Friday, March 28, 2014

Trento Doc Bellaveder Brut riserva 2008

by le mille bolle

Oltre due anni orsono mi è piaciuto salutare l’avvento sulla scena del Trento Doc di un nuovo soggetto produttivo proposto da una realtà non nuova. Considerato che da sette ettari e mezzo vitati situati in un corpo unico a circa 300 metri d’altezza con esposizione a Sud e Sud-Ovest nella zona collinare del conoide di Faedo l’azienda Bellaveder, ospite nell’antico maso omonimo, produce, con validi risultati, una vasta gamma di vini fermi, Pinot bianco, due Chardonnay, uno dei quali fermentato e affinato in legno, Sauvignon, Müller Thurgau, Gewürtraminer, Lagrein persino Teroldego, e due Pinot nero, di cui il Faedi che ha vinto l’edizione 2012 del Concorso nazionale del Pinot nero con l’annata 2009.
Come scrissi già all’epoca l’azienda conta su due diverse tipologie di terroir: “l’una, che si trova nella parte a valle del maso, caratterizzata da un substrato calcareo a prevalenza di dolomie e un terreno moderatamente profondo a tessitura franco-sabbiosa, l’altra costituita da un terreno più profondo con quantità maggiore di argille e marne e un substrato composto da un conglomerato di marne e siltiti di colore rossastro, nella zona a monte”. E il carattere spiccato dei vini è proprio dovuto alla compresenza e interazione di questi due tipi di terreno.

L’approdo al Trento Doc, da un vigneto a Chardonnay piantato in epoche diverse ad inizio e metà anni Ottanta, è più recente e si è tradotto in due diversi prodotti, un Trento Doc Riserva e un Trento Doc Nature affinato 36 mesi sui lieviti e sboccatura senza aggiunta di alcuna “liqueur d’expedition”.
Due anni fa avevo assaggiato la prova d’esordio del Riserva, anche questo un Blanc de blanc base Chardonnay che si affina tre anni, e ho voluto vedere, mentre si sta compiendo il percorso della conversione bio di terreni e vigneti, se nel contempo fossero ulteriormente migliorate le cose e se ci fosse stata, come auspicavo, una crescita in quanto a personalità e complessità.
BellavederTrentoDocriserva2008

I vigneti sono sempre allevati a pergola semplice spezzata e spalliera, la resa è contenuta in 90 quintali ettaro e la vinificazione prevede pressatura soffice dell’uva con resa massima in mosto del 60% e fermentazione condotta sia in acciaio che, parte, in legno.
Il colore continua a non essere spettacolare, la parte forte del vino, virando più sul verdolino che su un paglierino scarico, il perlage è sottile e continuo ed il naso si fa ancora più apprezzare, in questa versione 2008, sboccatura 2013, per un timbro fresco, sottile, molto di montagna, con sale e mineralità a prevalere una sottile vena agrumata fiori bianchi, frutta secca non tostata, con una certa grazia ed eleganza.
La bocca è sottile e delicata, con una vena leggermente morbida e rotonda nel retrogusto, la freschezza e l’acidità non mancano, come pure una certa lunghezza, ma da una riserva sarebbe lecito chiedersi un filo di complessità, energia e ampiezza di definizione in più, anche se la piacevolezza non fa certamente difetto e da un punto di vista tecnico il vino è indubbiamente impeccabile e ben fatto.

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Austerity: Italy's Government Selling Its Luxury Cars

by Tyler Durden

You know it's bad when... Italy's new prime minister Matteo Renzi has decided that around 1,500 non-essential government official cars will be sold off (via eBay). As La Repubblica reports, the cars (among them dozens of BMWs, Alfa Romeos, Lancias, nine Maseratis and a couple of Jaguars) have come to be a symbol of wasteful government spending. Renzi noted, via Twitter, "Why should an under-secretary have an official car? The undersecretary should go by foot."

The big question is... why sell all this non-essential crap when your yields are at record lows implying that everything is fucking awesome?!!!! (oh wait, what's that red line)

Yeah, QE will really help eh?!

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Sugar market has 'bearish tone' despite dry Brazil

by Agrimoney.com

The sugar market retains a "bearish tone" despite the damage to Brazil's cane crop from drought, Sucden Financial said, highlighting the prospect of higher exports from Thailand, and reduced Chinese demand.

The agricultural commodities trade house acknowledged a large dent to Brazil's cane harvest from "disastrous" weather which had seen the key Centre South district, responsible for 90% of the country's sugar output, receive 340mm rain in the December-to-February period, compared with an average of 620mm.

"There is no (recent) precedent of such dismal levels at the heart of the rainy season," Sucden said, pointing to losses of over 10 tonnes a hectare in cane yield in some areas, equivalent to well over 10%.

"There is a risk" that some cane planted late in 2013 "will have died".

'Cane can recover'

However, while cutting its forecast for the Centre South cane harvest by 35m tonnes, Sucden's estimate of a 586m-tonne harvest remained above that of many other commentators.

Rabobank, for example, last week cut its estimate to 570m tonnes, in line with a forecast from co-operative giant Copersucar.

"Sugar cane is a grass and can recover somewhat on the back of future rainfall," Sucden said, adding that rains this month, while "sometimes scattered will already have been beneficial".

Sugar vs ethanol

Furthermore, the commodities trader highlighted the potential for higher prices, up 22% from a March low, to incentivise mills to turn cane into ethanol rather than sugar.

While sugar is likely to take a relatively small amount of cane early in the cane crushing season, with producers "reluctant" to sell too much of the sweetener for early shipment, "the current market configuration is such that the possibility for a higher sugar mix should not be underestimated".

From July, the market is pricing in an ethanol parity equivalent to a raw sugar price of 16.5 cents a pound, well below the 18.28 cents a pound at which New York's July raw sugar futures contract was trading at on Friday.

Sucden forecast Centre South sugar output in 2014-15, starting in April, at 34.3m tonnes, in line with this season's levels, and above forecasts from the likes of FO Licht, which has pegged production at 31.1m tonnes, and Datagro, which expects volumes of 33.2m tonnes.

China imports to 'falter'

Sucden highlighted the potential too for a pick-up in exports from Thailand, the second-ranked sugar shipper after Brazil, where exports for the first three months of 2014, appear to have fallen below the 1.0m tonnes a year before, and the 1`7m tonnes in the first quarter of 2012, despite bumper production.

A record cane crop of 107m tonnes has put the country in line for sugar output of 11.5m tonnes, up 1.5m tones year on year.

"As a consequence, there will be pressure to increase exports," Sucden said.

On the demand side, imports by China "should falter" and prove limited to 2.4m tonnes in 2014, down 40% year on year, after the country enlarged stockpiles by 5m tonnes over the past two years.

'Bearish tone'

"Overall, there remains a significant trade flow surplus estimated at around 5m tonnes in December 2014," Sucden said.

"The surplus gives a 'structural' bearish tone to sugar fundamentals in the coming 6-9 months," although much will depend on how the Centre South cane crop turns out, and whether an El Nino, which often brings dryness to India and excess rains to Brazil, begins later in the year.

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Why you may want to avoid ETFs

By Mark Hulbert

Opinion: Open-ended index funds can offer a better deal

Here is a surprise for most investors: Exchange-traded funds aren’t always cheaper than traditional open-end mutual funds.

True, ETFs have much lower expense ratios than the typical open-end fund. The average ETF’s annual fee is currently 0.58%, versus 1.24% for the average open-end fund, according to data from investment-research firm Morningstar.

But the numbers can be misleading. For starters, they aren’t based on an apples-to-apples comparison, according to Joel Dickson, a senior investment strategist at Vanguard Group, which sells both ETFs and conventional funds. Most ETFs are low-cost index trackers, he said in an interview, while most open-end funds are actively managed, which have higher expense ratios — in part, at least, because they cost more to run.

On average, open-end index funds actually have half the expense ratio of index ETFs, Dickson says.

Moreover, expense ratios are but one of several factors that affect the true cost of fund ownership. Dave Nadig, chief investment officer at ETF.com, a research firm, says that these other factors have just as large an impact on a fund’s cost as its expense ratio, if not more. A fund’s “headline expense ratio is very misleading,” he says.

These other costs fall into three categories.

Transaction costs

These apply primarily to ETFs, since — provided you focus on no-load funds — you can often buy open-end index funds without a commission. With an ETF, you can pay a commission both to your broker as well as in the spread between the ETF’s bid and offer price.

Without taking these commissions into account, many index ETFs will appear to be cheaper than open-end funds benchmarked to the same index. When transaction costs are included in the calculation, however, open-end funds become more competitive. For example, a $10 brokerage commission on a $10,000 purchase adds 0.1% to an ETF’s cost of ownership, possibly eliminating several years’ worth of the savings you otherwise would have realized by going with it rather than the open-end fund.

To be sure, if you are a short-term trader, ETFs may very well enjoy a transaction-cost advantage, since open-end funds often impose redemption fees when selling shares held for only a short period.

Tracking error

Tracking error refers to how much an index fund’s returns diverge from that of the market average to which it is benchmarked. It can lead to big differences in the ultimate costs of various funds.

Tracking error sometimes varies widely over time for the same fund. Consider the iShares MSCI Brazil Capped ETF /quotes/zigman/264176/delayed/quotes/nls/ewz EWZ +0.94%  , with a 0.61% expense ratio.

According to Nadig, there have been some 12-month periods in which the fund has beaten its benchmark by 1.25% and others in which it has lagged by 3.57%. With a swing in tracking error that big, he says, the fund’s expense ratio of 0.61% “becomes sort of irrelevant.”

By contrast, Nadig points to another emerging-markets index fund whose tracking error has fallen within a much more narrow range: the iShares Core MSCI Emerging Markets ETF /quotes/zigman/12337698/delayed/quotes/nls/iemg IEMG +1.22%  , with an expense ratio of 0.16%.

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Picturing Our Dystopian World - Where Less Is More

by Tyler Durden

The economic growth expectations for the world in 2014 just plunged to fresh lows at a mere 2.78% - that is 15% "less" growth than was expected a year ago. The world's equity markets are up 25% "more" than at the start of 2013. Thus, our dysfunctional dystopian world where 'less' economic growth is 'more' wealth-creating. Long live the central bank utopia...

MSCI World (green) vs 2014 World GDP expectations (red)

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Shut up already! It’s not 1929

By Chuck Jaffe

Jaffe: It’s a bull market for bearish forecasts


Getty Images

Long-term investors are taking their eyes off the prize when they get distracted by doomsday predictions and focus on the market rather than the economy, writes Chuck Jaffe.



The market is about to crash! Now that I have your attention, I can tell you why you should ignore alarmist headlines (and statements) like that one.

It’s not that crashes and downturns have been rescinded by a five-year bull market, it’s that what should matter the most to a long-term investor is the economy over the market, and the long-term trend instead of what’s happening now.

It’s hard not to be interested in the market calls of experts, but it’s not necessarily profitable, especially when the projections are more extreme.

And yet average investors can’t help themselves from looking at anything that screams coming doom or that forecasts Armageddon, or that predicts a coming scenario where it’s possible to get rich quick.

It’s a bit like rubber-necking at a car accident, a situation where most people will tell you that they don’t want to slow down and look, but yet that’s exactly what they do as they pull up on the scene.

It’s what explains why MarketWatch has had popular pieces recently like Thursday’s “Is this the correction or a coming crash?” or “Stop trading! Now, before 2014 turns into 1929” or “New doomsday poll: 99.9% risk of 2014 crash.” It’s why books like “The Demographic Cliff” — the latest from noted gloom-and-doomer Harry Dent — hit the best-seller lists.

Average investors don’t “follow” gurus, soothsayers, clairvoyants and stock jockeys. They set up a portfolio and stick to the path — for at least the bulk of their assets — no matter what is happening on Wall Street or with the economy.

When those headlines, statements and sound bites catch their attention, however, they watch and listen, and wonder “What if?”

Richard Peterson of MarketPsych Data noted that investors are attracted to gloom-and-doom — like rubber-necking type — by instinct. “We want to learn from others’ misfortunes so we don’t have them happen to us,” he said.

Further, he noted, “People are hard-wired to pay attention to potential losses and investigate them more than they are for potential gains. We want to prepare for them to protect ourselves.”

The fortune-tellers, meanwhile, not only recognize those human instincts, but they know that the more outrageous the prediction, the more attention they get. They can highlight any forecasts they get right, knowing that their misfires are forgotten quickly.

Thus, calamity and catastrophe sells.

Right now, it’s a bull market for bearish forecasts.

The investor who falls for that stuff, however, can do permanent damage to their portfolio.

Part of the problem is that long-term investors are taking their eyes off the prize when they focus on the market rather than the economy.

As Benjamin Graham, the father of value investing, noted, the stock market in the short run is like a voting machine, registering which companies are popular or not popular; over the long haul, however, it’s a weighing machine, taking the full measure and assessment of the company in the form of its stock price.

“Long-term investors should think about the economy and the prospects of U.S. and foreign companies they invest in. They should not focus on the market,” said behavioral finance expert Terrance Odean, a professor at the Haas School of Business at the University of California-Berkeley. “In the long run, what matters if whether the economy prospers and firms earn profits.

“Yes, there are times when companies can be bought at higher or lower prices relative to earnings, but timing the market is difficult and most individuals get it wrong. Rather than asking themselves ‘Is this the right moment to buy stocks,’ investors should ask themselves if they are willing to invest long term in the U.S. or world economy, and maybe consider that there are few other long-term alternatives.”

None of this is to suggest that investors should ignore the possibility that the market is due for a correction or a crash. For a long-term investor, trouble is unavoidable.

Disaster preparation, however, comes in the planning stages, rather than in knee-jerk reactions.

For investors looking for a sign about whether the market is ready to turn, consider all of the scary headlines a positive as, empirically speaking, few people are calling for Armageddon when the market is nearing a top. Yet respecting that same kind of empirical evidence would suggest that at times when there are a lot of gloomy predictions, there’s already a downturn or crisis in progress or there is one to come, just much more slowly than expected.

Since it’s hard to suggest there’s a downturn or crisis in place now – even with a market that has been volatile but flat year-to-date, it will be awhile before the buzz of last year’s 30 percent gains fades – you can rest assured that trouble has not been repealed and that tough times are coming, even if it is later rather than sooner.

The interesting thing compounding the current situation — and the fascination with the calls for a market collapse — is that there are plenty of experts who feel the bull will keep on running for several more years. Arguing experts — instead of having most prognosticators agree — increases investors’ anxiety.

“All the street investor can see is disagreement among what appear to be experts, and expert uncertainty and disagreement is one of the key factors by which people perceive or gauge risk,” said Donald MacGregor of MacGregor-Bates, a consumer/investor research firm.

“The pathway forward is to have a personal financial strategy that creates diversification, and a time horizon for investment that is concrete and to which one will hold,” he added, though he noted that anyone who believes the financial fundamentals of the U.S. and world economies are so “out of whack” that there is real value in the rantings of the doomsayers “probably should move to rural Oregon and stock up the root cellar.”

For everyone else, however, the course of action despite the titillating headlines is simple: “Become a discriminating and educated investor and stay away from toxic talk,” MacGregor said. “It can be hazardous to your financial health.”

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Elliott Wave Review: Gold, crude, S&P 500

By Gregor Horvat

Weekend Elliott Wave Review: Gold, Crude oil and S&P 500

Gold (COMEX:GCK14) turned bearish last week from $1,380-$1,400 Fibonacci resistance zone and extended losses in this week beneath $1,300 psychological level where market could look for some support if we consider five sub-waves down from 1391. We are talking above red wave i)/a) that could be near completion, so traders should be aware of three wave rally back to $1,327-$1,342 region. The RSI is also showing some signs of a divergence. Keep an eye on upper trendline of a current downward channel; a break above it will suggest that three wave rally has began.

Gold, 4h Elliott Wave Analysis

Crude oil (NYMEX:CLK14) is at new high of the week after strong rally yesterday to above 101 level. Ideally price is now in the middle of wave (iii) heading up to 104.20 projected level; 161.8% extension of wave (i) from wave (ii) low. Short-term critical support is now at 98.80; as long this level holds trend is up.

Oil, 4h Elliott Wave Analysis

S&P 500 (CME:SPM14) turned up last Thursday but from an Elliott Wave perspective we see a completed three waves rally at 1877, so we still like the bearish scenario for a decline back to 1830 and possible even 1818. The RSI divergence line also reacted as a resistance in the last few days so it supports the idea for short-term lower prices. Based on latest structure 1869 should hold for a bearish case.

S&P 500, Elliott Wave Analysis

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Warning from the Gold-to-Copper Ratio Breakout

By Michael Lombardi

Copper is considered an industrial metal, used in industries across the board. When copper prices fall, it’s usually an indicator of a slowdown in the global economy. On the contrary, gold bullion isn’t much of an industrial metal; rather, it is used as a hedge against uncertainty in the global economy.

When you look at these two metals together, often referred to as the gold-to-copper ratio, they tell us something very important: the ratio of how many pounds of copper it takes to buy one ounce of gold bullion has long been an indicator of sentiment in the global economy.

If the gold-to-copper ratio is in a downtrend, it means investors are betting on the global economy to grow. In contrast, if it is increasing (if the number of pounds of copper it costs to buy an ounce of gold is rising), it tells us investors are concerned about protecting their wealth in a slowing global economy.

Below, you’ll find a chart of the gold-to-copper ratio.

GOLD - Spot (EOD) Copeer Chart

Chart courtesy of www.StockCharts.com


Looking at the chart above, it is clear something happened at the beginning of 2014. Investors became very worried. Since the beginning of the year, the gold-to-copper ratio has increased more than 28%—the steepest increase in more than two years.

And the weekly chart of copper prices looks terrible too:

Copper - Spot Proce (EOD) CME Chart

Chart courtesy of www.StockCharts.com

Copper prices have been trending downward since 2011. In 2013, these prices broke below their 200-day moving average and recently, they broke below a very critical support level at $3.00. While all of this was happening, on the chart, there was also a formation of a pattern called the “descending triangle.” It’s a bearish breakdown pattern that suggests prices are going to head much lower.

One must wonder how low copper prices can actually go. Just by looking at the descending triangle pattern, technical analysts usually target the price by measuring the widest distance on the pattern and subtracting it from where the price broke below. In simple terms, by that measure, copper prices may be heading toward the $2.00 level or lower, another 33% below where they are today.

After the financial crisis, the easy money supplied by the central banks in the global economy created the illusion that there was economic growth. But the reality was the complete opposite.

Now, the Federal Reserve is pulling back on its printing program. We recently heard that the central bank will be printing $55.0 billion a month in new paper money instead of the $65.0 billion it printed last month and the $85.0 billion it printed each month for most of 2013. (Source: Federal Reserve, March 19, 2014.)

Add to the Fed’s pullback on quantitative easing the troubles coming out of the Chinese economy, and it looks to me as if the global economy is going the wrong way. While politicians will simply choose not to talk about it, the mainstream media is directing investors the wrong way, just as the bear wishes; it’s leading investors back into the stock market, as if it’s a safe place to be again.

Dear reader, the truth is that the economy isn’t getting better; it’s getting worse.

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Boss, We Got a Situation in Natural Gas

by AuthorWolf Richter

This winter, polar vortices blew across the land and sent the price of natural gas into dizzying spikes and plunges, head fakes, and whiplash-inducing turnarounds, and some traders timed it just right and made a buck. Now winter is petering out, and we’re left with a very peculiar situation.

Years of “shale gas revolution” that had turned into a crazy over-hyped no-holds-barred land-grab and fracking boom veered into overproduction that whacked the price, causing untold industry mayhem, billions in write-offs, and the collapse of a business model – drilling profitably for dry natural gas. But nothing can be priced below the cost of production forever.

The Energy Information Administration reported today that for the week ending March 21, natural gas in underground storage dropped by 57 billion cubic feet to 896 Bcf, down 50.8% from the five year average for that week, and down 44.6% from the five-year minimum. Or 12 days supply.

While NG production is fairly steady throughout the year, consumption jumps during heating season and also perks up in the summer when power generators are trying to supply enough juice for maxed-out air conditioners. After the heating season ends, inventories begin to build, hopefully to a level that will be enough to get us through the winter – hopefully, because this year, the equation seems iffy.

Look what happened:

The last time we saw a March with storage levels below 1,000 Bcf was in 2003. But last year, consumption was 16.7% higher than in 2003. Something has to give.

It isn’t just the weather.

In some parts of the country, we can use the weather to explain the low storage levels and price spikes this winter. But in the West, which includes my beloved State of California where the weather has been gorgeous most of the winter, storage levels dropped 44% below the five year average! It got so bad that the Independent System Operator issued a Flex Alert on February 6 for voluntary power conservation; Southern California Gas Company had issued “Emergency Curtailments” to several gas-fired power plants.

Old inefficient coal power plants are being retired around the country because they would be too costly to upgrade and operate under the new emission rules. Some nuclear power plants, including the leaky San Onofre plant in Southern California, have been retired. A multi-year drought has gripped the West Coast, and hydropower generation has been curtailed. Gas-fired power generation has to fill in the gaps.

Then there’s the new industrial miracle: with natural gas being far cheaper in the US than in the rest of the world, global companies with energy-intensive processes and chemical processes that use natural gas as feed stock have been building plants in the US to gain a competitive advantage through lower cost.

Meanwhile, drillers, those that wanted to survive, switched from drilling in shale formations that are high in dry gas to those that are high in natural-gas liquids and oil, which sell for much higher prices and turn wells profitable. That strategy reduced dry gas to a byproduct.

But fracking is a treadmill.

Production falls off a cliff soon after a well starts producing, and new wells must be drilled constantly just to keep production even. The more wells are drilled, the more wells must be drilled just to keep production level. But at low prices, fracking is a money suck. Billions have disappeared into the ground.

So drillers got off the treadmill. Rig count for NG wells dropped to 326 as of last Friday, down from 1,450 during the crazy days of 2007, down from 652 two years ago, down from 418 last year. It was the lowest rig count since 1995. OK, new drilling technologies, efficiencies, etc. etc. make up for part of it, but look at the results.

Production is declining in some shale formations and has flattened out in others. Overall, production in the US last year rose only 1.0% to 24,887 trillion cubic feet, while consumption rose 2.1% to 26,627 trillion cubic feet. This imbalance is likely to get worse this year; it has had a good start so far.

The largest, most productive shale formation, the Marcellus, is the big exception. Production jumped 40% from January to November last year. The glorious shale gas revolution has become a one-trick pony. During its heady days, thousands of wells had been drilled in the Marcellus, but there were few pipelines to take the gas to market, and perhaps 1,300 wells remained shut in. Last year, takeaway capacity caught up, and the gas started flowing to New York City and elsewhere – hence the sudden spike in “production.”

Meanwhile, drilling activity plunged.

As of March 21, there were 78 active drilling rigs in the Marcellus, down from 89 rigs a year ago and from 141 rigs during the peak of the Marcellus drilling bubble in October 2011. Now that the gas is flowing, the steep decline rates are catching up with reduced drilling activity. Since December, production has barely budged.

And unless a miracle happens, such as a sudden drilling boom, we may have a peculiar situation this coming winter: a shortage.

Not that the US will run out; there are plenty of producing countries chomping at the bit to sell us LNG. We’d be competing with Japan and Korea, and they paid up to $18 per million Btu, instead of our current $4.50/mmBtu. Yet price is the solution. A substantially higher price will motivate drillers, and production will eventually catch up with demand. The current price – though up 134% from two years ago – isn’t nearly high enough. And the longer the price hangs out in this range, the more interesting the situation is going to be. This may turn into a seatbelt mandatory ride.

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Japanese Prepare For "Abenomics Failure", Scramble To Buy Physical Gold

by Tyler Durden

As we reported yesterday, the world's most clueless prime minister, Japan's Shinzo Abe, has suddenly found himself in a "no way out" situation, with inflation for most items suddenly soaring (courtesy of exported deflation slamming Europe), without a matched increase in wages as reflected in the "surprising" tumble in household spending, which dropped 2.5% on expectations of a 0.1% increase in the month ahead of Japan's infamous sales tax hike. How does one explain this unwillingness by the public to buy worthless trinkets and non-durable goods and services ahead of an imminent price surge? Simple - while the government may have no options now, the same can not be said of its citizens who have lived next to China long enough to know precisely what to do when faced with runaway inflation, and enjoying the added benefit of a collapsing curency courtesy of Kuroda's "wealth effect." That something is to buy gold, of course, lots of it.

According to the FT, "Tanaka Kikinzoku Jewelry, a precious metals specialist, reported that sales of gold ingots across seven of its shops are up more than 500% this month. At the company’s flagship store in Ginza on Thursday, people queued for up to three hours to buy 500g bars worth about Y2.3m ($22,500). March has been the busiest month in Tanaka’s 120-year history."

Of course, while the Japanese consumers know what is the best defense against runaway inflation and purchasing power destruction, the government also knows that just like in India, where massive gold imports to satisfy local demand so skewed the current account deficit that India spent most of 2013 imposing gold capital controls, it simply needs to make gold purchases impossible in order to redirect spending into more Keynes-approved products and services.

However, for now Japan is happy just to crush its population's meager disposable income with soaring energy prices. Which also means the locals can allocate their personal capital in the most efficient way: one which discounts a very unpleasant future.

Investors are being drawn to the metal not just because of higher taxes, said Itsuo Toshima, an adviser to pension funds.“Slowly and steadily, people are preparing for the worst, which is the failure of Abenomics." “To protect the value of wealth, gold comes into play as an inflation hedge, and if the economy goes back to deflationary circumstances then, again, money seeking safe havens would flow into gold.”

Wait, did someone in Japan finally admit the inevitable, i.e., that Abenomics will crash and burn in a pyre of runaway inflation and a crashing economy? Well, good. The problem is that when that moment happens, the response to the government's "all in" bet to led its population into the slaughter will mean that one will need lead far more than gold.

But we'll cross that bridge when we get to it. For now, we eagerly look forward to yet another major buyer of gold emerging on the global landscape, alongside China, India, and all other countries not transfixed by the dulcet tunes of central-planning and nominal paper profits.

Japan’s hunger for gold bars is at odds with general sentiment towards the precious metal, the price of which fell 28 per cent last year, bring an end to a 12 year bull run. Yet Yuichi “Bruce” Ikemizu, head of commodities trading at Standard Bank in Tokyo, said retail buyers had been tempted into purchases by lower prices.

The Fruit of Gold ETF managed by Mitsubishi UFJ Trust and Banking, the country’s most popular bullion-backed investment vehicle, saw its assets rise from 5.6 tonnes, when Mr Abe assumed power in December 2012, to 6.9 tonnes now – even as the US dollar price of gold fell by more than a fifth over that period.

Individual investors in the fund numbered 15,243 in mid-January, a sharp increase from 9,849 a year earlier, said general manager Osamu Hoshi.

At Tanaka’s third-floor store in Ginza, one 33-year trader at a foreign-owned brokerage, who did not want to be named, said the tax increase represented a “good opportunity” to buy more gold as he was worried about holding too many yen-denominated assets.

“I plan to hold it for a long time until there is a good time to sell when the yen collapses or something,” he said.

Even a strong rise in Japanese gold purchases is unlikely to affect the global bullion market. Last year consumer demand in Japan was 21.3 tonnes, according to the World Gold Council, compared to 1,066 tonnes in China and 975 tonnes in India.

Unlikely? Really - lets see what happens when 100 million Japanese suddenly decie half a kilo of gold is precisely what the doctor ordered. Then again, this is the FT, the same media outlet that recently, and inexplicably, pulled an article discussing gold manipulation without any explanation.

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The Golden Era of the 1950s/60s Was an Anomaly, Not the Default Setting

by Charles Hugh Smith

The 1950s/60s were not "normal"--they were a one-off, extraordinary anomaly.

If there is one thing that unites trade unionists, Keynesian Cargo Cultists, free-market fans and believers in American exceptionalism, it's a misty-eyed nostalgia for the Golden Era of the 1950s and 60s, when one wage-earner earned enough to buy all the goodies of a middle-class lifestyle because everything was cheap. Food was cheap, land was cheap, houses were cheap, college was cheap and most importantly, oil was cheap.
The entire political spectrum looks back at this Golden Age with longing because it was an era of "the rising tide raises all ships:" essentially full employment, a strong U.S. dollar and overseas demand for U.S. goods combined to raise wages while keeping inflation low.
The nostalgic punditry quite naturally think of this full-employment golden age of their youth as the default setting, i.e. the economy of the 1950s/60s was "normal." But it wasn't normal--it was a one-off anomaly, never to be repeated. Consider the backdrop of this Golden Era:
1. Our industrial competitors had been flattened and/or bled dry in World War II, leaving the U.S. with the largest pool of capital and intact industrial base. Very little was imported from other nations.
2. The pent-up consumer demand after 15 years of Depression and rationing during 1942-45 drove strong demand for virtually everything, boosting employment and wages.
3. The Federal government had put tens of millions of people to work (12 million in the military alone) during the war, and with few consumer items to spend money on, these wages piled up into a mountain of savings/capital.
4. These conditions created a massive pool of qualified borrowers for mortgages, auto loans, etc.
5. The Federal government guaranteed low-interest mortgages and college education for the 12 million veterans.
6. The U.S. dollar was institutionalized as the reserve currency, backed by gold at a fixed price.
7. Oil was cheap--incredibly cheap.
All those conditions went away as global competition heated up and the demand for dollars outstripped supply. I won't rehash Triffin's Paradox again, but please read The Big-Picture Economy, Part 1: Labor, Imports and the Dollar (September 23, 2013).
In essence, the industrial nations flattened during World War II needed dollars to fund their own rebuilding. Printing their own currencies simply weakened those currencies, so they needed hard money, i.e. dollars. The U.S. funded the initial spurt of rebuilding with Marshall Plan loans, but these were relatively modest in size.
Though all sorts of alternative global currency schemes had been discussed in academic circles (the bancor, etc.), the reality on the ground was the dollar functioned as a reserve currency that everyone knew and trusted.
But to fund our Allies' continued growth (recall the U.S. was in a political, military, cultural, economic and propaganda Cold War with the Soviet Union), the U.S. had to provide them with more dollars--a lot more dollars.
Federally issued Marshall Plan loans provided only a small percentage of the capital needed. As Triffin pointed out, the "normal" mechanism to provide capital overseas is to import goods and export dollars, which is precisely what the U.S. did.
This trend increased as industrial competitors' products improved in quality and their price remained low in an era of the strong dollar.
Long story short: you can't issue a reserve currency, export that currency in size and peg it to gold. As the U.S. shifted (by necessity, as noted above) from an exporter to an importer, a percentage of those holding dollars overseas chose to trade their dollars for gold. That cycle of exporting dollars/importing goods to provide capital to the world would lead to all the U.S. gold being transferred overseas, so the dollar was unpegged from gold in 1971.
Since then, the U.S. has attempted to square the circle: continue to issue the reserve currency, i.e. export dollars to the world by running trade deficits, but also compete in the global market for goods and services, which requires weakening the dollar to be competitive.
In a global marketplace for goods and services, all sorts of things become tradable, including labor. The misty-eyed folks who are nostalgic for the 1950s/60s want a contradictory set of goodies: they want a gold-backed currency that is still the reserve currency, and they want trade surpluses, i.e. they want to export goods and import others' currencies. They want full employment, protectionist walls that enable high wages in the U.S. and they want to be free to export U.S. goods and services abroad with no restrictions.
All those goodies are contradictory. You can't have high wages protected by steep tariffs and also have the privilege of exporting your surplus goods to other markets. That's only possible in an Imperial colonialist model where the Imperial center can coerce its colonial periphery into buying its exports in trade for the colonies' raw commodities.
And very importantly, oil is no longer cheap. The primary fuel for industrial and consumerist economies is no longer cheap. That reality sets all sorts of constraints on growth that central states and banks have tried to get around by blowing credit bubbles. That works for a while and then ends very badly.
The 1950s/60s were not "normal"--they were a one-off, extraordinary anomaly. Pining for an impossible set of contradictory conditions is not helpful. We have to deal with the "real normal," which is a global economy in which no one can square the circle for long.

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China's Liquidity Crunch Slams Importers Who Are Defaulting, Reneging On Deals

by Tyler Durden

Over the past month, we have explained in detail not only how the Chinese credit collapse and massive carry unwind will look like in theory, but shown various instances how, in practice, the world's greatest debt bubble is starting to burst, resulting not only in the first ever corporate default but also in the bursting of the associated biggest ever housing bubble. One thing we have not commented on was how actual trade pathways - far more critical to offshore counterparts than merely credit tremors within the mainland - would be impacted once the nascent liquidity crisis spread.

Today, we find the answer courtesy of the WSJ which reports that for the first time in the current Chinese liquidity crunch, Chinese importers, for now just those of soybeans and rubber but soon most other products, "are backing out of deals, adding to a wide range of evidence showing rising financial stress in the world's second-biggest economy."

While apologists of China's collapse have been quick to point out that China's credit collapse would be largely a domestic issue, with little foreign creditor exposure at either the public debt, or private - corporate - debt levels, one thing nobody can deny is that if and when Chinese trade routes grind to a halt, the downstream impacts would be devastating, and spread like wildfire as the offshore supply chain is Ice 9'ed.

More from the WSJ:

Most purchases are private, with little data on the volumes affected, but traders at Asian trading firms say they are seeing a sharp rise in canceled contracts this year while other buyers are demanding heavy discounts.

The U.S. Department of Agriculture confirmed that China has canceled orders for 517,000 metric tons of soybeans, used to make cooking oil, and compares to imports of 63.4 million tons last year. South American soybean contracts have also been canceled because of weak demand, says trade journal Oil World.

The cancellations are a big worry for the commodity markets as exporters around the world had relied for years on China's insatiable appetite for a wide range of raw ingredients. But now as jitters rise over the health of the economy, the fallout is rippling through into agricultural commodities, just weeks after the price of copper and iron ore tumbled on worries they had been used in risky Chinese financing deals.

For now the impacted importers are those dealing purely with commodity products, such as rubber. The problem is that once one importer defaults on a contract, suddenly counterparty risk regarding all of China (and certainly those using commodities on Letters of Credit, recall China Commodity Funding Deals) soars, forcing other offshore exporters to collapse liquidity terms when dealing with Chinese buyers, and demand payment on truncated timeframes, resulting in a closed loop of liquidity evaporation from trade networks, which in turn forces local banks to step in and provide liquidity at precisely the time when banks are suddenly far more selective who they issue loans to.

Natural rubber, mostly grown in Southeast Asia and used to make products ranging from tires to latex gloves, is also getting hit as some buyers from China refuse to honor existing agreements, or look for ways to negotiate discounts. Two large Asian rubber producers, who asked not to be named, said Chinese buyers had defaulted on them.

Traders say buyers are trying to ask for discounts, citing reasons such as cargo arriving a few days late and claims about poor quality or contamination, said Bundit Kerdvongbundit, vice president of Von Bundit Co., Thailand's second-largest natural rubber producer. The contracts are already signed, but Chinese importers "refuse to take cargo or pay unless they get discounts."

Surely someone hedged though - it is not as if everyone was naive enough to sign major trade deal assuming the status quo would continue indefinitely despite China's well-documented recent liquidity concerns. Well, maybe...

One comfort is that most companies trading with China have taken some sort of safeguards after widespread defaults in the wake of the 2008 global financial crisis, like asking for deposits, said Benson Lim, chief operating officer and head of global rubber trading at R1 International.

.. But, not really:

However, "the business is so competitive that not all sellers are taking deposits, so they are hard-hit when buyers default," he added.

The result: collapsing commodity prices as the biggest marginal buyer suddenly goes bidless, if not an outright seller.

Rubber prices have dropped more than 20% since the beginning of the year, due to worries over China's slowing economy and a global surplus of the commodity. Many sellers who bought at high prices are unwilling to sell at a loss, pushing up stocks at the port of Qingdao to near-record levels recently. Stockpiles in some other commodities like soybeans and iron ore are also high as buyers hang on.

Which means that after having stuck their head in the sand for years, and ignoring just the possibility of precisely this outcome, suddenly everyone is scrambling and asking how this could have possibly happened:

Commodities are particularly sensitive to the health of the economy given the their wide-ranging use. But with China this month recording its first ever corporate bond default, and fears over a property developer, investors are growing jittery as Beijing tries to clamp down on years of reckless lending.

"The number one problem is weak demand from the credit tightening last year and real estate which has a direct or pass through effect on all of this activity," said Shanghai-based Citi Research commodities strategist Ivan Szpakowski.

There is one other tangent: what is the common link between rubber and soybeans? We explained precisely this ten days ago in "What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?" Yup - as briefly noted above, these are all the commodities that serve as conduits in China's numerous Commodity Funding Deals. Only no more.

Which means that far form merely crushing exporters who suddenly are dealing with Chinese importers who have torn apart contracts, obviously with no recourse, suddenly China's entire "hot money" laundering infrastructure (which as explained over the weekend, has gold performing an even greater role than copper) is about to collapse.

And when the counterparties of China's hundreds of billions in CCFDs decide to also get out of Dodge and unwind these deals (amounting to hundreds of billions in notional), only to find the underlying commodity has not only been re-re-rehypotecated countless times and has been sold, then there is truly no way of saying what happens next.

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Self-Insurance or Self-Destruction?

by Gene Frieda

NEW DELHI – Though the US Federal Reserve is turning a blind eye to the spillover effects of its monetary policy, the rest of the world is worrying about the impact that capital-flow reversals will have on emerging economies. Will the foreign reserves that these countries have built up in recent years prove adequate to protect their financial systems, as liquidity flows back toward developed economies?

The short answer is no, because excessive self-insurance ultimately does more harm than good. In order to break the destabilizing cycle of short-term capital flows and excessive accumulation of foreign reserves, the International Monetary Fund, with broad support from the G-20, must devise new rules regarding monetary-policy spillovers.

Severe crises leave an imprint on a nation’s psyche. In the late 1990’s, the currency and banking crises that ravaged Asian economies led the affected countries’ leaders to a simple conclusion: no amount of insurance was too much. Although the introduction of floating exchange rates removed the incentive to borrow in a foreign currency (and thus the need for self-insurance), the political humiliation of losing sovereignty to the IMF – if only temporarily – was so devastating that the economic costs of building a massive foreign-currency war chest seemed worthwhile. But these countries’ leaders failed to grasp the full consequences.

Foreign-exchange reserve accumulation depresses the exchange rate, ostensibly as a smoothing device. But stronger emerging-market currencies in the 2000’s would likely have led to earlier rebalancing toward domestic demand. And if these countries had recycled a smaller stock of foreign reserves into US Treasuries, agency bonds, and subprime securities, US interest rates would likely have remained higher, emerging-market current-account surpluses would have declined earlier, and advanced-economy deficits would have contracted, thereby restoring some semblance of equilibrium. But, of course, that is not what happened – to the detriment of global financial stability.

Furthermore, the accumulation of self-insurance can beget competition similar to an arms race. Whether to prevent the appearance of inadequate insurance or to avoid losing export share, sizable interventions in currency markets became widely accepted among Asia’s emerging economies as a natural response to large capital inflows – directly contradicting these countries’ commitments to floating exchange rates.

Given that persistent currency intervention reduced volatility, it encouraged ever-larger capital inflows, under the presumption of less risk. At the same time, the currencies of countries that chose not to intervene became targets of speculative inflows, owing to the expectation that they would appreciate.In other words, spillovers occurred not only between advanced and emerging economies, but also among emerging economies.

Nonetheless, countries like South Africa and Mexico – both of which chose to forego intervention – did better, in many ways, than their intervention-happy counterparts. Both suffered little financial fallout from the currency weakness that followed the Fed’s announcement last May that it would “taper” its purchases of long-term assets. Truly floating exchange rates generally served their purposes: removing the incentive to accumulate external debt, encouraging flexibility within the real economy, and promoting the development of deep and liquid capital markets.

Another consequence of self-insurance is rooted in the ostensibly laudable goal of preserving national sovereignty. Specifically, governments may be tempted, especially around election time, to use self-insurance as a substitute for adjustment, rather than to help cushion the impact of a shock or support economic rebalancing. The alternative – “renting” insurance from multilateral bodies like the IMF – would demand fulfillment of certain reform obligations.

The fact is that emerging economies’ self-insurance policies, like the Fed’s ultra-loose monetary policy, fuel a reflexive feedback loop. While any suggestion that countries cede monetary-policy independence would be foolhardy, some rules are clearly needed to limit spillovers – rules that should come from a revamped IMF, with the US Congress demonstrating its support through a long-overdue quota increase.

Specifically, the IMF should be responsible for assessing spillovers and mobilizing liquidity support for vulnerable economies accordingly, either through central-bank currency-swap lines or IMF liquidity facilities. Such multilateral insurance would lessen the need for self-insurance, without impinging on countries’ sovereignty.

To be sure, such rules would not insulate economies entirely from monetary-policy spillovers, which are an inescapable element of an economy’s adjustment process. But they would help to mitigate the kind of tail risks that have plagued the financial system over the last two decades. Only with a well-defined mechanism for managing spillovers can the vicious cycle of capital-flow volatility and excessive self-insurance accumulation finally be broken.

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Joe Friday…Big Tech support test, as Google, Tesla, Bio-Tech lag big time!

by Chris Kimble

CLICK ON CHART TO ENLARGE

If I had told you a month ago that Google, Tesla and Bio-Tech would fall -7% to -15% , would you have thought the S&P 500 would be "FLAT" if that happened?  Well it did and I suspect that surprised more than me.

These three stocks that have been hit hard are associated with the Nasdaq index. The above chart reflects that the NDX 100 index is testing rising support and its 50MA at the same time.

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5 Things To Ponder: Words Of Caution

by Lance Roberts

The financial markets have not done much since the beginning of the year but that is not necessarily bad news.  Despite Russia's annexation of Crimea which sparked threats of military conflict, the Federal Reserve tapering asset purchases, massive "polar vortexes" and less than impressive economic data - the markets have remained mostly resilient. I discussed yesterday that there are signs of deterioration in the market internals which are typical of market tops.

Howard Marks once wrote that being a "contrarian" is a lonely profession. However, as investors, it is the downside that is far more damaging to our financial health than potentially missing out on a short term opportunity.  Opportunities come and go, but replacing lost capital is a difficult and time consuming proposition.  So, the question that we will "ponder" this weekend is whether the current consolidation is another in a long series of "buy the dip" opportunities, or does "something wicked this way come?"  Here are some "words of caution" worth considering in trying to answer that question.

1) Born Bulls by Seth Klarman via Zero Hedge

In the world of investing there are only a handful of portfolio managers that are really worth listening to.  Ray Dalio, Howard Marks and Seth Klarman rank at the top of my "read every word" they say list.  In this regard, I suggest that you take some time this weekend to read Seth's year-end 2013 investor letter which details the many dangers that lay ahead.  The problem is that most investors are blind to those dangers as they continue to follow the madness of crowds. 

"In the face of mixed economic data and at a critical inflection point in Federal Reserve policy, the stock market, heading into 2014, resembles a Rorschach test. What investors see in the inkblots says considerably more about them than it does about the market.

If you were born bullish, if you’ve never met a market you didn’t like, if you have a consistently short memory, then stocks probably look attractive, even compelling. Price-earnings ratios, while elevated, are not in the stratosphere. Deficits are shrinking at the federal and state levels. The consumer balance sheet is on the mend. U.S. housing is recovering, and in some markets, prices have surpassed the prior peak. The nation is on the road to energy independence. With bonds yielding so little, equities appear to be the only game in town.

But if you have the worry gene, if you’re more focused on downside than upside, if you’re more interested in return of capital than return on capital, if you have any sense of market history, then there’s more than enough to be concerned about.

A skeptic would have to be blind not to see bubbles inflating in junk bond issuance, credit quality, and yields, not to mention the nosebleed stock market valuations of fashionable companies like Netflix and Tesla. The overall picture is one of growing risk and inadequate potential return almost everywhere one looks.

There is a growing gap between the financial markets and the real economy."

2) What A Mean Reversion Would Mean To The Market by Shawn Tully, CNNMoney

I have often written about the consequences of mean reversions, read "30% Up Years", to the average investor.  However, during ripping bull markets, as Seth states above, there are few individuals that have the "worry gene."  I do.  Therefore, I agree with Shawn analysis of the markets and the framework for an eventual reversion.

"Seldom have so many of the metrics that influence stock prices strayed so far from the long-term trends we've come to consider 'normal.' Corporate earnings are far above what's normal historically, interest rates are way below normal because of Fed intervention, and bond prices that wax when rates wane are hovering at seemingly unnatural heights. The typical investor might echo something Yogi Berra could have said: 'I'm confused by the 'new normal' because it's so unusual.'

The total expected return is that 4% plus inflation of around 2%, or a total of 6%. That return comes in two parts. The first is the dividend yield of around 1.6% a year (large companies today pay out about 40% of their profits), and the second is earnings-per-share growth of 4.4% annually. Keep in mind that earnings per share increase at a far slower rate than overall corporate earnings that over long periods track GDP, because companies typically issue large numbers of shares each year, in excess of buybacks, to fund their plans for expansion.

That's hardly a wonderful outlook, and it's a long way from bountiful future Wall Street expects. But the second scenario is far more daunting. It demonstrates the dastardly meanness in mean reversion.

The abnormally low real rates are the work of the Fed. They cannot last. Once demand for capital supplants money supply creation as the principal force driving rates, as it must, real rates are bound to rise sharply, restoring the trend that began in mid-2013. That's why the mean-reversion scenario is the most likely, if not inevitable, outcome. One scenario is fair, the other is poor, and the poor one will probably reign. The Wall Street pundits can't stop thanking the Fed. They should reconsider."

3) Stocks On The Precipice Of A Huge Move by Todd Harrison via Minyanville.com

"Neil Young famously sang, "I caught you knocking at my cellar door; I love you baby, can I have some more; ooh, ooh, the damage done."
The bears have repeatedly knocked on both sides of the cellar door that is S&P 1850 seventeen times as they tried to break out to the upside and another seven times as they tried to knock it back down.

"The first is the percentage of Russell 2000 stocks above their 200-week moving averages, which is at 40% (MKM Partners).  Historically, when that percentage reaches 40%, it was at or near an intermediate-term top in the index.  The second is the average return for the 1-, 3-, 6-month and 1-year periods following those events. Take a good look."

Minyanville-Russell2000-032814

"History doesn't always repeat but it often rhymes, and after the insane run in the small caps and biotech stocks some perspective is an important context when mapping forward risk. As we often say, to fully understand where we are, we must understand how we got here."

4) Is This A Correction Or A Coming Crash? by Michael Gayed via MarketWatch

"Has the correction finally started? There are enough things happening behaviorally within the market to consider this. The deflation pulse, which has been a big theme of mine over the past year, remains alive and well. We must all ask ourselves why in the world Treasurys are so well bid when the Fed is stepping away from stimulus.

"Judge a man by his questions rather than his answers."

—Voltaire

We must also ask ourselves why defensive sectors such as consumer staples, health care and utilities are leading. When low-beta areas of the market outperform, that tends to be a warning sign of coming volatility and a potential correction ahead for equities."

5) Keep Buying Or Get Out?by Martin Pelletier via Financial Post

Retail investors have a very bad habit of "buying high and selling low."  This is due to the combined effect of an always bullish media bias combined with the emotional flaw of greed.  However, retail investors generally lack the tools, information and discipline to identify major turning points in the market.  Martin makes some valid points about what "smart money " is doing and focuses on the single most important point.

"But it isn't the smart money doing the buying. Recent Bank of America research shows institutional clients have been large net sellers of stocks since mid-February despite receiving large inflows from investors.

Corporate insiders have also been hitting the sell button. As cited by Mark Hulbert, editor of Hulbert Financial Digest, officers and directors in recent weeks have on average been selling six shares of their company stock for every one that they bought. This is more than double the long-term adjusted ratio since 1990 and is the most pessimistic insiders have been in more than 25 years. The closest we've come to this level was in early 2007 and early 2011.

With the smart money exiting, who's behind the bids?

ICI-EquityFlows-032814

"Not surprisingly, average retail investors have been huge net buyers of stocks and stock funds since early June of last year. This trend has gained so much momentum that these investors now hold eight times as much money in bull funds compared to bear funds, setting a new all-time high.

If you are considering going all-in or, worse, leveraging up, we recommend taking a step back to examine what your long-term investment goals really are and measure them in the context of the current market environment. Moving away from the herd can help you avoid buying market tops and selling market bottoms.

Finally, remember that no one truly knows what is going to happen when pundits call for new highs or the next major correction. Your time is better spent focusing on what you can control and that is managing risk, because if history teaches us anything it’s that irrational behaviour works both ways."

See the original article >>

Natural Gas Stocks To Benefit from Expanding U.S. LNG Export

By Tara Clarke

As Russia's clash with Ukraine and the West boils on, pressure is mounting for the federal government to loosen export regulations on U.S. liquefied natural gas.

Currently, the U.S. exports natural gas to only a handful of countries, such as Canada. No U.S. LNG is exported to Europe.

That's mainly because the key factor in gaining the U.S. Department of Energy's blessing to export is whether or not the importing country has a free-trade agreement (FTA) with the United States.

Before this week, a total of six permits for sales to non-FTA nations, like India and Japan, had been issued - five of those permits had been granted in the last 10 months.

But on Monday, the Department of Energy conditionally approved the $7.5 billion Jordan Cove LNG project in Coos Bay, Ore., making it the seventh export terminal to receive a federal permit to export to a non-FTA nation. Final approval for the project is still subject to environmental and regulatory review, the Department of Energy said.

The Jordan Cove terminal will export to Asia, and not to Europe, where lawmaker proponents of LNG exports hope that U.S. LNG would undermine Russia's grip on Europe's natural gas markets.

Russian President Vladimir Putin has threatened multiple times to restrict gas supplies as a weapon in this conflict with Ukraine and the West. This places heightened urgency and importance on the exportation of U.S. LNG as a means to meet increasing world energy demands.

And that's a major bullish sign for natural gas stocks in 2014...

Geopolitical Pressures Boost Need for U.S. LNG

U.S. exports of LNG could mitigate any shortages in Europe caused by the Ukraine-Russia conflict.

natural gas stocks 2014

Prior to Monday's conditional approval, the Department of Energy's six approved projects to export LNG to countries without FTAs amounted to a flow-rate volume of 8.5 billion cubic feet per day (ft3/d) of LNG. Compare that to the 6 billion ft3/d that Russia exports to Europe via Ukrainian gas pipelines; Russia provides 30% of Europe's gas using pipelines that cross Ukraine.

"Expanding U.S. LNG exports is an opportunity to combat Russian influence and power, and we have an energy diplomacy responsibility to act quickly," U.S. Rep. Fred Upton, R-MI, chairman of the Natural Resources Committee, said earlier this month. "We will continue to advance legislation and develop new proposals that allow market forces and technology to help expand Eastern Europe's access to affordable energy beyond Russia."

Even though the United States is the world's largest natural gas producer, efforts to export LNG have been drowning in federal rules, financing issues, and construction demands - winning federal approval can take three years or more.

Only one of the six approved projects has final approval from the federal government, and it will not start exporting natural gas until 2019.

That's why the Obama administration's decision on Monday to conditionally approve the Jordan Cove export terminal was met with praise from lawmakers.

"This is welcome news for those opposed to Russia's aggression," Brendan Buck, spokesman for House Speaker John Boehner, R-OH, said Monday. Buck encouraged the administration to approve more projects "if we're going to weaken Russia's dominance in many foreign energy markets."

"There can be no doubt that we have crossed a line into an era when we could be massively exporting America's natural gas, sending the jobs and consumer benefits abroad along with the fuel," Foreign Relations Committee member Sen. Edward Markey, D-MA, said of the approval.

The Jordan Cove facility, owned by Veresen Inc., could export up to 0.8 billion standard cubic feet of natural gas per day over the next 20 years. Natural gas would be transported to the Jordan Cove liquefaction terminal via the 234-mile long Pacific Connector Gas Pipeline. When Veresen applied for the permit in May 2013, it said it would take 42 months to construct the facility, which would put completion in September 2015, following the Department of Energy's approval Monday. The facility will employ around 900 people on average and up to 2,000 in peak periods.

As the United States continues to ease restrictions on natural gas exports, the rising demand and prices in Europe creates a unique window of opportunity for natural gas stocks in 2014...

Natural Gas Stocks 2014: On the Rise

The Ukraine conflict has given LNG companies' stock prices an additional boost on top of their rise in 2014.

"[This is] an example of how geopolitical events sometimes have a major energy component," Money Morning Global Energy Strategist Dr. Kent Moors said in early March. "In the case of what is transpiring in Ukraine, energy may be the main chess board in which political change is worked out."

Cheniere Energy Inc. (NYSE: LNG) - an LNG stock we've been optimistic about for years - is up 27.34% in 2014 and 11.09% so far in March alone, when troubles in Ukraine came to a head.

Owner, operator, and manager of LNG vessels GasLog Ltd (NYSE: GLOG) is an LNG carrier that could be directly impacted by increased LNG exports out of the United States. The company's stock is up 42.01% so far in 2014 and 15.24% in March.

Golar LNG Ltd. (Nasdaq: GLNG) also owns and operates LNG carriers. GLNG stock is up 18.19% in 2014 - and 17.19% in March alone, since the Ukraine conflict began pressuring the energy industry.

Dominion Resources Inc.'s (NYSE: D) portfolio of assets includes a 21,800-mile-long gas distribution pipeline and an underground natural gas storage system with approximately 947 billion cubic feet of storage capacity. Dominion shares are up 9.52% in 2014 and 23.02% from a year ago; the company has enjoyed a steady, fairly constant rise since going public in 1978.

Sempra Energy (NYSE: SRE) has climbed 8.08% in 2014 and 2.69% in March. The holding company owns and operates natural gas distribution utilities, storage facilities, and LNG pipelines and sells and transports natural gas across the United States.

These are only a few of the natural gas stocks on an upward march so far in 2014.

"The market events that I'm predicting will make the New Year a big one for LNG investors," Moors said. "The global energy sector is intensifying, and its importance has never been more striking than it is right now."

See the original article >>

Offsides

by Marketanthropology

This week we welcomed what we expect will be a new-er normal, with emerging market equities (EEM) outperforming the SPX to the tune of over 4.5%, and commodity currencies - such as the Canadian and Australian dollars each surging a respectable ~ 1.75% for the week. 
The more road that is traveled this year, the more confident we become that the baton is being slowly passed from developed economies such as our own to those emerging markets that have glaringly underperformed over the past five years. Helping to set things in motion this year has been the offsides standings in the bond market, which had anticipated long-term interest rates to continue rising while the Fed pivoted its policy stance. Our expectations have very much remained countervailing over the past several months, and we believe that divergence will only grow.   
With that said, as much as we field the streams openly with the North American genus of equity bears, we are cognizant that our longer-term expectations will likely diverge downstream from their more considerable appetites. From long-term and varying perspectives of valuation and momentum, we continue to view the market with the greatest similarities to the cyclical peaks in 1946 and 1981, respectively - which saw the equity markets correct and consolidate more discretely in nominal terms. 
Should 10-year yields continue to breakdown as we suspect, it will likely present another headwind for the financial sector, but provide a strong trade wind to commodities and precious metals.

See the original article >>

Stocks and Gold Simply Cannot Get it Up!

By: Anthony_Cherniawski

SPX made a sideways consolidation and closed beneath the Head & Shoulders neckline today. It may pop briefly above it in the morning, but this is a good sign that the decline is gathering momentum to the downside.

Despite the late day VIX dump, it still closed above mid-Cycle support at 14.41. There is no loss of the sell signal with VIX. In fact, I had some concern that today we might see VIX making a lower Intermediate Wave (2). VIX shows surprising strength in this regard.

NDX leads the decline for the stock indexes. It also had a sideways consolidation after the big push don at the open. Iy may reach for Cycle Bottom resistance in the morning, but the Wave structure has a lot further to go.

Gold sliced through its 50-day moving average at 1303.72 today. My comment in the Closing Commentary about not pausing for a bounce above the 50-day was spot on. It is still possible that gold may retest the 50-day from beneath, but that may not be a trading opportunity. Chance are that it may not pause, or pause only briefly, until it reaches the Lip of its Cup with Handle formation near 1183.00.

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How the Bank of Yellen Really Operates

by Bill Bonner

Dying Cows

Praying for Nicaragua when you live in Tunbridge Wells is the first sign of madness.

Evelyn Waugh

“Three more cows died,” Jorge, our Argentine ranch manager, reported yesterday. We had reacted as fast as we could. Still, the disease – whatever it is – moved faster.

Jorge and his crew of five gauchos worked for three days – including a Sunday and a national holiday – almost without rest. From first light ‘til after dark they rounded up the cattle and ran them through the stocks.

It was hard work. But there were no complaints. They all knew it had to be done. All the animals have now been given an injection. Whether that stops the epidemic, or not, we wait to find out …

dead_cow_leather_boots

(Photo credit: Nathan Cowlishaw)

Rube Charm

We are beginning to ruminate on the strange, wide and unappreciated gulf between Nicaragua and Tunbridge Wells…

A stock character of show-business (less so now than 50 years ago) was the “hick.” Recently fallen from the turnip truck, he knew his bucolic world. He knew his cows and his bottom 40 … but the larger, outside world was a mystery.

Confronted with a public policy issue (for these men were often elected to the House or the Senate), he resorted to folk wisdom and practical experience.

“Well, if you give money to lazy people, it won’t make them any less lazy,” he might have opined on a welfare program. Or: “I don’t know why we need to put fancy theatras and basketball courts in public high schools. I went to a one-room school house. And I can guarantee you it didn’t have air-conditioning.”

This down-home outlook made the hick a laughingstock to urbane policymakers. And he was often a fool. But it endeared him to the bumpkins who elected him.

President Johnson was one of the last major politicians who used this rube charm to good effect. When the occasion called for it he wore his cowboy hat. And he had many colorful expressions to substitute for real thinking. One of his favorites was: “The time to kill a snake is when you have a hoe in your hand.”

The expression brought back the reality of country life. When you saw a snake with your own eyes you knew what to do… especially if you had a hoe in your hands. But a hoe is one thing; a Huey helicopter is another.

Here on the ranch, we find a dead cow. We make decisions that put the whole farm into motion, costing us a few thousand dollars that we can ill afford. Either we are right. Or we are wrong. But at least we operate on facts, as best we can. And we suffer the consequences as we must.

We are six hours from the nearest city. Things happen here that we see, feel… and within the limits of our own senses and sensibilities… understand.

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(Photo credit: Cecil Stoughton)

No Hoe

But the markets are a different animal. At our Bonner & Partners Family Office research department, a question has been preoccupying us: Does QE transmit inflation to consumer prices?

Much time was spent researching how the banking system works in a fiat money world. More time was spent wondering how and when the velocity of money might increase.

Experts disagree on major points. Can banks use their excess reserves to increase lending? Even this simple question throws up so many different viewpoints… and so many footnotes and nuances… that we regard it as beyond meaningful understanding.

On what facts does Janet Yellen operate? How connected is she to the real world? Does she understand the connections between QE and consumer price inflation better than we do? Or does she mistake the US Army for a hoe and the Vietcong for a snake, as Lyndon Johnson did?

You can judge for yourself. Our old friend John Mauldin is quoted in a film about how the Bank of Yellen operates. As you will see, Yellen has no real facts. She has no hoe. And she wouldn’t know a dead cow if it bit her on the derriere.

Since the beginning of time until today, there is no evidence that activist central bankers – like activist politicians – have ever done anything but cause mischief. Yet the entire market is depending on them, as though they knew what they were doing. We repeat our warning: A distorted market is a dangerous one.

Janet-Yellen-QE

(Image via Flickr / DonkeyHotey)

The above article is from Diary of a Rogue Economist originally written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

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