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What Does The Yield Curve Yield?

The opposite of what most other market participants believe. Most market participants anticipate the FED to tighten, as they have indicated, indicating economic growth and higher interest rates. In such a scenario you should see spreads widening. Instead, we are beginning to see a trend reversal and yield curve compression since the start of this year. 

Does the bond market see something that most other market participants do not? 

I believe so. In fact, we anticipate the yield curve to flatten further over the next 24 months and possibly invert as the bear market of 2014-2017 enters the picture. As we have indicated on this blog so many times before the bear market will usher in a severe recession, forcing the FED to flood the market with further liquidity. In such an environment, we would anticipate the long end of the curve to head lower. Much lower. 

If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here.  

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What Does The Yield Curve Yield?  Google

 

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How To Invest In Weed To Get Filthy Rich

I fathom that marijuana will be legal in most (if not all) 50 states within 5-10 years. The question is, how do you become filthy rich from the trend? Even if you are a stoner. 

Looking at history, there are 4 general ways when it comes to making money within any new industry. 

1. Grow, Manufacture & Distribute: I wouldn’t know anything about growing or selling marijuana so I digress on this point. There should be a number of other resources on this matter out there. 

2. Sector Servicing: Also known as, selling shovels to the gold miners.  For instance, last I have heard, retailers in Colorado are unable to deposit revenue generated by their businesses into banks due to Federal regulations. Anyone who solves this problem becomes an instant millionaire. There are many others, but I am not involved in the industry to give any other worthwhile advice on this point.  

3. New Products Associated With Marijuana: From pot brownies and pot strawberry/chocolate bars to e-pot cigarettes….use your imagination. Come up with a must have product and you are a few months away from a 60 foot yacht with 10 topples girls on board. The sky is the limit.  

4. Stock Market: Invest in marijuana related companies. Unfortunately, since the industry is so new and technically still “illegal” in most states, there are a very few companies to chose from. There are many penny stocks associated with the industry, but they are too risky. Based on my quick research, there are 3 more or less prominent companies in the industry that are listed. They include GWPH, CANN and CANV. Again, investing in such companies is not without risk. There will be big winners and complete losers. However, if you are able to pick that winner and buy the stock at the right price it should be an easy 10X or even 100X over the next 5-10 years. 

That about covers it. If you would be interested in participating in the sector, pick a category and go for it. I hope this helps. 

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How To Invest In Weed To Get Filthy Rich  Google

Call it a drug trade for investors. Todd Harrison, CEO and founder of Internet-based financial media company MInyanville, thinks cannabis “will be the single best investment idea for the next ten years.”

But while the public has watched recreational marijuana take off in Colorado this year, how can they profit from it as an investment theme?

Harrison believes it will be driven by the broader legalization of marijuana, inspired by states’ need for tax revenue. He points to expectations that legal marijuana use is expected to generate $134 million in tax revenue for the upcoming fiscal year in Colorado, the first state to allow recreational marijuana. That’s  nothing to sneeze at, and Harrison calls the state the “litmus test” for broader legalization. Harrison also cites the expected decline in crime rates and  prison populations as powerful incentives to decriminalize  marijuana.

The New York Times reports that half the states in the U.S., including some in the conservative South, are currently considering decriminalization of the drug or legalizing it for medical or recreational use. Oregon and Alaska are the likeliest to legalize pot next year. Twenty states now permit the use of medical marijuana now, while Colorado and Washington have legalized it for recreational use.

The legal marijuana market is estimated to grow  64% to $2.34 billion in 2014 from $1.44 billion, according to a recent report by the cannabis investment and research firm Arcview Group.

Wall Street currently doesn’t cover the marijuana market as an industry but once legalization is more widespread, that will be the inflection point when we marijuana investing moves mainstream, says Harrison.

Currently the chatter is mostly about marijuana penny stocks. They are not what Harrison is talking about. He says those stocks are very risky and volatile, and he doesn’t touch them.

But there are some “real” companies generating interest. Harrison cites the cannabinoid prescription medicine company GW Pharmaceuticals (GWPH) as an example. He’s not suggesting the stock as a buy or sell, just as an example he’s traded in the past. The stock has rallied more than 500% since last summer.

Advanced Cannabis Solutions (CANN), soared 62% in a single day when its stock chart was shown on CNBC earlier this week — even though it was a mistake, and the anchor was actually discussing another company in the cannabis industry, called CannaVEST (CANV). Advanced Cannabis Solutions leases growing facilities to legal marijuana growers and dispensary operators. CannaVEST makes hemp-based consumer products.(CORRECTION: An earlier version of this story said that Advanced Cannabis Solutions soared 62% in a single day when it was mentioned on CNBC earlier this week.)  

“That’s more bearish than bullish,” says Harrison, reminding him of the bubble levels reached back in Y2K days.

The comparison could cause would-be investors to bristle. Harrison says it’s about investors’ time horizon and risk tolerance. In the bubble of Y2K, everyone was excited about the Internet, he says, and everything they expected the Web to be proved true, but not until after the tech crash.

Harrison says investors should expects ebbs and flows in the marijuana industry. He sees a 10-year horizon with tremendous opportunity that will not be without “potholes, false starts and a lot of risk.” The moral of the story is to do your homework.

Others are more skeptical. Bloomberg reports Mark A.R. Kleiman, professor of public policy at the University of Southern California at Los Angeles, doesn’t “see how there’s money to be made producing an agricultural commodity,” which marijuana is, because once the market becomes competitive, prices will fall.

Other investors recommend avoiding these stocks until marijuana is legal throughout the U.S. Federal law still says marijuana is illegal, though the Obama Administration has said it won’t interfere with the rollout of legalized cannabis in individual states. And though the federal government has said that bankers following Treasury guidelines in providing services to cannabis companies operating in those states won’t face prosecution, many large banks still won’t process funds earned from pot sales.

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Attention: Deflation Is Here, What’s Next?

I have been arguing deflation with inflationists, goldbugs and the likes for years. To no avail. Today’s WSJ snippet (see below) confirms my view without a shadow of a doubt. There is no inflation as the central bank’s preferred inflation gauge slowed to an annual gain of less than 1%. Instead, we are in a deflationary environment where bad debt and credit defaults must be liquidated. 

This becomes even more evident when you think about the amount of liquidity the FED had pumped into our financial system over the last 5 years. Despite, QE, over $1 Trillion in liquidity, and other monetary stimulus, inflation gauge remains at 1%. Without such massive stimulus today’s deflationary environment would be more clear.

Well, let me correct myself. There has been massive inflation over the last few years. In the stock market, the real estate market and some other commodities. Most of the liquidity the FED had infused went right into speculation. When the bear market of 2014-2017 starts all of that inflation will vanish into thin air. Understanding this clearly plays an important role in your upcoming portfolio allocation. If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here.   

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Attention: Deflation Is Here, What’s Next? Google

WSJ Writes: Inflation Slows Again, Bouncing Around Four-Year Low

Inflation isn’t just going nowhere. It may be slipping again.

The Commerce Department’s latest read of consumer prices on Friday showed price pressures moving in a direction many Federal Reserve officials find uncomfortable. The personal consumption expenditures price index — the central bank’s preferred inflation gauge — slowed to an annual gain of less than 1%.

The PCE index’s 0.9% annual increase in February marked the weakest reading since October, when year-over-year inflation touched a four-year low.

The latest data suggests the U.S. faces little risk of rapidly accelerating inflation as the Fed slows the amount of stimulus it’s pumping into the economy. Earlier this month, the central bank said it would lower the pace of monthly bond buying by another $10 billion to $55 billion.

Friday’s report showed the pace of food inflation increased in February after holding virtually flat the previous five months. But that gain was largely offset by declining prices for long-lasting durable goods and energy last month.

The consumer price index, a separate inflation measure calculated by the Labor Department and released earlier this month, rose 1.1% in February from a year earlier. That, too, was a slowdown from January. 

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Warning: Why Investors Should Be Horrified Of “Boring Markets”

As the WSJ article below indicates, outside of this weeks sell off in high flying technology and Biotech, markets have been fairly “boring” over the last 5-6 weeks and since the start of the year. Yet, based on my mathematical and timing work, investors should always be wary of such periods. The market loves putting investors and traders to sleep right before the big move takes place. That is one of the primary reasons why most investors are caught unprepared. 

Case and point, 1987 top. The market was climbing for exactly 5 years, everyone was fat and happy, there was no indication of any trouble, the market paused gently at the top, oscillated up and down for a few week (putting investors further into sleep), then proceeded to collapse 25% in just a few trading days. Does any of this sound familiar?

No, I am not predicting a 1987 type of a crash here. I am simply stating that investors should pay a very close attention to the market when the market is “boring”. Such periods indicate shifting energy patterns within the market. When the energy shifts markets go from “boring” to “exciting” in a mad dash. As we have stated so many times before, the bear market of 2014-2017 will start shortly. When it does, expect energy patterns to shift. If you would be interested in learning exactly when the bear market will start (to the day) and it’s internal composition, please Click Here.  

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Warning: Why Investors Should Be Horrified Of “Boring Markets”  Google

WSJ Writes: Morning MoneyBeat: The ‘Meh’ Market

U.S. stocks are stuck in neutral. So is investor sentiment.

The S&P 500 has drifted roughly between 1840 and 1880 for the past six weeks before finishing Thursday at 1849.04. The narrow trading range is representative of investors getting neither too bullish nor too bearish on stocks, a mindset that played out in the latest American Association of Individual Investors’ weekly survey.

Neutral sentiment, the expectation that stock prices will stay essentially unchanged over the next six months, jumped to 40.2% in this week’s AAII poll, the highest level since April 14, 2005. The association releases the results of its Internet survey—which asks its members to register their bullish, bearish or neutral views on the stock market—early each Thursday.

The latest reading marked the 12th straight week in which the neutral reading remained above its historical average of 30.5%.

The nine-year high in neutral sentiment underscores how the rally has stalled after the S&P 500’s 30% surge to record levels last year. The stalemate is expected to continue until a catalyst pushes the market one way or another.

Until then, valuations look relatively pricey in many pockets of the market and the potential for the Federal Reserve to raise interest rates as early as 2015 has prompted some worries. Some investors are waiting for a significant pullback before adding to positions, while others are frustrated that the market hasn’t been able to maintain the upward momentum it exhibited last year.

The S&P 500 is up 0.68 point, or 0.04%, in 2014.

“There’s a big disbelief that things are as good as the market makes them out to be at these levels,” Charles Rotblut, vice president of the AAII, said in a chat with MoneyBeat. “Even though we had a huge rally last year, people haven’t bought into the attitude that good times are here,” he added.

There are similarities between now and nine years ago, when neutral sentiment was at these levels. Back then the S&P 500 was in the middle of about a 5% pullback that took place from March through May. The market bounced back but traded in a fairly tight trading range for several months. It was slightly higher in October 2005, six months after that lofty neutral reading, and finished up 3% for the year.

Now, the S&P 500 has bounced back from its 5.8% slump from mid-January through early February and has bounced around ever since.

“The larger story affecting markets hasn’t really changed,” says Dan Greenhaus, chief strategist at BTIG in New York. “We have been advancing our ‘lateral’ trading thesis for many weeks now and in front of earnings season, this view has largely been accurate.”

In other words, welcome back to the “meh” market.

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Stock Market Update. March 27th, 2014. InvestWithAlex.com

Daily Chart March 27, 2014 investwithalex

The Dow Jones ended the day where it started  with a loss of 5 points (-0.03%) while the Nasdaq declined 22.35 points (-0.54%). 

The Dow Jones continues to perform as per our forecast, on it’s way to hitting our ultimate mathematical and timing target (forecast available in our subscriber section). The Nasdaq continues to underperform and diverge from the Dow. In fact, over the last five trading days the Nasdaq has lost 4.3% while the Dow declined a more manageable 1.2%. I continue to believe that the Nasdaq is oversold and due for a bounce. In fact, I believe that quarter end window dressing over the next two trading day in conjunction with an “oversold” bounce should propel all markets higher over over the next few trading days. 

Please note, we have no intention of trading this “potential bounce”. Any such gains will be short lived and volatile. Our long term picture remains intact. The bear market of 2014-2017 is just around the corner. If you would like to learn when the bear market will start (to the day) and it’s internal composition, please Click Here.  

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Stock Market Update. March 27th, 2014. InvestWithAlex.com  Google

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Why Interest Rates Will Remain Low

According to David Kotok, co-founder, chairman and chief investment officer of Cumberland Advisors,  “long-term rates are likely to stay near current levels for quite a while”.

I tend to agree, but I will go even further. Not only will interest rates stay low, but I would expect the 10-Year Note to retrace back to at least 2% over the next 2-3 years. Why? 

Again, the forecast above is based on our incredibly accurate mathematical and timing work. This work predicts a severe bear market in US equities between 2014-2017 and a subsequent deep recession. As it is now, inflation is nonexistent as we continue to deal with debt liquidating deflationary forces.

When the bear market hits (we are almost there), the FED will have no choice but to abandon their “tightening” plan. Instead, a year from now they will be flooding the market with further liquidity/stimulus to try and avoid any further collapse. As you can understand, in such a interest rate environment, short-term rates will remain at zero while long-term tail of the yield curve will flatten once again. 

If you would like to find out exactly when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here. 

Percent growth

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Why Interest Rates Will Remain Low   Google

The Daily Ticker Reports: Short-term interest rates likely to stay near zero for 2 more years: David Kotok

A week after Janet Yellen unnerved financial markets in her first press conference as Fed chair, markets have settled down. The Dow (DJI), which fell 114 points after she suggested the Fed could raise interest rates “something on the order of six months” after ending its asset purchases, has made up for close to half its losses that day. And the 10-Year Treasury yield (^TNX) has dropped slightly, to 2.7% from 2.78%, raising Treasury prices, which move inversely to yields.

David Kotok, co-founder, chairman and chief investment officer of Cumberland Advisors, tells The Daily Ticker that long-term rates are likely to stay near current levels for quite a while unless the economy tanks — in which case they could drop to near 2% — or inflation takes off, sending rates sharply higher. And he expects short-term rates — which are set more directly by the Fed — will remain near zero. 

“The Fed is still easy. The interest rate is still near zero and it’s going to be there for two more years,” says Kotok who describes himself as an “unabashed fan of Janet Yellen.”

Indeed, in its latest policy statement Fed said that it continued to anticipate near zero short-term rates “for a considerable time after” after it ends asset purchases so long as inflation is under 2% and long-term inflation expectations are contained. At the current rate of Fed tapering, those purchases would end in December. 

The Fed had previously tied raising short-term rates to an unemployment rate at 6.5% or below but dropped the jobless rate reference in its latest communique.

Future Fed policy will be not only data-dependent but also a reflection of the makeup of its policy-making Federal Open Market Committee, says Kotok, noting that the 12-person committee is currently short three members and more changes will follow after those vacancies are filled.

“The nature of the Federal Open Market Committee is likely to develop [as] more dovish, a little less hawkish … because of the changes in personalities in the next year,” says Kotok.

President Obama has nominated former vice chair of Citigroup Stanley Fischer as Fed vice chairman and Lael Brainard, former Undersecretary of the Treasury for International Affairs, to the Fed board. Current Fed Governor Jerome Powells, who served in George H.W. Bush’s White House, has been re-nominated (his current erm is expiring). Also, Cleveland Fed Bank President Sandra Pianalto is expected to leave at the end of May. 

The Senate banking committee has held hearings on the nominations but the full Senate hasn’t voted yet on the nominations. 

Watch the video above for more on David Kotok’s view of future Fed policy and tell us your expectations for Fed policy.

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Ukraine’s Navy Dolphins Defect To Join Russia & Other Insanity

The insanity that surrounds Russia, the US/EU and Ukraine continue unabated. I present you with the best of it….just in today’s news.   

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Ukraine’s Navy Dolphins Defect To Join Russia & Other Insanity Google

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Is Gold About To Surge?

There is very little love for the yellow stuff at the moment. Since topping out less than two weeks ago, gold is down 6%. Today,many people and money managers are falling all over each other, suggesting that the gold has topped out and the time to short is NOW. Not so fast. Not according to our mathematical and timing work.

Here is what most people miss. Most people anticipate strong economy, tightening, stronger dollar and somewhat higher interest rates going forward. That is not what our mathematical and timing work shows. Not at all. Quite the opposite.  Our work shows that a severe bear market of 2014-2017 is about to start, ushering in a deep recession where the FED will be forced to flood the market with liquidity once again. Not tighten by any measure. In such an environment (liquidity pump while equity markets decline) gold tends to perform very well. 

That is on top of a favorable technical setup. While I wouldn’t buy just yet, Gold should be on your BUY watch list. If you would be interested in learning when the bear market will start (to the day) and it’s internal composition, please Click Here.  

Gold bars

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Is Gold About To Surge?  Google

Talking Numbers Writes: Why the top could be in for gold

The world is just as unstable now as it was a month ago. Yet,gold is now close to breaking below the $1,300 per ounce level.

Now, before gold bugs start panicking, let’s put this all in perspective: Gold is still up about 7% since the start of 2014. That’s seven times the return of the benchmark S&P 500 index for stocks. In 2014, gold is beating Google (up 3%),Apple (down 3%), Netflix (flat), Twitter (down 27%), and theUS Dollar index (flat) among countless others.

In other words, gold hasn’t been such a bad buy this year. But will that continue going forward?

Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, says gold may take a hit in the short-term but the technicals are showing the yellow metal to be near a critical support level that could make for a buying opportunity.

“It looks to me as if gold has taken its position as the currency of fear once again,” says Ross. “That’s all well and good when Russia is annexing Crimea. But, when those emerging markets start to bottom and you get a strong rally and the macro unrest subsides, obviously, that going to hurt gold prices. That’s what the catalyst behind this big pullback we’ve seen recently.”

Ross sees notes gold has been trading in a range between $1,180 per ounce and $1,420 per ounce since June 201,3 with bullion testing and holding the $1,180 per ounce level in June and a couple of times in December. But, the level Ross is watching is $1,300 – or, to be more specific, $1,292 per ounce. That’s where gold’s 50-day moving average crossed above its 150-day moving average.

“That should be bullish,” says Ross. “It should provide support for this pullback around current levels. A break below that level could send gold down to the low end of that range [$1,180 per ounce]. I think support holds and I think we get another test of the high end of that trading range [$1,420 per ounce]. I would be a trading buyer here of gold.”

Portfolio manager Chad Morganlander of Stifel’s Washington Crossing Advisors is taking the other side of Ross’ trade. After owning gold for six years, his firm sold out its gold position because it sees improvements ahead in the US and European economies as well as improved capital and credit markets.

“Let’s bottom line it: I would be short gold,” says Morganlander. “I would not own gold in my portfolio. We think that the safe haven asset class is not necessary at this point in time.”

Morganlander doesn’t believe the current crisis in Ukraine will have a long-term effect on gold. 
“We think the Russia/Crimea issue is a storm that’s going to pass,” says Morganlander. “Geopolitical premia are going to be compressed.”

That and his expectations of better economic data ahead are leading Morganlander to see gold prices falling. “We would stay away from gold,” he says.

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Do Foreign Owned Assets Play An Important Role?

Foreign-owned assets in the US hit an all time high of $26.54 Trillion at the end of 2013. Most of the gains came in the form of asset appreciation as opposed to direct capital inflows.  To be honest with you, this is an irrelevant measure. It is simply indicative of what the US Stock market reflects. Overvaluation, speculation, massive credit expansion and credit mechanism dilution by the FED. At the end of the day it will move up or down in conjunction with the US stock market and the US Economy. 

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Do Foreign Owned Assets Play An Important Role?  Google

WSJ Reports: Foreign Investment in U.S. Hits New Record

Foreign investment in the U.S. hit a fresh record in the final quarter of 2013 as rising stock prices boosted the value of American assets, according to figures released Wednesday.

The value of foreign investment in the U.S. hit $26.54 trillion the fourth quarter, up $777.8 billion from the previous quarter and far surpassing a $372.1 billion increase in U.S. investments abroad, the Commerce Department’s Bureau of Economic Analysis said. Adjusting for inflation, the value of foreign investment surpassed the previous record in 2011 and is at the highest level since the data were first collected in 1976.

Reuters

The quarterly report showed foreign investors and companies playing an expanding role in U.S. markets. The development has worried some economists, because it makes the U.S. more vulnerable to major shifts in the global economy. But it also could show strengthening confidence in the American economy.

The BEA said most of the quarterly increases were based on rising asset prices, rather than investors plowing more cash into markets. In that period, the Dow Jones Industrial Average rose by around 8% to new highs, buoyed by growing optimism about the U.S. economic outlook.

U.S. investments overseas were tempered by lingering concerns about Europe’s economic recovery and worries over tapering growth in large emerging markets.

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Attention: Tech Stocks About To Surge?

With King Digital going public and Facebook’s $2 Billion acquisition, The Daily Ticker asks “Are we on the verge of another tech bubble?”

Idiots. 

On “the verge” implies that today’s valuation are normal and we are about to experience a huge run up, leading to an eventual “bubble”. We are in a massive bubble already. Today. Thanks to the FED and their monetary policy or lack thereof. The valuations are at astronomical levels and today’s active IPO market is a clear indication of that. Further, with our mathematical and timing work clearly predicting a severe bear market and a US recession between 2014-2017, the bubble is about to POP.  

Dumb and Dumber (Screengrab)

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Attention: Tech Stocks About To Surge?  Google

Daily Ticker Are we on the verge of another tech bubble?

Shares of King Digital Entertainment (KING), the mobile game maker of the popular Candy Crush, started  trading today for the very first time but below an IPO price of $22.50 a share which valued the company at  $7.1 billion. In early trading shares were down about 8% at $20.70.

Facebook (FB) announced it’s buying virtual reality firm Oculus VR for $2 billion--$400 million in cash plus stock–just five weeks after it announced a $19 billion acquisition of WhatsApp. Oculus makes virtual reality goggles used to play video games, but Facebook CEO Mark Zuckerberg said Tuesday he plans to expand its platform to include education, medicine and more.

Finally, Box Inc., a cloud storage company, announced Monday plans to raise $250 million through an IPO.Unlike King Digital, which had profits of more than half a billion dollars last year, Box has been operating at a growing deficit despite increasing revenues.

Could we be on the verge of another tech bubble?

“Don’t insult the real bubble of the 1990s,” says Henry Blodget, though he admits “some valuations are breathtaking,” like King’s. Its “numbers are already shrinking,” says Blodget. “I don’t know anyone who plays Candy Crush anymore.”

There are no current numbers for Oculus. Its virtual reality headset is available only as a prototype for developers and not for sale to consumers. “This is as speculative as you can get,” says Blodget. This acquisition is unlike Facebook’s other recent buys: $1 billion for Instagram, a company with 100 million users and $19 billion for WhatsApp with 450 million users (growing at a rate of 1 million users a day).

Most people have never used the Oculus virtual reality headset but those “who have tried it say it’s mind-blowing,” says Blodget. Still, he warns, “there’s a very good chance that this thing is worth zero in two years.”