Tuesday 3/5/2013

Good Morning,

1. The currency markets (and all the economic news from Finance Ministers) seem to be on hold while the banks meet around the world.  My friends in Stuttgart and NY seem to believe that investors are waiting to read the minutes coming out of these meetings. They do not expect any rise in interest rates.
2. Europe -- Surprise,  a composite gauge of output in Europe shows that contraction is less than expected.  The expected drop was to 47.3 level, but it only reached 47.9.  I guess news that is not as bad (but still bad) expected is good news as the markets have reacted positively.  In the mid-level time frame, investors in Europe agree that the Central Bank will have to cut rates again.  There is a belief that the Italian protests (which are nearing violence) will lead to deficit reduction targets and rate cuts.  
3. Australia - The central bank was the first of the CBs to announce their decision: no change.  Home prices in Australia have stabilized, and the finance minister sees no indication of any inflation. Always be aware that Australia's exports are tightly linked to China, and the reports out of China are not good.  Stevens: ""The exchange rate remains higher than might have been expected, given the observed decline in export prices, and the demand for credit is low, as some households and firms continue to seek lower debt limits,"
4.  Oil and China and Canada - Service Industry has expanded at its weakest pace in 5 months.  For whatever reason, (not obvious to the common man) the investors feel that China's service industry is a negative for Oil, and Oil has fallen below $90 per barrel.  (Light Crude is at 90.35 as of this moment).  The International Energy Agency trimmed their Oil demand forecast for 2013 after disappointing news in China.  (Please note, that this could have been included in the "DON'T CARE" section, but it is so surprising as to merit a place here.
1. Canadian $$$ -- it fell very close to an 8 month low against the US $$$.  Traders in NY are expecting that the Bank of Canada will keep rates unchanged.  When the minutes are released, traders are expecting the tone of the minutes to be dovish, and if so, the Loonie will come under pressure.  
2. However, Carney may also change the tone a bit, and that could be very positive for the Loonie.  The volatility risk for the exchange rate will be high until traders have digested the minutes.
5. DON'T CARE Report  (NOTE: When the equity market of the USA is in a bull market, all bad news is discounted, and all good news drives expectations up.  As Mr. Buffet said last week, the risk is higher in not being invested than it is to be invested.)
1. Italy is in Economic and Political trouble.  Yesterday it was reported that Italian debt jumped in 2012 to 127% of gross domestic product from 120.8% in 2011.  According to Bloomburg, that is the most since Mussolini won 64% of the popular vote.  
2. China's real estate investments are not good -- not good at all.  They have an over-heated real estate market, and China's cabinet announced on Friday that they will increase down payment requirements and increase substantially the loan rates for buyers of second homes in cities where prices are rising too rapidly.
3. China's PMI slid from 56.2 to 54.  In reaction, China's stock market plunged to its steepest daily loss in months.  It closed down 4.6%.  
6. GOLD --  Goldman Sachs has lowered its projections for Gold, and has said it is headed to $1200.  
1. It is rare when the analysis at the investment banks are correct.  (As Rick Rule of Casey Research says: " They have a record unblemished by success."
2. But what about miners?  The recent action is horrific.  The Market Vectors Gold Miners Fund (GDX) is down 23% in 2013 and down 33% since last September.  What is interesting (from the investor's perspective) is relative to gold, gold stocks are as cheap as they were 12 years ago.  And not only that they are nearly as cheap today as they were during the mass liquidation in 2008. Gold stocks are so over-sold that it is absurd.  Major mining corporations are trading with single-digit price-to-earnings ratios and paying twice the yield of the S&P 500.  Will they get cheaper?  It is improbable (but not quite impossible) for the sector to get any less expensive.  
3. Reuters - SPDR gold holding dropped about 70 tons.  This was a very large decline, but fundamentally, (inflation, terrorism, etc) nothing has changed.  This has only happened once since the bull market in gold that started in 2001.  The year was 2008.  When it turned around, the HUI was 100% higher 2 months later.  Now is Goldman (and JP Morgan) right?  Or will you and I look back a year from now and wonder why we did not buy when it was so cheap.  OK, I go with this.  I can go broke buying the sales at Wal Mart (and eBay).  I need a techinical timing signal.  Then let me suggest to you $BPGDM which you can track on stockcharts.com.  When that index rises on the point&figure chart into a column of X's look to buy some, and buy some more as it goes up.  Make sure you have a good money management scheme (when will you get out with a profit, and determine where your risk exit is.  
1. Unfortunately, the mining sector could rally 10% (potentially) and not signal a buy on gold.  If you were interested in investing, now would be a good time to risk a little.  One of the very best buys is Seabridge Gold (SA) in Canada.  It is sitting on 44 million ounces of proven gold reserves, and 214 million ounces of silver.  
2. Gentle Readers -- it does not get any better in the investment world than this -- Canada, Gold, Silver (I wonder if the Canadians would allow an old man from the USA to retire there? I love British Colombia more everyday.)  
4. Nevada is being listed on www.mining.com as one of the top mining locations for 2013.  Their reports indicate they are very optimistic about gold's price.  
5. Basically, all the environmental controls and bureaucratic controls will limit any new explorations and opening of mines.  Apparently, Finland and Sweden may be exceptions.   
6. Overall, the message is MIXED...  Big banks (for whatever reason) are negative on gold.  Other organizations are positive due to the problem exploration has decreased (mostly due to bureaucratic overhead). 
7. Detroit -- Interesting article on the Dual Nature of the Economic Recovery and its effect on Detroit...  http://www.nytimes.com/2013/03/05/us/a-private-boom-amid-detroits-public-blight.html?nl=todaysheadlines&emc=edit_th_20130305&_r=0  "Key statement: "I’m here and I’m committed,” she said, adding, “This city has had so many heartbreaks.”  Ms. Kimen
8.  Warren Buffet: "Anything I bought at $80 I don't like as well at $100. But if you're asking me if stocks are cheaper than other forms of investment, in my view the answer is yes. We're buying stocks now. But not because we expect them to go up. We're buying them because we think we're getting good value for them."

The following is a little different.  Like most businesses and analysts I use Excel constantly.  Most of my econometric models are built in Excel and then reprogrammed into C# and SQL Server.  So for fun, I thought I would share with you some simple techniques to improve your spreadsheets.  I will find it interesting if any one comments that it was useful.  

Sorting: 

Excel's sorting ability is quite amazing, and with the very large number of rows allowed in the current Excel version, it can help you organize data in different ways.  

Sort by Multiple Columns:  Assume you are using Office 2007 or above

• Enter the following data into cells A1 to C4:  A1=Name  B1 = Age C1 = Start Date (these are the headings)
• A2 = Joe  B2 = 34 C2 = 11/3/2009
• A3 = Sam  B3 = 56  C3 = 10/2/2009
• A4 = Mary B4 = 34  C4 = 4/5/2009
• Select cells A1 to C4 to "highlight" them
• Click on "Home" tab of the ribbon
• Click on "Sort & Filter" icon on the ribbon to open the drop down list
• Click on "Custom Sort" in the drop down list to bring up the sort dialogue box.
• Under the column heading in the dialogue box, choose Sort by Age from the drop down list to first sort the data by the "Age Column".
• Under the Sort Oder heading, choose Smallest to Largest from the drop down list to sort the "Age data with the smallest values at the top of the list and the largest at the bottom.  
• At the top of the dialog box, click on the "Add Level" button to add a second sort option.
• Under the Column heading in the dialog box, choose "Sort by Date" from the drop down list to use the Date Column as the second sort option.
• Under the Sort Order heading in the dialogue box, chose Newest to Oldest from the drop down list for the Date Column.
• Click OK in the dialogue box to close it and sort the data.
• The data should be sorted such that the data record for Joe is listed first, followed by Mary and then Sam.  

Joe and Mary are the same age, and Excel choose to sort those two records on the second sort criteria.

Excel assumes the first row of data in your selection contains column headings.  It uses these headings as choices under the Column option in the sort dialogue box.  

What should you do if your first column does not contain headers?  Of course, you could insert a row and put headers in... a good option.  What if you don't want to do that?  If the first row of data does not contain headers, remove the check mark from the "My data has headers" option at the top right of the dialog box.  Excel will then use something like "Column A, Column B, etc as the choices option in the dialogue box.

By the way, sorting on dates is problematic.  If one enters all the dates in the same format, Excel has no problem.  (Dates are really just numbers, and if you unformat the date, you will observe the numbers.  The issue become when the date data is entered inconsistently.  For example, some of the dates may contain European formats, some North American, and so-on.  This will take a macro to fix them, and you would need to know how to create, test, debug and execute a macro.  

In the future, if I get a request, I will instruct you on how to build a VB program to get consistency in data for data mining techniques, but I will wait to see if anyone reads this and asks. 

I have a couple of other sort things I've figured out over time - sort by cell color, sort by font color and so-on.  Also conditional formatting is very useful if you have not used that.

Have a great day.  Remember to hug your teenager and tell them they are worthwhile, important and you love them.  (Even if some days it is very difficult to do that.)