didn't want to risk putting this story up. I guess it is time to give it some attention as it is exactly what Snowden is now confirming with real documents.

MUST WATCH THIS! - FROM EARLIER THIS YEAR....
William Binney gives us an 8 minute review of the extent of how your government monitors your life and how they attempt to use all of the available data available to them to construct a view of you.

THE PROGRAM .

Interesting, this program even mentions the Kieth Alexander interview with Hank Johnson. As I mentioned above, Director Alexander seemed to be answering every question with framed words to meet some specific way of communicating. Oddly, since I had watched the video, The Program, I almost thought that everyone in the USA knew that everything we did online, in email, phone, and even with our bank and credit card accounts was monitored. I guess others didn't.

ARE WE SAFER?
So, the question really is, will the efforts by the NSA and other government agencies make us safer? The answer is of course, no. Perhaps low level attackers that are capable of small attacks might be caught planning things on the internet, but the reality is that larger, smarter attacks will be coordinated well outside the net cast by these guys. In addition, the huge volume of data of the program makes it harder to actually narrow things down to specific threats. The Boston bombers are a perfect example as these men should have been monitored, but even after warnings from the Russians, they were somehow able to plan and carryout bloody attacks. Where was the fruit of all of this surveillance capability?

ARE WE TO BELIEVE THAT COURTS WILL PROTECT US?
We are told that when there is a real threat that evidence is brought to a judge with the FISA court and then a warrant for monitoring is either granted or denied based on the merits of the case. While I'd love to believe this, we have a perfect example in the White House leak probe where the Attorney General LIED to a judge to include the FoxNews reporter, James Rosen, and named him as a co-conspirator in the case! In otherwords, even our top enforcement agent, Eric Holder, will fabricate facts and twist the scope of a case to get the administrative approval necessary to create and substantiate the legal basis for what they probably already had in the information trove!!!! Frankly, do you trust the judge to be independent when he is guaranteed a nice pension for life if he does the good work of the "citizens" by allowing the state police to get their paperwork in order?

No, my belief that this program of monitoring is not really for the purpose of protecting us, I can only guess the real purpose, but clearly our civil servants, military, and three branches of government are not functioning in a way to protect citizens from unlawful searches and the growing encroachment of government reach is beyond what probably can be controlled now.

GOATMUG

FB ---- SHORT IT AND KEEP SHORTING IT!

noreply@blogger.com (Goatmug) — Wed, 29 May 2013 16:13:00 +0000

I've been quite open about my dislike of Facebook and how they and their investment bankers ripped off their IPO investors. I've also been upfront about how I don't believe that FB is going to be a lasting and viable company as we've already seen its popularity with younger folks wane.

A BILLION USERS?
Yes, they have a billion users, which love to waste time and share their fake (made up) lives online. I've also been quite frank noting that FB lives are the ones we wish we had where everything is great, we are successful, and our kids aren't spoiled, and we earn 10 times what we really do. (Ok, I'm being sarcastic, but I think there is some truth to what I type!).

Anyway, Tim at Slope of Hope put up a marvelous short idea today about LinkedIn and the chart looks really ready for a fall. I do believe that LNKD is actually one of the only good social medial/tech companies out there, but I think I fall into Tim's camp that it has an obscene valuation and needs to be corrected. Noting his short, I went back to my charts and looked up my old buddy FB that simply continues to disappoint and muddle along while others like LNKD, GOOG, and even NFLX have shot higher.
Tim's post -

LNKD chart -

SHORT AND GETTING SHORTER
As I look at the chart of FB, I see a $19 handle in its future. Once again, those that got creamed in the IPO just keep on getting bad news. FB chart link -

ADVERTISERS DON'T LIKE WHAT THE BOTS ARE DOING
Finally, the fundamental news looks poor for FB as well as advertisers are not liking the placement of their ads next to questionable or even offensive Facebook posts by users. As we know, social media and targeted advertising bots read and follow your online activities and then "show" you ads based on what you have previously looked at or what advertisers hope that you'll buy. The funny thing though is that you might be surfing the social media pages or the web and looking at "bad stuff" and right next to that material you'll get an advertisement for diapers, or a McDonald's burger, or even a generator (if you've been searching online for them). In the attached story from ThinkProgress we find that advertisers don't like the idea of you looking at posts of domestic violence or some sort of assault and seeing their images and logos! I thought we heard that FB had figured everything out regarding advertising and mobile advertising?!! By the way, I have never, ever, ever purposefully clicked on an advertisement on mobile. I unfortunately fat-finger those stupid ads daily when on my mobile phone. Mobile advertising is simply a total waste in my book, and guess what, that is what FB has tied itself to.

Good luck with that. Short till $19.50 on FB.

GOATMUG

RETURN OF REALITY? (US BOND MARKET UPDATE)

noreply@blogger.com (Goatmug) — Tue, 28 May 2013 16:43:00 +0000

NIRVANA IS SHUTTING ITS DOORS?
In the past four years we've all lived in a sort of Nirvana-like state where equities go up everyday and somehow government bond yields go lower too. For sometime, I've been troubled by the weird relationship many markets have maintained because the activity of the "new-normal" period we've had just doesn't conform to historical norms.

We've had strange intra-market relationships between US government bonds and equity markets, US currency and the stock and bond markets, and even odd performance relative to emerging markets. In the past week or two though, some interesting developments have occurred which probably tie closely to the Fed hinting that they may taper or begin to taper purchases of bonds and mortgage backed securities.

SELL EM IF YOU'VE GOT EM!
To get the work week started, please take a look at the following screenshots of the government bond price action this morning. While stock markets are moving up (as they should) when government prices are going down (yields are up), I'm a bit alarmed as these are HUGE moves. The ten year treasury moving 5% in any direction is massive and can't be good for those hedge funds and insurance companies that are leveraged and positioned the wrong way.

Not to be out done, Japanese bonds are also getting clobbered. I wonder if the Japanese Central Bank has unlimited QE ready, it looks like they are going to need it.

US Tips (Treasury Inflation Protected Securities) are also getting smacked around too, so it would seem there is nowhere to hide in government bonds today.

GOATMUG

FALLOUT (HFT DEBACLE in AEP)

noreply@blogger.com (Goatmug) — Thu, 23 May 2013 15:05:00 +0000

THE SCAM CONTINUES
Obviously US equity exchanges have not terminated their relationships with high frequency traders as we continue to see the evidence of "flash crashes" where in an instant (or less) specific stocks are taken to the woodshed and destroyed, only to have much of their value returned a moment or two later.

The problem of course is that if you were unlucky enough to enter in a market order to sell at that instant, you would be crushed and lose significantly. Additionally, if you were smart enough to have a stop in place, you got crushed unless you entered in a stop-limit order (although it probably gets executed as the stock recovers). Ultimately, the loser here is the smaller consumer-type retail investor and we continue to see nothing done to lessen the power and control these automated systems have in our stock marketplace. It is even more of a joke to hear that these connected and wealthy firms have a physical presence in exchanges where they get an advantage in terms of communication time and speed.

WATCH OUT BELOW
Here is a great example of how wonderfully these can impact a simple dull little stock like a utility! Check out AEP on a 2 minute chart and also a Daily Chart.

2 MIN - AMERICAN ELECTRIC POWER
Wouldn't it feel nice to leave your computer for a second and return having sold your position $10 less than where it is trading?

DAILY CHART - AEP

Technology helps provide liquidity doesn't it? If that is the benefit from all this technology, I'll pass.

GOATMUG

MACRO UPDATE - Sotheby's (BID)

noreply@blogger.com (Goatmug) — Fri, 03 May 2013 04:05:00 +0000

Over the years I've highlighted a few of the major "turning point" indicators I've watched over the course of my involvement with the equity markets. One of those that I found years back was the relationship that has held between the overall markets and that of Sotheby's. I guess Sotheby's is a perfect example of disposable income at its best sort of like a Tiffany's or other high end retailer.

The redish line is (BID), while I've added the SPX behind in black. BID seems to be an early turn indicator in the last two major swoons in early 1999 and also in late 2007, I've marked those in blue. Late in 2012 again has presented us with a major turn signal where BID certainly has fallen, yet in this Fed stimulated world.... SPX continues to fly (marked in red at the far right of the chart).

While the overall markets "should" according to this two instance example begin to turn, it might just be a safer bet to short BID and just forget about shorting the overall market. Are we even allowed to short anything? Tomorrow's employment report will be interesting as we've heard from the Fed that they are willing and able to pump to the moon, as labor participation rates continue to decline, unemployment figures seem to improve as well. I'm very interested to see what happens when the unemployment trap is set and the Fed needs to restate that they didn't really mean that they would really stop stimulating when the unemployment rate actually gets in the high 6% range.

As with everything, I'm sure we'll just have a new set of rules or a new boogey man that will require unlimited printing and liquidity-less liquidity.

GOATMUG

A CERTAIN AMOUNT OF PERSISTENCE (Why the USA is doomed)

noreply@blogger.com (Goatmug) — Tue, 30 Apr 2013 16:49:00 +0000

I'll post this video and encourage you to simply soak in the fullness of the awful realities that are set before the United States.

Please spend 2:00 peering at the fruit of an education system in the US that is preparing us to compete in a global economy. Without some significant help; all of our grit, determination, and a certain amount of persistence won't help one bit. My concern is that if this is a view of our average guy in America, we are simply doomed.

GOATMUG

WHERE ARE WE? (Sector Rotation Models)

noreply@blogger.com (Goatmug) — Mon, 29 Apr 2013 04:38:00 +0000

I suppose that I could lavish you with lots of thoughts about how were are stuck in some crazy feed-back loop of Fed induced mirages and half recoveries yet it would only be tired old cry that prattles on about how the deception will work well, till it doesn't.

So, instead of singing the same old tune and holding my nose and buying those stocks that have been defensive and leading this nutty rally for the last year or so, I'll simply provide a snapshot of the old sector rotation model that we've examined before. My guess is that we are nearer to the far right side of this image which would suggest that the equity markets have topped AND we are in early recession. The only fly in the ointment if you will is that I have been holding utilities, healthcare, and consumer staples for almost two years and these stocks have been our leaders! This segment of the equity markets usually doesn't maintain leadership for this long, so as usual, there are new, weird, and unknown forces at work in this screwed up Fed driven market.

If we think we really are progressing along the economic cycle, you might dip a toe in the finance area, (which I did when I bought some regional bank stocks several months ago). Those are about flat still, so I guess we'll see how long it takes for the economy to finally break down in a real way and have those interest rates rise, bringing helpful and healthy rising net interest margin...... hold your breath about rising rates, it probably won't ever happen.

GOATMUG

RECOUPLING....T-BOND REVIEW (TLT,TBF, XLU)

noreply@blogger.com (Goatmug) — Wed, 17 Apr 2013 17:24:00 +0000

I've posted a number of charts in the past months that examined the amazing experience we had in 2012 where typical market relationships melted into nothing and became completely useless. One old notion that treasuries acted inversely to the equity markets was one of these. In 2012, we witnessed treasuries increasing in value (yields falling) and equities rising, frankly, this isn't normal.

We've speculated as to why this happened, but without fail we always came back to, "Fed manipulation" as the key distorting factor. Is it really that foreign investors needed safe sovereign holdings and continued to by US bonds without regard for yield? Maybe. Was it that Joe 6 Pack was abandoning his fear and rushing headlong into the equity market. Possibly, with a portion of his holdings. Each answer may be correct as the Fed's insatiable desire to buy up mortgages and treasuries has artificially suppressed yields and also forced Grandma and pension managers to elect for riskier assets with "new" money in an attempt to make something. I think this is why our equity leadership has been focused like a laser in dividend paying stocks in defensive sectors. The average investor doesn't trust this rally and hasn't, so as he holds his nose he buys utilities, consumer staples, and healthcare and shuns small caps and technology.

Don't think utilities have been a safe-haven? Check this out. I haven't sold my XLU yet, but is is on the agenda.

As 2013 dawned, we've seen a recoupling of the old relationship in the first few months, and I for one, am very happy. Yet, as happy as I have been, an odd sense of dread kicked in as the relationship over the last few weeks started to break down. Perhaps it was Cyprus, or perhaps the huge rally in the first quarter just needed a breather, but bond yields started floating lower, yet the equity markets just continued to press higher and float out in space to new highs. I 've highlighted the chart of TBF (which is the etf that shorts treasuries which shows the relationships I've been watching). In this chart, TBF should move in lock-step with the equity market (SPX) which is the black line behind the TBF chart.

A month or so ago I put this chart up and called for a change in direction for the stock market, but it didn't come. The weakness in TBF suggests that a healthy correction is in store for stock markets.

Don't get too bearish and over extended here, but certainly the chart suggests a bit lower in equity markets.

GOATMUG

ALL YOUR HARD STUFF, IS WORTHLESS!!

noreply@blogger.com (Goatmug) — Mon, 15 Apr 2013 22:01:00 +0000

SUDDENLY, GOLD, SILVER & BITCOINS ARE WORTHLESS.....
Just when the bitcoin mania was going great and everyone I knew was emailing me about them, blamo! Goodbye bitcoins!

What specifically happened today to make all assets (excluding paper dollars and bitcoins) much more worthless than Friday? While I am not stepping in front of this train that is heading south, I find several things quite odd.

WEIRD THINGS IN THIS MARKET OVER THE LAST COUPLE OF WEEKS
First, that everyone in the world could watch oil, gas, and every other commodity collapse and assume that the stock market would continue ramping higher.

That all conservative stock holdings like utilities, consumer staples, and healthcare easily beat small caps and other companies and no one was concerned about the market's path. If everything is great, why was all the money going into defensive stocks?

That unemployment was greater, housing, was slower, and consumer spending was falling, didn't worry anyone.

That the market reached all-time highs everyday yet emerging markets kept getting destroyed.

Bond markets suddenly were going higher even though the equity markets hit highs.

THOUGHTS ON GOLD AND SILVER
I think gold can visit $1,200 so I'm not moving too quickly to buy this drop. Longer term, I am betting on physical assets as there is no way Japan can continue their actions without destroying the yen. If they destroy the yen, the daisy chain of connected global financial entities will pretty much destroy it all. I'd rather have some shiny stuff than an electronic asset in a bank that can be given a haircut to save a few important financial institutions. Don't believe me, just ask the citizens of Cyprus.

THOUGHTS ON BITCOINS
Do not do it! I have not had time to finish a post on bitcoins, but at the end of the day, you don't want to own this very interesting and scary electronic currency.

No other comments are necessary. By Friday the markets will be back to moving higher, nothing to see here folks!

GOATMUG

DIVERGENT REALITY - MARKET UPDATE

noreply@blogger.com (Goatmug) — Tue, 19 Mar 2013 16:36:00 +0000

Somehow, someway, the markets simply keep moving up. Perhaps they are climbing a wall of worry. Perhaps stimulus that is coordinated and assisted by loose monetary policy simply keeps all the plates spinning. At some point, gobs of stimulus will meet the headwinds of a global financial slowdown in Europe, an inflationary overheating and under performing Asia and Pacific Rim, and a flight to safety from risky assets as smarter money says, "screw this".

ISLAND BACKGROUND
Quickly, let's review a little about Cyprus. The tiny island attempted to create its own niche economy in Europe by becoming a financial haven. They offered very low tax rates and an even lower concern for the origins of the global cash horde that was being deposited within their banks. Cyprus become an outsized financial powerhouse and a haven for money laundering. Russian gangsters like Putin and his crony oligarchs have hidden massive amounts of stolen money in Cyprus.

Bankers were all too happy to take the money and of course, they had to invest in bonds of other Euroland sovereigns. They purchased a ton of Greek debt, which of course has been a disaster. Cyprus' financial condition has been a known problem for a while, but clearly, the ECB desired to act. As little as a month ago, financial and political leaders in Cyprus stated emphatically that bank institutions were fine and depositor money was safe. This weekend, this all changed as Cyprus posted documents outlining the "bailout" where the ECB would step in and give approximately $10 billion in funds, but it required depositors to kick in a total of about $7 billion. Now think about this. This isn't the bank getting crushed. This isn't some bond holder or stock purchaser, this is someone that was saving and simply putting money away. Depending on how much you have, you'd potentially pay anywhere from 7% to 12%, in a sense, you just took a pretty big haircut for being dumb enough to save and trust a bank.

LOCKED OUT
Over the weekend, the people started hearing about a bank lock up and started sharing information about the vote about the fate of their money that was going to be held on Monday. Clearly the upset people took to the street and wouldn't allow politicians to steal their money and give it away. As I type, political and financial leaders in Cyprus attempt to walk a very small line where they can somehow appease the ECB and global banking syndicate and yet keep their heads as they have awoken a very interested and angry population. The Cypriot legislative body will attempt to forge a solution that placates the bankers and limits the impact on regular folk that never had anything to do with Cyprus banking institution's purchases of Greek bonds with their deposits.

Don't forget too that the Russians are the ones that will take a huge hit in this "bailout". Possibly the ECB calculated that the funds were illegally garnered, but my guess is that Putin and his buddies will not take kindly to a 12% or greater haircut of their stash. The ECB is screwing around with these guy's personal cache of money, they better watch it.

THE GLOBAL BANK DEPOSITOR'S DILEMMA
Banks essentially removed the "haircut" from bank accounts almost immediately, and therefore the effective "tax" was confiscated. As a depositor, what would you do now? Can you trust the bank? As a citizen in a Euroland country like Italy, Spain, or even Portugal, are you certain that this would not happen to you? The outright theft of deposits is simply too easy for governments when they can shut a bank down electronically and remove funds before anyone has a chance to prevent it. The Cyprus example is surely a scary test case. So what will they do? We are hearing that there is calm in other Euro countries and no one is rushing to take their funds. The better question in my mind is WHY AREN'T THEY? It only takes a few people to start a panic, reasonable depositors should be calmly removing funds. Do you think they wouldn't do something similar in the United States given extraordinary circumstances?

I've often advocated that you should have some cash on hand in case banks were suddenly inaccessible and you should also couple that with some physical metal holdings like gold, silver, or even palladium. Make a trip to the bank today and get enough cash to ensure you could make it through a couple of weeks with no problem. I'll do another follow post about metals, but is there any way this cannot be bullish for them?

INVESTMENT IMPLICATIONS - EMB:TENZ -

Despite what you are told and what we are seeing, the global financial markets don't like this. US markets somehow keeps levitating, but that divergence is getting way out of bounds of what it should look like.
Take a look here at the EMB:TENZ ratio chart. Remember, this is a measure of the emerging markets stocks versus the ten year treasury. Essentially, this is a measure that show when investors desire risk versus when they want safety. Emerging markets have been really under performing and in a sense, the 10 year treasury is beating on a relative basis. If investors were feeling risky, they'd want to go long emerging markets. As you can see in this view, the ratio of EMB:TENZ has been very good at tracking the SPX (black line behind the red/black ratio) and probably even leading it up and down. Now look what has happened recently. The ratio has cratered suggesting that investors don't want emerging risk at all. Despite the risk-off move, SPX continues to power higher.

RISK ON? RISK OFF?
This is a slightly different look, which might be better. It is still the same concept charted with the MSCI Emerging Markets Index against the Dow Jones Treasury Index. I provided a monthly view and I think it shows how strikingly in sync this relationship is. The only two questions we should be asking is how long can the divergence remain, and which direction will it resolve?

GOATMUG

PAPER TIGER? PAPER CITY?

noreply@blogger.com (Goatmug) — Tue, 05 Mar 2013 14:57:00 +0000

GHOST CITIES
Please take a few minutes to watch this 60 Minutes video on China's ghost cities. I've written about this several times, but given the recent new action by the Chinese government to curb real estate inflation, it seems as though the may be new movement in possible deterioration of their most-loved asset market. The Communist government announced new taxes that require sellers to pay 20% capital gains taxes and also mandated that purchases of second homes must be paid for with 60% cash down payments.

WHAT ELSE CAN THEY DO?
Given the investing approach and lack of alternatives, who knows if this will be the final straw that blows them up? As we know, central planning and central banking and a zero interest rate world creates all sorts of mal-investments and mis-allocation of investments to compensate for distortions in yield and risk.

Enjoy;

Thanks for reading. I've been slammed with lots of projects, please check back frequently as I am trying to post more.

GOATMUG

THE TURN?

noreply@blogger.com (Goatmug) — Thu, 21 Feb 2013 14:49:00 +0000

Here is an interesting chart I've posted before showing the XLU as a ratio vs SPX (defensive utilities versus market) and the SPX is also shown here. If you follow the logic, market participants seek safety and more defensive holdings and sell the market in scary times. They sell their defensive stuff and go into the market when they are bullish leading to a decline in the XLU:SPX relationship.

We appear to see a turn here where investors have begun looking for safety instead of a face-ripping rally. Hope Joe 6 Pack didn't get all in last month.

GOATMUG

PAIN AT THE PUMP (GASOLINE)

noreply@blogger.com (Goatmug) — Sun, 10 Feb 2013 21:41:00 +0000

A NEW RIDE
I made two purchases in the last month that have been significant. First, my old used car that was wonderful and cool, simply died. I am a huge believer in buying a used car and driving it to death. In the past, I've ridden cars till they were 11 or 12 years old and I could see the writing on the wall, and then I sold them. In this case, with little warning, the transmission of my car simply went to transmission heaven.

The only complaint I ever had about my old Acura was that it didn't get good gas mileage since it had a nice 6 cylinder with some power. With a crippled transmission, I went to work looking for a new car and quickly found a good deal on a used.....white Acura. Several days after the purchase, I needed to go out of town and was simply shocked to note the difference in gas mileage that my new car received. I noticed that I got about 28 miles to the gallon on this new car, way better than the 14 or 15 I normally got in the old one! Wow!

So why would I take time to talk about this here in the blog? Simply that my second purchase in early January was an old favorite, UGA (Gasoline). The purchase also has been a good one and it seems as though there is no stopping the etf.

Take a look at the chart; - http://scharts.co/XOegHT

It looks like UGA has room to run, and the seasonal trend is also with us on this trade since many refiners shut down during this time. If there is a classic trade to buy in January and sell in May, this is usually one that falls into that nice pattern.

GOATMUG