Tuesday, December 31, 2013 Zeb’s VUE

General Information and Analysis

Warren Buffet: “The best way to minimized risk is to think.”

US

Comment for 12/26/2013	Measure	Indicator	Ranking
Weekly RSI	WeeklyRSI	73.5	OverBought
Long Term MVA (200 day MVA)	200 MVA	9.96%	Bull
5 Day Slope of 55 day MVA	Slope55MA	0.65%	Bull
Intermediate Trend (Using ADX)	ADX(14)	20.3	Bull
Short Term Trend (Daily RSI 3)	RSI(3)	85.62	Overbought
Relative Volatility (ATR% vs StdDev over last 90 days	ATR(90)	.78%	Normal
VIX - MACD 10/30 (slope down)	MACD	-0.053	Bulll
The USA stockmarket is bullish, with very short term indication on S&P emini of overbought.

 

The table above is a rating for intermediate and long term trend in the S&P500.  I used the S&P 500 as the indicator for the USA stock market.  For day traders: You may find it useful to trade in the direction of the trend.  However, looking at any daily chart over lots of years, the trading direction for the day is pretty random. 

S&P PIVOT ES Mini - Friday - Useful on Monday 12/23/2014

High	1838.50
Low	1833.50
Close	1834.75
R2	1838.00
R1	1840.75
Pivot	1835.75
S1	1833.00
S2	1830.75

 

Stocks –

Zeb’s View:  Basically, the stock market is rising, period.  Fueled by the Federal Reserve easy money and an improving USA economy, stocks are poised to close the year positively.  The market is on track to close the best year since 1995. 

Private Equity firms are setting a record for the best returns every surpassing 2012.  The sector has been assisted by low interest rates.  Blackstone (BX) and KKR (KKR) have some of the best performance numbers ever, and they were certainly assisted by low interest rates in buying up homes, fixing them up and renting them.

Small companies sentiment is bullish.  That is amazing as we own several, and it has been a difficult year with ObamaCare uncertainty, lack of liquidity available, and prices rising where the business cannot raise the prices as the large companies have not raised their prices.  Reuters ran a survey 75% of owners said they expect sales to improve in 2014.  At the same time the small-business “confidence index” reached an 18 month high of 108.4. 

US Budget...

From the beginning you know I've not been excited by the budget deal.  The Bipartisan Budget Act of 2013 is ludicrous.  CBO (Congressional Budget Office) announced the budget will save $23 billion dollars over 10 years.  This was met by the media (and most Republicans except Paul and Cruz) as wonderful news. 

Put the reduction in perspective, and possibly you will see the Republicans drinking from the same Kool-Aid bucket as the Democrats.  Drum roll from the marching band, please!  The $23 billion will reduce our estimated growth in debt by .00363 or 1/3 of 1% .  OK, as I'm writing this, I have to get up and bang my head against the wall. 

OK, I just remembered that the Feds are tapering (reducing liquidity), GDP is growing, and the world is rosy (unless you run a small business, and apparently most of those people don't have my problems.) 

Having stated the positive, however, I believe the Fed's tapering will not last long, and they know that.  The people at the Federal Reserve are very smart, and I believe they are fully aware that US economy (and the world economy) is addicted to stimulus.  The USA nor global economy can stand for long without stimulus.  When the pain form tapering is obvious to everyone, the Fed Heads will have to step back into the ring, and purchase bonds in large amounts. 

China

Did you see the reports on China's debt yesterday?  China for the first time ever printed their Government debt totals.  China's National Audit Office (NAO) announced yesterday that China's total government debt (including both central and local governments) amounted to RMB20.7  trillion as of this June, equivalent to 40% of China's GDP. However, including contingent liabilities, China's total government debt would exceed RMB30trn, or equivalent to 50-55% of China's GDP. 

Dear Reader: It is my opinion that if this information is accurate (and it is as accurate as governments anywhere else) then China's debt is not a problem.  If only the USA and the Eurozone had China's liability as a percentage of GDP. 

Not only that, China holds a Treasure Chest of reserves.  That chest exceeds $2T dollars. 

Compare that to the Trillions of Dollars the US is going into debt with no known reserves at all, then the USA is in sad shape to be a competitor with China in the global market place. 

This was interesting.  Zu He Liang China's director of Chinese Gold Market Research Center gave a speech. 

"Due to the fact that entire world is paying close attention to the price of gold shows that we are all pursuing a "World Dream". The "World Dream" is nothing but a pursuit for world peace, the healthy and stable development of the world's economy, and a world which is fair to every country and its citizens. The pursuit for gold reflects mankind's pursuit for the "World Dream". Gold represents mankind's yearning and aspirations for stability, and healthy economic development; it is a wonderful wish."

http://www.usagold.com/cpmforum/2013/12/31/china-accumulates-gold-for-the-%E2%80%9Cworld-dream%E2%80%9D/

Rarely would a leader of any kind publish or say something that was not approved by the Communist Party and rulers in power.   Underlying this wonderful speech is the hint that China wants an international trading currency based on gold. 

Gold:      

Gold Investors say "Ouch":  Gold was way down yesterday, and it is down well below 1200 on the March futures contract.  Ouch, Ouch, Ouch...  Consipiracy theories aside, gold is down for whatever reasons gold is down. 

Gold miners are in for more difficult decisions as they write-down values due to plunge in prices.   The value of gold bullion has dropped (as you know), and Gold mining companies face write-downs due to the drop.  The drop has undermined their economic viability.  Barrick (ABX) and Newcret Mining (NEM) have already taken a massive write down in 2013 of writing. Barrick Gold (ABX) last assumed a price of $1,500/oz and Newmont Mining (NEM) $1,400/oz; Barrick, Newcrest Mining (OTCPK:NCMGY) and other mine rs have already taken massive write-downs this year.

As you know if you read my materials, Gold and Silver are recommended as a hedge against world-USA-chaos.  They are not yet in a position to be considered having bottomed.  However, seasonal cycles indicated that Gold and Silver could have a considerable rebound in the 1^st quarter.  The rebound could be profitable on a very short investment cycle.   However, a retail investor would have to be very nimble to profit.  Look for retail investors to plunge in as gold looks like a bottom, and then get burned as they have no reasonable plan how to trade short term.