Economic Blogs

Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear

The Market Oracle - Tue, 28/10/2014 - 17:09
Editor's note: With permission, the following article was adapted from the October 2014 issue of The Elliott Wave Financial Forecast, a publication of Elliott Wave International, the world's largest market forecasting firm. You may review an extended version of the article for free here. In February, The Elliott Wave Financial Forecast discussed the great boom in New York City's residential real estate and its keen resemblance to what happened in 1929, when the demand for luxury housing also spiked to previously unseen heights. At 133 East 80th Street, we found this plaque commemorating the earlier era's brick-and-mortar monuments to a Supercycle degree peak in social mood.
Categories: Economic Blogs

China and India Changing the Global Marketplace

The Market Oracle - Tue, 28/10/2014 - 16:55
China is looking at investing in infrastructure in India. That’s the best idea I’ve heard in a long time. China has overinvested — like 12 to 15 years of future urban migration out — with 27% of home vacancies in cities. India has underinvested in everything. The roads are terrible, electricity is nearly non-existent in rural areas and it’s shoddy at best in urban sectors. Water and sewer services are not up to snuff and there are slums everywhere.
Categories: Economic Blogs

Stock Market Investor Sentiment

The Market Oracle - Tue, 28/10/2014 - 16:48
The American Association of Individual Investors survey (AAII) has a good record in signaling important lows. Despite the previous week's large sell-off the survey showed optimism at a six-week high (the survey was completed prior to the Friday rally). That aberration should have been corrected last week. Instead, last week's numbers show optimism surging and pessimism plunging again - implying that the 10/15/14 low was not an "important" low (the "buy the dips" mentality was stronger than any fear created by the market drop).
Categories: Economic Blogs

Gold vs Paper - A Tale of Two Cities

The Market Oracle - Tue, 28/10/2014 - 16:44
This is a work of fiction with a few similarities to the reality we all know and trust, or … the reality that we think we know. City A in a Paper World: A financial genius had a plan!  He and his offspring implemented the plan over several hundred years.
Categories: Economic Blogs

Omniscient Federal Reserve Captures The Capital Market, For Now. Gold Beckons

The Market Oracle - Tue, 28/10/2014 - 16:40
A cursory glance at the various financial news media this morning shows nothing particularly unusual for these unusual times. The ECB have paraded a list for stress tested banks and the market shrugged. However, there is a disturbing thread running through most of the stories to which we have become immune but which would have been considered highly unusual at almost any time in the twentieth century. And that thread is the influence of the Federal Reserve in practically every key market in the world. 
Categories: Economic Blogs

Investing While in Debt: Reasons You May Want to Think Twice

The Market Oracle - Tue, 28/10/2014 - 16:31
Thinking about investing in your financial future? Whether it’s the stock market, real estate, or retirement savings, smart investments can definitely lead to financial gain. However, it seems that there is an overwhelming understanding that being in debt while investing is okay… While it would be nice to essentially use our investment opportunities as a method for paying off our debts, the likelihood of that happening is slim to none. You see, you need to have money to invest in order to turn a profit, and if you’re in debt, chances are you don’t REALLY have money to invest. As long as you owe someone, the money you’re investing is not your own.
Categories: Economic Blogs

Principle, Rigor and Execution Matter in U.S. Foreign Policy

The Market Oracle - Tue, 28/10/2014 - 16:09
U.S. President Barack Obama has come under intense criticism for his foreign policy, along with many other things. This is not unprecedented. Former President George W. Bush was similarly attacked. Stratfor has always maintained that the behavior of nations has much to do with the impersonal forces driving it, and little to do with the leaders who are currently passing through office. To what extent should American presidents be held accountable for events in the world, and what should they be held accountable for?
Categories: Economic Blogs

The Secret Oil Price Rally No One’s Talking About

The Daily Reckoning - Tue, 28/10/2014 - 15:20

This post The Secret Oil Price Rally No One’s Talking About appeared first on Daily Reckoning.

Oil is now as abundant as oxygen.

The world is drowning in the stuff. Oil supplies are far outstripping demand. And unloading a barrel of crude is like trying to sell sand in the Sahara.

OK, so I made all that up…

But that’s exactly what Goldman Sachs wants you to believe.

The evil geniuses at Goldman Sachs just released a report predicting crude will plummet to $70 by next spring. The new target price is a full $15 lower than Goldman’s previous guess from last quarter. Could the Masters of the Investment Universe have made a mistake?

After the smart money cashes out of its bets against oil, it usually triggers a massive rally.

Goldman says the U.S. shale oil boom has now juiced supplies to the point that we have way too much oil sloshing around. Their report trumpets the fact that the U.S. will pump more crude than Saudi Arabia this month… for the first time in over 40 years! And of course, there’s more where that came from.

So it’s time to dump all your oil stocks. The oil price is heading to the cellar. After all, Goldman said so. And Goldman is like the pope of the financial world. Whatever it says is infallible. Right?

I’m sure you know a leading question when you see one. And you’re right…

There may be a far more sinister motive behind Goldman’s $70 oil price prediction. (Shocking, I know).

So what’s the deal? Here’s what I think…

Goldman knew its report would go right into the financial news meat grinder. The dupes would scream that the “smart money” sees the oil price heading down even further than anticipated. Perfect — just in time for more investors to panic.

But if you bother to look at what the real smart money is doing — instead of chowing down on their prepackaged reports — you’ll see that the big hedgers (some of them undoubtedly from Goldman Sachs) are actually taking profits on their oil shorts. That’s right — while smart guys are telling you to get out, they’re actually waiting to pounce. And as overzealous traders press their luck on the downside, the big boys are already aboard their private jets, counting their profits…

“Hedgers have already cut their net short position by a record 205,000 contracts,” explains Dana Lyons, partner at J. Lyons Fund Management, Inc.

Lyons goes on to explain that there have been just five other occasions where hedgers have covered short positions as big as this one…

“Those dates were in December 1997, September 2003, November 2008, October 2011 and June 2012,” Lyons explains. “The last four of those such occasions led to intermediate-term rallies in crude oil of roughly 105%, 150%, 50% and 30%, respectively. Only the 1997 instance did not lead to a rally.”

See a pattern here? After the smart money cashes out of its bets against oil, it usually triggers a massive rally.

That’s some pretty compelling evidence pointing to a bounce in the oil price sooner rather than later. Just yesterday morning, light crude again slipped below $80. But only for a few minutes. Before lunch, crude was back above $80…

Bottom line: this crude crash needs a break. And if history is any indication, we could be in store for a surprise rally here as $80 holds. Even a run higher toward $85-$90 would be a strong enough bounce to pull up some sinking energy names from the gutter — and give you a shot at quick gains.

Now, I’m not going to sugar-coat it — buying oil stocks down here is a bit of a risk. You should set a tight stop on this trade idea — and you shouldn’t bet the farm. Consider this a small, speculative bet on a counter-trend move. But don’t let those bastards at Goldman profit from the oil price snapback without getting in on the action yourself!


Greg Guenthner
for The Daily Reckoning

P.S. I continued this conversation in today’s issue of The Rude Awakening e-letter. In addition to this potential bounce in the oil price, I gave readers one other important trend to follow, 5 specific numbers to watch, and 3 specific chances to discover real, actionable stock picks. All of that and more comes packed in every single issue of The Rude Awakening — all completely FREE. Click here now to sign up for FREE and you’ll get regular updates, every trading day, right around the opening bell.

The post The Secret Oil Price Rally No One’s Talking About appeared first on Daily Reckoning.

Categories: Economic Blogs

Support Crash! Boom! Pop! on Kickstarter & Startjoin

Steve Keen - Australian Economist - Tue, 28/10/2014 - 14:53

A brilliant team of graphic artist Miguel Guerra, layout artist Suzy Dias, and writer Genevieve Tran have combined to produce what I can describe as a “cartoon version of Debunking Economics”. They plan to produce up to six graphic novels around the theme of “M” (Money, Mayhem–the Financial Crisis–Method, Macro and Micro), to use visual media to take the mickey out of economics for those who don’t want to wade through a 500 page book.

They’re running a Kickstarter campaign now–starting on the 85th anniversary of Black Tuesday 1929.

The product will be brilliant. Miguel’s cartoons are Marvel Comic standard, and the text from gonzo-blogger Genevieve Tran will be sharp and modern. It will put the message that mainstream economics is seriously ill in a form that will get through to a much wider audience than any standard book can reach. And it will be funny and beautiful at the same time.

Click here to support it on Kickstarter; and Click here to support it on Startjoin.

For your enjoyment, here are some of Miguel’s existing cartoons.

The Fed blowing bubbles

Richie Rich gets outside his 0.1% comfort zone

In other news, there are now Chinese, French and Spanish translations of Debunking Economics (the Spanish version will be available in a few weeks). But it’s this fourth translation I’m most looking forward to.

Categories: Economic Blogs

Stock Investors Don't Be Fooled: IBM Is in Big Trouble

The Market Oracle - Tue, 28/10/2014 - 14:40
Warren Buffett famously said at the height of the financial crisis that you only know who's been swimming naked when the tide goes out. Unfortunately for him and his shareholders at Berkshire Hathaway Inc. (BRK.A, BRK.B), it appears that one of the Sage of Omaha's biggest holdings, International Business Machines Corp. (NYSE: IBM), has been skinny dipping for a long time. Some astute observers such as Stanley Druckenmiller, Doug Kass, and Fred Hickey, the editor of The High-Tech Strategist, have been warning for months that IBM's business and balance sheet were deteriorating.
Categories: Economic Blogs

This Little Piggy Bent The Market

The Market Oracle - Tue, 28/10/2014 - 14:33
About 18 months ago, I had a very pleasant chat with a gentleman by the name of Luzi Stamm. You may detect some measure of surprise in my words, and the reason for that is quite simple: Luzi Stamm is a politician; and, as regular readers will know, I am no fan of that particular class. But Herr Stamm was different.
Categories: Economic Blogs

The End of QE and the Price of Gold

The Market Oracle - Tue, 28/10/2014 - 14:19
Background The programme known as Quantitative Easing is due to be halted at the end of October, coinciding with the next meeting of the Federal Open Market Committee which is scheduled for 28/29 October 2014.  Monetary policy plays a big role in gold’s fortunes and so the strategies put in place by the central banks around the world need to be watched very carefully.
Categories: Economic Blogs

U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits

The Market Oracle - Tue, 28/10/2014 - 13:47
Our view has been that a stronger US dollar would eventually start to eat away at corporate results, especially in the manufacturing sector and at US based companies with a global customer base. The decline in revenues thus far is something to be watched because where revenues go, earnings eventually follow. [edit: the segment previous to this one reviewed a contrast between strong earnings and sagging revenues with companies that have reported earnings thus far]
Categories: Economic Blogs

Oliver Gross Says Peak Gold Is Here to Stay

The Market Oracle - Tue, 28/10/2014 - 13:31
The wave of zero-interest liquidity washing over the financial world could result in a short-term gold bottom of $1,000 per ounce, reports Oliver Gross of Der Rohstoff-Anleger (The Resource Investor). The good news is that Peak Gold is here to stay, which means that midtier producers will soon be desperate to buy low-cost, high-quality deposits. In this interview with The Gold Report, Gross argues that this could be the opportunity of a lifetime for contrarian investors, and suggests a half-dozen best bets to be taken out. The Gold Report: Earlier this month, the broader equities markets suffered huge losses as gold made significant gains. Then, after the broader markets recovered, gold fell. Is there now an inverse relationship between the health of the broader markets and the price of gold?
Categories: Economic Blogs

The Hedge Fund Rich List Infographic

The Market Oracle - Tue, 28/10/2014 - 13:25
David submits: Hedge fund rich list includes many familiar faces such as those of the Goldman and Sachs boys, David Tepper and John Arnold. Others you may not be so familiar with, but that is why we have created this infographic, to introduce you to these wealthy traders, illustrate to you how they made their fortunes and hopefully provide you with the motivation you need to start trading yourself.
Categories: Economic Blogs

Total War over the Petrodollar

The Market Oracle - Tue, 28/10/2014 - 11:09
The conspiracy theories surrounding the death of Total SA’s chief executive, Christophe de Margerie, started the second the news broke of his death. Under mysterious circumstances in Moscow, his private jet collided with a snowplow just after midnight. De Margerie was the CEO of Total, France’s largest oil company. He’d just attended a private meeting with Russian Prime Minister Medvedev, at a time when the West’s relationship with Russia is fraught, to say the least.
Categories: Economic Blogs

Does Gold Price Always Respond to Real Interest Rates?

The Market Oracle - Tue, 28/10/2014 - 11:05
Generally, the real interest rates are negatively correlated with the gold price, i.e. the rising interest rates adversely impact the yellow metal. Based on this adverse relationship between real interest rates and price of gold, Elfenbein built a model for the price of gold. According to it, whenever the dollar's real short-term interest rate is below 2%, gold rallies, and whenever the real short-term rate is above 2%, the price of gold falls. Another rule of thumb is that gold moves eight times stronger than the difference between real interest rates and 2%. If the model is correct, the Fed's future interest rates hike may be detrimental for the price of gold. However, there are many objections to the use of such a simple model, and generally to the adverse relationship between gold and real interest rates.
Categories: Economic Blogs

When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General

The Market Oracle - Tue, 28/10/2014 - 11:01
Central Banks and the Business Cycle I like it when someone besides a few financial bloggers takes the gloves off and starts asking some hard-hitting questions.
Categories: Economic Blogs

Crude Oil Price Sinking Or Rebounding

The Market Oracle - Tue, 28/10/2014 - 10:55
Trading position (short-term; our opinion): No positions. On Friday, crude oil lost 0.68% as concerns over a global oversupply continued to weigh. Additionally, soft U.S. housing data pushed the commodity below $82 per barrel. Will we see another test of the strength of the psychologically important level of $80?
Categories: Economic Blogs

Functional Economics - Getting Your House in Order

The Market Oracle - Tue, 28/10/2014 - 10:51
Old Habits Reappear Fighting the Fear of Fear Growing Conspiracy Myself Is after Me Frayed Ends of Sanity Hear Them Calling Frayed Ends of Sanity Hear Them Calling Hear Them Calling Me - Frayed Ends of Sanity, Metallica
Categories: Economic Blogs
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