Trends I'm Watching

The Federal Reserve Buying U.S. Debt: How Long Can It Continue?

2009-11-08T11:13:04-05:00

Trend: The Federal Reserve has been buying U.S. long-term U.S. debt to support lower interest rates and the economic recovery. The authors of this commentary suggest that Fed's debt buying actions appear to be unsustainable. Excerpts below. Link: Who is really lending the US all this money? |AR Absolute Return - Alpha ...foreigners are selling longer dated US Agency/MBS debt and moving the money they raise into shorter term US Treasury debt. And who is buying this debt? The Federal Reserve. Out of nearly $2.1 Trillion of net issuance across the Treasury, Agencies and MBS markets from June 2008-9, the Federal Reserve has accounted for nearly 40% of the total demand, buying more than every foreign government combined. It is also not a stretch to say the Fed has become the entire mortgage market; it has purchased nearly $500B of MBS securities during a period where there was only $350B...

India Central Bank Buys 200 tons of Gold for $6.7 Billion

2009-11-03T18:46:38-05:00

Trend: Central banks with massive foreign reserves are spending dollars on gold, creating more demand for the precious metal. David Parkinson at Seeking Alpha describes the reason that the price of gold spiked up on November 3, 2009. Excerpts below. Link: Why the IMF's Indian Gold Sale Matters -- Seeking Alpha. Bullion surged more than $30 (U.S.) to $1,085 an ounce in New York Tuesday, trouncing is record high set just three weeks ago, after the IMF disclosed that it had sold 200 tons of gold to the Reserve Bank of India - for the low, low price of just $6.7 billion. The sales took place over the past two weeks, and represent almost half of the IMF's previously announced 403.3-ton gold sales program. The prospect of the IMF and other gold-rich central banks selling off gold reserves to the open market was one of the few factors out there...

Dept of Energy Grants $3.4 Billion to the Smart Grid Development

2009-11-03T08:17:23-05:00

Trend: Smart grid technology, designed to increase energy efficiency, received a boost from $3.4 billion in grants from the Obama administration. The focus is on smart meter installations, including advanced metering infrastructure, customer systems, electric distribution systems, electric transmission systems, equipment manufacturing, and integrated and/or crosscutting systems. Excerpts below. Link: DOE Grants Jump-Start the Smart Grid Toward a Still Undefined Future - NYTimes.com. President Obama traveled to Florida to highlight DOE awards to 100 utilities, equipment manufacturers, cities, systems developers and other recipients. The winners have committed $4.7 billion of their own resources to match the smart grid grants. The president sketched his vision of a clean-energy future marrying solar panels, advanced storage batteries, plug-in electric hybrid cars, home energy management systems and smart appliances together in a grid studded with new sensors and control devices. Smart grid technologies will reduce electricity use by more than 4 percent by 2030,...

Investing in the Shortsightness of Government Officials

2009-10-27T18:31:24-04:00

Trend: Governments that have focused only on short-term problems are facing some grim realities as neglected long-term problems expand exponentially. Below are some excerpts from a speech by David Einhorn, President of Greenlight Capital. He describes some of the trends that worry him and the events that got us into this situation. For the first time, he suggests holding gold to protect capital. He is renowned for shorting Lehman Brothers before the financial crisis after uncovering the problems that the ratings agencies ignored. Link: John Mauldin's Outside the Box - InvestorsInsight.com Presently, Ben Bernanke and Tim Geithner have become the quintessential short-term decision makers. They explicitly "do whatever it takes" to "solve one problem at a time" and deal with the unintended consequences later. It is too soon for history to evaluate their work, because there hasn't been time for the unintended consequences of the "do whatever it takes" decision-making...

Can We Survive Unsustainable Budget Deficits for a Decade?

2009-10-18T11:44:18-04:00

Trend: The budget deficits caused by government overspending are growing larger and more damaging to the US economy, with no solution in sight. John Mauldin first wrote about the Muddle Through Economy in 2002. In 2007 he wrote that we would indeed get back to a Muddle Through Economy after the end of the coming recession. Last week he expressed concern that the US is taking actions that could indeed "Kill the Goose" of our free-market economy. Now he is questioning how we can muddle through in the face of $1.5 trillion and larger deficits. Excerpts below. Link: Thoughts from the Frontline - John Mauldin I am not surprised about the response of the Fed to the current recession and credit crisis, whether it's the large monetization of debt or the low interest rates. Assuming they more or less remove the monetary easing in a reasonable manner, there is nothing...

The ECRI Weekly Leading Index Predicts Strong Recovery

2009-10-12T08:24:44-04:00

Trend: The ECRI Weekly Leading Index predicts that the economy is poised for its strongest recovery in more than 30 years. John Markman says, "...the ECRI weekly leading index is the only gauge of the economy that I have found to have real usefulness as a forecasting tool. Unlike the linear measures that most indexes use, it uses non-parametric measures to look around the corner and figure out what’s coming." Excerpts below. Link: Here's Why the U.S. Rebound Will Be Stronger Than You Think - Jon D. Markman According to the latest data from the Economic Cycle Research Institute, the economy is poised for its strongest recovery in more than 30 years. The monthly growth rate of its Weekly Leading Index is now sitting at a level that has not been witnessed in at least four decades. That’s big. It was early in calling the recession two years ago, and...

Best Performing ETFs for the Past Week

2009-10-12T07:10:30-04:00

Trend: Direxion Daily Energy Bull 3X Shares (ERX) led the one week performance (+24%). Ultra Silver ProShares (AGQ) and Direxion Daily Financial Bull 3X Shares (FAS) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 10/9/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs Direxion Daily Energy Bull 3X Shares ERX Specialty - Natural Resources holdings $44.28 24.07 22.97 85.86 14.43 N/A N/A N/A Ultra Silver ProShares AGQ Specialty - Precious Metals holdings $64.54 20.30 15.62 78.63 104.89 N/A N/A N/A Direxion Daily Financial Bull 3X Shares FAS Specialty - Financial holdings $86.42 19.76 13.97 122.60 -31.73 N/A N/A N/A Direxion Daily Small Cap Bull 3X Shares TNA Small Company holdings $47.53 18.18 15.10 105.10 39.94 N/A N/A N/A Direxion...

The Budget Deficit Tipping Point

2009-10-10T08:20:40-04:00

Trend: According to the Congressional Budget Office, in FY 2009 40% of federal government spending was funded by debt, compared to 15% in 2008 and 6% in 2007. Michael Panzner calls our attention to a disturbing benchmark. Let's hope that the US government can lower the budget deficit before the consequences undermine the financial system in this country. Excerpts below. Link: Financial Armageddon: The Real Threat to Future Economic Stability. According to research highlighted by Hayman Advisors in their October Letter, the fact that such a sizeable share of government spending is being financed with borrowed money has, historically at least, been a harbinger of trouble ahead: There have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland) has spent his career...

Are Actively Managed ETFs a Good Investment?

2009-10-07T10:40:04-04:00

Trend: ETFs are taking investors and funds from the mutual fund industry; the mutual fund industry is retaliating with actively managed ETFs. Teeka Tiwari at The Tycoon Report sees managed ETFs as an attempt by the declining mutual fund industry to create stock-picking ETFs that are managed by their fund managers. Link: The Tycoon Report - Teeka Tiwari - Sector ETFs: Still the Most-Profitable Way to Invest. A recent article in The Wall Street Journal sang the praises of "managed" Exchange-Traded Funds (ETFs). Don't be fooled by these "new" financial products. They are just old-fashioned mutual funds disguised as ETFs. You see, the mutual fund boys have been hemorrhaging cash, as the ETF market has exploded in popularity. ETFs have just a fraction of the cost of a mutual fund and are infinitely more flexible.You can sell an ETF short, and you can also buy or sell options against it....

Currency Devaluation and Gold

2009-10-02T09:56:17-04:00

Trend: Currency devaluation – the falling dollar – is a primary reason that gold is attracting smart money. Alice Schroeder at Bloomberg.com describes why gold is a good investment before financial crises. Excerpts below. Link: Gold Tells You U.S. Bubble Hasn’t Popped Yet: Alice Schroeder - Bloomberg.com ...the relationship between gold and financial crises goes back centuries. In the aftermath of the credit-bubble bust, we confront a Moby Dick-size pile of leverage and the question of whether this is inflationary or deflationary. So it’s worth considering what the price of gold may be telling us. Leverage is a broad term that covers the complete history of finance, which all boils down essentially to the same structure: debt secured by assets. You give me a cow, I give you a piece of paper. Later innovations are simply variations of obligations secured by assets. So a simple explanation of bubbles is that...

Best Performing ETFs for the Past Week

2009-09-28T08:36:47-04:00

Trend: PowerShares DB Crude Oil Dble Short ETN (DTO) led the one week performance (+18%). UltraShort DJ-AIG Crude Oil ProShares (SCO) and Direxion Daily Real Estate Bear 3X Shrs (DRV) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 9/25/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs PowerShares DB Crude Oil Dble Short ETN DTO Specialty - Natural Resources $91.33 18.49 18.73 23.85 -37.46 143.81 N/A N/A UltraShort DJ-AIG Crude Oil ProShares SCO Specialty - Natural Resources holdings $19.09 17.50 16.00 13.12 -39.69 N/A N/A N/A Direxion Daily Real Estate Bear 3X Shrs DRV Specialty - Real Estate $21.03 15.68 -21.94 N/A N/A N/A N/A N/A ELEMENTS CS Global Warming ETN GWO Specialty - Natural Resources $7.14 15.46 -0.17...

The Illusion of Dollar Pricing

2009-09-25T11:21:38-04:00

Trend: The weakening dollar makes the 2009 gains in the S&P 500 look much better. There are many reasons that the political leaders will let the dollar weaken, even while they say they "favor a strong dollar policy." Many of consequences are subtle and unpublicized. J.S. Kim at The Underground Investor shows us one of the illusions created by a weaker dollar. Click on the link to see the charts. Link: A Market Rally in Monopoly Money | The Underground Investor When priced in US dollars, the US stock market appears to have rallied significantly since the beginning of the year, now up 18.31% since January 1st. ...if we price the behavior of the S&P 500 in terms of gold, the gain in the S&P 500 since the beginning of the year shrivels to a 3.92% rise. When we price the behavior of the S&P 500 in terms of silver,...

Many Foreclosures May Not Be Legal

2009-09-24T08:55:39-04:00

Trend: A Kansas Court ruling means foreclose on homes with securitized mortgages in Kansas just got a lot harder, and the ruling could spread to the rest of the nation. MERS (Mortgage Electronic Registration Systems) is a key component of this issue. Below are excerpts from commentaries by Barry Ritholtz (The Big Picture) and Karl Denninger (The Market Ticker). Here's the big question: How will this impact home builders, home sales, banks, and mortgage bondholders? Link: Mortgage Electronic Registration Systems Loses Legal Shield | The Big Picture. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. (Other than GlobalResearch.ca, I have yet to see any MSM coverage of the issue). The Court stated that MERS’ relationship is not that of a true party possessing all the rights given...

Alternative Weighted ETFs Can Boost Gains

2009-09-17T19:35:04-04:00

Trend: A S&P 500 index equal weighted ETF (RSP, +29% YTD) has almost doubled the performance of the giant traditional cap-weighted ETF (SPY, +15% YTD) in 2009. Ron Rowland at Money and Markets provides an excellent overview of the weighting options available to ETF investors. Excerpts below. Link: Get Creative With Alternative Weighting ETFs | Money and Markets Weighting is simply the way stocks are distributed in a portfolio. An index is nothing more than a publicly-available list of stocks that are weighted according to some sort of strategy. The S&P 500, for example, consists of 500 large U.S. stocks that are selected by a committee at Standard & Poor’s. Like most indexes, the S&P 500 is “cap-weighted.” Each stock receives an allocation equal to its proportional market capitalization — the total value of all outstanding shares at the latest price. With hundreds of stocks in the index, it’s obvious...

Best Performing ETFs for the Past Week

2009-09-14T04:45:00-04:00

Trend: Direxion Daily Real Estate Bull 3X Shrs (DRN) led the one week performance (+15%). Direxion Daily Energy Bull 3X Shares (ERX) and Direxion Daily Dev Mkts Bull 3X Shrs (DZK) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 9/11/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs Direxion Daily Real Estate Bull 3X Shrs DRN Specialty - Real Estate $126.71 21.49 11.51 N/A N/A N/A N/A N/A Direxion Daily Energy Bull 3X Shares ERX Specialty - Natural Resources holdings $38.57 14.16 17.27 -6.98 -2.36 N/A N/A N/A Direxion Daily Dev Mkts Bull 3X Shrs DZK Foreign Stock holdings $85.60 14.11 25.82 44.20 47.30 N/A N/A N/A Ultra Real Estate ProShares URE Specialty - Real Estate holdings $5.92 13.36...

Best Performing ETFs for the Past Week

2009-09-07T18:16:00-04:00

Trend: Ultra Silver ProShares (AGQ) led the one week performance (+21%). UltraShort DJ-AIG Crude Oil ProShares (SCO) and PowerShares DB Crude Oil Dble Short ETN (DTO) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 9/4/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs Ultra Silver ProShares AGQ Specialty - Precious Metals holdings $56.58 20.60 21.10 -0.93 76.03 N/A N/A N/A UltraShort DJ-AIG Crude Oil ProShares SCO Specialty - Natural Resources holdings $16.61 15.04 16.28 5.43 -41.79 N/A N/A N/A PowerShares DB Crude Oil Dble Short ETN DTO Specialty - Natural Resources $78.18 14.75 16.52 13.70 -41.14 130.70 N/A N/A iPath DJ AIG Lead TR Sub-Idx ETN LD Specialty - Natural Resources $65.26 14.58 17.39 42.60 126.73 17.55 N/A N/A...

Scarcity Industrialism Gaining Momentum

2009-09-05T12:23:39-04:00

Trend: China is banning the export of rare earth elements – and they currently produce about 90% of the world’s supply. John Michael Greer describes what he calls "scarcity industrialism." Companies in countries where scarce resources are available will have a competitive advantage as this trend grows more prevalent (look at Saudi Arabia). Excerpts below. Link: The Archdruid Report: The Dawn of Scarcity Industrialism. Avoid Big Losses! If you lose 50%, you must gain 100% to get back to even! :-( However, if you lose 20%, you must only gain 25% to recover. Prevent Big Losses eBook ...the Chinese government is planning to ban the export of rare earth elements ...these have become crucial to many cutting edge technologies. Lanthanum, for example, is used in high-tech batteries, and neodymium goes into the permanent magnets used in electric motors and wind turbines. The innards of the Prius and other hybrids, to...

Why Are Gold Prices Rising?

2009-09-03T21:03:23-04:00

Trend: The price of gold is approaching an all-time high, boosted by significant upward moves in the first three days of September. The explanations for the increase in gold prices vary with the political and economic perspective of the person commenting. While prices "don't lie", there's always the possibility of a push by major players who smell an opportunity for big profits, like the oil price run up in the summer of 2008. Chinese buying gold, Fed policies, a declining dollar, excessive lending and debt, and Wall Street's hold on Washington are all discussed below. Avoid Big Losses! If you lose 50%, you must gain 100% to get back to even! :-( However, if you lose 20%, you must only gain 25% to recover. Prevent Big Losses eBook From Paul Mylchreest's Thunder Road Report (via Kitco.com): Apparently China is pushing the idea of buying gold and silver for investment purposes...

Best Performing ETFs for the Past Week

2009-08-31T05:03:00-04:00

Trend: MacroShares Major Metro Housing Up (UMM) led the one week performance (+15%). iPath DJ AIG Lead TR Sub-Idx ETN (LD) and Direxion Daily Real Estate Bull 3X Shrs (DRN) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 8/28/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs MacroShares Major Metro Housing Up UMM Specialty - Real Estate $27.13 15.45 35.99 N/A N/A N/A N/A N/A iPath DJ AIG Lead TR Sub-Idx ETN LD Specialty - Natural Resources $56.34 11.80 12.10 38.56 97.87 4.86 N/A N/A Direxion Daily Real Estate Bull 3X Shrs DRN Specialty - Real Estate $116.08 11.19 N/A N/A N/A N/A N/A N/A Direxion Daily 30 Yr Trs Bull 3X Shares TMF Government Bond - Treasury $43.71...

The Gap Between the Stock Market and the Economy

2009-08-30T14:33:03-04:00

Trend: The S&P 500 is up over 50% since early March, while most of the measures of the U.S. economy show weakness. This gap between the stock market and the economy cannot continue indefinitely. Either the stock market will be pulled down by the weak economy, or, the stock market is a leading indicator and the economy is starting to rebound. If you believe that the economy will pull the stock market down, you will be prepared for a downturn. On the other hand, if you feel that the stock market is indeed a leading indicator and the economy will start to rebound soon, you will be investing in "bargain" stocks for the run up. Avoid Big Losses! If you lose 50%, you must gain 100% to get back to even! :-( However, if you lose 20%, you must only gain 25% to recover. Prevent Big Losses eBook You can...

Best Performing ETFs for the Past Week

2009-08-24T07:53:24-04:00

Trend: Direxion Daily Real Estate Bull 3X Shrs (DRN) led the one week performance (+11%). Ultra DJ-AIG Crude Oil ProShares (UCO) and Direxion Daily 30 Yr Trs Bull 3X Shares (TMF) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 8/21/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs Direxion Daily Real Estate Bull 3X Shrs DRN Specialty - Real Estate $106.87 11.19 N/A N/A N/A N/A N/A N/A Ultra DJ-AIG Crude Oil ProShares UCO Specialty - Natural Resources holdings $12.96 9.83 16.65 25.70 -5.33 N/A N/A N/A Direxion Daily 30 Yr Trs Bull 3X Shares TMF Government Bond - Treasury $39.63 9.29 13.96 -7.41 N/A N/A N/A N/A Direxion Daily Energy Bull 3X Shares ERX Specialty - Natural Resources...

China is Spending Excess Dollar$

2009-08-21T17:01:49-04:00

Trend: China is buying assets – commodities, land, mines, corporations, rare earths, and gold – with the excess dollars it has accumulated from exporting goods to the US. Richard Russell describes why China is on a buying spree: to get rid of the excess dollars being devalued by the Fed policy of money creation. China is using these dollars to purchase tangible assets that will grow in value as the dollar declines. I'll be following the China strategy. This is a potentially huge trend. Excerpts from Richard Russell's comments are below. Link: Richard Russell, Dow Theory Letters, 8/19/2009 The battle to save economies goes on. The feared enemy is deflation. How do you conquer deflation? Deflation, by definition, represents an insufficient amount of money dealing with too great a supply of goods. So the Bernanke solution is tried -- create trillions in new money. Urge consumers to buy, buy, buy....

Precious Metals Gain Favor

2009-08-18T14:31:32-04:00

Trend: The creation of money by governments is stimulating interest in owning precious metals as a safeguard for future purchasing power. Currency creation (quantitative easing) usually decreases the value of the currency. Much currency is being created by central banks throughout the world to counter deflationary trends. Link: Thoughts from the Frontline - The Great Reflation Experiment. ...the dollar must fall over time. Investors need to diversify away from this risk. There are three obvious ways. The first is investing in high-quality US equities that have a majority of their earnings and assets in hard-currency countries. Avoid Big Losses! It's the most important rule in investing. Here's how: Prevent Big Losses eBook The second is investing in gold and related assets. Gold will probably remain in a tug of war for some time. On the negative side, it is faced with nonexistent global price inflation, even deflation, and a sharp...

Best Performing ETFs for the Past Week

2009-08-15T15:20:29-04:00

Trend: Direxion Daily Real Estate Bull 3X Shrs (DRN) led the one week performance (+11%). B2B Internet HOLDRs (BHH) and Direxion Daily 30 Yr Trs Bull 3X Shares (TMF) were the second and third best performers, respectively. The 20 ETFs with the best one week performance through 8/14/2009 tracked by Morningstar are shown below. Source: MSN Money Exchange Traded Funds (ETFs) Performance Tracker Name Ticker Category Holdings Morningstar Last Price* 1-Wk 4-Wks 13-Wks YTD 52-Wks 3-Yrs 5-Yrs Direxion Daily Real Estate Bull 3X Shrs DRN Specialty - Real Estate $104.84 11.19 N/A N/A N/A N/A N/A N/A B2B Internet HOLDRs BHH Specialty - Technology holdings $0.40 11.11 25.00 7.27 73.91 -41.18 -1.08 -0.75 Direxion Daily 30 Yr Trs Bull 3X Shares TMF Government Bond - Treasury $39.57 10.78 -2.87 -18.22 N/A N/A N/A N/A Direxion Daily Small Cap Bull 3X Shares TNA Small Company holdings $37.16 10.00 58.33 72.26 16.79...

This Market Rally Lacks One Key Ingredient

2009-08-11T20:13:08-04:00

Trend: The stock market has rallied in the summer of 2009 with weak volume. Market upswings on low volume are abnormal. Much of the volume in the current market is program trading, especially in the leveraged ETFs. As Shah Gilani at Money Morning emphasizes in The Hidden Risks of ETFs, the volume that we see now can be misleading – it's not the kind of volume we saw in the good old days. When the shares of an ETF trade, for any number of reasons, at a discount or premium to their net asset value, or NAV, the “authorized participants” rush in to “arbitrage” the difference. Buying or selling shares, and swapping them out on the other side to the ETF sponsors, theoretically drives the ETF price closer to NAV. There are billions of dollars to be made – chiefly by insiders, or those connected to insiders – in this...