Tuesday, October 29, 2013

Stock Market Trend – Eye Opening Information

My Stock market trend analysis is likely different from what you think is about to unfold. Keep an open mind as this is just showing you both sides of the coin from a technical stand point. Remember, the market likes to trend in the direction which causes the most investor pain.

Since the stock market bottom in 2009 equities has been rising which is great, but this train could be setting up to do the unthinkable. What do I mean? Well, let’s take a look at the two possible outcomes.

The Bear Market Trend & Investor Negative Credit 

 

The S&P500 has been forming a large broadening formation over the last 13 years. The recent run to new highs and record amounts of money being borrowed to buy stocks on margin has me skeptical about prices continuing higher.

Take a look at the chart below which I found on the ZeroHedge website last week. This chart shows the SP500 index relative to positive and negative investor credit balances. As you can see we are starting to reach some extreme leverage again on the stock market. I do feel we are close to a strong correction or possible bear market, but we must remember that a correction may be all we get. It does not take much for this type of borrowed money to be washed clean and removed. A simple 2-6 week correction will do this and then stocks will be free to continue higher.

credit

Monthly Bearish Trend Outlook

 

Below you can see the simple logical move that should occur next for stocks based on the average bull market lasts four years (it has been four years) and the fact the negative credit is so high again.

Also, poor earnings continue to be released for many individual names across all sectors of the market. While corporate profits may be holding up or growing in some of the big name stocks, revenues are not. This means the big guys are simply laying off workers and cutting costs still.

Overall the stock market is entering its strongest period of the year. So things could get choppy here with strong up and down days until Jan. After that stocks could start to top out and eventually confirm a down trend. Keep in mind, major market tops are a process. They take 6-12 months to form so do not think this is a simple short trade. The market will be choppy until a confirmed down trend is in place.

MajorBear

Monthly BULLISH Trend Outlook

 

This scenario is the least likely one floating around market participant’s minds. It just does not seem possible with the global issues trying to be resolved. With the Federal Reserve continuing to print tens of billions of dollars each month inflating the stocks market this bullish scenario has some legs to stand on and makes for the perfect “Wall of Worry” for stocks to climb.

The U.S. dollar is likely to continue falling in the long run, but I do not think it will collapse. Instead, it will likely grind lower and trade almost in a sideways pattern for years to come.

FoodForThought

Major Stock Market Trend Conclusion:

 

In summary, I remain bullish with the trend, but once price and the technical indicators confirm a down trend I will happily jump ships and take advantage of lower prices.

Remember, this is big picture stuff using Monthly and quarterly charts. So these plays will take some time to unfold and within these larger moves are many shorter term opportunities that we will be trading regardless of which direction the market is trending. 

As active traders and investors we will profit either way.

Get My Reports Free at The Gold & Oil Guy.com

Chris Vermeulen


Free Weekly Low Risk Stock Picks


Sunday, October 27, 2013

The Great American Wall Of Worry – U.S. Stock Market

Traders and investors all around the world is having trouble climbing over the wall of worry/fear with the US stock market, and rightly so. There is a lot of things taking place and unfolding that carry a high level of uncertainty. Let’s face it, who wants to invest money into the market when it’s hard to come by (high unemployment, banks are still extremely tight with their money, companies are nowhere near wanting to hiring new staff).

The hard pill to swallow is the fact that the stock market loves to rise when uncertainty is high. It’s almost doing it just to drive investor’s nuts who sold out near market bottom or recent correction. You must overcome the urge to short the market when the economy looks so bearish in the years ahead, and continue to trade with the trend.....Read the entire story and view the charts.



Get our Gold, Crude Oil & Index ETF Trading Analysis


Thursday, October 24, 2013

Precious Metals: Gold, Silver and Miners Are Trapped

The precious metal market has been stuck in a strong down trend since 2012. But the recent chart, volume and technical analysis is starting to show some signs that a bottom may have already taken place.

This report focused on the weekly and monthly charts which allow us to see the bigger picture of where the precious metals sector stands in terms of its trend. Let’s take a look at a few charts below for a quick overview, but if you want more interesting ...... Click here to Read More.

Wednesday, October 23, 2013

A Million Dollars Isn’t What It Used to Be

By Dennis Miller

We all share a common goal: to grow our nest eggs and make sure they last over the long haul. Our generation was taught to live off the interest and never touch the principal, but interest rates for CDs and Treasuries no longer allow for that. Frankly, they don’t even keep up with inflation, so we have to invest our money elsewhere if we want it to last.


It is a challenge to keep up with inflation and earn enough income to supplement our Social Security. Also, when our respective parents died, my wife and I each inherited a bit of money to add to our retirement fund, and we hope to do the same for our children. Many of you likely have a similar goal.

In 2007, an investor with $1 million could earn $60,000 annually on a certificate of deposit. Today, that same CD would earn $12,000, which makes things a lot more difficult. We will use $1 million in our examples simply because it’s an easy number to follow and do math with in our heads. However, the principles we’ll discuss apply no matter what size your retirement portfolio happens to be.

The Old Rule of Thumb

 

Back in the good old days, there were four estimates that worked well for conservative retirement planning:
  1. Return on your portfolio: 6%
  2. Inflation rate: 2%
  3. Age your money needs to last to: 120 years old
  4. Percentage of your portfolio to invest outside of CDs and high-quality bonds: 100 minus your age at retirement

Will 100 Minus Your Age Work Today?

 

A retiree who invests 65% or more of his or her nest egg in Treasuries or CDs will not earn enough to keep up with inflation, let alone pay the bills. Furthermore, while fixed-income investments were once considered safe, they carry significant risk, as rising inflation rates could destroy their value. So, retirees are under a two-sided attack.

How Should We Factor in Inflation?

 

This is really a twofold question: what is the inflation rate; and how does it affect our personal buying power?
Regardless of what the inflation rate is, to maintain the buying power of our nest egg, our principal must be adjusted every year. If we have $1 million and plan for 4% inflation to leave a little room for error (that’s a little over twice the official September 2013 annual rate), we need to earn $40,000 at the end of the year to cover inflation. Anything above that is supplemental income, or we can keep it in our portfolio.

There has been a lot of discussion about what the real rate of inflation actually is. The Bureau of Labor and Statistics’ (BLS) formula is quite complicated, and takes into consideration housing costs, food, and health care, etc. However, the BLS inflation rate can seem irrelevant when your costs are increasing much faster than it suggests they should.

In our reader poll, folks estimated their personal inflation rate at 8.1%, on average. Using that number, you would need to earn $81,000 on $1 million dollars just to stay even. Depending on your personal expenses, inflation will affect you differently. So, take a good look at your expenses and find a reasonable rate that suits the rising costs in your life.

Inflation varies from year to year. Most folks think the increase to our 2013 Social Security checks did not even come close to covering the true inflation rate for 2012. While inflation over the last 30 years may have been 2-3%, it is much better to err on the side of caution. I’d rather overshoot the number than not. So, set a reasonable inflation target that’s somewhere above the official 2.0% rate.

Personally, I believe there is a commonsense rule that applies. A few years ago my wife Jo and I had a terrific year, with overall returns in excess of 25%. When that sort of windfall occurs, a retiree who wants to stay retired will use some common sense and not go on a spending binge. They will take out only what they need to meet regular expenses and leave the balance in their portfolio to grow. When a lean year comes along, we may fall a percent or two short. Life is much less stressful if during most years we bank a little extra to build a cushion.

What About 4% to Supplement Your Income?

 

Unlike inflation and CD rates, there are some variables over which we do have control. Income and 4% are great examples.

Many baby boomers and retirees are choosing to exercise caution here. I recently heard of a baby boomer who sat down with his analyst and saw that while he had enough money to retire, it would be close. He enjoyed his job and wanted to enjoy retirement without worry, so he decided to keep working for a couple of years to build up a cushion.

In addition, a lot of retirees are now back in the work force. While some may have to work in order to put food on the table, others have simply taken part-time employment doing something they enjoy. A friend of mine who needed a new car decided to go back to work to pay for it instead of taking the money out of his nest egg. He didn’t have to, but thought it better to err on the side of caution.

During the first few years of our retirement, taking out 4% to cover living expenses was no problem at all. Now I see lots of folks, Jo and myself included, who are looking at expenses much more critically. They are cutting back on a lot of things that really don’t affect their lifestyle. Maybe we don’t need to pull out 4% anymore.

As an illustration, we used to have XM radio. It was cool because we could listen to ‘50s and ‘60s music without a bunch of CDs falling all over the place. When we bought it, it was $9.95/month – no big deal. Now it is close to $15/month per vehicle. My son pointed out I could download all of our music onto our cellphones, and it can play through the Bluetooth on the radio. Now we sing along to the same music without the monthly cost.

Controlling Financial Risk

 

If you feel extremely behind in your retirement, you may have made some mistakes in the past. However, remember there’s only one thing worse than making one big mistake – it’s making two big mistakes.
We cannot put more of our life savings in high-risk investments to try to pick up the slack. That is like a gambler doubling his bet to make up for his losses – and we all know how that story ends. We are at a point in life where a do-over is unlikely. The consequences of losing a major portion of our nest egg are too catastrophic to justify foolhardy risks.

So, while it’s tempting to play catch up by taking on more risk, we recommend staying safe instead of possibly getting yourself in even deeper trouble. You may have to adjust your lifestyle a bit, but that is much better than losing a major portion of your life savings to a poor investment decision.

Some of my Money Forever regular readers are already retired and some are a few years out. Either way, they have all committed the time and resources necessary to become their own money managers—to continually learn more about handling their money. Remember: no one has more of a vested interest in you getting this right than you do.

From the very first issue of Money Forever our goal—my mission­­—has been to help those who truly want to take control of their retirement finances. I want our subscribers to have more wealth, a better understanding of how to create an income-producing portfolio, and confidence their money will last throughout retirement.

With that in mind, I’d like to invite you to give Money Forever a try. The current the subscription rate is affordable – less than that of your daily senior vitamin supplements. The best part is you can take advantage of our 90-day, no-risk offer. You can cancel for any reason or even no reason at all, no questions asked, within the first 90 days and receive a full, immediate refund. As you might expect, our cancellation rates are very low, and we aim to keep it that way. Click here to find out more.


Get our Free Trading Videos, Lessons and eBook today!


Tuesday, October 15, 2013

Busting Economic and Natural Resource Myths

By The Gold Report

The Gold Report: Why is the theory of tapering or turning quantitative easing (QE) off a myth, and who really benefits from QE?


Rick Rule: My view—as an investor, not an economist—is that QE is misnamed. I think it's another way of saying counterfeiting. It exists in large measure because we're running a trillion-dollar deficit and, while we can hoodwink investors into funding two-thirds of it, we need to print away the last third.

TGR: What are the consequences of turning off QE?

Louis James: Federal Reserve Chairman Ben Bernanke said himself that he had certain criteria he wanted to see before tapering—employment in particular. Those have not been met. Employment figures have improved, but only in—I guess the technical term would be "crappy" jobs. Long-term employment, the middle class' bread and butter, is not better.

TGR: Rick, you defy common sense and argue that bull markets are bad and bear markets are good, but it doesn't feel that way.

RR: JT, at the risk of being sexist, women are normally more rational shoppers than men. Think about the stock market as a mall.

In the mall, the store on the left-hand of the entrance has a big flashing sign that says, "Bear Market Merchants All Goods 70% Off, No Reasonable Offer Refused, Come Back Tomorrow—Prices May Be Lower." The store on the right-hand side has a tiny sign that says, "Bespoke Bear Market Merchants, No Deals Ever, High Margin for Merchants, Don't Even Think About Asking for a Deal, Prices May Be Higher Next Week."

If you're going to buy a pair of shoes, which store would you go to? This is a no-brainer. When people buy physical goods, they act rationally. When they buy financial goods, they want to overpay. It's totally irrational, and it's extraordinarily common. If you want to become wealthier, why wouldn't you buy financial assets when they're on sale?

TGR: Staying with the mall analogy, does that suggest that people are afraid stocks will be on even deeper sale tomorrow?

Marin Katusa: You have to look at the timeframe. This is a great market if you're an accredited investor and have an account with someone like Rick Rule or you subscribe to the International Speculator and follow the right management teams. Today, you can invest in deals with five-year full warrants that would not have been available three years ago. Rick and I have been in meetings where the venture teams laughed at me when I requested full warrants. Rick just said, "Bite your lip, smile, and wait." And he was right.
If you're buying stock today in hopes that the market will go up the next day, you'll be in a lot of pain. But if you have a two- to five-year timeframe, you can get guys like Bob Quartermain and Lukas Lundin on sale.

LJ: What would you give to go back in time and buy Apple just after the Apple II came out? Or to buy Microsoft when DOS was new?

Over the course of the last decade—what I think of as the first half of this great bull cycle—billions of dollars have gone into the ground and done good work.

Companies with 10 million ounces of high grade gold in a safe mining jurisdiction are on sale below IPO prices. Some companies with excellent management and assets in hand are selling for less than cash value. You can buy these companies now, instead of looking for the next Apple or Microsoft.

RR: Words like "want" and "hope" in speculation are truly four-letter words, profanities. Having a stock in your portfolio that cost $200,000 and has a current market valuation of $40,000 is unfortunate, but irrelevant. Investors need to take advantage of their education and do their best with the situation at hand. Right now, things are cheap. When things are cheap you're supposed to buy. In bull markets, when things are expensive, you're supposed to sell.

Right now, buying is easy because you have no competitors. In a bull market, selling is easy because everybody is a buyer. If the market is desperately looking for bids and you are scared to death because your stocks can't catch bids, you have to bid. They say the market was desperate for asks, but this market is desperate for bids.

TGR: Some have said this the end of the commodity supercycle. Is that a myth? And is it more or less of a myth in some sectors than others?

RR: The narrative that existed in 2009-2010, when the commodity supercycle was the currency of all financial thinking, is unchanged. The first part of that narrative was founded on the idea that world population growth was taking commodity consumption higher. World population growth is not over.

The second part of the narrative was that as poor people gained more freedom, they got richer and consumed more. Political liberalization in emerging frontier markets has continued, and people are wealthier and are consuming more.

A third part of the narrative was that Western consumers had lived beyond their means and as a consequence were debasing the denominators, the fiat currencies. If you debase the denominator, the nominal value of stuff would go up. We have not stopped debasing the denominator.

The entire narrative associated with the resource-industry bull market is intact. Nothing has changed except the price. A cyclical decline in a secular bull market is a different way of describing a spectacular sale, for people who understand that the narrative hasn't changed.

TGR: Are there some sectors that still feel as if it's a commodity supercycle?

MK: Definitely. Look at oil.

RR: But your readers don't want to look for hot sectors, because they are overpriced. They want to look for cold sectors. They want to find the sector, management team, or the company that's going to be hot.

TGR: If oil is hot right now, what is going to be hot?

MK: From the energy side, I think within three years uranium will be hot.

TGR: Why the three-year timeline?

MK: There are three major catalysts. First is the end of the US-Russia Highly Enriched Uranium Purchase Agreement (HEU). The last shipment will happen at the end of 2013.

Second is the transitional agreement, in which the Russians will provide up to 50% of the uranium on a new pricing metric than the HEU agreement. Only this time, the Russians have new dance partners: Saudi Arabia, China, India, Korea, even France. The reality is the Americans will have to pay more for uranium from the Russians.

Third, nuclear reactors are not all being taken down; they're being built. Japan plans to bring its reactors back online, just not on the timeframe the junior resource sector wants them to. The Japanese cannot afford to pay the most expensive electricity prices in the world and stay competitive. They have no choice but to move forward with nuclear power.

TGR: Is the end of HEU already priced in to uranium?

MK: Yes, both because the market is determining what it's worth today and because Japan shut down 40 nuclear reactors. That's a black-swan game-changer that shifted everything.

Yet, the long-term price is 50% higher than the spot price, and more than 90% of the uranium being consumed and traded is based on the long-term price. That's the equivalent of saying gold today is $1,300/ounce, but if you want to take delivery in three or four years—which is what nuclear utilities do for uranium—you have to pay $1,900/oz. Or copper at $4.50/pound if you want delivery in five years. That's the situation in uranium today.

TGR: Louis, which sector are you looking forward to?

LJ: There's talk on the streets about helium, although I'm not sure I want to move in that direction. I'm happier focusing on something right in front of me and that I understand. Finding a company that has a multimillion-ounce, high-grade deposit and is on sale at half price is similar to going into the supermarket and finding the thickest, most beautifully marbled T-bone steak, fresh cut today, on sale for half off. Why bother with hamburger of unknown quality?

TGR: We keep hearing that we've hit a bottom, which would imply that the market is moving up. However, Rick, you have described it as a bifurcated market in which the bad stocks will continue to sink, which would be a good thing. How do we know which companies will sink and which will revive?

RR: That's a critical question. Before your readers classify stocks, they need to classify themselves. Are they the type of person who will put enough time and attention into securities analysis to compete on their own? Or do they need other people to help them compete?

While securities analysis and stock selection in the junior market is imperfect, it can be done. It requires understanding the stock. If you're not willing to understand the stock, you need an advisor.

TGR: How many hours does that work take? What questions should investors be asking?

RR: Speculators running their own portfolios without advice should limit the number of stocks in the portfolio to the number that they can spend two or three hours a month working on. That means reading every press release, proxy, quarterly, and annual report. Read the president's message and measure it against what he said the company would accomplish over the year.

Speculators unwilling to do that need to hire somebody who will. That may mean subscribing to one of the trading services offered by Casey or hiring an organization like Sprott to be a broker or a manager.
Getting to bifurcation and stock selection, if 15% of the stocks are moving higher, 85% are moving lower. You won't be able to concentrate 100% in either camp, but if you get more right than wrong, you'll make so much money that the outliers will be irrelevant. If you get it wrong, you'll lose so much money that you ought to be in some other business.

TGR: Are there fewer brokers walking the streets of Vancouver these days?

MK: Definitely, also fewer analysts and fewer corporate development positions and many fewer investor relations people.

There are more BMWs, Mercedes, and Ferraris on sale, and now more offices becoming vacant.

TGR: Does that mean only the best are left?

MK: Not necessarily.

RR: But it does reduce the population. To be a responsible analyst, you once had to look in a cursory fashion at 4,000 companies. Today, having only 3,000 companies to look at is an advantage.

The three of us look at data in a summary fashion to try and dispose of a company. You look for something to kill your interest. The good news is that the population of timewasters is down by at least a third. That's unfortunate for their shareholders, but that's their problem, not ours. Our job is to look after our subscribers or clients.

TGR: Let's talk about regions. Is it true that the Yukon is remote?

LJ: It's no more remote now than it was last year. You can't write off the Yukon or anywhere without looking at and understanding the specifics of individual opportunities. Miners with remote projects that have high enough margins are able to barge or truck diesel fuel in and run gen-sets, etc. If Canadians can mine diamonds in the Arctic Circle, they can mine gold in the Yukon.

Remoteness by itself is not the issue. The issue is margin. If you're in the Yukon and you've got something low grade, with low recoveries and complex metallurgy—don't call us, we'll call you. If you have something high grade, open pit, that leaches, tell me more.

TGR: Rick, in your presentation, you talked about platinum and palladium. Is that an area where the supercycle needs to whip things up?

RR: I don't think it even requires a supercycle. With platinum and palladium, I can look empirically at simple supply and demand. On a global basis, the platinum and palladium industry doesn't earn its cost of capital. That means one of two things will happen: The price of platinum and palladium will increase, or there won't be enough platinum and palladium to supply current demand.

In the context of supply, you don't have to worry about investor inventories because there are almost none. The world supply of existing, finished platinum and palladium is less than one year's fabrication demand.
The consequence of the industry not earning its cost of capital is that production has fallen by 19% over six years. New mine supply is falling. South Africa itself accounts for 70% of world platinum production and 39% of world palladium production.

In South Africa, the industry has deferred $5 billion in sustaining capital investments; workers are dying and infrastructure is more and more decrepit.

A skilled worker crouching 7,000 feet underground in 105-degree heat in two inches of water makes $700 per month. An unskilled worker who mucks the material on his hands and knees 400 meters from the mine face to the adit makes $200 a month. A migratory worker sustaining a family in the homeland is probably sustaining another family at the mine face. Wages have to go up, but they can't because the companies don't earn their cost of capital.

According to the majority of South Africans, social take—taxes and royalties—has to go up, but can't because companies don't earn their cost of capital.

Prices have to go up. Platinum and palladium prices can go up because their utility to users is so high. It goes into high-carat jewelry. Platinum goes up a smokestack. Mostly, it goes out a tailpipe.

It costs $200—the cost of a catalytic converter in a new car—to give us the air quality we enjoy today. There's a social consensus in favor of stricter air-quality standards. If the price of platinum and palladium doubled, the catalytic converter would cost $400 in a $27,000 new car; the demand impact would be de minimus.

LJ: We all know the often-quoted phrase that most of the gold ever mined in the world is still sitting in purified form on the surface in one form or the other. Platinum and palladium are different; they are consumed. I agree with Rick.

I would go one step further regarding South Africa. It's not just the economics that don't work; it's the country itself. It's a balloon resting on pins. I see platinum and palladium as speculation on South Africa going up in flames, which is an easy bet to take now. I'm sorry for the South Africans, but it's a bad situation with no easy way out.

TGR: There's been a lot of talk about the dearth of young, qualified people coming up to take a place in management teams. Has the next generation of managers—and investors, for that matter—left the sector? If so, what will happen?

MK: There's a significant age gap in our industry. When I was taking geology courses at university, our professor would ask why we were taking this class. There were no jobs. He recommended we go into computers, and a lot of people did.

Unfortunately, good management teams are very difficult to come by. Only 1 in 3,000 projects ever becomes an economic mine, and I'd say investing in the right people is more important than any other factor.

LJ: This scarcity makes the investor's job a little easier. Just type the CEO's name in Google and look up his history. Has he done this before? Has he succeeded? Was he an accountant or a used car salesman? Google is one of our primary triage tools.

People is the first of Doug Casey's famous Eight Ps. If I hear about a story that fits our general criteria, the first thing I look at is management and directors. If I recognize the name of someone who has lied to me or whom I don't trust, I don't even look at the project.

TGR: New people coming up need to get experience by being in a successful project. Are there enough successful projects that they're learning how to do it?

LJ: I don't necessarily agree with that angle. All experience is good experience. A person can learn a lot from working for a company that does something wrong. It's having lots of experience, both good and bad, that is so important. The problem is that, unless you get very lucky, you need to have experience to really call shots well, and there are not enough people out there with the decades of experience needed.

On the bright side, because there is money in the field now, geology departments are no longer shutting down; enrollment is up. Supply is improving, but it will be another 5 to 10 years before the supply of highly experienced personnel really improves.

RR: Let's personalize it for your readers. There are three analysts in the room: an old one and two young ones. I guarantee you that, as a consequence of the bear market they just experienced, the two younger analysts will make their readers more money with less risk in the next bull market.

Youth isn't enough. You need to have a decade under your belt so that you have lived through the changes. Marin and Louis just lived through the kind of challenges I lived through in the 1980s. They now have the two things needed to survive in this racket: legs and scars.

MK: He's not joking about the scars.

RR: The transfer of the mantle from the Doug Caseys and Rick Rules of the world to the Marin Katusas and Louis Jameses is under way. The batons are being passed.

TGR: Is the bear market making a better generation of investors? Will they be more patient, have more perspective given what they've been through?

MK: If they stick with it. It's all about timeframe and perspective. The bear market will wash out a lot of investors; do not allow yourself to become a victim. But as Rick said, investors have to mitigate risk to stay alive until the next leg in the bull market.

RR: You're wrong there, Marin. You have to thrive. The year 2000, which was the market bottom, was one of the best investment years of my life. And 2001 was even better, as was 2002.

A bear market is when you make your money. You don't get to put it in your pocket until things turn, but you make your money by thriving in bear markets. You don't thrive in bull markets. You cash the checks. It's very different.

LJ: I expect this will be a painful experience for a lot of people. Some will learn a lesson, but it will be the wrong lesson. The lesson will be: Don't invest in commodities; they're too risky. That lesson will stick until the prices go bananas again, when they'll give it another try and get taken to the cleaners again.

To buy low and sell high, investors have to be able to sell high, which means they are expecting people to act irrationally when prices are very high—which means they didn't learn the lesson. It's unfortunate for our world that human nature is so, but it is so, and investors who ignore the opportunities this creates don't do anyone any favors.

TGR: Marin, going back to energy, there's been a lot in the media about the International Energy Agency (IEA) report about energy independence in North America. Will we be the Saudi Arabia of natural gas?

MK: North America is already the Saudi Arabia of natural gas. Unfortunately, so are the Russians.

The report said that if these eight assumptions happen the way we hope, America will become almost energy independent. The media forgot about the eight assumptions, and they got rid of the word "almost."
The US has done a great job of bringing North American innovation to the shale industry, but the industry has many other challenges to work through.

TGR: Is Saudi Arabia still the Saudi Arabia of oil? Its wells are getting long in the tooth, and the country is building nuclear plants for domestic use.

MK: We're all asking that question. The Ghawar oil field has been producing oil since before Elvis hit the scene and today produces about half of Saudi Arabia's oil. There is significant risk in relying on these old elephant deposits that have been producing for more than 50 years.

RR: I agree. What has happened in the US, and to a lesser degree Canada, is unique because our competitive markets still work. For example, 50 or 60 competitors at Eagle Ford tried and failed using various completion techniques, each time getting better and better. Ultimately, Eagle Ford was an extremely messy success.

In most of the world, there's one quasi-state oil company looking at a basin. There's no competition trying different solutions. Exporting American or Canadian technology doesn't work without exporting the messiness of the North American energy-exploration business.

Marin, would exporting technology from Eagle Ford work in Argentina's Vaca Muerta Shale?

MK: It would take billions of dollars to make it work at Vaca Muerta. A junior company with a $10 million market cap and $500,000 to make management's salary and payment on their BMWs will never be able to develop this billion-dollar shale potential. It will require a big company, like a Chevron.

TGR: We heard a lot about the potential for crowdfunding to save the resource sector by funding more companies. True?

MK: I'd like to make sure that all of your readers stay the hell away from crowdfunding for the resource sector. I've heard it works OK in the tech sector and among the let's-make-a-movie crowd, where all that is needed is to raise $150,000 for something that may or may not work.

In the resource sector, real exploration cannot be done for $2-3 million. If people want to invest in the sector, go to someone with a track record, someone who knows what he's doing. Subscribe to Louis' newsletter and educate yourself. Stay the hell away from crowdfunding for the resource sector.

RR: The last thing the sector needs is more companies. The idea that the crowd would invest $3 million in a de novo project when there are companies out there that have spent $80 million on an existing project, yet have a $6 million market cap is the most counterproductive activity that one could imagine. If there are 3,000 public companies doing exploration on a global basis, we don't need another 300. We need 2,000 fewer.

LJ: It's one thing to go directly to the masses with an art project that some snob at the National Endowment for the Arts turned down, but entirely another to do so for a mine project no knowledgeable investor will touch.

TGR: What myth would you want our readers to stop believing in?

LJ: I would like to dethrone the "grade is king" myth. It's not grade; it's margin. You can have an exceptionally high-grade deposit in an exceptionally expensive, difficult, or kleptocratic jurisdiction, and it won't work. You could have a water table that's so fluid that you spend more money pumping water than mining. There are so many things that can go wrong or add to costs. Too many people believe if a project is high grade, it has to make money. No, it doesn't. High margin is paramount, not grade.

MK: I think the myth that the commodity bull market is over is insane. We're nowhere near being over. This is the opportunity of a lifetime. This is when you start doing your homework and investing money.

RR: The idea that bear markets are bad and bull markets are good is bullshit. It's the other way around. Bear markets are good. Bull markets are bad.

LJ: Bullshit is a technical term.

TGR: I enjoyed talking with the three of you. Thanks.


Hungry for more insights like these? Want specific, actionable recommendations to accompany them? These are the kinds of exchanges that have made Casey Summits must-attend events for resource investors… not to mention why they consistently sell out.
If you missed the 3 Days with Casey Summit and its all-star lineup—
which included Ron Paul, Lacy Hunt, James Rickards, Catherine Austin Fitts, and Dr. Elizabeth Vliet, among many others—you can still listen in on every session… every breakout session… every Q&A… by preordering the Casey Summit Audio Collection. 

It includes all this plus images of any visual aids each speaker used. And if you order while they're in production, you'll enjoy substantial savings.  







Wednesday, October 9, 2013

Who Knows More: The S&P 500 Options or Financial Pundits?

By now the major media outlets have made sure to inform the public that the U.S. government is shut down, or partially shut down depending on your political perspective. Most financial pundits are looking to the recent past for clues about what to expect in the future.

While the situation appears to be similar to what we witnessed in 2011 with the debt ceiling debacle, the outcomes may be significantly different. I am a contrarian trader by nature, and as such I am constantly expecting for markets to react in the opposite way from what the majority of investors expect.

A significant number of financial pundits and writers all have a similar perspective about what is likely to occur. It seems most of the financial punditry believe that until there is a resolution in the ongoing government debacle, market participants should expect volatility to persist. Some of the talking heads are even calling for a sharp selloff if no decision on the debt ceiling is made by early next week.

The debt ceiling decision needs to be made by midnight on October 17th otherwise the first ever default on U.S. government debt could occur. Thus far, the volatility index (VIX) has moved higher as investors and money managers use the leverage in VIX options to hedge their long exposure.

As can be seen here, we are seeing the VIX trade at the second highest levels so far in 2013.....Read the entire article "Who Knows More: The S&P 500 Options or Financial Pundits?"



Using options like a Professional Trader, get started now!
 


Wednesday, October 2, 2013

Thoughts from the Frontline: Rich City, Poor City

By John Mauldin



"The future is already here," intoned William Gibson, one of my favorite cyberpunk science fiction authors, "it's just not very evenly distributed." Paraphrasing Gibson, the pension crisis is already here; it's just not very evenly distributed. For the past two weeks we've been exploring the problems of state pension funds. This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research. Then again you may be pleasantly surprised and congratulate yourself on choosing a particularly adept hometown. And be on notice that, no matter what your personal conclusion and how well-grounded your analysis is, there will be people who live in your neighborhood who think you are utterly full of, well, let's just say "nonsensical matter" and leave it at that. This is a family letter.

Into the Transformational Future

First, a quick announcement. I am constantly asked where the future jobs will be, and I think hard about the answer to that very personal question (it's crucial to those of us who have young kids). Will we see Gibson’s dystopian world or Ian Banks' world of abundance? The answer is, of course, that secular growth in employment will come from the new, transformational technologies that are already being created all around us, truly new industries that will change everything and create opportunities for work that we can't even imagine yet, in the same way the automobile or telecommunications or the McCormick reaper both took some jobs away and created even greater opportunities. The transition is the thing, though. It will be filled with opportunities for some and forced change for others, while we wait for the future to become more evenly distributed. In the next few weeks, you are going to get a letter from me that will tell you about the newest addition to Mauldin Economics, the Transformational Technologies Alert, written by my longtime friend Pat Cox, who is no stranger to readers of this letter. Pat and I have long wanted to work together, exploring the future and especially biotech. He is the best, and you will want to join us from the very beginning. We invite you to charge ahead into the future with us, exploring opportunities that will begin to change your own life right now. And now back to pensions…

Through the courtesy of one of your fellow readers I've been given a treasure trove of data on 702 city pension plans. I won't say that I got lost in the data, but the search and rescue teams sent to find me had to go back for extra supplies. There were some very dark alleys that it took a while to find my way back out of. Not to mention some twists and turns that were totally surprising.

So first I need to say a big thank you to Gregg L. Bienstock and Justin Coombs of Lumesis for giving me access to their data. Gregg is a cofounder of Lumesis, and their signature software is called (appropriately enough, given the oceans of data they plumb) DIVER. They've compiled data on 54,000 issuers of municipal and state bonds from over 100 sources. They sent me an Excel file on the major pension plans of every state and the pension plans of cities with populations over 100,000. And Justin was kind enough to create multiple spreadsheets and graphs upon request and patiently explain their data. The bulk of the data in this letter is from http://www.lumesis.com. The opinions are my own and should not be attributed to Lumesis. From time to time we will also look at another fascinating study from the Pew Charitable Trusts on pensions and retiree healthcare in 61 cities.

As we have seen the last two weeks (here and here), the assumptions that states make about their future investment returns are fairly unrealistic and generally nothing like what they've achieved for the last 10 years. This makes their balance sheets look far better than they really are, and for some states the discrepancy is pretty stark. Witness Illinois, where unfunded pension liabilities run north of $280 billion, give or take. That is more than $20,000 for every man, woman, and child in the state. And the bill keeps rising every month as the state plows ever deeper in debt to its own future.

Keeping in mind the caveat that the percentages may actually be worse than reported, let's look at a few graphs on a state-by-state basis. This first graph shows the funded ratio of state pension plans through 2012. (Note: on all the graphs the large "island" below Louisiana is a representation of Puerto Rico. To its left is Alaska, and both are obviously not to scale.)




The next graph shows actuarial required contributions (ARC). The ARC is simply the amount of money required to fund the pension plan given the return assumptions of the plan. The important thing to note here is the amount of blue in the graph. If you ask your local politicians how their pension plan is doing, they can probably tell you with a straight face (and because they don't know any better) that their state's pension is fully funded. I note with some alarm that "conservative" Texas doesn't fare very well. While Texas claims funding above 80%, a more reasonable assumption on returns suggests it is no better than 43%. Can Rick Perry run for president as a conservative on that number? Then again, can New Jersey Republican governor uber-star Chris Christie run on his state's funding level of 33%? Just asking.




To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – Please Click Here.

© 2013 Mauldin Economics. All Rights Reserved.

Visit  "Thoughts from the Frontline"  today!

 


Tuesday, October 1, 2013

eMini Trading Strategies....Laying it all out!

The staff here at the Stock Market Club can’t help but wonder why anyone would pass up a lifetime of unlimited personal mentoring and daily trade updates. Including access to fully disclosed trading strategies proven to work over the last two decades!

Especially when it comes with a 1 year, 365 day, 100% money back performance guarantee. Our only guess is you’re either not interested in trading the E-Mini futures, or you missed the opportunity to get in when it was available.

If the latter sounds like you we have some good news for you.

Todd Mitchell just reopened the E-Mini Success Formula 2.0 until midnight tonight with one big twist. You still get all the mentoring, bonuses, and the one year performance guarantee.

But now you can get all of this with a new payment plan and a much lower monthly investment. This is really your last chance.

LAST CHANCE: Just Click to Enroll Today