Market Rubbernecker

Gold: Bursting Bubble?

ken@asperafinancial.com (Unknown) — Mon, 14 Dec 2009 18:13:00 +0000

Following an impressive 20% gain in just 2 months, gold has dropped $100/oz in the past two weeks. I've seen a number of pundits come out recently stating that gold prices are much too high, gold is a bubble, and/or a significant decline is coming. Some of these comments are coming from the very individuals who've tried calling the top in gold a number of times over the last 5 years, during which time gold has appreciated 200%. Compare that return to the stock or bond markets.

Looking below at the 10-year chart of gold you see price action typical of a long-term secular bull market. Sharp climbs are followed by some retracement and consolidation. This 9-year (so far) bull market has experienced a number of year-long periods of stagnation or decline. The fact that we're experiencing some profit taking after the recent run shouldn't surprise anyone. This is normal and healthy.

So is the current decline a temporary shake-out of weak hands, the beginning of a more significant decline, or the beginning of a period of extended consolidation? Only time will tell, but it's unlikely that the secular bull market in gold has just seen its peak. We've been using the current pullback as an opportunity to once again boost our exposure.

Until the trend of global monetary and political mismanagement is convincingly reversed, there is little reason to sell our precious metals position. Annual gold production has been in decline this decade, central banks will soon be net buyers, the opportunity cost to owning gold is nil, gold is terribly under-owned, the metal is very cheap relative to the monetary base, and the public is just beginning to wake up to the merits of owning gold.

I find gold as attractive today as I did in 2003, although the investment case has changed somewhat. My contrarian nature struggles somewhat with the tremendous performance gold and gold stocks have already posted and the fact that gold is no longer hated and undiscovered. Nevertheless, the investment case remains strong, and there is a very decent chance that a mania phase still lies ahead. I suspect the time to sell will be when virtually everyone can quote you the price of gold.

link to video

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Unemployment Insurance Follow-Up

ken@asperafinancial.com (Unknown) — Fri, 11 Dec 2009 16:49:00 +0000

Here's the latest example of the insight one can gain from watching CNBC. The relevant part of the video begins about 2:30 into the clip. Note that Steve Liesman is CNBC's Senior Economics Reporter. Remember that. Senior. Economics. Reporter.

link to video

CNBC's Senior Economics Reporter is completely unaware of the existence of the Emergency Unemployment Compensation (EUC) program. I can understand not being able to rattle off the latest EUC figures from memory, but he doesn't even know the program exists. Perhaps Obama's jobs program could include fact checkers for CNBC.

Here is the link to the latest weekly report. Look at the last row of the table. Granted, the number isn't emphasized in the report, but it is mentioned near the bottom of the text and in the table. I suppose it's unreasonable to expect a Senior Economics Reporter to read beyond the first paragraph.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Unemployment Claims

ken@asperafinancial.com (Unknown) — Thu, 10 Dec 2009 15:16:00 +0000

Despite the improving trend of initial unemployment claims (still at very high levels), little attention has been paid to the escalating number of people who are exhausting their benefit and falling into the Emergency Compensation category. Although the government is likely to indefinitely extend these Emergency benefits, recipients aren't likely to be buying plasma TVs, new homes, cars, iPhones (just kidding - they'll still buy their iPhone), name-brand canned goods, teeth whitener, etc.

From ZeroHedge:

The number you won't hear mentioned anywhere in the Mainstream Media: 327,729. That is how many people shifted to Emergency Unemployment Compensation programs in the last week alone, hitting an all time record high of 4.2 million! So as everyone is focused on the benign picture of initial claims in the last week which was "only" 474,000, the number of people rolling off continuing benefits has exploded and is now a stunning 592,579 only in the last two week.

link to full post

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: David Stockton

ken@asperafinancial.com (Unknown) — Sat, 05 Dec 2009 14:43:00 +0000

I found today's QOTD in the latest copy of my undergraduate alumni magazine. The magazine ran an article on alumnus David Stockton who is the director of the Federal Reserve's Division of Research and Statistics. Before getting to the key quote, let's look at the article's description of David's responsibilities.

..Stockton oversees one of the world's largest economic research teams -- approximately 290 economists, financial analysts, computer scientists, research assistants and other personnel. Stockton and his staff sort through and interpret information streaming from the country's financial markets each day. One of Stockton's primary responsibilities is presenting periodic economic forecasts to the Federal Open Market Committee (FOMC) on job losses, housing wealth and business spending.

You won't find many people with greater access to economic and financial data than Stockton. The article quotes Bernanke as saying that "David's wise counsel, keen insight and deep knowledge of the economy have proved invaluable to me and the other members of the FOMC through the years, but most especially during the recent time of financial turmoil."

Now to the QOTD from Mr. Stockton:

What economists don't know about how the economy operates dwarfs what we do know. Our research program is intended to chip away at the margins of our ignorance.

I had a mixed reaction when I read this. On the one hand, it's very refreshing to have one of our leading economists so clearly state how little the Fed really knows about how the economy works. On the other hand, it's very disturbing to have one of our leading economists essentially admit that the Fed has no sound basis for its monetary policy.

If economists and the Fed don't really understand how the economy operates, how can they possible presume to know where short-term interest rates should be set?

The Fed's track record this past decade is abysmal. Artificially low rates helped fuel the internet bubble and the housing/credit bubble. Now, the Fed is again keeping rates absurdly low and is again fueling the next crisis. All of this is being done within "the margins of our ignorance."

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

SNL: Obama's China Visit

ken@asperafinancial.com (Unknown) — Sun, 22 Nov 2009 17:52:00 +0000

It looks like SNL's writers have a much better command of economics than our policy makers.

America's middle class also deserves a wet kiss, an expensive dinner, and a double feature.

link to video

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

No Inflation? Student in the UC System May Disagree

ken@asperafinancial.com (Unknown) — Thu, 19 Nov 2009 23:11:00 +0000

Of course, any one data point is irrelevant, and saying that California has the finances of a third-world country is insulting to many third-world countries. Still, a 32% hike in tuition? Consumer inflation is supposedly nil yet tuition is going up by 32%? I hope those kids don't need to eat or drive to class.

From the San Francisco Chronicle:

The UC regents are expected to put the final seal today on a hefty 32 percent tuition increase as students resume the protests that shut down their board meeting three times Wednesday and required campus police in riot gear to maintain calm.

full article

link to video

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Pop-Up Book of Phobias

ken@asperafinancial.com (Unknown) — Thu, 19 Nov 2009 19:52:00 +0000

Maybe I need to get out more, but I found this very interesting and creative. The only thing missing was a fear of being left behind in the market.

The Pop-up Book of Phobias from donvanone on Vimeo.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

China: Government Planning At Its Worst

ken@asperafinancial.com (Unknown) — Thu, 12 Nov 2009 13:13:00 +0000

Nice work from Al Jazeera highlighting the lengths China has gone to in order to sustain its economic growth. China may have a very bright future, but investors ignore China's expensive stock market, urban real estate bubble, and manufactured economic statistics at their own peril.

The advantage to centralized decision-making is the speed with which decisions can be made. The downside is clear in the following video.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

IEA Whistleblower Buoys Peak Oil Theory

ken@asperafinancial.com (Unknown) — Tue, 10 Nov 2009 01:14:00 +0000

There's a terrific piece in the Guardian today entitled "Key oil figures were distorted by US pressure, says whistleblower." The gist of the story is that the IEA has been intentionally overstating future oil supply estimates in order to prevent a panic. Some key passages:

"The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year," said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. "The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this.
"Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources," he added.
A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

This is huge news as many of the Peak Oil doubters had depended on IEA data to bolster their case. It also speaks to the unreliability of official statistics. If non-OPEC data is being so severely manipulated, just imagine how absurd OPEC numbers must be.

The days of inexpensive and easily accessible oil are over. There is still plenty of oil buried very deep offshore West Africa, Brazil, and in the Gulf of Mexico. Other deep plays are sure to be discovered as well, and the Arctic region holds great promise. The tar sands also hold a great quantity of oil. None of these plays, however, are inexpensive. High oil prices will be required to justify the investment needed to explore and develop these reserves.

These high oil prices will also be the incentive the market needs to develop alternative energy sources. The higher the price of oil goes, the more competitive the alternatives become. Still, this shift will take decades. In the meantime, higher oil prices will be a boon to much of the traditional energy sector.

We are long a number of E&P and energy service stocks. There will be bumps along the way, but energy should be a winner in the coming decade.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Michael Milken

ken@asperafinancial.com (Unknown) — Fri, 06 Nov 2009 17:31:00 +0000

Michael Milken on the usefulness of credit rating agencies:

So if you are relying on rating, then I am not sure why, as a money manager, you should be paid a fee because there isn’t too much value-added you are providing. Besides, people who provide ratings are just human beings. Maybe if they are the most talented in the world, you would have already hired them.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Dr. Doom vs. The Investment Biker

ken@asperafinancial.com (Unknown) — Thu, 05 Nov 2009 01:22:00 +0000

Roubini versus Rogers. Let's recap the match to date. First, Nouriel Roubini gets in the ring by himself and starts shadow boxing. He warns that a "wall of liquidity" and "the mother of all carry trades" (via the dollar) are sparking asset bubbles and could lead to another financial crisis.

Next, for some reason Jim Rogers decides to step into the ring, takes offense that Roubini is swinging, throws a quick jab that lands squarely on Mr. Roubini's feelings. More specifically, Rogers said that "Mr. Roubini hasn't done his homework." Rogers claims that there is no bubble in gold, equities, or commodities. Instead, Rogers asserts that they've all simply had a very good year. He then goes on to say that gold could reach $2,000 per ounce in the next decade.

Not to be outdone, Roubini throws a powerful hook intended to knock out Jim's gold fillings. He states that Jim's claim that gold will reach $2,000 is "utter nonsense."

And that brings us to the end of round three. Ultimately, these two publicity hounds both win from this spat given all of the...well...publicity. If their publicists are worth their salt, Rogers will next come out and claim that Roubini's accent is fake. Roubini then fires back that the only bike Jim could ride is a senior scooter. Someone leaks a sex tape...

Let's ignore the personal jabs for a moment and look at the content of what they're both saying. They both make some valid points. Equity markets and many commodities have indeed had very good years so far. Are they cheap? Not many. Are they in bubble territory today? There are a handful of asset classes in select countries that I would argue are in a bubble, but for the most part, most assets are simply overvalued. Jim is right that we don't have bubbles (for the most part) yet, but Roubini is right in warning that the excess liquidity and dollar carry trade will ultimately create bubbles and another financial crisis. See how easy that was.

As for gold, I have more sympathy for Rogers. I'd be curious to know what Roubini has been saying about gold since it bottomed near $260 per ounce in 2001. I may be wrong, but I doubt that he ever expected it to reach $1,080, a four-fold increase in 8 years. Rogers stated that he expected gold to double to $2,000 in the next decade. 7% per year for 10 years will get you there. Whether it happens or not, it strikes me as somewhat naive to call that "utter nonsense," particularly in light of the currency debasement and massive deficits we're experiencing. Actually, when I put it that way, $2,000 gold in the next decade seems practically assured unless Washington suddenly finds religion when it comes to fiscal restraint (no sign of it today with the extension of the ridiculous home-buying credit).

Bottom line: Whether or not we're yet in bubble territory and regardless of whether gold reaches $2,000 in the next decade, this little spat is probably pushing the speaking fees for Rogers and Roubini squarely into bubble territory.

Disclosure: Aspera Financial, LLC has been and remains overweight gold and gold equities.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Chart Of The Day: VIX

ken@asperafinancial.com (Unknown) — Sun, 01 Nov 2009 20:11:00 +0000

The VIX index (a measure of implied volatility) put in an amazing performance on Friday, rocketing 24% higher on the session. The index had been trending lower since peaking just north of 80 in late December of last year. On October 21st, it reached its lowest level since September of 2008. Not coincidentally, that was also the day of the stock market's most recent peak. The volatility of volatility was pretty dramatic in October.

Disclosure: Things had become a little too calm for our liking. We initiated a long volatility position on October 19th to increase our hedge position.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

FDIC: The Lady Doth Protest Too Much

ken@asperafinancial.com (Unknown) — Sun, 25 Oct 2009 00:01:00 +0000

Investment rule: The more they tell us not to worry, the more there is to worry about.

link to video

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Qin Xiao and Chinese Bubbles

ken@asperafinancial.com (Unknown) — Thu, 22 Oct 2009 00:24:00 +0000

This quote comes from a Financial Times story entitled, "Top China banker warns on asset bubbles." What I most appreciate is that I can't imagine a top U.S. banker saying this. From the article:

China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned.
Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says in Thursday’s Financial Times that the government should not be afraid of a “moderate slowdown” in the economy.
“Monetary policy must not neglect asset-price movements,” he writes. “Therefore it is urgent that China shifts from a loose monetary policy stance to a neutral one.”

Of course, this doesn't mean that the authorities will be immediately changing policy (though they should). However, if they continue their loose monetary policy, their stock and real estate bubbles will get out of hand. The higher they run, the harder they'll fall. It'll be interesting to see how the authorities walk the fine line between encouraging employment growth and asset bubbles and intentionally (and responsibly) slowing economic activity. Regardless, the fact that a private sector leader can so freely, frankly, and intelligently speak his mind is refreshing, even if it's coming from half-way around the world.

Disclosure: We recently sold our China equity exposure.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Video: The Button

ken@asperafinancial.com (Unknown) — Sun, 18 Oct 2009 22:15:00 +0000

I like to think of the cast as follows:

Mr. Mathison is Goldman Sachs
"Someone somewhere in the world..." is the American taxpayer
The button is Congress
The million dollars is the bailout

The Button - watch more funny videos

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Chart Of The Day: Dow Breaks Through...7500?

ken@asperafinancial.com (Unknown) — Thu, 15 Oct 2009 17:52:00 +0000

My clients often hear me harp about inflation and the importance of looking at returns and performance on a real basis (taking out the impact of inflation). Today's Chart Of The Day comes compliments of the folks at Zero Hedge. While everyone was celebrating yesterday's close above 10,000 for the 12th time (by my rough count) in the last decade, let's not lose sight of the fact that the Dow is down 25% over the last 10 years when adjusted for the value of the dollar.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

A Saudi Oil Subsidy?

ken@asperafinancial.com (Unknown) — Wed, 14 Oct 2009 17:31:00 +0000

Saudi Arabia is proposing that the developed world compensate the kingdom for any global warming-related decline in the demand for crude oil. You have to love the thinking: We expect to be paid a lot of money for our oil one way or another. Either demand outstrips supply and prices stay high, or demand falls short and you make up the difference. Heads I win. I said heads I win.

Maybe we should just subsidize everyone anytime demand for their product falls. Perhaps we should have been paying off the buggy whip manufacturers these past 100 years since they were unfairly disadvantaged by the automobile firms. Should we all compensate Canada if we ever stop building houses out of lumber? Or bail out the French if people stop drinking wine? Or compensate the U.S. if... Bad example. The only thing we're good at manufacturing these days are loans and dollar bills.

Of course, the Saudis can't really be serious. They'd still be a fourth world backwater sand lot if it weren't for oil. They've had decades to put that wealth to work in diversifying their economy rather than paying off all of their princes. I think their latest census showed one out of every three people was a prince. The other two either worked for a prince or were a king.

The Saudis know that this proposal will never fly, but this is how you negotiate. You never come to the table with what you reasonably expect. If I want a new set of golf clubs, I don't ask my wife for a new set of golf clubs. I tell my wife that we should sell the house and buy a newer more expensive home right on the golf course. Voila. I get a new set of golf clubs.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Elephant Cheeks

ken@asperafinancial.com (Unknown) — Tue, 13 Oct 2009 18:28:00 +0000

This speaks for itself.

Many people attempt to be analysts or economists, yet they speak without having real experience, and they fail to see that they are really nothing more than a fly on the ass of a big elephant. They do not realize they are even sitting on an elephant and worse still, they do not understand what is an elephant.

Martin Armstrong

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: Frankly Stupid

ken@asperafinancial.com (Unknown) — Fri, 09 Oct 2009 19:46:00 +0000

Courtesy of Calculated Risk:

“I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast. That’s a policy.”

Barney Frank, chairman of the House Financial Services Committee on recent FHA lending.

I wonder if, as the words came out of his mouth, Mr. Frank thought, "I can't believe I'm saying this." So, bad loans are fine so long as they're made in an attempt to manipulate the market for the benefit of the U.S. taxpayer...who will be saddled with repaying those debts once they blow up. Apparently, we shouldn't concern ourselves with the wisdom of government action so long as they mean well.

Here are some other policies.

Barney Frank, Congress, and the FHA do not know the "right" level for home prices, so they should stop trying to manipulate the housing market.
Do unto others before they wise up and vote you out of office.
Don't rob Peter to loan the money to Paul for a new home. Paul is broke. He needs to move back in with Mom and rebuild his savings.
Speak softly and...actually just stop speaking.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Who Is Worse? Cramer or a $500 Per Hour Psychic?

ken@asperafinancial.com (Unknown) — Thu, 08 Oct 2009 16:52:00 +0000

I seldom struggle for words. Fortunately, this video clip from Jim Cramer's TheStreet.con (not a typo) speaks for itself. At least we now have a better idea where Jim's investment ideas come from.

There are many potential anecdotal signals of an impending secular bull market. One would be for CNBC to be taken off the air. Another would be for Cramer and TheStreet.con to simply disappear. My crystal ball tells me this will eventually happen. That prediction was free.

link to video

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Dilbert: Plunge Protection Team

ken@asperafinancial.com (Unknown) — Sat, 03 Oct 2009 12:27:00 +0000

Clear signs of a manufactured rally:

stocks rise on low volume
the market is dependent on a global liquidity bubble
the private sector is flat-lining
cartoon dogs have a better grasp of reality than most portfolio managers

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Today Only! New-Car Sales Report Out! Hurry! Don't Miss It!

ken@asperafinancial.com (Unknown) — Thu, 01 Oct 2009 19:03:00 +0000

I wrote a brief piece a few days ago about the cash-for-clunkers program and how it would simply pull sales forward rather than stimulating any sustained demand. The first piece of evidence came out today with the release of new-car sales.

From the New York Times:

After two frenzied months during the government’s cash-for-clunkers program, new-vehicle sales in the United States fell in September back to the levels seen earlier this year, automakers said Thursday.

General Motors said it sales declined 45 percent, and Chrysler reported a 42 percent drop from September a year ago.

Sales were down 20 percent at Honda, 13 percent at Toyota and 7 percent at Nissan.

Total industry sales are expected to be 23 percent less than a year ago, according to a forecast by the Web site Edmunds.com.

Those are big declines, but they shouldn't have surprised anyone. Free money is a powerful incentive, even if you had to go further into debt for that new car.

The clunkers program also cleared out inventories at many dealerships, leading G.M., Ford, and other automakers to increase production at some plants and call back thousands of laid-off workers to their assembly lines. Without a large selection for customers to choose from, many dealerships had more difficulty making sales in September than they would have otherwise.

Right. Sales were weak because there just wasn't enough inventory on hand. Ok. Sure. They can float that excuse for a month or two as they're busy ramping production to replenish inventory to meet this supposed burgeoning unmet demand. However, I suspect they'll soon be sitting on too much inventory, offering the latest excuse for weak car sales while aggressively lobbying Congress for Revenge of Cash-for-Clunkers. Here are a few potential excuses for next month's new-car sales report:

Customers are eager to buy but are just dazed and confused by our huge inventory selection.
Consumers were too busy cashing out their 401Ks to buy food, but they'll be back soon.
With more people losing their homes we expect car sales to rocket any day now as folks are forced to live out of their cars.
We just didn't have the right mix of inventory to meet the huge demand.
We think we just didn't have enough balloons in the showroom to spur sales.
It would have been a great month if our commission-based salesmen could have made more money selling cars than collecting unemployment insurance. But just wait til their insurance runs out!
Coming soon! Zero down, $10,000 cash back, 1 year no-risk trial period, we'll babysit your kids every other weekend!
Americans were too distracted trying to find American Samoa on a map.

We are very unlikely to see a sustained and strong improvement in new car sales, absent continuous government incentive welfare programs. Consumer debt is too high, unemployment is too high and rising, and job loss fears remain elevated. More and more people are discovering that you really don't need a new car every few years.

If only the car manufacturers had stuck to their earlier strategy of manufacturing a bad product that didn't last very long...

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Dilbert on Retirement Planning

ken@asperafinancial.com (Unknown) — Tue, 29 Sep 2009 12:04:00 +0000

As much as I like outside-the-box thinking, I don't expect to see this on the next CFP exam.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Quote Of The Day: German Car Industry

ken@asperafinancial.com (Unknown) — Mon, 28 Sep 2009 21:36:00 +0000

Every frat boy (U.S. government) loves a kegger (cash for clunkers), but the resulting hangover (fewer future sales) is another story. Cash for clunkers has come and gone. As expected, auto sales jumped. I personally finally benefited from the government's recent generosity (your tax dollars) and traded in my dear old '96 Ford F-150 for more of a family car. Would I have bought a new car without the incentive? Yes.

All of these government incentive programs are simply shifting sales/demand forward and arbitrarily rewarding some consumers at the expense of others, often for decisions they would have made anyways. They are clearly boondoggles and a waste of taxpayer money, and we're likely to see more of them since "free" money is a difficult drug to kick. We're not even close to a real recovery given that we haven't even completed Step 1 - admitting we have a problem.

The following comes from the latest piece by Evans-Pritchard:

The risk for Germany is that the economy tips into a double-dip recession as emergency stimulus subsides. Its cash-for-clunkers scheme expired earlier this month after a rush of sales over the summer. The Centre for Automotive Research says sales will fall by a million next year in "the largest downturn ever suffered by the German car industry".

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.

Chart Of The Day: Baltic Dry Index Revisited

ken@asperafinancial.com (Unknown) — Tue, 22 Sep 2009 12:54:00 +0000

Despite pervasive optimism that the global economy has left the recession behind and is poised for solid future growth, the Baltic Dry Index (BDI) continues to trend lower. Recall, the BDI is a price index which tracks the cost to ship dry commodities.

Iron ore and coal have been the two large swing commodities in recent years. These are the main products carried by the Capesize ships (the largest ships which are too big to pass through the Suez or Panama canal and must therefore go around the Cape of Good Hope or Cape Horn), represented by the blue line in the chart above.

The stockpiling of iron ore by the Chinese in the first half of 2009 led to a very nice rebound in Capesize rates (following a 96% collapse), but virtually all of the gain since the beginning of the year has now been given back. Capesize rates are now nearly identical to rates for the smaller Panamax and Supramax vessels. This seems to confirm the anecdotal evidence we've seen of pig farmers stockpiling copper as well as recently declining steel prices in China.

This weakness in the BDI does not support a resurgent global economy thesis, but it's just one variable. New ship deliveries, the rate of mothballing, and product stockpiling will all impact shipping rates along with demand. So, we must be careful not to read too much into it. Still, it would be foolish to ignore this real-time indicator of economic activity which has now been steadily falling for nearly 4 months.

The stock market is now pricing in a vibrant recovery and strong earnings growth. If this rally is to continue or if the gains are to be held, it's now "show me" time. Indicators such as the BDI which rely on more than just government stimulus to move their needle will need to start registering some impressive gains to substantiate the stock market rally. I suspect that investors will soon be forced to recognize that a deleveraging private sector won't be contributing much to economic growth any time soon. The question then turns to how long the government will be willing or able to sustain its immense stimulus measures.

The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.