Article Title: One More Bear Market, Please
Article Date: Between 31st of August & 26th of September 2012
"...it is important to understand the context and conditions we find ourselves in right now. Currently, we are in an equity bear market from a secular perspective and at the same time in an equity bull market from a cyclical perspective. Actually, we are in one of the "best ever" cyclical bull markets when it comes to performance gains and length (according to the article). So with that in mind, we can all agree that sooner or later, this powerful and aged cyclical bull market will end.
By refusing to let equities correct through natural free market forces, central bankers have now overvalued the current cyclical bull market. Therefore, this most likely means that the next fall will play catch up on the downside in a much more violent and swift manner. Downside mean revisions are never a pretty sight."
"The question I would like to discuss is whether or not you guys believe Apple is a real mania? To me, this whole thing is totally ludicrous. Absolutely absurd. Maybe it is just me, but when I view the way everyone has gone totally mad, with frenzy and euphoria, about these telephones... yes, that is all they are, just telephones (we haven't yet cured cancer or reached world peace)... I think that the obsession society currently has towards Apple, which is discussed daily on all news channels and hourly on fiannce news channels regarding where its share price trades, is similar to the obsession society once experienced back during the Tulip Bubble."
While a year ago, we had panic and fear rule the market, the current market conditions have me wondering where are all the bears? Weather we look at the remarkable performance of S&P 500 or DAX 30, extremely complacent levels of volatility, overly optimistic sentiment surveys, very low levels of cash, high risk exposure by hedge funds, the high level of corporate buybacks mixed together with a high level of insider selling or the elevated consumer confidence relative to last year - they all tend to send a signal that the market seems to be forming a more meaningful top around the current levels. Furthermore, while this post is not about fundamental analysis, let us not forget that we are now very late in the business cycle and a recession is most likely around the corner."
Article Date: 27th of June 2012
"Another major point I would like to put forward is that Gold's bearish sentiment has been trending downwards since August 2011, similar to the way it was trending downwards in 2008. Eventually, we will have no bears left and from those negative extremes a new cyclical bull market will be born.
Public Opinion on Silver, which is a select group of sentiment surveys, fell once again this week similar to Gold. However, unlike Gold, Silver's sentiment is now once again sending a strong contrarian buy signal from bearish extreme levels, which usually occurs as readings drop below 35% bulls. Another major point I would like to put forward is that Silver's bearish sentiment has not recovered towards a neutral / median position (60% bulls) since February of this year. Prolonged bearish sentiment can create super strong short squeezes and amazingly powerful rallies, last of which we saw in January and February 2012 for Silver after a similar downbeat mood.
Gold mining shares have been absolutely decimated in recent quarters. We are currently extremely oversold according to the Summation Index, % of Stocks Above 200 MA and % of Stocks @ 52 Week Lows. All three major long term breadth components are indicating that the bear market is either already over or is very close to being so, after a final capitulation occurs. One major technical development that has not yet occurred is a brake out on the upside from a downtrend in Cumulative AD Line, as well as the actual price itself. Until we get those confirmations, the downtrend might persist and retest recent GDX lows.
Most PMs bulls already know this, but majority of the time over the last 5, 15 or 30 years Gold has a tendency to bottom around the middle of the year and start advancing into August and September. Majority of the gains occur in the month of September, which was a completely opposite outcome to what happened in 2011. Let us hope this time around we move back to proper seasonal patterns, giving us traders the edge to front-run the price (doesn't always work).
I truly believe that Gold and Silver are very smart investments for years to come and I expect a major mania to occur sometime within the next several years. The only time one should plan on selling their Gold and Silver holdings is at the final vertical spike. All other sell offs, consolidations, cyclical bear markets and corrections (minor or major) should be used to accumulate more of the Precious Metals. That is what I plan to do and will continue from a month to month basis as my fund receives new inflows.
Article Date: 20th of May 2012
Market Call: Medium Term Bullish On Wheat
I still remain super bullish on Agriculture. Regular readers of this blog should know that I have been EXTREMELY bullish on Wheat especially, predicting prices as high as $9 per bushel even this year, if not by next. And of course this is all despite constant oversupply news. I have argued for months that Wheat does have short term oversupply, but that the news has already been discounted due to record net short positions. The whole time Wheat failed to make new lows, despite bad news - which from a contrarian point of view tends to be very bullish!
In my opinion, eventually we are moving towards another major shortage of Agricultural supplies similar to 2008. Constant crisis periods from Lehman Brothers to Greece have created an under-investment environment in all commodities, but especially Agriculture. Even with falling demand due to average economic activity, supply across the board is falling much quicker on the historical basis looking back to 1960s, creating shortages. We have a shortage of equipment, shortages of farmers, shortage of supplies and shortage of just about anything Agri-related. It is becoming ever harder to feed Chin-dia and its 4 billion people population, which is slowly becoming a net importer of global grains and softs.
Article Title: Portfolio Update: Long Silver
Article Date: 30th of December 2011
Market Call: Secular Very Long Term Bullish On Silver
"...central banks, which have no other option, have now started going completely mad with money printing and devaluing of global currencies. With Japan and the US crisis, just around the corner, any smart man sees no other alternative apart from more money printing, liquidity injections, bank bail outs and kicking cans down the road. All of this, obviously is super bullish for precious metals in the long term."
"In recent months, sentiment on Silver has been extremely low without any ability of recovery. The conditions have been very bearish, price has been falling hard and majority traders saw lower prices. As of this Tuesday, SentimenTrader's Public Opinion readings dropped to the lowest level in at least 6 years or even more. In plain terms, Silver investors are now more bearish, than they were during the depths of the Financial Crisis in October as Lehman Brothers declared bankruptcy.
Speculative positions through COMEX futures tracked by the CFTC Commitment of Traders reports, show that Silver positioning has been reduced to levels that are of the charts. Speculators aka Dumb Money, are actually so bearish, that we have to go back to 2002 to see this little exposure to Silver. All in all, it is obvious that Silver is very much hated right now and there is above average chance of a rally around these levels. However, bear markets or crashes can go further than most of us think..."
Article Date: Between 13th of December & 19th of December 2011
One of the main grain commodities, Soybeans, which has great fundamental outlook due to Chinese demand, now presented a great entry point as majority of the bullish bets have been cut. On top of that, Commercial positions are net long in almost every single Agricultural commodities, which means smart money like farmers and producers are now buying as they see value at these prices. The lowest readings for Daily Sentiment Index on Agriculture as of last couple of weeks was 8% bulls on Corn, 9% bulls on Soybeans, 8% bulls on Wheat, 9% bulls on Sugar, 8% bulls on Cocoa and the list goes on. As you can see, negativity is quite extreme over the last few weeks.
Over the last few weeks or even months, all I have been reading and hearing from the news wires is how bad the outlook is for Agricultural commodities. In my opinion, that is total non sense. First of all, despite recent increases in Corn, Wheat and Soybean stockpiles, supplies still remain at historical lows. That is quite a worry for the world, because any further shocks to inventories will create price spike with dramatic fashion from these levels. So how possible is this price shock? In my opinion, it is just a matter of time really.
So with prices depressed on historical factors, farmers do not have favourable conditions to plant and grow supplies to the point where the world has more than it needs. Furthermore, not only is arable land not expanding, but we also have a shortage of farmers too. Agricultural industry has some of the highest suicide rates from India to UK, while farmers from Australia to Japan, and from India to the US have an average age of 55 plus. We are not only running empty on inventories, we are also running low on farmers.
Furthermore, not only are Emerging Markets like the BRICs hungry, but they also want to eat better food like we do in the West. That requires a higher protein diet, which in turn means more Grains to feed the Live Stock. Yes... you heard right, more Grains - the same ones that the world has been neglecting for decades and currently has very short supplies off.
...sentiment is extremely negative on Agriculture with futures positions at the lowest level since March 2009, while DSI survey's on individual commodities have all reached single digit bull readings in recent weeks. Looking at the chart above, Agriculture is very very oversold while the bearish momentum is slowly weaning off as we diverge. This is your typical run of the mill bear market which has declined for over 10 months and almost 30% from the peak in February 2011. If investors are meant to buy value at cheap prices, than Agriculture with its strong fundamentals and discounted price presents an amazing opportunity right now."
Asset Performance: Rogers Agriculture (RJA) traded around $8.40 between 13th & 19th of December 2011, while CME Soybean spot traded at $11.20 per bushel. As of 26th of October 2012, Rogers Agriculture (RJA) traded at $9.55 while CME Soybeans spot traded at $15.50 per bushel. Agriculture index has so far gained almost 14% while Soybeans have managed an impressive gain of almost 40%. Since we are tracking a long term outlook, we will come back and update the progress in following quarters and years.
Article Date: Between 27th of September & 04th of October 2011
"Since majority seem to be more interested in equities, despite knowing that we are still in a secular long term bear market, I will cover the equity market indicators. One thing I can say is that if I had to choose between equities, bonds or cash - I would choose to buy equities as of today.
Also consider that 5 of the past 10 days saw down volume make up 90% or more of all NYSE volume. That might not sound like such a scary thought to you, but in the past 62 years only three other time periods come even close to matching this type of extreme down pressure. You might become a bit more interested now and ask me what periods were those? Well, the first two occurred before I was born and I was a baby to remember the last. The dates were August 1943, October 1978 and October 1987 (see... Octobers once again).
A large number of 52 Week New Lows tends to create an oversold condition like we had on 09th of August when S&P 500 fell to 1100. However, that does not necessarily bottom the overall market. It just creates an oversold bounce. For the overall market to bottom, we need to see lower index price while we have less and less 52 Week New Lows occur. In other words, bears are exhausted and are struggling to push the majority of index components lower. As fewer and fewer components keep making new lows, eventually the index itself regains strength to turn around and stage a real rally, not just a small bounce... and we are just about there now.
There are many different traders, investors, strategists, analysts and experts of skill within the market environment. It is a melting pot with the goal to make money. Keeping that in mind, if Corporate Insiders are one of the smartest groups out there, than Rydex traders have to be the complete opposite. If the English vocabulary failed to invent a word that was worse than “dumbest”, then Rydex traders would be the closest phrase available. These guys are hilariously wrong all the time. They are actually dumber than the dumbest - if that makes sense. Rydex traders, on averages, get all the bets wrong, all the time. If you are feeling bullish... bet against these guys and you'll make money at least for a rally!
We have forced liquidating; volatility has been high for months; sentiment surveys are extremely negative; hedge funds are losing money; institutional cash levels are high; dumb money is loading up on puts; insiders were buying heavily last month; analysts are now capitulating; valuations are attractive if you believe in Asian demand & growth; mums and dads exiting; Rydex dumb money is also panicking (god bless them); seasonal weakness is ending in October; and finally equities offer value against bonds and cash.
Finally, I came across this and I thought I would share it with you. At the end of last month, CNBC was asking its viewers if they believe the economy is now heading into "depression". In my opinion, it doesn't even matter what you believe the answer is, just the question itself is enough of a contrarian indicator..."