The Fundamental View

Examining The Baltic Dry Index With More Detail

noreply@blogger.com (Dan D.) — Fri, 27 Jan 2012 19:50:00 +0000

I want to thank a reader for sending me a link to a Marketwatch.com article today regarding an explanation as to why the Baltic Dry Index may be falling hard. The article provides the following highlights that I suggest you read before I get into my own commentary.

The warning signs being flashed by the collapsing Baltic Dry Index (BDI), a leading global economic indicator, may reflect the folly of misguided expectations during the prior global economic boom, according to Hong Kong-based shipping analysts.

New super-sized ships ordered up during the era of cheap credit and surging global trade could explain the index’s 57% plunge in the last three weeks, according to Macquarie Research, which described this month’s BDI drop as “relentless” and “extreme.”

The BDI, which tracks worldwide shipping rates for dry-bulk cargoes in four vessel classes, is now touching lows last seen in early 2009, when global trade was just recovering from the financial shock waves of the Lehman Bros. collapse.

Shipping rates for Capesize vessels, a class that includes some of the world’s biggest ships, are down 76% this so far this year.

Macquarie analysts said Thursday the slump in the broader dry-bulk index represents “too much capacity in the face of more modest growth of trade volumes.”

Shipping companies appear to have jinxed their own industry by ordering up too many grand ships when conditions looked very favorable before 2008.

Meanwhile, further new capacity, equivalent to 22.7% of the existing fleet, is due to be delivered this year, according to Macquarie calculations.

“It’s hard to see much relief, even assuming slippage in the order book [deliveries],” said Macquarie analysts.

In a recent outlook report, Credit Suisse said the sector fundamentals may come into better balance in 2013, when new capacity is due to decline to 8.6% of existing fleet size. The turnaround would depend upon “significantly stronger” demand, the analysts said, even as they cautioned against expectations of a recovery along lines similar to 2009, when global fiscal-stimulus efforts were in full swing.

“With the global economy and China slowing down, we do not expect a repeat of 2009 to 2010,” the analysts said.

The Globe and Mail newspaper cited Export Development Canada’s chief economist Peter Hall as saying earlier this week commodity shipments were likely weaker in the second half of 2011 owing to factors that include the Japanese earthquake and tsunami, social unrest in the Arab world and slower economic growth in China.

The article on the one hand confirms that shipping was down because of a slowdown in China. We are now getting indications of global slowdown and as we saw today in the GDP report, we have a slowdown in North America. The IMF and World Banks have both warned about slowing growth and the possibility of global recession and the Fed’s moves confirm that they too feel that slowdown is here given their target rate held through 2014.

The argument that these ships were ordered during the boom times, doesn’t wash with me. The glut just didn’t appear the last month. These ships have been available to haul cargo now for the better part of 3 years. Why now are we seeing a massive decline in the index? We saw the same decline in early 2009 and shortly thereafter we saw the great collapse of share prices in March of 2009.

As one reader commented on the article, “NICE TRY....BUT Those ships are build on a expected growth...DIDN'T happened [sp] ,TRADE CRASHED....The BDI is telling the real HORROR story..DEPRESSION world wide...”

In a nutshell, good are not being moved. There is less demand because the world is entering a period of slowdown. The charts I have posted have not let me down. As a reminder, here’s the 3 year chart I posted the other day:

While I might agree that the index looks extremely oversold, I really doubt that it has anything to do with the glut of ships but rather is foretelling a slowdown in shipping in general. The fewer good being moved, the slower the economy is getting.

Another analyst Nick Bullman, managing partner at risk consultant Check Risks says:

“What this is signalling is that the world economy is slowing down much more quickly than people have been thinking.”

Credit Crisis: Are We Set Up for The Perfect Storm?

noreply@blogger.com (Dan D.) — Fri, 27 Jan 2012 15:09:00 +0000

Guest Commentary Courtesy of Elliot Wave International

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Baltic Dry Index Continues To Collapse Down Another 3.94%

noreply@blogger.com (Dan D.) — Fri, 27 Jan 2012 15:03:00 +0000

No need to say anymore. The Index coupled with today’s lower than expected GDP numbers tell us that the economy is collapsing right in front of our eyes, something not lost on me when the Federal Reserve decided to keep rates at historically low levels through the year 2014. They know what’s coming.

TINKA RESOURCES UPDATE

noreply@blogger.com (Dan D.) — Thu, 26 Jan 2012 15:46:00 +0000

Last night I had the pleasure of interviewing a good friend in the investment community who attended the recent Vancouver Resource Conference on January 22^nd-23^rdearlier this week. He advises me that he came away with firm conviction that there exists some extraordinary value within the junior mining sector/TSX Venture Exchange.

The highlight of his research expedition was meeting with one of our mutually favourite value plays for 2012, Tinka Resources Limited, which is developing the Colquipulcro silver deposit (“Zone 1”) located in northern Peru, a 20.3 million ounce, 43-101 inferred resource sitting atop a ridge within an oxide setting and whose metallurgy was confirmed as yielding 97% recoveries after a 72-hour leach period. Recent step-out drilling has indicated the high probability of enhancing that resource to 30-35m ounces and possibly a great deal more but at a market cap of $35m, the company is valued at pretty close to $1.00 per ounce of silver, with the silver-developer universe in the $2.00-2.50 range after peaking in early 2011 in the $4-5 range. Based upon a target of $3.00 per ounce, Tinka deserves a $90m market cap or slightly north of $1.00 per share on a fully-diluted (79.5m) basis.

However, what is of considerable interest to us is the recent drill results and core analysis from their adjacent Ayawilca Property where the company reported two massive sulphide intercepts of 8 metres of 15.9% zinc (hole53) and 4 metres of 30.90% zinc at relatively shallow depths. The geophysics shown below convey a 600m by 400m IP anomaly whose vertical dimension is (for now) approximately 100m and is wide open to depth and to both the south and east. While more IP is being carried out to the east (toward Zone 1), what is of obvious importance is the regional geology of northern Peru where the Cerro de Pasco Mine (Silver-lead-zinc-copper) owned by Peruvian mining giant Volcan carries “elephant” status as well as Buenaventura’s Uchucchacua Mine(150m ounces of silver). While it is still “early days”, if the entire anomaly bears mineralization similar to the two initial discovery holes, the potential exists for a 50-million-ton resource with further untested anomalies of similar size present to the south and east.

During my friend’s tour of the Vancouver Conference floor, he visited a number of junior silver and junior base metals companies and could not help but to reflect on the relative value offered by Tinka’s already-inferred silver resource. When you are buying a junior that is a pure exploration play, you are normally inheriting a great deal of risk in that the market is being valued on the hope of a discovery with the resultant downside being substantial in the event that the dual mining deities Mother Nature and Lady Luck prove to be cruel mistresses. With Tinka, we are offered a valuation buttress in our Zone One silver resource which can easily provide a significant valuation lift if three events occur: 1. silver rises in price this year and 2. Zone 1 in-fill and step-out drilling augments the resource upward.and 3.It is also important to note that the 2007 43-101 report incorporated a highly-conservative assumption by using a 30-gram/tonne cutoff grade. It would be interesting to calculate the new inferred resource in the event that Tinka management elects to revise the 43-101 after the new drill hole results are received using a 15-gram/tonne cutoff. It remains our strong conviction that all three of these very signifiantly positive events will occur and, as such, the risks associated with Ayawilca results are negligible while the reward potential is enormous.

What my friend and I have learned over the years that company management will give you clues to their optimism by way of their actions as opposed to their words. Accordingly, when we learned that a decision had been made to move the larger Longyear 4400 rig from Tibillos up the road to Ayawilca as opposed to Zone 1, such actions are indicative of high levels of confidence in current progress related to this impressive massive sulphide discovery. In fact, as can be observed below, the core from the most recent drill hole intercepts is one very impressive graphic.The core seen below is now at the assay lab with results expected within fifteen days.

To summarize, Tinka carries a compelling valuation based upon results received in 2007 and which are currently being enhanced by way of step-out drilling and rising silver prices as measured against its peers. Most silver developers are capped at $2-2.50 per ounce while Tinka is currently around $1.00 per ounce. Excluding Ayawilca, we see $1.00-1.25 as a minimum target based upon a $30/oz. silver price and an eventual upgade to 30m ounces at Zone 1.

The company has 79.5m shares out (fully-diluted) and is currently holding $2.3m in working capital. It has a burn-rate of approximately $300,000 per month. Warrants from the July 2011 financing at $.35 could provide an additional $4.695 million which would be triggered on any sustained move north of $1.00 and remember that this is included in the fully-diluted number.

Where does that leave us? The massive sulphide intercept at Ayawilca provides infinitely-higher valuation potential and therefore provides the speculative hydraulics above and beyond Zone 1. Assays are expected from both Zone 1 and Ayawilca over the next few weeks and as long as we can acquire the stock at a discount to $2.00 per ounce Ag ($1.00), we are insulated from excessive exploration risk.

Tinka remains my top recommendation for 2012. Please read the disclaimer and please note that you should always speak to your broker or lisenced professional before investing in any stock. Disclosure: I own Tinka Resources. I have not been paid or compensated in any way by the company.

Baltic Dry Index Continues To Bleed

noreply@blogger.com (Dan D.) — Thu, 26 Jan 2012 14:19:00 +0000

Something we continue to follow here and we wrote more in-depth about it yesterday. The Baltic Dry Index was down another 2.8% yesterday and the bleeding looks like it will continue today.

Nothing Generates More Email Replies Than Silver Commentary

noreply@blogger.com (Dan D.) — Wed, 25 Jan 2012 19:17:00 +0000

I’ve received a flood of emails. For the record… my silver position and gold is for the LONG TERM. Short term trading opportunities will exist. There will be times to go short and times to go long for TRADES. Silver moved hard, already made .30 cents on the downside on weekly puts. But I can not and will not disclose all my trading positions on the blog as these are investments that sometimes transpire over an hour or two. We really didn’t think silver would go back to $40.00 today did we? We saw the knee jerk, played it the other way for a quick profit and I hope through experience that some of you will glean this.

Silver may still correct to below $25.00….nobody can tell you with certainty that it won’t. In this world of rapidly changing events and news items and in a world where an investor’s time frame is 2 hours, we have to constantly re-evaluate our way of thinking. I may want to go short gold again tomorrow or next week. I will let world events lead me in my decision making.

Please…for all the new comers to the blog, read up on my older silver articles. I am not a turncoat and I resent being called that. I saw an opportunity to short an over-crowded trade and on 80% of those occasions we were right. The last one didn’t work out so well but show me anyone batting 100% on their stock portfolio and I’ll show you a picture of Madoff.

Trading Position Updates

noreply@blogger.com (Dan D.) — Wed, 25 Jan 2012 18:03:00 +0000

Please read my prior post. All shorts in the metals have been closed out. Bit the bullet and took it out.

The IBM puts remain an interesting situation. Sure, stocks normally benefit from accommodative language. The RIGHT stocks however. If we are to believe that the economic climate is expected to be negative on a prolonged basis and that the world is headed into a global slowdown then I do think that technology stocks like IBM might suffer. This is secondary to corporations having to tighten the belt. With such a fantastic run that IBM has had, I still think that there is some time to let these play out and see if the stock suffers a pullback.

Time To Go Long Gold And Silver Again

noreply@blogger.com (Dan D.) — Wed, 25 Jan 2012 17:54:00 +0000

I want to be clear, that I think the Fed made it quite clear that they are going to continue to print so long as they feel like doing so. Therefore, LONG TERM, I would be buying metals at this juncture. I’ve closed all short positions and am now going to be buying all the dips I can for my longer term holdings. That is not to say that trading opportunities won’t exist but trading should not be misunderstood for investing. I would have rather bought the news and breakout than guessed wrong. Cheers. By the way, please no emails asking me to predict targets. This recommendation is for long term or until such time as the fundamentals or technicals say otherwise.

Baltic Dry Index Collapses To Below Early 2009 Levels

noreply@blogger.com (Dan D.) — Wed, 25 Jan 2012 14:39:00 +0000

I have often posted updates about this index and the significance that it holds when trying to gauge economic activity. In essence I’ve tried to update my readers who, like me, often forget to check this important indicator. In the past I have often posted the index when I felt it held some significance. The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. Despite its name, the index is not restricted to Baltic Sea countries only, instead the index tracks worldwide international shipping prices of various dry bulk cargoes. The intent of the index is to provide an assessment of the price of moving raw materials by sea. It does this by tracking the 26 major shipping routes and measures on a time charter and voyage basis, dry bulk carriers carrying a range of commodities including coal, iron ore and grain. Essentially, if ships are sitting idle, the index does poorly. The more goods being moved and the more ships in use moving those goods, the higher the index. Here’s the Index reading today:

Nick Bullman, managing partner at risk consultant Check Risks says in this piece published this morning that the index remains a good way of looking at the risks to the global economy, “as it tends to be where they hit first”. In addition he says,

“This collapse looks similar to the falls we saw in the Baltic Dry ahead of the recessions of the late 1970s and early 1990s – but this drop is actually steeper.”
“US employment is in high double digits at moment, not 9% - the way the US government collates the data means the long-term unemployed just fall out of the numbers.”

Furthermore, as noted in the Financial Times article referenced above,

However, using the Baltic Dry as an indicator of global economic health is complicated by the fact that prices also fall when new ships come into service. Shipping firms have been expanding their fleet in response to rising Chinese demand for imported commodities in recent years.

But Bullman said that shipping companies have also been deliberately slowing down their journeys to save fuel, with trips from China to the US going now taking around 50% longer than they were early in 2011.

Instead, he said he was surprised by how long the Baltic Dry took to fall. The NewContex index – an indicator of prices for transporting products in container ships – started falling in April last year.

Bullman said: “When we saw that happening in April, we realised that risks had returned to pre-2008 levels. We thought the Baltic Dry would start falling too, but it was actually relatively resilient.”

“What this is signalling is that the world economy is slowing down much more quickly than people have been thinking.”

Finally, take a look at the 3 year chart. We are now at the same levels were were at in the early part of 2009.

I don’t want this to be your only measure of economic activity but it is certainly one item that can not be overlooked. We can draw only one conclusion from this chart … forget Apple's blow out numbers and forget the media spin if you will for a moment and focus on the facts present. They all point to the conclusion that the global economy is grinding back to a halt and the prospects for global recession are more probable. This should be worrying.

And Then We Told Them Wealth Would Trickle Down

noreply@blogger.com (Dan D.) — Tue, 24 Jan 2012 16:53:00 +0000

No Deal For Greece And Rumour That Portugal May Need A Second Bailout

noreply@blogger.com (Dan D.) — Tue, 24 Jan 2012 14:10:00 +0000

As we suspected over the weekend, the latest deal to halt a Greek default has been rejected by creditors. EU finance ministers rejected proposals by private bondholders over the extent of the “haircut” they were willing to accept in order to avoid a Greek default on its debts in March.

News regarding this event will most likely trickle in throughout the day but what we know for sure is that ministers insisted that banks must accept a lower interest rate on the new Greek bonds that they will receive as part of the deal. Looks like the Ministers want free money.

The Euro, Stocks and commodities are all down this morning on the news but European markets are not in panic mode. It seems as though market participants still believe the rhetoric coming from politicians that a deal will be struck.

As Reuters correctly points out, these talks now have been going on for upwards of 7 months and there has yet to be any major breakthrough.

Negotiations over what's called 'private sector involvement' (PSI) have been going on for nearly seven months without a concrete breakthrough. Failure to reach a deal by March, when Athens must repay €14.5bn of maturing debt, could result in a disorderly default.

The Guardian now also reports that Portugal may need a second bailout and while this is still rumour, it wouldn’t surprise anyone who has been following this European debt ordeal. Said the Guardian:

There are rumours that Portugal may need a second bailout. Despite Lisbon's labour market reforms, financial markets fear the country could be next in line to default after Greece – whose debt deal with private creditors has just been rejected by eurozone finance ministers. According to financial data firm Markit, Portuguese debt insurance costs have hit record levels.

The Wall Street Journal has picked up on this Portugal story as well:

LISBON—Investors, economists and politicians are increasingly concerned that Portugal will need a second bailout as fears mount that it won't be able to return to markets for financing next year.

While the Portuguese government's finances are covered this year as long as it abides by its bailout agreement, Portugal must regain full access to capital markets next year to help repay €9 billion ($11.64 billion) in debt coming due in September 2013.

Of course, we’ll try to bring you the most relevant news and perhaps some of the little details that are being glossed over as we hear more. I’m still sipping my morning espresso after a late night catching up on some work I had been procrastinating on.

EU Officially Bans Iranian Oil Imports

noreply@blogger.com (Dan D.) — Mon, 23 Jan 2012 17:03:00 +0000

Back in early January we heard that the EU had reached an agreement in principal to ban oil imports from Iran. Today that news became official as the EU agreed to an immediate ban on all new contracts to import, purchase or transport Iranian crude oil and petroleum products. The move is intended to step up pressure on Tehran over their nuclear program.

The European Union gave a deadline of July 1, 2012 for all existing European Union members with existing contracts for Iranian oil and related products to finalize those existing agreements.

Reuters reports that a review of the measures will be undertaken before May 1, 2012, to assess whether it the sanctions are effective and whether EU states are succeeding in finding sufficient resources of alternative crude oil.

A Little Contrarian Conspiracy Talk

noreply@blogger.com (Dan D.) — Mon, 23 Jan 2012 15:56:00 +0000

I’m not one for conspiracy theories. I do however believe that certain things happened because the agenda’s backing the ideas are far stronger than the actions themselves. But I’ve got one little ant-conspiracy theory for everyone out there.

The conspiracy theorist nuts out there would have you believe that “The Powers That Be” or the ones really in charge behind the scenes i.e. the global elitists, banks Bilderbergers; always have a master plan.

So let me give you this nugget to chew on conspiracy theorists;

With Ron Paul talk going crazy and dominating the twitter feeds over the weekend, has any one of you ever stopped to consider that the next conspiracy would be to have Ron Paul elected and then see none of his proposed changes come to pass? By having him elected the right wing extremists will have their man in power and soon realize that there is really nothing he can do to change the system. No gold backed currency, no silver as real money and no audit or shutdown of the Federal Reserve.

If we believe that “The Powers That Be” put people in charge to carry out their agenda of global government, global currency and tyranny then what makes you so sure that Ron Paul won’t be part of that agenda. Is it ok to believe, as many of the right wing extremists that follow such names as Alex Jones for example, Barack Obama’s “Hope and Change” platform was planted by the global elite as part of their master plan and that President Obama was merely a puppet? If so, is it that far-fetched to believe that Ron Paul isn’t just spewing the garbage that the same “elitists” want him to spew because they need a period during which they can shut the public up for a bit?

Do you see why I hate conspiracy theories? Even suggesting them makes you look like a nut. Obama was part of a globalist conspiracy … Ron Paul won’t be. Sure!

I sit here laughing at the prospects of seeing Ron Paul elected thinking he will bring any more change to the broken systems in place than any other prior president did.

Conspiracy theories and conspiracy theorists. The problem with them is that they bombard you with information in an attempt to destroy your rational views and opinions and to replace them with their own through repetition and fear. The end result is to attempt to change one opinion with another, usually unproven but based on circumstantial evidence.

It’s fun to talk about “what ifs”. Heck, I’m guilty of doing it to. But to have these theories consume your way of life and to have them affect every decision you make is taking it to an extreme. Also, I’m not naive enough to think that conspiracy theories don’t exist. Technically and legally,speaking, a conspiracy is a secret plan by at least two or more people to commit an illegal act. However, For a true conspiracy to really be successful, few people need to know. The kind of conspiracy that some of these people throw out there are so massive in scale that one has to wonder why nobody has ever accidentally blurted the truth out. I’m sure some of the alleged participants have had a few cocktails too many at some gathering. Think about that for a moment if you subscribe to the theory that the “global elitists” are somehow planning to enslave us all and ask yourself if every other president was a puppet in their “scheme” then tell me why Ron Paul wouldn’t just be another cast of characters in the grand script?

Ron Paul is saying everything that has been programmed into the psyche of Americans over the last 4 years since the economic downturn. Down with corporate elitists, bring back gold and silver as currencies, audit the big bad Federal Reserve or even abolish it. Now he’s hopped on the anti “Stop Online Piracy Act” (SOPA) bandwagon. This is want people want to hear. People also wanted to hear “Hope and Change” from the current sitting president now didn’t they? How did that turn out?

I hold no opinion one way or the other. I just want to give you some food for thought.

Update On Greece: No Deal Before Monday’s Finance Ministers Meeting

noreply@blogger.com (Dan D.) — Sun, 22 Jan 2012 18:43:00 +0000

I wrote about the conflicting media reports out of Greece yesterday with news agencies apparently at odds over what actually transpired between Greece and its creditors. Today’s news is a bit more clear when reading the Telegraph’s headline indicating that the talks have indeed suffered a setback. This may negatively affect markets on the open tomorrow. We shall see. Stranger things have happened.

The Telegraph this morning is reporting that talks did indeed come to an abrupt halt over the weekend and have been suspended as the representative of bondholders flew out of Athens empty handed.

A spokesman for the IIF said that Mr Dallara had travelled to Paris for a long-standing social arrangement and his departure was "in no way a reflection on the talks". The talks have made "substantial" progress, the spokesman said, noting that Mr Dallara was in phone contact with the Greek prime minister and could return to Athens at any point.

Are you kidding me? Yesterday the IIF representative indicated that a deal was imminent. Today we hear that Mr. Dallara left for Paris for a long-standing social event? With Greece on the verge of default this guy needs to attend a social event? This doesn’t sound like any deal is close.

In order to prevent a debt default, a deal to re-pay €14.5 billion of Greek bonds that mature in March needed to be reached. Greece was also anxious to put in motion a deal that would qualify them for their next aid tranche worth upwards of €130 billion.

Talks have now been put on hold for a few days indicating that a deal won’t be presented to European leaders when the meet on Monday.

A full summary of the news can be had by reading the Telegraph’s coverage on the weekend talks HERE.

So far we have seen a large gap down on the Euro which could place pressure on commodities and the stock market tomorrow.

Mixed Reports on Greece Debt talks: Has Deal Been Struck or Have Creditors Left?

noreply@blogger.com (Dan D.) — Sat, 21 Jan 2012 19:35:00 +0000

Perhaps the correct answer to that question is that both might be accurate. It is still unclear as to what exactly went on today in Greece during the talks that are aimed to have major creditors take a severe haircut on their debt. Early reports out of Greece seemed to imply that creditors left the talks but Greece is steadfastly denying this as is the IIF.

A report this morning by REUTERS suggests that Greece’s creditors have left Athens with no deal on the table and that this departure was “unexpected”.

The representatives of Greece's private creditors left Athens unexpectedly on Saturday without a deal on a debt swap plan that is vital to avert a disorderly default, sources close to the negotiations told Reuters.

However, that doesn't mean that the talks have broken down — "quite the contrary" — a representative for the Institute of International Finance said Saturday.

Negotiations will continue over the phone during the weekend but it is unlikely that an agreement can be clinched before next week, the sources said, as Athens races against the clock to strike a deal.

HOWEVER….

The Guardian Reports that Greece has struck a deal with creditors on a new interest rate for their bonds.

Greece is on the verge of a breakthrough in talks with its creditors that could wipe out up to 70% of its debts and alleviate the crisis in the eurozone.

An outline deal, hurriedly endorsed by Brussels, came after a frantic three days of negotiations that at one time appeared to be heading for deadlock.

It appeared that Greece had secured a deal to pay an interest rate of 3.1%, rising to 4.75%, on new 30-year bonds created from its outstanding €360bn (£300bn) debt burden. The effect would be for creditors to accept write-downs of up to 70% on many of their loans.

Sources close to the Greek government said it was still possible that major lenders could walk away if there was a failure to get agreement on some of the fine detail, but Athens was confident that further talks over the weekend would bring a comprehensive deal.

The Telegraph’s reports seem to echo the Reuters story above

Greece’s finance minister Evangelos Venizelos had said that negotiations would continue on Saturday after a four-and-a-half hour meeting with officials broke up in the early hours of the morning.

But at lunchtime on Saturday, there were reports that representatives of Greece's private creditors had left Athens unexpectedly without a deal on the debt swap plan that is vital to avert a disorderly default.

I smell different spins depending on who the individual reports are using as their sources. I also suspect that if a deal in principal was really struck as reported by The Guardian, more media outlets would be reporting it.

Here’s how I personally think it all went down in easy to understand terminology. The Creditors were told by the Greeks that they would get thirty cents on every dollar of debt or get nothing at all if they don’t accept the package. Also, they would have to take that money and lend it back to them on a 30 year term with horrible rates. The alternative would be for the creditors to get zero .. nada… zilch μηδέν!!!! The creditors are most likely gone from Greece as I write this and the frantic talks that might continue over the telephone are perhaps the Greeks begging for them to take the deal. I can’t imagine that the creditors left in a good mood.

Herein lies the problem. Have you ever tried to paint your entire house in a day? Have you ever tried to plan a wedding with 300 guests in a week? Have you ever tried cooking a rack of baby back ribs in 30 minutes? These things can all be done. You can paint your house in a day, plan a wedding in a week and cook a rack of ribs in under 30 minutes. HOWEVER, it won’t be done right. The paint job will look like crap, the wedding will be cheap feeling and looking with half the gusts unable to attend and you won’t get a decent rib without slow cooking it for 3 hours minimum. When you rush something that requires time you are undoubtedly going to get poor results.

As the heads from Brussels indicated in the Guardian report, Brussels “hurriedly” endorsed the outline of the deal. They are clearly in a state of panic and are rushing any deal that will stave of contagion and a domino effect of defaults. They are desperate on another front too…they must save their single currency, the Euro. The Greeks are desperate to bring a deal to the table at Monday’s meeting of euro zone finance ministers. As has become customary in these talks, last minute seems to be par for the course.

I remember when I first started blogging about the situation in Greece. I remember stating quite clearly that the first package wouldn’t work and that this entire mess would eventually end up having Greece default. I remember when the second and third bailout packages were being put together for Greece telling readers the same thing. I maintain the same sentiment today. This is a horrible “deal” for Greece’s creditors and the fact that everyone is scrambling and rushing to save the Euro, save the markets and save face, it will end up missing on key points and having major portions of the long term consequences overlooked. Can someone please point me to where, in the deal, does it guarantee fiscal and policy reform to ensure that these people aren’t going to be sitting at the same table in the months/years ahead wondering where everything went wrong?

They are also setting a horrible precedent for other struggling Euro nations (we can’t call them the PIIGS anymore because more countries are now facing financial collapse)

Perhaps I’ve rambled but the bottom line is that these negotiations are being conducted in front of a hurried and frenzied backdrop. Something will get missed. Greece’s problems will not be fixed. I will re-state this for the record, they will default. Now technically, I’m cheating. You see, regardless of what the business community will say about whatever deal is reached, any deal in which a creditor is forced to sacrifice a portion of the monies owed to them effectively constitutes a default on the part of the debtor.

You see, when nations can’t pay their bills we allow them to restructure by giving them more taxpayer money. When you and I can’t pay our creditors, we are forced to file for bankruptcy and face great difficulty trying to borrow any money for the ensuing 5-7 years. Is there any wonder why there is such a public disdain for the corporate elite?

IBM PUT POSITION OPENED $IBM Feb 170 PUTS … COULD TODAY BE THE FINAL MOVE?

noreply@blogger.com (Dan D.) — Fri, 20 Jan 2012 19:56:00 +0000

I’ve taken a short position on IBM This afternoon using the February $170.00 puts at an entry price of .22 cents per share.

Let’s take a look at the 3 year chart and notice the significant rise. Do you spot what I spot at the far right of the chart?

Let’s zoon in to the 6 month chart shall we?

Yes, we got some major steam in IBM today accounting for most of the Dow Jones’ gains for the day. HOWEVER, I don’t like the way the chart is shaping up and I am positioning myself for a correction.

To give you an idea, the stock is up $8.11 as I write this with those options bidding .20 cents and the offer is .22. The high for that series today was .90 cents and the low sits at .20 so I’m betting on a correction off today’s big move which should give us enough gains to take our capital off the table and allow us to ride the rest of the pattern as it forms. Any close above 194.90 negates this and we should quickly sell the options purchased if you play along.

Remember, if you chose to play along, risk only what you can afford to lose…. Options are very volatile and because of the huge move upward today, I think we are getting some value on these options. If anything, we now have a gap to fill. However, in the bigger picture, I do think that IBM is putting in a very important top here. Remember, they are not what they once used to be. Please read my disclaimer. Speak to your own licenced professional. The 3 year IBM Chart strongly reminds me of the gold chart before it double topped and broke down. Could today’s move be the final one for Big Blue? The final blow-off top? Here are the two charts side by side:

Update on the SLV Puts

noreply@blogger.com (Dan D.) — Thu, 19 Jan 2012 19:03:00 +0000

We were admittedly early to the show on those SLV puts we opened the other day. Since then we have seen silver continue to rally and it almost looked like it broke out overnight but it didn’t have any follow-through and actually traded back into the red briefly today. As I write this, spot silver is only marginally in the green.

There are many interpretations of the silver charts and any Google search will give you 5-10 different interpretations. I want to state for the record that I will bite the bullet and take a loss on those puts if silver smashes up and starts to move higher. We can’t win all our trades and we have to be able to recognize when to fold ’em in addition to knowing when to held‘em. Given the fact that we have a month before those puts expire though, I am apt to give them a tad bit longer to see if we can get confirmation of any direction. Perhaps I should have done that but I really thought the day I opened the position was at the end of the bounce off the December bottom.

In any event, what the chart has succeeded in doing on the SLV is that the gap that existed is officially filled and contended with.

However, there are also some chart analysts our there that seem to think that silver has broken out from a reverse head and shoulder (bullish) but in my view, the right shoulder is very weekly defined and it might be a stretch to call it an actual right shoulder. Silver has tried hard to break out to the upside but is meeting some tight resistance in and around the $30.75 level (spot price) and a convincing move above $31.00 might force me to close the puts and go long calls looking for a potential move to $35. However, there is a clear battle going on in and around these levels between the bulls and the bears. We might have timed our trade incorrectly but we should know what direction silver, and more importantly, SLV is going to take. Keep your eyes open and stay alert.

I would love for any technical trader out there with more experience than me to chime in with some other interpretations because indeed, we should never stop trying to learn.

Helping You Spot The DNA Of An Asset Bubble

noreply@blogger.com (Dan D.) — Thu, 19 Jan 2012 18:23:00 +0000

I want you all to study the following chart very closely. The chart was created by Jean-Paul Rodrigue - Hofstra University and provides a visualization of an asset bubble and the lifecycle of it, or let’s call it the DNA. Every asset bubble resembles this chart. Superimpose it on market tops like the Nasdaq, the Dow, oil, or any other asset that severely went POP and you can see the relationship to the DNA model shown in the chart.

Insert your asset and your relative time frame and try to use it wisely. Think very closely, is there any asset at the current moment that comes close to resembling this chart? Using it wisely and spotting the trends and market moves and hedging accordingly can help you in the long run. The chart tells us that any asset that truly is victim of a bubble pop must retrace all the gains accumulated during the smart money phase before the price returns to the mean.

Europe Still Failing To Address The Real Problem

noreply@blogger.com (Dan D.) — Wed, 18 Jan 2012 14:57:00 +0000

There has been increased buzz over the Euro zone over the course of of the last couple of days as central banker and lenders meet to try to come to some form of Agreement on a bailout mechanism for troubled/indebted Eurozone nations. All previous mechanisms put in place have failed to stem the slide of the region’s common currency. Yesterday’s successful bond auctions should not be confused with any thought that conditions have improved over in Euro-land given that the cost of insuring troubled debt actually rose.

The International Monetary Fund is talking about boosting its reserve fund to 1 trillion dollars and has asked the United Kingdom to help out but contributing 19 billion to the fund. England says it will only add more if troubled Euro nations can get their houses in order and agree to more reforms. The focus has shifted in my view to trying to save the currency and not the countries within it. This is a bad move. A little short term pain for the currency in my opinion might be what is needed for the sake of salvaging the single currency experiment. However, in this word of window dressing and ensuring that things appear better than they are, the focus has shifted to how the markets perceive the values of currencies and stock markets. Essentially, even though it’s crap, those in charge want to wrap up that crap and make it look better than it really is.

Let’s assess it though from a realistic view. We have had numerous “bailouts” so far since the Greek crisis hit and then morphed into a Euro-wide problem. Using different mechanisms and bailout vehicles, we have been told that measures were put in place to stem the risk of default. Let’s be honest to ourselves and admit that none of these rescue mechanisms have worked and none appear to stand a chance at working because none of them tackle the real underlying problem; the fiscal mismanagement and the rot within the affected governments. None of the bailout measures actually tackle fiscal reform but instead, they are all designed to simply throw good money after bad. It is because of that fact that any additional measures will be destined to fail. We can increase the size of bailout funds to infinity but we will always face the same problems so long as the policies in place that allowed for this to happen remain in place, the problems will never be solved.

Sure the Euro currency itself is looking for anything it can hold on to in order to attempt a rally. The short interest is so high on the Euro that any news perceived as “maybe good” will cause short covering. This is not to be mistaken for any thought that the problems are indeed solved. The Eurozone is truly struggling at the moment to stem the heightening risk for contagion. Rumours were abound last week about imminent government downgrades. We don’t get this in an improving environment. Fitch Ratings warned Spain, Italy, Ireland, Cyprus, Belgium and Slovenia may face another round of rating downgrades because as I noted above, the region is failing to carve out any real solution to the problem. Throwing money at it is not solving the problem. Even the World Bank lowered their forecast for European growth for 2012 suggesting that the region’s economy might actually contract by 0.3% this year.

Talks are currently underway to try to put together a second bailout package for Greece notwithstanding the fact that they have failed to implement any tangible policy reforms. This fact, and the fact that other European nations are more content with finding money rather than tackling their policies doesn’t instil much confidence in me that they will figure out the solution anytime soon. For these reasons alone, any excitement in the Euro should be tempered.

Gold To Surpass $2,000 An Ounce In 2012: Survey

noreply@blogger.com (Dan D.) — Tue, 17 Jan 2012 23:13:00 +0000

Gold seems to be bouncing off its correction lows. The latest Thomson Reuters report/survey suggests that analysts see the price surpassing last year’s high as it marches over $2,000.00 an ounce. From The Guardian:

The Thomson Reuters GFMS annual gold survey, published on Tuesday, reveals that global investment in gold jumped more than 20% last year to a record $80bn, pushing the price to its peak of $1,920 an ounce in September. Much of this was due to physical buying of bullion: purchases of gold bars rose by more than a third to almost 1,200 metric tonnes, particularly in China, Germany, Switzerland and Austria. East Asia accounted for 456 tonnes of the total (up 53%), western markets bought 335 tonnes (up 41%) and India 297 tonnes (up 9%).

Philip Newman, research director in precious metals at Thomson Reuters GFMS, said that with the spectre of 1920s hyperinflation haunting Germans, the last two years have seen strong growth in the number of smaller investors buying gold bars and coins. "For many years now, these German-speaking markets have had a well-developed infrastructure for consumers to buy product."

The report predicts that the second half of the year will see the return of concerns about the health of the US economy, prompting a fresh round of quantitative easing. Newman said despite some encouraging recent economic indicators in the US, the country's huge debt problems remain unresolved and are unlikely to be tackled during an election year, which will make investing in the dollar less attractive. Coupled with exceptionally low interest rates across Europe and the US, and rising inflation, this should benefit bullion.

A survey of mining executives by PricewaterhouseCoopers last week found that 80% of mining companies expected the price of gold to continue to increase this year, with the majority expecting it to peak at $2,000 an ounce. Tim Goldsmith, global mining leader at PwC, believes that amid the current market volatility, companies that are flush with cash will swoop on smaller players, which are more vulnerable to market fluctuations and have difficulty raising capital.

TRADING IDEA: SILVER SHORT POSITION OPENED USING $SLV PUTS

noreply@blogger.com (Dan D.) — Tue, 17 Jan 2012 21:42:00 +0000

You might recall that I closed out a profitable short position in the SLV on December 29 on the basis that I felt that silver had become oversold and that the dollar rally was a tad overextended. Before my inbox gets inundated with hate mail, let me say for the record that my long term fundamental basis for owning physical silver remains in tact. “Long Term” remains the operative phrase here.

As for rumours of additional money printing in Europe, be forewarned that we have had these rumours before only to see the price of silver continue to decline. Money printing in Europe alone doesn’t guarantee that the precious metals will catch a significant bid.

Today I opened the following position. Long 400 contracts of the February $25.00 SLV Puts at an average entry price of .22 cents per contract (before commission).

I feel that the snap-back corrective rally in the price of the metal has run its course and is set to resume it’s downtrend.

Remember, options carry with them a high degree of volatility but silver’s lack of conviction today off the opening gap tells me that a least for the short term, the buying from the $26.15 level may be exhausted. It will be interesting to see how the next few days play out. As with any trade, seek the advice of your own financial advisor and read my disclaimer. These are my ideas and are not intended as advice but merely stated to advise readers of my own thoughts.

France Loses AAA Credit Rating

noreply@blogger.com (Dan D.) — Fri, 13 Jan 2012 15:49:00 +0000

It has been a common theme here at the Fundamental View over the past year or so it seems. Almost a regular dosage of news coming out of Europe. This is because Europe as we know it, is soon on the brink of going back to the way Europe once was. Individual nations with their own monetary policies and decision making. We cannot be ignorant of the fact that the Eurozone has been a failed experiment from day one. It was doomed to fail when nations like Greece and Italy ha to fudge their books to even gain entry into the Union. Perhaps the biggest “tell” was England’s ‘no thank you’ refusal to join the zone.

Markets today were rocked on news that S&P will downgrade several euro-region countries. The fact that JP Morgan Chase had revenue that was 20% less than last year didn’t help set the tone but the real damage to the markets was done when the rumours of further downgrades broke.

Well the first one has just hit the wires. France has lost its AAA credit rating from S&P. Expect more to follow.

Europe has done absolutely nothing but kick the can down the road to try to fix their disaster and unfortunately, the rot runs so deep it will never fix it. I sit here counting the days when the Euro will cease to exist as we know it and Germany says “Fick dich!” to the rest of the nations currently dragging it, and its taxpayers down into the abyss.

Update: KAMINAK GOLD

noreply@blogger.com (Dan D.) — Thu, 12 Jan 2012 17:31:00 +0000

If you’ve been reading the blog long enough you all know that I’ve loved this story coming out of the Yukon as it pertains to what I refer to as the “Lead Dog” in the new Yukon gold rush. I was a little early to the party when I advised readers to accumulate KAM on the Canadian Venture Exchange back in November as it did take a downturn after that, as did many other junior mining and exploration companies.

However, I want readers to know that I am still long and still nibbling at stock at current levels as my excitement level continues to rise as the company continues to announce more and more gold bearing assays.

On January 11, 2012 the company announced:

Supremo T3 high-grade oxidized gold zone extended an additional 100m south along strike. Results include: 19.6 grams per tonne gold (g/t Au) over 10.7m (from 120.7m hole depth); 45.9 g/t Au over 3.1m (from 25.0m hole depth); 5.7 g/t Au over 15m (from 77m hole depth) and 6.5 g/t Au over 12.2 m (from 6.4m hole depth). Gold mineralization on T3 now extends at least 700m along trend and remains open in all directions.
Surface soil geochemistry and newly acquired aeromagnetic data suggest the Supremo ‘T’ structures link with the Latte zone located 1km south, and also extends northwards for up to 800m, for a total inferred strike length of 2.5km.
Newly Defined Supremo T2 oxidized zone identified approximately 150m west of and parallel to T3. Results include: 2.6 g/t Au over 24.4m (from 12.5m hole depth); 2.9 g/t Au over 21.3m (from 53.6m hole depth) and 6.5 g/t Au over 9.2m (from 152.7m hole depth). Mineralization can be traced at least 350m along strike and remains open in all directions.
Latte West deep drilling further extended mineralization down-dip. Results include: 3.8 g/t Au over 8m (from 237m hole depth); 1.1 g/t Au over 48m (from 281m hole depth); 1.1 g/t Au over 26m (from 337m hole depth) and 1.9 g/t Au over 10m (from 334m hole depth).
Regional drilling yields new gold discovery at Macchiato soil anomaly. Four holes spaced over 300m all intersected significant gold mineralization. Results include: 5.4 g/t Au over 5m (from 10m hole depth); 4.2 g/t Au over 6m (from 45m hole depth); 3.6 g/t Au over 6m (from 56m hole depth) and 5.8g/t over 3m (from 121m).

Here’s the recent chart for KAM:

I am currently accumulating more. My target is north of the old highs. I WILL NOT provide a time frame though. Please don’t ask me to.

A Growing Theme: Class Conflict Soon To Become Class Warfare

noreply@blogger.com (Dan D.) — Thu, 12 Jan 2012 16:30:00 +0000

Since the start of the financial collapse in 2008, there has been greater recognition and tension growing in the United States over the gross inequality in “class” or economic stature. More and more people have had their eyes opened to this growing inequality in a nation (US) that now has the greatest divide between its rich and poor.

This awareness comes to light in the most recent survey results released by The Pew Research Center. Some of the findings may surprise you. For example,

In 2009 only 47% of respondents indicated that there was "very strong" or "strong" conflicts between the rich and poor. By 2011 that number had jumped to 66%. Theses results show that Americans now think that “class conflict” is actually stronger than the conflicts between Americans v immigrants, black v white and young v old. It would seem that money, and more importantly the struggle against who actually controls it and who doesn’t has risen to societal warfare levels as we’ve seen recently in the “occupy” movements.

I’ve been following the struggle of wealth in the United States for a couple of years now and it amazes me how many more people are finally starting to understand that one of the biggest problems that the U.S. faces is the markedly increasing divide between the rich and the poor. This great divide is starting to boil over and what is now referred to as conflict could easily one day turn in to warfare vis-à-vis protests that could turn ugly, greater “occupy” movements and hopefully not, out and out rioting.

According to the The Pew survey, white Americans had significantly larger increases in perception of class conflict than blacks and Hispanics, rising to 65% in 2011from 43% in 2009. Conversely, 74% of blacks and 61%t of hispanics are increasingly aware of class conflict, increasing by less than 10% since 2009. Perhaps its because the latter groups have always noticed the discrepancies and as such, were already more familiar with them.

In February of 2011 I posted visual charts highlighting the growing income and class discrepancies in the United States so this information really is nothing new. However, what it does show us is that awareness of “class conflict” and social standing has significantly increased since 209.

Is The CME Group Going To Be Broken Up?

noreply@blogger.com (Dan D.) — Tue, 10 Jan 2012 18:21:00 +0000

Charlie Gasparino of Fox News reports that his sources are indicating that the CME group might be broken up into a regulatory arm to combat suspected collusion and price-fixing. Regulators are scrutinizing whether or not the CME Group did enough on the compliance side regarding the entire MF Global scandal. According to Gasparino, this is currently being investigated and on the table.

You can view Charlie Gasparino’s interview/report here